What changed in this filing

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Item 1. Financial Statements

2021-05-14 compared with 2020-11-09 · 1336 added, 1742 removed, 351 unchanged (90% of the section changed)

Financial Statements.

AVALON GLOBOCARE

GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED

BALANCE SHEETS

September 30,

CONSOLIDATED BALANCE SHEETS

CURRENT ASSETS:

Accounts receivable

Accounts receivable - related party

Rent receivable

Deferred financing costs

Prepaid expenses and other current assets

Total Current Assets

financing costs

expenses and other current assets

Current Assets

NON-CURRENT ASSETS:

Rent receivable - noncurrent portion

Prepaid realtors’

commission - noncurrent portion

Right-of-use asset, operating lease

Property and equipment, net

Investment in real estate, net

Equity method investment

Total Non-current Assets

receivable - noncurrent portion

leasing costs

lease right-of-use assets, net

and equipment, net

in real estate, net

method investment

Non-current Assets

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Accrued professional fees

Accrued research and development fees

Accrued payroll liability

Accrued liabilities and other payables

Accrued liabilities and other payables - related parties

Operating lease obligation

Tenants’

security deposit

Total Current Liabilities

professional fees

research and development fees

payroll liability and directors' compensation

liabilities and other payables

liabilities and other payables - related parties

lease obligation

payable - related party

Current Liabilities

NON-CURRENT LIABILITIES:

Operating lease obligation - noncurrent portion

Note payable - related party

Loan payable - related party

Total Non-current Liabilities

Total Liabilities

Commitments and Contingencies - (Note 13)

Preferred stock, $0.0001 par value;

lease obligation - noncurrent portion

payable - related party

Non-current Liabilities

and Contingencies

Preferred stock, $0.0001

10,000,000 shares authorized;

no shares issued and outstanding at September 30, 2020 and December 31, 2019

Common stock, $0.0001 par value;

no shares issued and outstanding

at March 31, 2021 and December 31, 2020

Common stock, $0.0001 par

490,000,000 shares authorized;

81,876,855 shares issued and 81,356,855 shares outstanding at September 30, 2020;

76,730,802 shares issued and 76,210,802 shares outstanding at December 31, 2019

Additional paid-in capital

84,943,564 shares issued

and 84,423,564 shares outstanding at March 31, 2021;

82,795,297 shares issued

and 82,275,297 shares outstanding at December 31, 2020

paid-in capital

common stock held in treasury, at cost;

520,000 shares at September 30, 2020 and December 31, 2019

Accumulated deficit

520,000 shares at March

31, 2021 and December 31, 2020

(44,408,493 )

(42,041,375 )

Statutory reserve

Accumulated other comprehensive loss - foreign currency translation adjustment

Total Avalon GloboCare Corp.

stockholders’

Non-controlling interest

Total Liabilities and Equity

See accompanying

notes to the condensed consolidated financial statements.

AVALON GLOBOCARE

other comprehensive loss - foreign currency translation adjustment

Avalon GloboCare Corp.

stockholders' equity

Non-controlling

Liabilities and Equity

accompanying notes to the condensed consolidated financial statements.

GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the Three Months Ended

For the Nine Months Ended

September 30,

Real property rental

Medical related consulting services - related party

Development services and sales of developed products

Total Revenues

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

the Three Months Ended

Real property

COSTS AND EXPENSES

Real property operating expenses

Medical related consulting services - related party

Development services and sales of developed products

Total Costs and Expenses

REAL PROPERTY OPERATING INCOME

GROSS PROFIT FROM MEDICAL RELATED CONSULTING SERVICES

GROSS LOSS FROM DEVELOPMENT SERVICES AND SALES OF DEVELOPED PRODUCTS

Total Gross Profit

property operating expenses

property operating income

OTHER OPERATING EXPENSES:

Professional fees

Compensation and related benefits

Research and development expenses

Other general and administrative

Impairment loss

Total Other Operating Expenses

Compensation and related

Research and development

general and administrative

Other Operating Expenses

LOSS FROM OPERATIONS

(14,285,412 )

OTHER INCOME (EXPENSE)

Interest expense

Interest expense - related party

Change in fair value of warrants liabilities

Financing expense

Loss from equity method investment

Other (expense) income

Total Other Income (Expense), net

Interest expense - related

Loss from equity method

Other Expense, net

LOSS BEFORE INCOME TAXES

1 unchanged sentence

$ (3,270,781 )

$ (4,334,058 )

$ (9,579,122 )

$ (13,277,810 )

NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST

NET LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

NET LOSS ATTRIBUTABLE

TO NON-CONTROLLING INTEREST

NET LOSS ATTRIBUTABLE

TO AVALON GLOBOCARE CORP.

COMMON SHAREHOLDERS

1 unchanged sentence

$ (3,270,781 )

$ (9,579,122 )

$ (12,621,235 )

COMPREHENSIVE LOSS:

1 unchanged sentence

$ (3,270,781 )

$ (9,579,122 )

$ (13,277,810 )

OTHER COMPREHENSIVE INCOME (LOSS)

Unrealized foreign currency translation gain (loss)

OTHER COMPREHENSIVE LOSS

foreign currency translation loss

COMPREHENSIVE LOSS

(13,337,819 )

COMPREHENSIVE LOSS ATTRIBUTABLE TO NON-CONTROLLING

COMPREHENSIVE LOSS ATTRIBUTABLE

TO AVALON GLOBOCARE CORP.

COMPREHENSIVE LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST

COMPREHENSIVE

LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

COMMON SHAREHOLDERS

1 unchanged sentence

$ (3,292,847 )

$ (9,558,181 )

$ (12,686,398 )

NET LOSS PER COMMON SHARE ATTRIBUTABLE TO AVALON

1 unchanged sentence

COMMON SHAREHOLDERS:

Basic and diluted

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic and diluted

See accompanying

notes to the condensed consolidated financial statements.

AVALON GLOBOCARE

accompanying notes to the condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED

STATEMENTS OF CHANGES IN EQUITY

For the Three and

Nine Months Ended September 30, 2020

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three Months Ended March 31, 2021

GloboCare Corp.

Stockholders’

Stockholders' Equity

Comprehensive

Non-controlling

Balance, January 1, 2020

$ (29,361,937 )

Sale of common stock, net

Issuance of common stock for services

Stock-based compensation

Foreign currency translation adjustment

Net loss for the three months

ended March 31, 2020

Balance, March 31, 2020

(32,632,718 )

Sale of common stock, net

Issuance of common stock for services

Stock-based compensation

Foreign currency translation adjustment

Net loss for the three months

ended June 30, 2020

Balance, June 30, 2020

January 1, 2021

$ (42,041,375 )

Sale of common stock, net

Issuance of common stock for services

Stock-based compensation

Foreign currency translation adjustment

Net loss for the three months

ended September 30, 2020

Balance, September 30, 2020

of common stock, net

of common stock

for services (Note 8)

translation adjustment

loss for the three

months ended March 31, 2021

March 31, 2021

$ (44,408,493 )

See accompanying

notes to the condensed consolidated financial statements.

AVALON GLOBOCARE

See accompanying notes to the condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED

STATEMENTS OF CHANGES IN EQUITY

For the Three and

Nine Months Ended September 30, 2019

Avalon GloboCare

Stockholders’

Treasury Stock

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three Months Ended March 31, 2020

GloboCare Corp.

Stockholders' Equity

Comprehensive

Non-controlling

Balance, January 1, 2019

$ (11,291,776 )

Issuance of common stock upon cashless

exercise of stock warrants

Issuance of common stock upon cashless

exercise of stock options

Stock-based compensation

Foreign currency translation adjustment

Net loss for the three months

ended March 31, 2019

Balance, March 31, 2019

(15,697,592 )

Stock-based compensation

Issuance of common stock for service

Sale of common stock

Foreign currency translation adjustment

Net loss for the three months

ended June 30, 2019

Balance, June 30, 2019

(20,054,816 )

Stock-based compensation

Issuance of common stock for service

Foreign currency translation adjustment

Net loss for the three months

ended September 30, 2019

Balance, September 30, 2019

January 1, 2020

$ (29,361,937 )

of common stock, net

of common stock for services

currency translation adjustment

loss for the three months ended March 31, 2020

March 31, 2020

$ (32,632,718 )

See accompanying

notes to the condensed consolidated financial statements.

AVALON GLOBOCARE

See accompanying notes to

the condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS

For the Nine Months Ended

September 30,

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

4 unchanged sentences

Bad debt provision

Depreciation and amortization

Amortization of straight-line rent receivable

Amortization of right-of-use asset

Stock-based compensation and service expense

Loss from equity method investment

Loss on fixed asset disposal

Changes in warrants derivative liabilities

Allocated financing costs

Impairment loss

Loss on equity method investment

Loss on fixed assets disposal

Changes in operating assets and liabilities:

Accounts receivable

Accounts receivable - related party

Rent receivable

Prepaid expenses - related parties

Prepaid expenses and other current assets

Security deposit

Deferred leasing costs

Prepaid expenses and other current assets

Accrued liabilities and other payables

1 unchanged sentence

Operating lease obligation

Tenants’

security deposit

NET CASH USED IN OPERATING ACTIVITIES

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

Improvement of commercial real estate

Prepayment made for purchase of long-term assets

Additional investment in equity method investment

1 unchanged sentence

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds received from note payable - related party

Repayments of note payable - related party

Proceeds received from loan payable - related party

Proceeds received from offering

Disbursements for offering costs

Repayments of loan payable

Proceeds received from equity offering

Disbursements for equity offering costs

NET CASH PROVIDED BY FINANCING ACTIVITIES

3 unchanged sentences

CASH - end of period

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for:

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Property and equipment acquired on credit as payable

Improvement of commercial real estate acquired on credit

Common stock issued for future services

Deferred financing costs in accrued liabilities

See accompanying

notes to the condensed consolidated financial statements.

Common stock issued for accrued liabilities

See accompanying notes to the condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 –

4 unchanged sentences

The Company was incorporated under the laws of the State of Delaware on July 28, 2014.

On October 19, 2016, the Company entered into and closed a Share Exchange Agreement with the shareholders of Avalon

Healthcare System, Inc., a Delaware corporation (“AHS”), each of which were accredited investors (“AHS Shareholders”)

pursuant to which we acquired 100% of the outstanding securities of AHS in exchange for 50,000,000 shares of the Company’s

common stock (the “AHS Acquisition”).

On October 19, 2016, the Company entered into and closed a Share Exchange Agreement with the shareholders of Avalon Healthcare System,

Inc., a Delaware corporation (“AHS”), each of which were accredited investors (“AHS Shareholders”) pursuant to

which we acquired 100% of the outstanding securities of AHS in exchange for 50,000,000 shares of the Company’s common stock (the

“AHS Acquisition”).

AHS was incorporated on May 18, 2015 under the laws of the State of Delaware.

4 unchanged sentences

assets in connection with this transaction.

Accordingly, the Company’s historical financial statements are those of AHS

and its wholly-owned subsidiary, Avalon (Shanghai) Healthcare Technology Co., Ltd.

(“Avalon Shanghai”) immediately

following the consummation of this reverse merger transaction.

AHS owns 100% of the capital stock of Avalon Shanghai, which is

a wholly foreign-owned enterprise organized under the laws of the People’s Republic of China (“PRC”).

Shanghai was incorporated on April 29, 2016 and is engaged in medical related consulting services for customers.

The Company is a clinical-stage, vertically

integrated, leading CellTech bio-developer dedicated to advancing and empowering innovative, transformative immune effector cell

therapy, exosome technology, as well as Coronavirus (“COVID-19”) related diagnostics and therapeutics.

also provides strategic advisory and outsourcing services to facilitate and enhance its clients’

growth and development,

as well as competitiveness in healthcare and CellTech industry markets.

Through its subsidiary structure with unique integration

of verticals from innovative research and development (“R&D”) to automated bioproduction and accelerated clinical

development, the Company is establishing a leading role in the fields of cellular immunotherapy (including CAR-T/NK), exosome

Accordingly, the Company’s historical financial statements are those of AHS and its

wholly-owned subsidiary, Avalon (Shanghai) Healthcare Technology Co., Ltd.

(“Avalon Shanghai”) immediately following the

consummation of this reverse merger transaction.

AHS owns 100% of the capital stock of Avalon Shanghai, which is a wholly foreign-owned

enterprise organized under the laws of the People’s Republic of China (“PRC”).

Avalon Shanghai was incorporated on

April 29, 2016 and is engaged in medical related consulting services for customers.

The Company is a clinical-stage, vertically integrated,

leading CellTech bio-developer dedicated to advancing and empowering innovative, transformative immune effector cell therapy, exosome

technology, as well as COVID-19 related diagnostics and therapeutics.

The Company also provides strategic advisory and outsourcing services

to facilitate and enhance its clients' growth and development, as well as competitiveness in healthcare and CellTech industry markets.

Through its subsidiary structure with unique integration of verticals from innovative R&D to automated bioproduction and accelerated

clinical development, the Company is establishing a leading role in the fields of cellular immunotherapy (including CAR-T/NK), exosome

technology (ACTEX™), and regenerative therapeutics.

1 unchanged sentence

Avalon (BVI) Ltd., a British Virgin Island company.

There was no activity for the subsidiary since its incorporation through September

There was no activity for the subsidiary since its incorporation through March 31,

Avalon (BVI) Ltd.

is dormant and is in process of being dissolved.

On February 7, 2017, the Company formed

Avalon RT 9 Properties, LLC (“Avalon RT 9”), a New Jersey limited liability company.

On May 5, 2017, Avalon RT 9 purchased

a real property located in Township of Freehold, County of Monmouth, State of New Jersey, having a street address of 4400 Route

9 South, Freehold, NJ 07728.

This property was purchased to serve as the Company’s world-wide headquarters for all corporate

administration and operations.

On February 7, 2017, the Company formed Avalon

RT 9 Properties, LLC (“Avalon RT 9”), a New Jersey limited liability company.

On May 5, 2017, Avalon RT 9 purchased a real

property located in Township of Freehold, County of Monmouth, State of New Jersey, having a street address of 4400 Route 9 South, Freehold,

This property was purchased to serve as the Company’s world-wide headquarters for all corporate administration and operations.

In addition, the property generates rental income.

Avalon RT 9 owns this office building.

Avalon RT 9’s business consists of the ownership and operation of the income-producing real estate property in New Jersey.

As of September 30, 2020, the occupancy rate of the building is 87.0%.

Currently, Avalon RT 9’s business consists

of the ownership and operation of the income-producing real estate property in New Jersey.

As of March 31, 2021, the occupancy rate of

the building is 89.4%.

On July 31, 2017, the Company formed Genexosome

1 unchanged sentence

(“Genexosome”) in Nevada.

On July 18, 2018, the Company formed a

wholly owned subsidiary, Avactis Biosciences Inc., a Nevada corporation, which will focus on accelerating commercial activities

related to cellular therapies, including regenerative medicine with stem/progenitor cells as well as cellular immunotherapy including

CAR-T, CAR-NK, TCR-T and others.

The subsidiary is designed to integrate and optimize our global scientific and clinical resources

to further advance the use of cellular therapies to treat certain cancers.

On June 13, 2019, the Company formed a

wholly owned subsidiary, International Exosome Association LLC, a Delaware company.

There was no activity for the subsidiary since

its incorporation through September 30, 2020.

Genexosome was engaged in developing proprietary diagnostic and therapeutic products

using exosomes.

Genexosome owns 100% of the capital stock of Beijing Jieteng (Genexosome) Biotech Co., Ltd., a corporation incorporated

in the People’s Republic of China on August 7, 2015 (“Beijing Genexosome”), and the Company holds 60% of Genexosome

Yu Zhou holds 40% of Genexosome.

The Company had not been able to realize the financial projections provided by Dr.

time of the acquisition and has decided to impair the intangible asset associated with this acquisition to zero.

Zhou was terminated

as Co-CEO of Genexosome on August 14, 2019.

Since the fourth quarter of 2019, the non-controlling interest keeps inactive.

On July 18, 2018, the Company formed a wholly

owned subsidiary, Avactis Biosciences Inc., a Nevada corporation, which will focus on accelerating commercial activities related to cellular

therapies, including regenerative medicine with stem/progenitor cells as well as cellular immunotherapy including CAR-T, CAR-NK, TCR-T

The subsidiary is designed to integrate and optimize our global scientific and clinical resources to further advance the

use of cellular therapies to treat certain cancers.

On June 13, 2019, the Company formed a wholly

owned subsidiary, International Exosome Association LLC, a Delaware company.

There was no activity for the subsidiary since its incorporation

through March 31, 2021.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 –

AND NATURE OF OPERATIONS (continued)

Details of the Company’s subsidiaries

which are included in these consolidated financial statements as of September 30, 2020 are as follows:

Details of the Company’s subsidiaries which

are included in these condensed consolidated financial statements as of March 31, 2021 are as follows:

of Subsidiary

2 unchanged sentences

(“AHS”)

Delaware May 18, 2015

100% held by AVCO

Provides medical related consulting services and

developing Avalon Cell and Avalon Rehab in United States of America (“USA”)

medical related consulting services and developing Avalon Cell and Avalon Rehab in United States of America (“USA”)

Avalon (BVI) Ltd.

(“Avalon BVI”)

British Virgin Island January 23, 2017

100% held by AVCO

Dormant, is in process of being dissolved

Avalon RT 9 Properties LLC (“Avalon RT 9”)

New Jersey February 7, 2017

100% held by AVCO

Owns and operates an income-producing real property

and holds and manages the corporate headquarters

Avalon (Shanghai) Healthcare Technology Co., Ltd.

British Virgin Island

January 23, 2017

is in process of being dissolved

Avalon RT 9 Properties LLC

(“Avalon RT 9”)

February 7, 2017

and operates an income-producing real property and holds and manages the corporate headquarters

Avalon (Shanghai) Healthcare Technology Co.,

(“Avalon Shanghai”)

PRC April 29, 2016

100% held by AHS

Provides medical related consulting services and

developing Avalon Cell and Avalon Rehab in China

April 29, 2016

medical related consulting services and developing Avalon Cell and Avalon Rehab in China

Genexosome Technologies Inc.

(“Genexosome”)

Nevada July 31, 2017

60% held by AVCO

Develops proprietary diagnostic and therapeutic

products using exosomes

Beijing Jieteng (Genexosome) Biotech Co., Ltd.

(“Beijing

Genexosome”)

PRC August 7, 2015

July 31, 2017

Beijing Jieteng (Genexosome) Biotech Co.,

(“Beijing Genexosome”)

August 7, 2015

held by Genexosome

Provides development services for hospitals and

other customers and sells developed items to hospitals and other customers in China

development services for hospitals and other customers and sells developed items to hospitals and other customers in China

Avactis Biosciences Inc.

(“Avactis”)

Nevada July 18, 2018

100% held by AVCO

Integrate and optimize global scientific and clinical

resources to further advance cellular therapies, including regenerative medicine with stem/progenitor cells as well as cellular

immunotherapy including CAR-T, CAR-NK, TCR-T and others to treat certain cancers

International Exosome Association LLC (“Exosome”)

Delaware June 13, 2019

100% held by AVCO

Promotes standardization related to exosome industry

July 18, 2018

and optimize global scientific and clinical resources to further advance cellular therapies, including regenerative medicine with

stem/progenitor cells as well as cellular immunotherapy including CAR-T, CAR-NK, TCR-T and others to treat certain cancers

International Exosome Association LLC

(“Exosome”)

June 13, 2019

standardization related to exosome industry

NOTE 2 –

PRESENTATION AND GOING CONCERN CONDITION

BASIS OF PRESENTATION

These interim condensed consolidated

financial statements of the Company and its subsidiaries are unaudited.

In the opinion of management, all adjustments (consisting

of normal recurring accruals) and disclosures necessary for a fair presentation of these interim condensed consolidated financial

statements have been included.

The results reported in the unaudited condensed consolidated financial statements for any interim

periods are not necessarily indicative of the results that may be reported for the entire year.

The accompanying unaudited condensed

consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange

Commission and do not include all information and footnotes necessary for a complete presentation of financial statements in conformity

with accounting principles generally accepted in the United States (“U.S.

AND GOING CONCERN CONDITION

Basis of Presentation

These interim condensed consolidated financial

statements of the Company and its subsidiaries are unaudited.

In the opinion of management, all adjustments (consisting of normal recurring

accruals) and disclosures necessary for a fair presentation of these interim condensed consolidated financial statements have been included.

The results reported in the condensed consolidated financial statements for any interim periods are not necessarily indicative of the

results that may be reported for the entire year.

The accompanying condensed consolidated financial statements have been prepared in

accordance with the rules and regulations of the Securities and Exchange Commission and do not include all information and footnotes

necessary for a complete presentation of financial statements in conformity with accounting principles generally accepted in the United

States (“U.S.

GAAP”).

The Company’s unaudited condensed

consolidated financial statements include the accounts of the Company and its subsidiaries.

All significant intercompany accounts

and transactions have been eliminated in consolidation.

Certain information and footnote

disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S.

GAAP have been

condensed or omitted.

These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s

audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the

year ended December 31, 2019 filed with the Securities and Exchange Commission on April 6, 2020.

The Company’s condensed consolidated financial statements include the accounts of the Company

and its subsidiaries.

All significant intercompany accounts and transactions have been eliminated in consolidation.

Certain information and footnote disclosures

normally included in the annual consolidated financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted.

These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial

statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed

with the Securities and Exchange Commission on March 30, 2021.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 –

BASIS OF PRESENTATION AND GOING CONCERN

CONDITION (continued)

BASIS OF PRESENTATION

AND GOING CONCERN CONDITION (continued)

Going Concern

The Company is a clinical-stage, vertically

integrated, leading CellTech bio-developer dedicated to advancing and empowering innovative, transformative immune effector cell

therapy, exosome technology, as well as COVID-19 related diagnostics and therapeutics.

The Company also provides strategic advisory

and outsourcing services to facilitate and enhance its clients’

growth and development, as well as competitiveness in healthcare

and CellTech industry markets.

The Company also develops related products for sale and licensure in the United States and the

People’s Republic of China.

In addition, the Company owns commercial real estate that houses its headquarters in Freehold,

The Company did not generate any revenue from medical related consulting services segment and development services

and sales of developed products segment during the nine months ended September 30, 2020.

These unaudited condensed consolidated

financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among

other things, the realization of assets and the satisfaction of liabilities in the normal course of business.

As reflected in the accompanying unaudited

condensed consolidated financial statements, the Company had an accumulated deficit of $38,941,059 at September 30, 2020, and

has incurred recurring net loss and negative cash flow from operating activities of $9,579,122 and $6,185,198 for the nine months

ended September 30, 2020, respectively.

The Company has a limited operating history and its continued growth is dependent upon

the re-commencing of medical consulting services which was completed in December 2019 to its only few clients who are related

parties and generating rental revenue from its income-producing real estate property in New Jersey and performing development

services for hospitals and other customers and sales of developed products to hospitals and other customers;

hence generating

revenues, and obtaining additional financing to fund future obligations and pay liabilities arising from normal business operations.

In addition, the current cash balance cannot be projected to cover the operating expenses for the next twelve months from the

release date of this report.

These matters raise substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital,

implement its business plan, and generate significant revenues.

There are no assurances that the Company will be successful in

its efforts to generate significant revenues, maintain sufficient cash balance or report profitable operations or to continue

as a going concern.

The Company is a clinical-stage, vertically integrated,

leading CellTech bio-developer dedicated to advancing and empowering innovative, transformative immune effector cell therapy, exosome

technology, as well as COVID-19 related diagnostics and therapeutics.

The Company also provides strategic advisory and outsourcing services

to facilitate and enhance its clients' growth and development, as well as competitiveness in healthcare and CellTech industry markets.

Through its subsidiary structure with unique integration of verticals from innovative R&D to automated bioproduction and accelerated

clinical development, the Company is establishing a leading role in the fields of cellular immunotherapy (including CAR-T/NK), exosome

technology (ACTEX™), and regenerative therapeutics.

In addition, the Company owns commercial real

estate that houses its headquarters in Freehold, New Jersey and provides outsourced, customized international healthcare services to

the rapidly changing health care industry primarily focused in the People’s Republic of China.

The Company did not generate any

revenue from medical related consulting services segment during the three months ended March 31, 2021.

These condensed consolidated financial

statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the

realization of assets and the satisfaction of liabilities in the normal course of business.

As reflected in the accompanying condensed consolidated

financial statements, the Company had working capital deficit of $1,059,606 as of March 31, 2021 and has incurred recurring net loss

and generated negative cash flow from operating activities of $2,367,118 and $1,515,525 for the three months ended March 31, 2021, respectively.

The Company has a limited operating history and its continued growth is dependent upon the continuation of providing medical consulting

services to its only few clients who are related parties and generating rental revenue from its income-producing real estate property

in New Jersey;

hence generating revenues, and obtaining additional financing to fund future obligations and pay liabilities arising from

normal business operations.

In addition, the current cash balance cannot be projected to cover the operating expenses for the next twelve

months from the release date of this report.

These matters raise substantial doubt about the Company’s ability to continue as a

going concern.

The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional

capital, implement its business plan, and generate significant revenues.

There are no assurances that the Company will be successful

in its efforts to generate significant revenues, maintain sufficient cash balance or report profitable operations or to continue as a

going concern.

The Company plans on raising capital through the sale of equity to implement its business plan.

However, there

is no assurance these plans will be realized and that any additional financings will be available to the Company on satisfactory

terms and conditions, if any.

However, there is no assurance

these plans will be realized and that any additional financings will be available to the Company on satisfactory terms and conditions,

The occurrence of an uncontrollable event such

as the COVID-19 pandemic had negatively impact on the Company’s operations.

Some tenants have delayed on rent payment and

our occupancy of our rental property has decreased.

Our general development operations have continued during the COVID-19 pandemic

and we have not had significant disruption.

However, we are uncertain if the COVID-19 pandemic will impact future operations at

our laboratory, or our ability to collaborate with other laboratories and universities.

In addition, we are unsure if the COVID-19

pandemic will impact future clinical trials.

Given the dynamic nature of these circumstances, the duration of business disruption

and reduced traffic, the related financial effect cannot be reasonably estimated at this time but is expected to adversely impact

the Company’s business for the year of 2020.

The accompanying unaudited condensed consolidated

financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts

or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

Some tenants have delayed on rent payment.

development operations have continued during the COVID-19 pandemic and we have not had significant disruption.

However, we are uncertain

if the COVID-19 pandemic will impact future operations at our laboratory, or our ability to collaborate with other laboratories and universities.

In addition, we are unsure if the COVID-19 pandemic will impact future clinical trials.

Given the dynamic nature of these circumstances,

the duration of business disruption and reduced traffic, the related financial effect cannot be reasonably estimated at this time but

is expected to adversely impact the Company’s business for the rest of 2021.

The accompanying condensed consolidated financial

statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and

classification of liabilities that may result should the Company be unable to continue as a going concern.

NOTE 3 –

1 unchanged sentence

Use of Estimates

The preparation of the unaudited condensed

consolidated financial statements in conformity with U.S.

The preparation of the

condensed consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect

the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial

statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from these

Significant estimates during the nine months ended September 30, 2020 and 2019 include the allowance for doubtful accounts,

the useful life of property and equipment and investment in real estate, assumptions used in assessing impairment of long-term

assets, valuation of deferred tax assets and the associated valuation allowances, and valuation of stock-based compensation.

the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements

and the reported amounts of revenues and expenses during the reporting period.

Actual results could differ from these estimates.

estimates during the three months ended March 31, 2021 and 2020 include the useful life of property and equipment and investment in real

estate, assumptions used in assessing impairment of long-term assets, valuation of deferred tax assets and the associated valuation allowances,

and valuation of stock-based compensation.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 –

1 unchanged sentence

ACCOUNTING POLICIES (continued)

Fair Value of Financial Instruments

and Fair Value Measurements

Fair Value of Financial Instruments and

Fair Value Measurements

The Company adopted

the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition

of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used

in measuring fair value as follows:

● Level 1-Inputs are unadjusted

quoted prices in active markets for identical assets or liabilities available at the

measurement date.

● Level 2-Inputs are unadjusted

quoted prices for similar assets and liabilities in active markets, quoted prices for

identical or similar assets and liabilities in markets that are not active, inputs other

than quoted prices that are observable, and inputs derived from or corroborated by observable

● Level 3-Inputs are unobservable

inputs which reflect the reporting entity’s own assumptions on what assumptions

the market participants would use in pricing the asset or liability based on the best

available information.

The carrying amounts reported in the unaudited

condensed consolidated balance sheets for cash, rent receivable, deferred financing costs, prepaid expenses and other current

assets, accrued liabilities and other payables, accrued liabilities and other payables –

related parties, operating lease

obligation, tenants’

security deposit, approximate their fair market value based on the short-term maturity of these instruments.

of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring

fair value as follows:

1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities

available at the measurement date.

2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets,

quoted prices for identical or similar assets and liabilities in markets that are not active,

inputs other than quoted prices that are observable, and inputs derived from or corroborated

by observable market data.

3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions

on what assumptions the market participants would use in pricing the asset or liability based

on the best available information.

The carrying amounts

reported in the condensed consolidated balance sheets for cash, rent receivable, accrued liabilities and other payables, accrued liabilities

and other payables –

related parties, operating lease obligation, and note payable, approximate their fair market value as of March

31, 2021 and December 31, 2020 based on the short-term maturity of these instruments.

ASC 825-10 “Financial Instruments”,

allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option).

fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs.

the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings

at each subsequent reporting date.

value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs.

If the fair value

option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent

reporting date.

The Company did not elect to apply the fair value option to any outstanding instruments.

and Cash Equivalents

A portion of the Company’s cash

is maintained with state-owned banks within the PRC.

Balances at state-owned banks within the PRC are covered by insurance up

to RMB 500,000 (approximately $74,000) per bank.

Cash and Cash Equivalents

At March 31, 2021 and December 31, 2020, the

Company’s cash balances by geographic area were as follows:

United States

For purposes of the condensed consolidated statements

of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less when purchased and money market

accounts to be cash equivalents.

The Company had no cash equivalents at March 31, 2021 and December 31, 2020.

Credit Risk and Uncertainties

A portion of the Company’s cash is maintained

with state-owned banks within the PRC.

Balances at state-owned banks within the PRC are covered by insurance up to RMB 500,000 (approximately

$76,000) per bank.

Any balance over RMB 500,000 per bank in PRC will not be covered.

30, 2020, cash balances held in the PRC are RMB 1,302,475 (approximately $192,000), of which, RMB 793,010 (approximately $117,000)

was not covered by such limited insurance.

The Company has not experienced any losses in such accounts and believes it is not

exposed to any risks on its cash in bank accounts.

The Company maintains a portion of its

cash in bank and financial institution deposits within U.S.

At March 31, 2021, cash balances held in the PRC

are RMB 1,083,049 (approximately $165,000), of which, RMB 556,726 (approximately $85,000) was not covered by such limited insurance.

The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts.

The Company maintains a portion of its cash in

bank and financial institution deposits within U.S.

that at times may exceed federally-insured limits of $250,000.

Company manages this credit risk by concentrating its cash balances in high quality financial institutions and by periodically

evaluating the credit quality of the primary financial institutions holding such deposits.

The Company has not experienced any

losses in such bank accounts and believes it is not exposed to any risks on its cash in bank accounts.

At September 30, 2020,

the Company’s cash balances in United States bank accounts had approximately $539,000 in excess of the federally-insured

At September 30, 2020, the Company’s

cash balances by geographic area were as follows:

September 30, 2020

United States

of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months

or less when purchased and money market accounts to be cash equivalents.

The Company had no cash equivalents at September

30, 2020 and December 31, 2019.

The Company manages

this credit risk by concentrating its cash balances in high quality financial institutions and by periodically evaluating the credit

quality of the primary financial institutions holding such deposits.

The Company has not experienced any losses in such bank accounts

and believes it is not exposed to any risks on its cash in bank accounts.

At March 31, 2021, the Company’s cash balances in United

States bank accounts had approximately $986,000 in excess of the federally-insured limits.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 –

1 unchanged sentence

ACCOUNTING POLICIES (continued)

Concentrations

of Credit Risk

Currently, a portion of the Company’s

operations are carried out in PRC.

Accordingly, the Company’s business, financial condition and results of operations may

be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC’s economy.

The Company’s operations in PRC are subject to specific considerations and significant risks not typically associated with

companies in North America.

The Company’s results may be adversely affected by changes in governmental policies with respect

to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation,

among other things.

Financial instruments which potentially

subject the Company to concentrations of credit risk consist principally of trade accounts receivable.

A portion of the Company’s

sales are credit sales which is to the customer whose ability to pay is dependent upon the industry economics prevailing in these

however, concentrations of credit risk with respect to trade accounts receivable is limited due to generally short payment

The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk.

in Unconsolidated Company –

Credit Risk and Uncertainties (continued)

Currently, a portion of the Company’s operations

are carried out in PRC.

Accordingly, the Company’s business, financial condition and results of operations may be influenced by

the political, economic and legal environment in the PRC, and by the general state of the PRC’s economy.

The Company’s operations

in PRC are subject to specific considerations and significant risks not typically associated with companies in North America.

The Company’s

results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures,

currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Financial instruments which potentially subject

the Company to concentrations of credit risk consist principally of trade accounts receivable.

A portion of the Company’s sales

are credit sales which is to the customer whose ability to pay is dependent upon the industry economics prevailing in these areas;

concentrations of credit risk with respect to trade accounts receivable is limited due to short-term payment terms.

The Company also

performs ongoing credit evaluations of its customers to help further reduce credit risk.

Investment in Unconsolidated

Company –

Epicon Biosciences Co., Ltd.

The Company uses the equity method of

accounting for its investment in, and earning or loss of, company that it does not control but over which it does exert significant

The Company considers whether the fair value of its equity method investment has declined below its carrying value

whenever adverse events or changes in circumstances indicate that recorded value may not be recoverable.

If the Company considers

any decline to be other than temporary (based on various factors, including historical financial results and the overall health

of the investee), then a write-down would be recorded to estimated fair value.

See Note 5 for discussion of equity method

The Company uses the equity method of accounting

for its investment in, and earning or loss of, company that it does not control but over which it does exert significant influence.

Company considers whether the fair value of its equity method investment has declined below its carrying value whenever adverse events

or changes in circumstances indicate that recorded value may not be recoverable.

If the Company considers any decline to be other than

temporary (based on various factors, including historical financial results and the overall health of the investee), then a write-down

would be recorded to estimated fair value.

See Note 5 for discussion of equity method investment.

Revenue Recognition

The Company recognizes

revenue under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC

The core principle of this new revenue standard is that a company should recognize revenue to depict the transfer

of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled

in exchange for those goods or services.

revenue under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”).

The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services

to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or

The following five steps are applied to achieve that core principle:

Identify the contract with the customer

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to the performance obligations in the contract

Recognize revenue when the company satisfies a performance obligation

Identify the contract

with the customer

Identify the performance

obligations in the contract

Determine the transaction

Allocate the transaction

price to the performance obligations in the contract

Recognize revenue

when the company satisfies a performance obligation

In order to identify

the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract

and identify each promised goods or service that is distinct.

the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract and identify

each promised goods or service that is distinct.

A performance obligation meets ASC 606’s definition of a “distinct”

1 unchanged sentence

The customer can benefit

from the good or service either on its own or together with other resources that are

readily available to the customer (i.e., the good or service is capable of being distinct).

from the goods or service either on its own or together with other resources that are readily available to the customer (i.e., the

goods or service is capable of being distinct).

The entity’s promise

to transfer the good or service to the customer is separately identifiable from other

promises in the contract (i.e., the promise to transfer the good or service is distinct

within the context of the contract).

If a goods or

service is not distinct, the goods or service is combined with other promised goods or services until a bundle of goods or services

is identified that is distinct.

to transfer the goods or service to the customer is separately identifiable from other promises in the contract (i.e., the promise

to transfer the goods or service is distinct within the context of the contract).

If a goods or service

is not distinct, the goods or service is combined with other promised goods or services until a bundle of goods or services is identified

that is distinct.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 –

OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue Recognition

The transaction price is the amount of

consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer,

excluding amounts collected on behalf of third parties (for example, some sales taxes).

The consideration promised in a contract

with a customer may include fixed amounts, variable amounts, or both.

Variable consideration is included in the transaction price

only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur

when the uncertainty associated with the variable consideration is subsequently resolved.

The transaction price is allocated to

each performance obligation on a relative standalone selling price basis.

The transaction price allocated to each performance

obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

Types of revenue:

● Service fees under consulting

agreements with related parties to provide medical related consulting services to its

The Company is paid for its services by its clients pursuant to the terms of

the written consulting agreements.

Each contract calls for a fixed payment.

● Service fees under agreements

to perform development services for hospitals and other customers.

The Company does not

perform contracts that are contingent upon successful results.

● Sales of developed products

to hospitals and other customers.

Revenue recognition

● The Company recognizes revenue

by providing medical related consulting services under written service contracts with

its customers.

Revenue related to its service offerings is recognized as the services

are performed.

● Revenue from development

services performed under written contracts is recognized as services are provided.

● Revenue from sales of developed

items to hospitals and other customers is recognized when items are shipped to customers

and titles are transferred.

The Company has determined that the ASC

606 does not apply to rental contracts, which are within the scope of other revenue recognition accounting standards.

Rental income from operating leases is

recognized on a straight-line basis under the guidance of ASC 842.

Lease payments under tenant leases are recognized on a straight-line

basis over the term of the related leases.

The cumulative difference between lease revenue recognized under the straight-line

method and contractual lease payments are included in rent receivable on the consolidated balance sheets.

The Company does not offer promotional

payments, customer coupons, rebates or other cash redemption offers to its customers.

SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

Revenue Recognition (continued)

The transaction price is the amount of consideration

to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected

on behalf of third parties (for example, some sales taxes).

The consideration promised in a contract with a customer may include fixed

amounts, variable amounts, or both.

Variable consideration is included in the transaction price only to the extent that it is probable

that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable

consideration is subsequently resolved.

The transaction price is allocated to each performance

obligation on a relative standalone selling price basis.

The transaction price allocated to each performance obligation is recognized

when that performance obligation is satisfied, at a point in time or over time as appropriate.

The Company’s

revenues are derived from providing medial related consulting services for its’

related parties.

Revenues related to its service

offerings are recognized as the services are performed.

Any payments received in advance of the performance of services are recorded

as deferred revenue until such time as the services are performed.

The Company has determined that the ASC 606 does

not apply to rental contracts, which are within the scope of other revenue recognition accounting standards.

Rental income from operating leases is recognized

on a straight-line basis under the guidance of ASC 842.

Lease payments under tenant leases are recognized on a straight-line basis over

the term of the related leases.

The cumulative difference between lease revenue recognized under the straight-line method and contractual

lease payments are included in rent receivable on the condensed consolidated balance sheets.

The Company does not offer promotional payments,

customer coupons, rebates or other cash redemption offers to its customers.

Per Share Data

ASC Topic 260 “Earnings per Share,”

requires presentation of both basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator

and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation.

Basic EPS excludes

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock

were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of

requires presentation of both basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator and denominator

of the basic EPS computation to the numerator and denominator of the diluted EPS computation.

Basic EPS excludes dilution.

reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into

common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.

Basic net loss per share is computed by dividing

net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period.

net loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents

and potentially dilutive securities outstanding during each period.

For the three months ended March 31, 2021 and 2020, potentially dilutive

common shares consist of the common shares issuable upon the exercise of common stock options (using the treasury stock method).

stock equivalents are not included in the calculation of diluted net loss per share if their effect would be anti-dilutive.

in which the Company has a net loss, all potentially dilutive securities are excluded from the computation of diluted shares outstanding

as they would have had an anti-dilutive impact.

The following table summarizes the securities

that were excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive:

Three Months Ended

Stock options

Potentially dilutive securities

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 –

1 unchanged sentence

ACCOUNTING POLICIES (continued)

Per Share Data (continued)

Basic net loss per share are computed

by dividing net loss available to common stockholders by the weighted average number of shares of common stock outstanding during

Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of common stock,

common stock equivalents and potentially dilutive securities outstanding during each period.

Potentially dilutive common shares

consist of the common shares issuable upon the exercise of common stock options and warrants (using the treasury stock method).

Common stock equivalents are not included in the calculation of diluted net loss per share if their effect would be anti-dilutive.

In a period in which the Company has a net loss, all potentially dilutive securities are excluded from the computation of diluted

shares outstanding as they would have had an anti-dilutive impact.

The following table summarizes the securities

that were excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive:

Three Months Ended September 30,

Nine Months Ended September 30,

Stock options

Potentially dilutive securities

Segment Reporting

The Company uses “the management approach”

in determining reportable operating segments.

The management approach considers the internal organization and reporting used by the Company’s

chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s

reportable segments.

The Company’s chief operating decision maker is the Chief Executive Officer (“CEO”) and president

of the Company, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company.

The Company previously had three reportable business

real property operating segment, medical related consulting services segment, and development services and sales of developed

products segment.

Due to the winding down of the development services and sales of developed products segment in 2020, the Company no

longer has any material revenues or expenses in this segment.

As a result, commencing from the first quarter of 2021, the Company’s

chief operating decision maker no longer reviews development services and sales of developed products operating results and the Company

no longer reports in three segments.

During the three months ended March 31, 2021,

the Company operates through two business segments:

real property operating segment and medical related consulting services segment.

These reportable segments offer different types of services and products, have different types of revenue, and are managed separately

as each requires different operating strategies and management expertise.

Reclassification

Certain prior period amounts have been

reclassified to conform to the current period presentation.

These reclassifications have no effect on the previously reported

financial position, results of operations and cash flows.

Recent Accounting

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value

Measurement .

The objective of ASU 2018-13 is to improve the effectiveness of disclosures in the notes to the financial statements

by removing, modifying, and adding certain fair value disclosure requirements to facilitate clear communication of the information

required by generally accepted accounting principles.

The amendments are effective for all entities for fiscal years, and interim

periods within those fiscal years, beginning after December 15, 2019 with early adoption permitted upon issuance of this ASU.

Certain prior period amounts have been reclassified

to conform to the current period presentation.

These reclassifications have no effect on the previously reported financial position,

results of operations and cash flows.

Recent Accounting Standards

In June 2016, the FASB issued ASU 2016-13, Financial

Instruments - Credit Losses (“Topic 326”).

The ASU introduces a new accounting model, the Current Expected Credit Losses

model (“CECL”), which requires earlier recognition of credit losses and additional disclosures related to credit risk.

CECL model utilizes a lifetime expected credit loss measurement objective for the recognition of credit losses at the time the financial

asset is originated or acquired.

ASU 2016-13 is effective for annual period beginning after December 15, 2022, including interim reporting

periods within those annual reporting periods.

The Company expects that the adoption will not have a material impact on the Company’s

consolidated financial statements.

In December 2019, the FASB issued ASU 2019-12,

Simplifying the Accounting for Income Taxes , as part of its Simplification Initiative to reduce the cost and complexity in accounting

for income taxes.

This standard removes certain exceptions related to the approach for intra period tax allocation, the methodology for

calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences.

amends other aspects of the guidance to help simplify and promote consistent application of GAAP.

The guidance is effective for interim

and annual periods beginning after December 15, 2020, with early adoption permitted.

The adoption of ASU 2019 –

13 did not have a material impact on the Company’s consolidated financial statements.

In June 2016, the FASB issued ASU

2016-13, Financial Instruments - Credit Losses (“Topic 326”).

The ASU introduces a new accounting

model, the Current Expected Credit Losses model (“CECL”), which requires earlier recognition of credit

losses and additional disclosures related to credit risk.

The CECL model utilizes a lifetime expected credit loss measurement

objective for the recognition of credit losses at the time the financial asset is originated or acquired.

ASU 2016-13 is effective

for annual period beginning after December 15, 2022, including interim reporting periods within those annual reporting periods.

The Company expects that the adoption will not have a material impact on the Company’s consolidated financial statements.

Other accounting standards that have been

issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the

consolidated financial statements upon adoption.

The Company does not discuss recent pronouncements that are not anticipated to

have an impact on or are unrelated to its consolidated financial condition, results of operations, cash flows or disclosures.

12 did not have

a material impact on the Company’s consolidated financial statements.

Other accounting standards that have been issued

or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial

statements upon adoption.

The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated

to its consolidated financial condition, results of operations, cash flows or disclosures.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 –

EXPENSES AND OTHER CURRENT ASSETS

At September 30, 2020 and December

PREPAID EXPENSES

AND OTHER CURRENT ASSETS

At March 31, 2021 and December 31, 2020,

prepaid expenses and other current assets consisted of the following:

September 30,

Prepaid NASDAQ listing fee

Prepaid directors and officers liability insurance premium

Prepaid professional fees

Recoverable VAT

Deferred leasing costs

Prepaid research and development fees

Prepaid directors and officers liability insurance premium

Prepaid VAT on purchase

Security deposit

Prepaid NASDAQ listing fee

NOTE 5 –

METHOD INVESTMENT

As of September 30, 2020 and December

31, 2019, the equity method investment amounted to $488,374 and $483,101, respectively.

The investment represents the Company’s

subsidiary, Avalon Shanghai’s interest in Epicon Biotech Co., Ltd.

As of March 31, 2021 and December 31, 2020, the

equity method investment amounted to $532,199 and $521,758, respectively.

The investment represents the Company’s subsidiary, Avalon

Shanghai’s interest in Epicon Biotech Co., Ltd.

(“Epicon”).

Epicon was incorporated on August

14, 2018 in PRC.

Avalon Shanghai and the other unrelated company, Jiangsu Unicorn Biological Technology Co., Ltd.

(“Unicorn”),

accounted for 40% and 60% of the total ownership, respectively.

Epicon is focused on cell preparation, third party testing, biological

sample repository for commercial and scientific research purposes and the clinical transformation of scientific achievements.

The Company treats the equity investment

in the consolidated financial statements under the equity method.

Under the equity method, the investment is initially recorded

at cost, adjusted for any excess of the Company’s share of the incorporated-date fair values of the investee’s identifiable

net assets over the cost of the investment (if any).

Thereafter, the investment is adjusted for the post incorporation change

in the Company’s share of the investee’s net assets and any impairment loss relating to the investment.

For the three months ended September 30,

2020 and 2019, the Company’s share of Epicon’s net loss was $14,966 and $25,266, respectively, which was included

in loss from equity-method investment in the accompanying unaudited condensed consolidated statements of operations and comprehensive

For the nine months ended September 30, 2020 and 2019, the Company’s share of Epicon’s net loss was $35,382

and $48,353, respectively, which was included in loss from equity-method investment in the accompanying unaudited condensed consolidated

statements of operations and comprehensive loss.

Activity recorded for the Company’s equity

method investment in Epicon is summarized in the following table:

Epicon was incorporated on August 14, 2018 in PRC.

Shanghai and the other unrelated company, Jiangsu Unicorn Biological Technology Co., Ltd.

(“Unicorn”), accounted for 40%

and 60% of the total ownership, respectively.

Epicon is focused on cell preparation, third party testing, biological sample repository

for commercial and scientific research purposes and the clinical transformation of scientific achievements.

The Company treats the equity investment in the

consolidated financial statements under the equity method.

Under the equity method, the investment is initially recorded at cost, adjusted

for any excess of the Company’s share of the incorporated-date fair values of the investee’s identifiable net assets over

the cost of the investment (if any).

Thereafter, the investment is adjusted for the post incorporation change in the Company’s

share of the investee’s net assets and any impairment loss relating to the investment.

For the three months ended March 31, 2021 and

2020, the Company’s share of Epicon’s net loss was $18,514 and $9,084, respectively, which was included in loss from equity

method investment in the accompanying condensed consolidated statements of operations and comprehensive loss.

In the three months ended March 31, 2021, activity

recorded for the Company’s equity method investment in Epicon is summarized in the following table:

Equity investment carrying amount at January 1, 2021

2 unchanged sentences

Foreign currency fluctuation

Equity investment carrying amount at September 30, 2020

The tables below

present the summarized financial information, as provided to the Company by the investee, for the unconsolidated company:

September 30,

Current assets

Noncurrent assets

Current liabilities

Noncurrent liabilities

Equity investment carrying amount at March 31, 2021

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 –

METHOD INVESTMENT (continued)

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

The tables below present

the summarized financial information, as provided to the Company by the investee, for the unconsolidated company:

Current assets

Noncurrent assets

Current liabilities

Noncurrent liabilities

For the Three Months

Ended March 31,

Loss from operation

1 unchanged sentence

LIABILITIES AND OTHER PAYABLES

30, 2020 and December 31, 2019, accrued liabilities and other payables consisted of the following:

September 30,

At March 31, 2021 and

December 31, 2020, accrued liabilities and other payables consisted of the following:

Accrued professional fees

Accrued research and development fees

Accrued payroll liability

Accrued directors’

Accrued payroll liability and directors’

Accrued tenants’

improvement reimbursement

Tenants’

security deposit

Accounts payable

Accrued utilities

Deferred rental income

NOTE 7 –

PARTY TRANSACTIONS

Medical Related Consulting Services

Revenue from Related Parties and Accounts Receivable –

Related Party

During the three and nine months ended

September 30, 2020 and 2019, medical related consulting services revenue from related parties was as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

Medical related consulting services provided to:

Beijing Daopei *

Shanghai Daopei *

Hebei Daopei *

* Beijing Daopei, Shanghai Daopei, and Hebei Daopei are subsidiaries

of an entity whose chairman is Wenzhao Lu, the largest shareholder of the Company.

Accounts receivable –

related party

at September 30, 2020 and December 31, 2019 amounted to $0 and $215,418, respectively, and no allowance for doubtful accounts

is deemed to be required on accounts receivable –

related party at September 30, 2020 and December 31, 2019.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 7 –

PARTY TRANSACTIONS (continued)

Accrued Liabilities and Other Payables

Related Parties

As of September 30, 2020 and December

31, 2019, the Company owed David Jin, its shareholder, chief executive officer, president and board member, $33,968 and $24,254,

respectively, for travel and other miscellaneous reimbursements, which have been included in accrued liabilities and other payables

related parties on the accompanying consolidated balance sheets.

As of September 30, 2020 and December

31, 2019, the Company owed Meng Li, its shareholder and chief operating officer, $0 and $10,473, respectively, for travel and

other miscellaneous reimbursements, which have been included in accrued liabilities and other payables –

RELATED PARTY TRANSACTIONS

Accrued Liabilities and Other Payables –

Related Parties

on the accompanying consolidated balance sheets.

At September 30, 2020 and December

31, 2019, the Company owed Yu Zhou, director and former co-chief executive officer and 40% owner of Genexosome, of $3,121 for

travel and other miscellaneous reimbursements, which have been included in accrued liabilities and other payables –

parties on the accompanying consolidated balance sheets.

The Company acquired Beijing Genexosome

for a cash payment of $450,000.

As of September 30, 2020 and December 31, 2019, the unpaid acquisition consideration of $100,000,

was payable to Yu Zhou, director and former co-chief executive officer and 40% owner of Genexosome, and has been included in accrued

liabilities and other payables –

related parties on the accompanying consolidated balance sheets.

As of September 30, 2020 and December

31, 2019, the accrued and unpaid interest related to borrowings from Wenzhao Lu, the Company’s largest shareholder and chairman

of the Board of Directors, amounted to $125,363 and $49,194, respectively, and have been included in accrued liabilities and other

payables –

related parties on the accompanying consolidated balance sheets.

The Company acquired Beijing Genexosome for a

cash payment of $450,000.

As of March 31, 2021 and December 31, 2020, the unpaid acquisition consideration of $100,000, was payable to

Yu Zhou, former director and former co-chief executive officer and 40% owner of Genexosome, and has been included in accrued liabilities

and other payables –

related parties on the accompanying condensed consolidated balance sheets.

As of March 31, 2021 and December 31, 2020, the

accrued and unpaid interest related to borrowings from Wenzhao Lu, the Company’s largest shareholder and chairman of the Board

of Directors, amounted to $213,105 and $167,956, respectively, and have been included in accrued liabilities and other payables –

related parties on the accompanying condensed consolidated balance sheets.

Borrowings from Related Party

Promissory Note

2019, the Company issued Wenzhao Lu, the Company’s largest shareholder and Chairman of the Board of Directors, a Promissory

Note in the principal amount of $1,000,000 (“Promissory Note”) in consideration of cash in the amount of $1,000,000.

The Promissory Note accrues interest at the rate of 5% per annum and matures March 19, 2022.

The Company repaid principal of $410,000

and $200,000 in the third quarter of 2019 and second quarter of 2020, respectively.

As of September 30, 2020 and December

31, 2019, the outstanding principal balance was $390,000 and $590,000, respectively.

Line of Credit

On August 29, 2019, the Company entered

into a Line of Credit Agreement (the “Line of Credit Agreement”) providing the Company with a $20 million line

of credit (the “Line of Credit”) from Wenzhao Lu (the “Lender”), the largest shareholder and Chairman

of the Board of Directors of the Company.

The Line of Credit allows the Company to request loans thereunder and to use the proceeds

of such loans for working capital and operating expense purposes until the facility matures on December 31, 2024.

The loans are

unsecured and are not convertible into equity of the Company.

Loans drawn under the Line of Credit bears interest at an annual

rate of 5% and each individual loan will be payable three years from the date of issuance.

The Company has a right to draw down

on the line of credit and not at the discretion of the related party Lender.

The Company may, at its option, prepay any borrowings

under the Line of Credit, in whole or in part at any time prior to maturity, without premium or penalty.

The Line of Credit

Agreement includes customary events of default.

If any such event of default occurs, the Lender may declare all outstanding loans

under the Line of Credit to be due and payable immediately.

As of September 30, 2020 and December 31, 2019, $2,900,000 and

$2,600,000 was outstanding under the Line of Credit, respectively.

For the three months ended September 30,

2020 and 2019, the interest expense related to above borrowings amounted to $41,531 and $8,842, respectively, and has been included

in interest expense –

related party on the accompanying unaudited condensed consolidated statements of operations and comprehensive

For the nine months ended September 30, 2020 and 2019, the interest expense related to above borrowings amounted to $126,169

and $23,425, respectively, and has been included in interest expense –

related party on the accompanying unaudited condensed

consolidated statements of operations and comprehensive loss.

On March 18, 2019, the

Company issued Wenzhao Lu, the Company’s largest shareholder and Chairman of the Board of Directors, a Promissory Note in the principal

amount of $1,000,000 (“Promissory Note”) in consideration of cash in the amount of $1,000,000.

The Promissory Note accrues

interest at the rate of 5% per annum and matures March 19, 2022.

The Company repaid principal of $410,000 and $200,000 in the third quarter

of 2019 and second quarter of 2020, respectively.

As of both March 31, 2021 and December 31, 2020, the outstanding principal balance

was $390,000.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 –

PARTY TRANSACTIONS (continued)

RELATED PARTY TRANSACTIONS (continued)

Borrowings from Related Party (continued)

Line of Credit (continued)

As of September 30, 2020 and December

31, 2019, the related accrued and unpaid interest for above borrowings was $125,363 and $49,194, respectively, and has been included

in accrued liabilities and other payables –

Line of Credit

On August 29, 2019, the Company entered into

a Line of Credit Agreement (the “Line of Credit Agreement”) providing the Company with a $20 million line of credit (the

“Line of Credit”) from Wenzhao Lu (the “Lender”), the largest shareholder and Chairman of the Board of Directors

of the Company.

The Line of Credit allows the Company to request loans thereunder and to use the proceeds of such loans for working capital

and operating expense purposes until the facility matures on December 31, 2024.

The loans are unsecured and are not convertible into

equity of the Company.

Loans drawn under the Line of Credit bears interest at an annual rate of 5% and each individual loan will be payable

three years from the date of issuance.

The Company has a right to draw down on the line of credit and not at the discretion of the related

party Lender.

The Company may, at its option, prepay any borrowings under the Line of Credit, in whole or in part at any time prior to

maturity, without premium or penalty.

The Line of Credit Agreement includes customary events of default.

If any such event of default

occurs, the Lender may declare all outstanding loans under the Line of Credit to be due and payable immediately.

As of March 31, 2021

and December 31, 2020, $3,305,249 and $3,200,000 was outstanding under the Line of Credit, respectively.

For the three months ended March 31, 2021 and

2020, the interest expense related to above borrowings amounted to $45,149 and $42,169, respectively, and has been included in interest

expense –

related party on the accompanying condensed consolidated statements of operations and comprehensive loss.

As of March 31, 2021

and December 31, 2020, the related accrued and unpaid interest for above borrowings was $213,105 and $167,956, respectively, and has

been included in accrued liabilities and other payables –

related parties on the accompanying condensed consolidated balance sheets.

Common Shares

Sold to Related Party

On April 1, 2020, the Company sold 645,161

shares of its common stock to WLM Limited (“WLM”), an entity owned by Wenzhao Lu, Chairman of the Board of Directors

of the Company, at a price per share of $1.55 for an aggregate purchase price of $1,000,000 (See Note 8 –

Common Shares

Sold for Cash).

from Related Party

Beijing Genexosome

uses office space of a related party, free of rent, which is considered immaterial.

Office Space from

Related Party

Beijing Genexosome uses

office space of a related party, free of rent, which is considered immaterial.

NOTE 8 –

2020 Incentive

Company held its annual meeting on August 4, 2020.

During its annual meeting, the Company approved 2020 Incentive Stock Plan and

reserved 5,000,000 shares of common stock for issuance thereunder.

Common Shares

Sold for Cash

On April 1, 2020, the Company entered

into a Subscription Agreement with WLM, an entity owned by Wenzhao Lu, Chairman of the Board of Directors of the Company, pursuant

to which WLM purchased 645,161 shares of the Company’s common stock at a price per share of $1.55 for an aggregate purchase

price of $1,000,000.

The closing occurred on April 1, 2020.

On December 13, 2019, the Company

entered into an Open Market Sale Agreement SM (the “Sales Agreement”) with Jefferies LLC, as sales

agent (“Jefferies”), pursuant to which the Company may offer and sell, from time to time, through Jefferies, shares

of its common stock, par value $0.0001 per share, having an aggregate offering price of up to $20.0 million.

On April 6, 2020,

the date on which the Company filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2019,

the Company’s registration statement became subject to the offering limits set forth in General Instruction I.B.6 of Form S-3.

the nine months ended September 30, 2020, Jefferies sold an aggregate of 3,468,315 shares of common stock at an average price

of $1.80 per share to investors.

2020 Incentive Stock

The Company held its

annual meeting on August 4, 2020.

During its annual meeting, the Company approved 2020 Incentive Stock Plan and reserved 5,000,000 shares

of common stock for issuance thereunder.

Common Shares Sold

On December 13, 2019, the Company entered into

an Open Market Sale Agreement SM (the “Sales Agreement”) with Jefferies LLC, as sales agent (“Jefferies”),

pursuant to which the Company may offer and sell, from time to time, through Jefferies, shares of its common stock.

During the three

months ended March 31, 2021, Jefferies sold an aggregate of 1,848,267 shares of common stock at an average price of $1.34 per share to

The Company recorded net proceeds of $2,337,259, net of commission and other offering costs of $144,146.

Common Shares

Issued for Services

During the nine months ended September

30, 2020, the Company issued a total of 1,032,577 shares of its common stock for services rendered and to be rendered.

were valued at $1,309,480, the fair market values on the grant dates using the reported closing share prices on the dates of grant

and the Company recorded stock-based compensation expense of $1,248,159 for the nine months ended September 30, 2020 and reduced

accrued liabilities of $35,325 and recorded prepaid expense of $25,996 as of September 30, 2020 which will be amortized over the

rest of corresponding service periods.

Common Shares Issued

During the three months ended March 31, 2021,

the Company issued a total of 300,000 shares of its common stock for services rendered.

These shares were valued at $360,000, the fair

market values on the grant dates using the reported closing share prices on the dates of grant and the Company recorded stock-based compensation

expense of $98,968 for the three months ended March 31, 2021 and reduced accrued liabilities of $261,032.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 –

The following table summarizes the shares

of the Company’s common stock issuable upon exercise of options outstanding at September 30, 2020:

The following table summarizes the shares of

the Company’s common stock issuable upon exercise of options outstanding at March 31, 2021:

Options Outstanding

Options Exercisable

Range of Exercise Price

Number Outstanding at September 30, 2020

Weighted Average Remaining Contractual Life

Weighted Average Exercise Price

Number Exercisable at September 30,

Weighted Average Exercise

activities for the nine months ended September 30, 2020 were as follows:

Number of Options

Weighted Average Exercise Price

Outstanding at

Weighted Average

Contractual Life

Exercisable at

$ 0.50 –

Stock option activities

for the three months ended March 31, 2021 were as follows:

Exercise Price

Outstanding at January 1, 2021

Terminated / Exercised

Outstanding at September 30, 2020

Options exercisable at September 30, 2020

Terminated / Exercised / Expired

Outstanding at March 31, 2021

Options exercisable at March 31, 2021

Options expected to vest

The aggregate intrinsic values of both

stock options outstanding and stock options exercisable at September 30, 2020 was $1,597,500.

The fair values of options granted during

the nine months ended September 30, 2020 were estimated at the date of grant using the Black-Scholes option-pricing model with

the following assumptions:

The aggregate intrinsic value of both stock options

outstanding and stock options exercisable at March 31, 2021 was $1,161,700.

The fair values of options granted during the

three months ended March 31, 2021 were estimated at the date of grant using the Black-Scholes option-pricing model with the following

volatility of 128.42%, risk-free rate of 0.36%, annual dividend yield of 0% and expected life of 5.00 years.

The aggregate

fair value of the options granted during the three months ended March 31, 2021 was $419,020.

The fair values of options

granted during the three months ended March 31, 2020 were estimated at the date of grant using the Black-Scholes option-pricing model

with the following assumptions:

volatility of 137.42% - 139.58%, risk-free rate of 1.39% - 1.67%, annual dividend yield of 0% and expected

life of 5.00 –

The aggregate fair value of the options granted during the nine months ended September 30, 2020

was $2,702,401.

Stock-based compensation expense associated

with stock options granted amounted to $739,362 and $1,916,193, of which, $605,555 and $1,803,829 was recorded as compensation

and related benefits, $110,970 and $112,364 was recorded as professional fees, $22,837 and $0 was recorded as research and development

expenses, for the three months ended September 30, 2020 and 2019, respectively.

Stock-based compensation expense associated

with stock options granted amounted to $2,251,312 and $5,713,079, of which, $1,975,245 and $5,155,983 was recorded as compensation

and related benefits, $240,162 and $557,096 was recorded as professional fees, $35,905 and $0 was recorded as research and development

expenses, for the nine months ended September 30, 2020 and 2019, respectively.

A summary of the status of the Company’s

nonvested stock options granted as of September 30, 2020 and changes during the nine months ended September 30, 2020 is presented

Number of Options

Weighted Average Exercise Price

Nonvested at January 1, 2020

Nonvested at September 30, 2020

The aggregate fair value of the options granted during the three months ended March 31, 2020 was $2,422,225.

For the three months ended March 31, 2021 and

2020, stock-based compensation expense associated with stock options granted amounted to $202,505 and $785,350, respectively, of which,

$139,507 and $674,998 was recorded as compensation and related benefits, $43,443 and $103,818 was recorded as professional fees, and

$19,555 and $6,534 was recorded as research and development expenses, respectively.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 –

Options (continued)

A summary of the status of the Company’s

nonvested stock options granted as of March 31, 2021 and changes during the three months ended March 31, 2021 is presented below:

Nonvested at January 1, 2021

Nonvested at March 31, 2021

NOTE 9 - STATUTORY

Avalon Shanghai and Beijing Genexosome

operate in the PRC, are required to reserve 10% of their net profit after income tax, as determined in accordance with the PRC

accounting rules and regulations.

Appropriation to the statutory reserve by the Company is based on profit arrived at under PRC

accounting standards for business enterprises for each year.

The profit arrived at must be set

off against any accumulated losses sustained by the Company in prior years, before allocation is made to the statutory reserve.

Appropriation to the statutory reserve must be made before distribution of dividends to shareholders.

The appropriation is required

until the statutory reserve reaches 50% of the registered capital.

This statutory reserve is not distributable in the form of

cash dividends.

The Company did not make any appropriation to statutory reserve for Avalon Shanghai and Beijing Genexosome during

the nine months ended September 30, 2020 as they incurred net losses in the period.

Avalon Shanghai and Beijing Genexosome operate

in the PRC, are required to reserve 10% of their net profit after income tax, as determined in accordance with the PRC accounting rules

and regulations.

Appropriation to the statutory reserve by the Company is based on profit arrived at under PRC accounting standards for

business enterprises for each year.

The profit arrived at must be set off against

any accumulated losses sustained by the Company in prior years, before allocation is made to the statutory reserve.

Appropriation to

the statutory reserve must be made before distribution of dividends to shareholders.

The appropriation is required until the statutory

reserve reaches 50% of the registered capital.

This statutory reserve is not distributable in the form of cash dividends.

did not make any appropriation to statutory reserve for Avalon Shanghai and Beijing Genexosome during the three months ended March 31,

2021 and 2020 as they incurred net losses in these periods.

NOTE 10 –

RESTRICTED NET ASSETS

A portion of the Company’s operations

are conducted through its PRC subsidiaries, which can only pay dividends out of their retained earnings determined in accordance

with the accounting standards and regulations in the PRC and after they have met the PRC requirements for appropriation to statutory

In addition, a portion of the Company’s businesses and assets are denominated in RMB, which is not freely convertible

into foreign currencies.

All foreign exchange transactions take place either through the People’s Bank of China or other

banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China.

of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment

application form together with suppliers’

A portion of the Company’s operations are

conducted through its PRC subsidiaries, which can only pay dividends out of their retained earnings determined in accordance with the

accounting standards and regulations in the PRC and after they have met the PRC requirements for appropriation to statutory reserve.

In addition, a portion of the Company’s businesses and assets are denominated in RMB, which is not freely convertible into foreign

All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to

buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China.

Approval of foreign currency payments

by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with suppliers’

invoices, shipping documents and signed contracts.

These currency exchange control

procedures imposed by the PRC government authorities may restrict the ability of the Company’s PRC subsidiaries to transfer

their net assets to the Parent Company through loans, advances or cash dividends.

Schedule I of Article 5-04 of Regulation

S-X requires the condensed financial information of the parent company to be filed when the restricted net assets of consolidated

subsidiaries exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year.

of this test, restricted net assets of consolidated subsidiaries shall mean that amount of the registrant’s proportionate

share of net assets of its consolidated subsidiaries (after intercompany eliminations) which as of the end of the most recent

fiscal year may not be transferred to the parent company in the form of loans, advances or cash dividends without the consent

of a third party.

These currency exchange control procedures imposed by the PRC government authorities

may restrict the ability of the Company’s PRC subsidiaries to transfer their net assets to the Parent Company through loans, advances

or cash dividends.

Schedule I of Article 5-04 of Regulation S-X

requires the condensed financial information of the parent company to be filed when the restricted net assets of consolidated subsidiaries

exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year.

For purposes of this test, restricted

net assets of consolidated subsidiaries shall mean that amount of the registrant’s proportionate share of net assets of its consolidated

subsidiaries (after intercompany eliminations) which as of the end of the most recent fiscal year may not be transferred to the parent

company in the form of loans, advances or cash dividends without the consent of a third party.

The Company’s PRC subsidiaries’

net assets as of September 30, 2020 and December 31, 2019 did not exceed 25% of the Company’s consolidated net assets.

the Parent Company’s condensed consolidated financial statements have not been required in accordance with Rule 5-04 and

Rule 12-04 of SEC Regulation S-X.

assets as of March 31, 2021 and December 31, 2020 did not exceed 25% of the Company’s consolidated net assets.

Accordingly, the

Parent Company’s condensed consolidated financial statements have not been required in accordance with Rule 5-04 and Rule 12-04

of SEC Regulation S-X.

NOTE 11 - CONCENTRATIONS

The following table sets forth information

as to each customer that accounted for 10% or more of the Company’s revenues for the three and nine months ended September

30, 2020 and 2019.

Three Months Ended September 30,

Nine Months Ended September 30,

A (Hebei Daopei, a related party)

The following table sets forth information as

to each customer that accounted for 10% or more of the Company’s revenues for the three months ended March 31, 2021 and 2020.

Three Months Ended

* Less than 10%

Two customers, whose outstanding receivable

accounted for 10% or more of the Company’s total outstanding accounts receivable, accounts receivable –

related party,

and rent receivable at September 30, 2020, accounted for 62.6% of the Company’s total outstanding accounts receivable, accounts

receivable –

related party, and rent receivable at September 30, 2020.

One customer, whose outstanding receivable accounted

for 10% or more of the Company’s total outstanding accounts receivable, accounts receivable –

related party, and rent receivable

at March 31, 2021, accounted for 70.3% of the Company’s total outstanding accounts receivable, accounts receivable –

party, and rent receivable at March 31, 2021.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 –

CONCENTRATIONS

CONCENTRATIONS (continued)

Customers (continued)

Two customers, whose outstanding receivable

accounted for 10% or more of the Company’s total outstanding accounts receivable, accounts receivable –

related party,

and rent receivable at December 31, 2019, accounted for 93.0% of the Company’s total outstanding accounts receivable, accounts

receivable –

Two customers, whose

outstanding receivable accounted for 10% or more of the Company’s total outstanding accounts receivable, accounts receivable –

related party, and rent receivable at December 31, 2020, accounted for 78.3% of the Company’s total outstanding accounts receivable,

accounts receivable –

related party, and rent receivable at December 31, 2020.

No supplier accounted for 10% or more

of the Company’s purchase during the three and nine months ended September 30, 2020 and 2019.

One supplier, whose outstanding payable

accounted for 10% or more of the Company’s total outstanding accounts payable at September 30, 2020, accounted for 93.6%

of the Company’s total outstanding accounts payable at September 30, 2020.

One supplier, whose outstanding payable

accounted for 10% or more of the Company’s total outstanding accounts payable at December 31, 2019, accounted for 90.8%

of the Company’s total outstanding accounts payable at December 31, 2019.

No supplier accounted for 10% or more of the

Company’s purchase during the three months ended March 31, 2021 and 2020.

One supplier, whose outstanding payable accounted

for 10% or more of the Company’s total outstanding accounts payable at March 31, 2021, accounted for 90.2% of the Company’s

total outstanding accounts payable at March 31, 2021.

One supplier, whose outstanding payable accounted

for 10% or more of the Company’s total outstanding accounts payable at December 31, 2020, accounted for 93.6% of the Company’s

total outstanding accounts payable at December 31, 2020.

NOTE 12 –

For the three and nine months ended September

30, 2020 and 2019, the Company operated in three reportable business segments - (1) the real property operating segment, (2) the

medical related consulting services segment, and (3) the performing development services for hospitals and other customers and

sales of developed products to hospitals and other customers segment.

The Company’s reportable segments are strategic business

units that offer different services and products.

They are managed separately based on the fundamental differences in their operations.

Information with respect to these reportable business segments for the three and nine months ended September 30, 2020 and 2019

was as follows:

For the three months ended March 31, 2020, the

Company operated in three reportable business segments - (1) the real property operating segment, (2) the medical related consulting

services segment, and (3) the performing development services for hospitals and other customers and sales of developed products to hospitals

and other customers segment.

Due to the winding down of the development services

and sales of developed products segment in 2020, the Company no longer has any material revenues or expenses in this segment.

a result, commencing from the first quarter of 2021, the Company’s chief operating decision maker no longer reviews development

services and sales of developed products operating results.

For the three months ended March 31, 2021, the

Company operated in two reportable business segments - (1) the real property operating segment, and (2) the medical related consulting

services segment.

The Company’s reportable segments are strategic

business units that offer different services and products.

They are managed separately based on the fundamental differences in their

Information with respect to these reportable business segments for the three months ended March 31, 2021 and 2020 was as

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 –

INFORMATION (continued)

SEGMENT INFORMATION

Three Months Ended

September 30,

Nine Months Ended

September 30,

Real property operations

Medical related consulting services - related party

Development services and sales of developed products

Costs and expenses

Real property operations

Medical related consulting services - related party

Development services and sales of developed products

Gross profit (loss)

Real property operations

Medical related consulting services - related party

Development services and sales of developed products

Other operating expenses

Real property operations

Medical related consulting services - related party

Medical related consulting services

Development services and sales of developed products

2 unchanged sentences

Interest expense

Real property operations

Corporate/Other

1 unchanged sentence

Real property operations

Medical related consulting services - related party

Medical related consulting services

Development services and sales of developed products

Corporate/Other

Total other income (expense)

Net income (loss)

Total other expense, net

Real property operations

Medical related consulting services - related party

Medical related consulting services

Development services and sales of developed products

Corporate/Other

(11,085,274 )

$ (3,251,959 )

$ (4,334,058 )

$ (9,579,122 )

$ (13,277,810 )

Identifiable long-lived tangible assets at

March 31, 2021 and December 31,

Real property operations

Medical related consulting services

Development services and sales of developed products

Corporate/Other

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 –

INFORMATION (continued)

Identifiable long-lived tangible assets at September 30, 2020 and December 31, 2019

September 30,

Real property operating

Medical related consulting services

Development services and sales of developed products

Identifiable long-lived tangible assets at September 30, 2020 and December

September 30,

SEGMENT INFORMATION

Identifiable long-lived tangible assets at

March 31, 2021 and December 31,

United States

1 unchanged sentence

AND CONTINGENCIES

From time to time, the Company is subject

to ordinary routine litigation incidental to its normal business operations.

The Company is not currently a party to, and its

property is not subject to, any material legal proceedings, except as set forth below.

On October 25, 2017, Genexosome entered

into and closed a Stock Purchase Agreement with Beijing Genexosome and Yu Zhou, MD, PhD, the sole shareholder of Beijing Genexosome,

pursuant to which Genexosome acquired all of the issued and outstanding securities of Beijing Genexosome in consideration of a

cash payment in the amount of $450,000, of which $100,000 is still owed.

Further, on October 25, 2017, Genexosome entered into

and closed an Asset Purchase Agreement with Dr.

Zhou, pursuant to which the Company acquired all assets, including all intellectual

property and exosome separation systems, held by Dr.

Zhou pertaining to the business of researching, developing and commercializing

exosome technologies.

In consideration of the assets, Genexosome paid Dr.

Zhou $876,087 in cash, transferred 500,000 shares of

common stock of the Company to Dr.

From time to time, the Company is subject to

ordinary routine litigation incidental to its normal business operations.

The Company is not currently a party to, and its property is

not subject to, any material legal proceedings, except as set forth below.

On October 25, 2017, Genexosome entered into and closed

a Stock Purchase Agreement with Beijing Genexosome and Yu Zhou, MD, PhD, the sole shareholder of Beijing Genexosome, pursuant to which

Genexosome acquired all of the issued and outstanding securities of Beijing Genexosome in consideration of a cash payment in the amount

of $450,000, of which $100,000 is still owed.

Further, on October 25, 2017, Genexosome entered into and closed an Asset Purchase Agreement

Zhou, pursuant to which the Company acquired all assets, including all intellectual property and exosome separation systems,

Zhou pertaining to the business of researching, developing and commercializing exosome technologies.

In consideration of the

assets, Genexosome paid Dr.

Zhou $876,087 in cash, transferred 500,000 shares of common stock of the Company to Dr.

Zhou and issued Dr.

Zhou 400 shares of common stock of Genexosome.

Company had not been able to realize the financial projections provided by Dr.

Zhou at the time of the acquisition and has decided

to impair the intangible asset associated with this acquisition to zero.

Zhou was terminated as Co-CEO of Genexosome

on August 14, 2019.

Further, on October 28, 2019, Research Institute at Nationwide Children’s Hospital (“Research

Institute”) filed a Complaint in the United States District Court for the Southern District of Ohio Eastern Division against

Zhou, Li Chen, the Company and Genexosome with various claims against the Company and Genexosome including misappropriation

of trade secrets in violation of the Defend Trade Secrets Act of 2016 and violation of Ohio Uniform Trade Secrets Act.

Institute is seeking monetary damages, injunctive relief, exemplary damages, injunctive relief and other equitable relief.

Company intends to vigorously defend against this action and pursue all available legal remedies.

The civil case against

Avalon is stayed pending resolution of the criminal proceedings against Dr.

Zhou and Li Chen, and while there can be no assurances,

the Company believes it has substantial legal and factual defenses to the Research Institute’s claims and the likelihood

of any findings of liability for the Company cannot be assessed at this time.

Operating Leases

Avalon Shanghai Office Lease

On February 24, 2020, Avalon Shanghai

entered into a lease for office space in Beijing, China, with a third party (the “Beijing Office Lease”).

to the Beijing Office Lease, the monthly rent is RMB 50,586 (approximately $7,000) with a required security deposit of RMB 164,764

(approximately $24,000).

In addition, Avalon Shanghai needs to pay monthly maintenance fees of RMB 4,336 (approximately $600).

The term of the Beijing Office Lease is 12 months commencing on March 1, 2020 and expires on February 28, 2021.

For the three

and nine months ended September 30, 2020, rent expense and maintenance fees related to the Beijing Office Lease amounted to approximately

$36,000 and $67,000, respectively.

As of September 30, 2020, the future minimum rental payment required under this Beijing Office

Lease is $40,438.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 13 –

AND CONTINGENCIES (continued)

Operating Leases (continued)

Operating Lease for General Business

In December 2019, the Company entered

into a lease in New York, U.S., with a third party (the “New York Lease”).

Pursuant to the New York Lease, the monthly

rent is $6,000.

The term of the New York Lease is 3 years commencing on January 1, 2020 and expires on December 31, 2022.

the three and nine months ended September 30, 2020, rent expense related to the New York Lease amounted to $18,000 and $54,000,

respectively.

Operating lease right-of-use asset related

to the New York Lease is included in “Right-of-use asset, operating lease”

and is included in the accompanying

consolidated balance sheets.

With respect to lease liability, operating lease liability is included in “Operating lease

obligation”

and “Operating lease obligation –

noncurrent portion,”

in the accompanying consolidated balance

The Company’s leases as of December 31, 2019 did not meet the requirements to be recorded as a right-of-use asset

and operating lease obligation as they were immaterial and less than 12 months in term.

Supplemental cash flow information related

to the New York lease for the nine months ended September 30, 2020 is as follows:

Further, the Company had not been able to realize the financial projections provided by

Zhou at the time of the acquisition and has decided to impair the intangible asset associated with this acquisition to zero on September

Zhou was terminated as Co-CEO of Genexosome on August 14, 2019.

Further, on October 28, 2019, Research Institute at Nationwide

Children’s Hospital (“Research Institute”) filed a Complaint in the United States District Court for the Southern District

of Ohio Eastern Division against Dr.

Zhou, Li Chen, the Company and Genexosome with various claims against the Company and Genexosome

including misappropriation of trade secrets in violation of the Defend Trade Secrets Act of 2016 and violation of Ohio Uniform Trade Secrets

Research Institute is seeking monetary damages, injunctive relief, exemplary damages, injunctive relief and other equitable relief.

The Company intends to vigorously defend against this action and pursue all available legal remedies.

The civil case against Avalon is

stayed pending resolution of the criminal proceedings against Dr.

Zhou and Li Chen, and while there can be no assurances, the Company

believes it has substantial legal and factual defenses to the Research Institute’s claims and the likelihood of any findings of

liability for the Company cannot be assessed at this time.

Operating Leases Commitment

The Company is a party

to leases for office space.

Rent expense under all operating leases amounted to approximately $39,000 for both the three months ended

March 31, 2021 and 2020.

Supplemental cash flow information related to

leases for the three months ended March 31, 2021 and 2020 is as follows:

Three Month Ended

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows paid for operating lease

Right-of-use asset obtained in exchange for lease obligation:

Right-of-use assets obtained in exchange for lease obligation:

Operating lease

Supplemental balance sheet information related to the New York

Lease as of September 30, 2020 is as follows:

The following table summarizes the lease term

and discount rate for the Company’s operating lease as of March 31, 2021:

Operating Lease

Operating lease right-of-use asset

Current portion of operating lease liability

Long-term operating lease liability

Total operating lease liability

Weighted average remaining lease term (in years)

Operating lease

Weighted average discount rate

Operating lease

The following table summarizes the maturity of lease liability

under the New York Lease as of September 30, 2020:

For the Year Ending September 30:

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 –

AND CONTINCENGIES (continued)

Operating Leases Commitment (continued)

The following table summarizes the maturity of lease liabilities under

operating lease as of March 31, 2021:

For the Twelve-month Period Ending March

Operating Lease

2 unchanged sentences

Amount of lease payments representing interest

Total present value of operating lease liability

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTE 13 –

AND CONTINGENCIES (continued)

Total present value of operating lease liabilities

Current portion

Long-term portion

Equity Investment Commitment

On May 29, 2018, Avalon Shanghai entered

into a Joint Venture Agreement with Jiangsu Unicorn Biological Technology Co., Ltd.

(“Unicorn”), pursuant to which

a company named Epicon Biotech Co., Ltd.

On May 29, 2018, Avalon Shanghai entered into

a Joint Venture Agreement with Jiangsu Unicorn Biological Technology Co., Ltd.

(“Unicorn”), pursuant to which a company named

Epicon Biotech Co., Ltd.

(“Epicon”) was formed on August 14, 2018.

Epicon is owned 60% by Unicorn

and 40% by Avalon Shanghai.

Within five years of execution of the Joint Venture Agreement, Unicorn shall invest cash into Epicon

in an amount not less than RMB 8,000,000 (approximately $1.2 million) and the premises of the laboratories of Nanjing Hospital

of Chinese Medicine for exclusive use by Epicon, and Avalon Shanghai shall invest cash into Epicon in an amount not less than

RMB 10,000,000 (approximately $1.5 million).

Epicon is focused on cell preparation, third party testing, biological sample repository

for commercial and scientific research purposes and the clinical transformation of scientific achievements.

As of September 30,

2020, Avalon Shanghai has contributed RMB 4,300,000 (approximately $0.6 million) that was included in equity method investment

on the accompanying consolidated balance sheets.

Avalon Shanghai intends to use its present working capital together with borrowings

from related party and equity raises to fund the project cost.

Epicon is owned 60% by Unicorn and 40% by Avalon Shanghai.

Within five years of execution of the Joint Venture Agreement, Unicorn shall invest cash into Epicon in an amount not less than RMB 8,000,000

(approximately $1.2 million) and the premises of the laboratories of Nanjing Hospital of Chinese Medicine for exclusive use by Epicon,

and Avalon Shanghai shall invest cash into Epicon in an amount not less than RMB 10,000,000 (approximately $1.5 million).

Epicon is focused

on cell preparation, third party testing, biological sample repository for commercial and scientific research purposes and the clinical

transformation of scientific achievements.

As of March 31, 2021, Avalon Shanghai has contributed RMB 4,700,000 (approximately $0.7 million)

that was included in equity method investment on the accompanying condensed consolidated balance sheets.

The Company intends to use its

present working capital together with borrowings from related party and equity raises to fund the project cost.

Joint Venture –

AVAR BioTherapeutics (China) Co.

On October 23, 2018, Avactis Biosciences,

(“Avactis”), a wholly-owned subsidiary of the Company, and Arbele Limited (“Arbele”) agreed to the

establishment of AVAR BioTherapeutics (China) Co.

(“AVAR”), a Sino-foreign equity joint venture, pursuant to

an Equity Joint Venture Agreement (the “AVAR Agreement”), which will be owned 60% by Avactis and 40% by Arbele.

purpose and business scope of the Joint Venture is to research, develop, produce, sell, distribute and generally commercialize

CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy in China.

Avactis is required to contribute $10 million (or equivalent in

RMB) in cash and/or services, which shall be contributed in tranches based on milestones to be determined jointly by AVAR and

Avactis in writing subject to Avactis’

AVAR BioTherapeutics

On October 23, 2018, Avactis Biosciences, Inc.

(“Avactis”), a wholly-owned subsidiary of the Company, and Arbele Limited (“Arbele”) agreed to the establishment

of AVAR BioTherapeutics (China) Co.

(“AVAR”), a Sino-foreign equity joint venture, pursuant to an Equity Joint Venture

Agreement (the “AVAR Agreement”), which will be owned 60% by Avactis and 40% by Arbele.

The purpose and business scope of

the Joint Venture is to research, develop, produce, sell, distribute and generally commercialize CAR-T/CAR-NK/TCR-T/universal cellular

immunotherapy in China.

Avactis is required to contribute $10 million (or equivalent in RMB) in cash and/or services, which shall be

contributed in tranches based on milestones to be determined jointly by AVAR and Avactis in writing subject to Avactis’

cash reserves.

Within 30 days, Arbele shall make a contribution of $6.66 million

in the form of entering into a License Agreement with AVAR granting AVAR with an exclusive right and license in China to its technology

and intellectual property pertaining to CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy technology and any additional technology

developed in the future with terms and conditions to be mutually agreed upon Avactis and AVAR and services.

In addition, Avactis is responsible for:

● Contributing registered capital

of RMB 5,000,000 (approximately $0.7 million) for working capital purposes as required

by local regulation, which is not required to be contributed immediately and will be

contributed subject to Avactis’

● assist AVAR in setting up

its business operations and obtaining all required permits and licenses from the Chinese

● assisting AVAR in recruiting,

hiring and retaining personnel;

● providing AVAR with access

to various hospital networks in China to assist in the testing and commercialization

of the CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy technology in China;

● assisting AVAR in managing

the Good Manufacturing Practices (GMP) facility and clinic to be developed by AVAR;

● providing AVAR with advice

pertaining to conducting clinicals in China;

● Within 6 days of signing

the AVAR Agreement, Avactis is required to pay to Arbele $300,000 as a research and development

fee with an additional two payments of $300,000 (for a total of $900,000) to be paid

upon mutually agreed upon milestones.

Under AVAR Agreement, Arbele shall be

responsible for the following:

Entering into a License Agreement with AVAR;

Providing AVAR with research and development expertise pertaining to clinical laboratory medicine when hired by AVAR.

As of September 30, 2020, Avactis has

paid $900,000 to Arbele as research and development fee, and License Agreement has not been finalized.

Within 30 days, Arbele shall make a contribution of $6.66 million in the form of entering into a License Agreement with AVAR granting

AVAR with an exclusive right and license in China to its technology and intellectual property pertaining to CAR-T/CAR-NK/TCR-T/universal

cellular immunotherapy technology and any additional technology developed in the future with terms and conditions to be mutually agreed

upon Avactis and AVAR and services.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 –

AND CONTINGENCIES (continued)

Joint Venture –

AVAR BioTherapeutics

In addition, Avactis is responsible for:

● Contributing registered capital of RMB 5,000,000 (approximately $0.8 million) for working capital

purposes as required by local regulation, which is not required to be contributed immediately and will be contributed subject to

Avactis’

● assist AVAR in setting up its business operations and obtaining all required permits and licenses

from the Chinese government;

● assisting AVAR in recruiting, hiring and retaining personnel;

● providing AVAR with access to various hospital networks in China to assist in the testing and

commercialization of the CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy technology in China;

● assisting AVAR in managing the Good Manufacturing Practices (GMP) facility and clinic to be

developed by AVAR;

● providing AVAR with advice pertaining to conducting clinicals in China;

● Within 6 days of signing the AVAR Agreement, Avactis is required to pay to Arbele $300,000 as a

research and development fee with an additional two payments of $300,000 (for a total of $900,000) to be paid upon mutually agreed

upon milestones.

Under AVAR Agreement, Arbele shall be responsible

for the following:

Entering into a License Agreement with AVAR;

Providing AVAR with research and development expertise

pertaining to clinical laboratory medicine when hired by AVAR.

As of March 31, 2021 and December 31, 2020, Avactis

has paid $900,000 to Arbele as research and development fee.

As of March 31, 2021, License Agreement has not been finalized.

Line of Credit Agreement

On August 29, 2019, the Company entered

into a Line of Credit Agreement (the “Line of Credit Agreement”) providing the Company with a $20 million line

of credit (the “Line of Credit”) from Wenzhao Lu (the “Lender”), a significant shareholder and director

of the Company.

The Line of Credit allows the Company to request loans thereunder and to use the proceeds of such loans for working

capital and operating expense purposes until the facility matures on December 31, 2024.

The loans are unsecured and are not convertible

into equity of the Company.

Loans drawn under the Line of Credit bears interest at an annual rate of 5% and each individual loan

will be payable three years from the date of issuance.

The Company has a right to draw down on the line of credit and not at the

discretion of the related party Lender.

The Company may, at its option, prepay any borrowings under the Line of Credit, in whole

or in part at any time prior to maturity, without premium or penalty.

The Line of Credit Agreement includes customary events

If any such event of default occurs, the Lender may declare all outstanding loans under the Line of Credit to

be due and payable immediately.

As of September 30, 2020, $2,900,000 was outstanding under the Line of Credit.

On August 29, 2019, the Company entered into

a Line of Credit Agreement (the “Line of Credit Agreement”) providing the Company with a $20 million line of credit (the

“Line of Credit”) from Wenzhao Lu (the “Lender”), a significant shareholder and director of the Company.

Line of Credit allows the Company to request loans thereunder and to use the proceeds of such loans for working capital and operating

expense purposes until the facility matures on December 31, 2024.

The loans are unsecured and are not convertible into equity of the

Loans drawn under the Line of Credit bears interest at an annual rate of 5% and each individual loan will be payable three years

from the date of issuance.

The Company has a right to draw down on the line of credit and not at the discretion of the related party

The Company may, at its option, prepay any borrowings under the Line of Credit, in whole or in part at any time prior to maturity,

without premium or penalty.

The Line of Credit Agreement includes customary events of default.

If any such event of default occurs, the

Lender may declare all outstanding loans under the Line of Credit to be due and payable immediately.

As of March 31, 2021, $3,305,249

was outstanding under the Line of Credit.

NOTE 14 –

On October 20, 2020, the Company entered

into a Distribution Agreement with Adial Pharmaceuticals, Inc.

(“Adial”) (the “Adial Agreement”).

to the Adial Agreement, the Company was appointed as a non-exclusive sub-distributor of Adial’s SARS-CoV-2 antibody tests

and antigen tests and other medical devices and equipment worldwide.

Stilley, a director of the Company as well as a member

of the Nominating and Corporate Governance Committee and Audit Committee, is the Chief Executive Officer and a director of Adial.

On December 13, 2019, the Company entered

into an Open Market Sale Agreement SM (the “Sales Agreement”) with Jefferies LLC, as sales agent (“Jefferies”).

From October 1, 2020 to November 9, 2020, Jefferies sold an aggregate of 41,909 shares of common stock at an average price of $1.55

per share to investors.

The Company received net cash proceeds of $63,197, net of commission paid to sales agent of $1,955.

MANAGEMENT’S DISCUSSION

AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following

discussion and analysis of our financial condition and results of operations for the three and nine months ended September 30,

2020 and 2019 should be read in conjunction with our unaudited condensed consolidated financial statements and related notes to

those unaudited condensed consolidated financial statements that are included elsewhere in this report.

Our discussion includes

forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives,

expectations and intentions.

Actual results and the timing of events could differ materially from those anticipated in these forward-looking

statements as a result of a number of factors, including those set forth under the Risk Factors, Special Note Regarding Forward-Looking

Statements and Business sections in our Form 10-K as filed with the Securities and Exchange Commission on April 6, 2020.

words such as “anticipate,”

Management has evaluated subsequent events through

the date of the filing.

MANAGEMENT’S DISCUSSION AND

ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion

and analysis of our financial condition and results of operations for the three months ended March 31, 2021 and 2020 should be read in

conjunction with our condensed consolidated financial statements and related notes to those condensed consolidated financial statements

that are included elsewhere in this report.

Our discussion includes forward-looking statements based upon current expectations that involve

risks and uncertainties, such as our plans, objectives, expectations and intentions.

Actual results and the timing of events could differ

materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under

the Risk Factors, Special Note Regarding Forward-Looking Statements and Business sections in our Form 10-K as filed with the Securities

and Exchange Commission on March 30, 2021.

We use words such as “anticipate,”

“estimate,”

10 unchanged sentences

“could,”

and similar expressions to identify forward-looking statements.

and similar expressions to identify forward-looking

Impact of COVID-19

on Our Operations, Financial Condition, Liquidity and Results of Operations

The ultimate impact of the COVID-19 pandemic

on our operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence,

including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic,

Although the COVID-19 vaccines have generally

been introduced to the public, the ultimate impact of the COVID-19 pandemic on our operations is unknown and will depend on future developments,

which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information

which may emerge concerning the severity of the COVID-19 pandemic, a significant increase in new and variant strains of COVID-19 cases,

availability and effectiveness of COVID-19 vaccines and therapeutics, the level of acceptance of the vaccine by the general population

and any additional preventative and protective actions that governments, or us, may determine are needed.

The occurrence of COVID-19 pandemic had

negatively impact on our operations.

Some tenants have delayed on rent payment.

Our general development operations have continued

during the COVID-19 pandemic and we have not had significant disruption.

However, we are uncertain if the COVID-19 pandemic will

impact future operations at our laboratory, or our ability to collaborate with other laboratories and universities.

we are unsure if the COVID-19 pandemic will impact future clinical trials.

Given the dynamic nature of these circumstances, the

duration of business disruption and reduced traffic, the related financial effect cannot be reasonably estimated at this time but

is expected to adversely impact the Company’s business for the year of 2020.

We have limited cash available to fund

planned operations and although we have other sources of capital described below under “Liquidity and Capital Resources,”

management continues to pursue various financing alternatives to fund our operations so we can continue as a going concern.

the COVID-19 pandemic has created significant economic uncertainty and volatility in the credit and capital markets.

plans to secure the necessary financing through the issue of new equity and/or the entering into of strategic partnership arrangements

but the ultimate impact of the COVID-19 pandemic on our ability to raise additional capital is unknown and will depend on future

developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak

and new information which may emerge concerning the severity of the COVID-19 pandemic.

We may not be able to raise sufficient additional

capital and may tailor our operations based on the amount of funding we are able to raise in the future.

Nevertheless, there is

no assurance that these initiatives will be successful.

Further, there is no assurance that capital available to us in any future

financing will be on acceptable terms.

clinical-stage, vertically integrated, leading CellTech bio-developer dedicated to advancing and empowering innovative, transformative

immune effector cell therapy, exosome technology, as well as COVID-19 related diagnostics

and therapeutics.

We also provide strategic advisory and outsourcing services to facilitate and enhance our clients' growth and

development, as well as competitiveness in healthcare and CellTech industry markets.

Through our subsidiary structure with unique

integration of verticals from innovative R&D to automated bioproduction and accelerated

clinical development, we are establishing a leading role in the fields of cellular immunotherapy (including CAR-T/NK), exosome

The occurrence of COVID-19 pandemic had negative

impact on our operations.

Some tenants have delayed on rent payment and some of the universities and laboratories with which we collaborate

were temporarily closed.

Our general development operations have continued during the COVID-19 pandemic and we have not had significant

However, we are uncertain if the COVID-19 pandemic will impact future operations at our laboratory, or our ability to collaborate

with other laboratories and universities.

In addition, we are unsure if the COVID-19 pandemic will impact future clinical trials.

the dynamic nature of these circumstances, the duration of business disruption and reduced traffic, the related financial effect cannot

be reasonably estimated at this time but is expected to adversely impact the Company’s business for the rest of 2021.

We have limited cash available to fund planned

operations and although we have other sources of capital described below under “Liquidity and Capital Resources,”

continues to pursue various financing alternatives to fund our operations so we can continue as a going concern.

However, the COVID-19

pandemic has created significant economic uncertainty and volatility in the credit and capital markets.

Management plans to secure the

necessary financing through the issue of new equity and/or the entering into of strategic partnership arrangements but the ultimate impact

of the COVID-19 pandemic on our ability to raise additional capital is unknown and will depend on future developments, which are highly

uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak and new information which may emerge

concerning the severity of the COVID-19 pandemic.

We may not be able to raise sufficient additional capital and may tailor our operations

based on the amount of funding we are able to raise in the future.

Nevertheless, there is no assurance that these initiatives will be

Further, there is no assurance that capital available to us in any future financing will be on acceptable terms.

The Company is a clinical-stage, vertically integrated,

leading CellTech bio-developer dedicated to advancing and empowering innovative, transformative immune effector cell therapy, exosome

technology, as well as COVID-19 related diagnostics and therapeutics.

The Company also provides strategic advisory and outsourcing services

to facilitate and enhance its clients' growth and development, as well as competitiveness in healthcare and CellTech industry markets.

Through its subsidiary structure with unique integration of verticals from innovative R&D to automated bioproduction and accelerated

clinical development, the Company is establishing a leading role in the fields of cellular immunotherapy (including CAR-T/NK), exosome

technology (ACTEX™), and regenerative therapeutics.

2 unchanged sentences

Avalon’s upstream innovative research includes:

Co-development of Avalon Clinical-grade Tissue-specific Exosome (“ACTEX™”) with Weill Cornell Medicine.

Novel therapeutic and diagnostic targets development utilizing QTY-code protein design technology with Massachusetts Institute of Technology (MIT) including using the QTY code protein design technology for development of a hemofiltration device to treat Cytokine Storm.

Co-development of next generation, transposon-based,

multi-target CAR-T, CAR-NK and other immune effector cell therapeutic modalities with Arbele Corp

Strategic partnership with the University of

Natural Resources and Life Sciences (BOKU) in Vienna, Austria to develop an S-layer vaccine that can be administered by an intranasal

or oral route against SARS-CoV-2, the novel coronavirus that causes COVID-19 disease.

Avalon’s midstream bio-processing

and bio-production facility is located in Nanjing, China with state-of-the-art, automated GMP and QC/QA infrastructure for standardized

bio-manufacturing of clinical-grade cellular products involved in our clinical programs in immune effector cell therapy, regenerative

therapeutics, as well as bio-banking.

Avalon’s downstream medical team

and facility consists of top-rated affiliated hospital network and experts specialized in hematology, oncology, cellular immunotherapy,

hematopoietic stem/progenitor cell transplant, as well as regenerative therapeutics.

Our major clinical programs include:

Avalon has initiated its first-in-human clinical trial of CD19

CAR-T candidate, AVA-001 in August 2019 at the Hebei Yanda Lu Daopei Hospital and Beijing Lu Daopei Hospital in China (the world’s

single largest CAR-T treatment network with over 600 patients being treated with CAR-T) for the indication of relapsed/refractory

B-cell acute lymphoblastic leukemia and non-Hodgkin Lymphoma.

● Development of Avalon Clinical-grade Tissue-specific Exosome (“ACTEX™”).

therapeutic and diagnostic targets development utilizing QTY-code protein design technology

with Massachusetts Institute of Technology (MIT) including using the QTY code protein design

technology for development of a hemofiltration device to treat Cytokine Storm.

partnership with the University of Natural Resources and Life Sciences (BOKU) in Vienna,

Austria to develop an S-layer vaccine that can be administered by an intranasal or oral route

against SARS-CoV-2, the novel coronavirus that causes COVID-19 disease.

Avalon’s midstream bio-processing and bio-production

facility is located in Nanjing, China with state-of-the-art, automated GMP and QC/QA infrastructure for standardized bio-manufacturing

of clinical-grade cellular products involved in our clinical programs in immune effector cell therapy, regenerative therapeutics, as well

as bio-banking.

As a result of the COVID pandemic, the operation of this facility has not been at full capacity.

However, the Company

expects to slowly increase operations during 2021.

Avalon’s

downstream medical team and facility consists of top-rated affiliated hospital network and experts specialized in hematology, oncology,

cellular immunotherapy, hematopoietic stem/progenitor cell transplant, as well as regenerative therapeutics.

Our major clinical programs

Avalon has initiated its first-in-human clinical trial of CD19 CAR-T candidate, AVA-001 in

August 2019 at the Hebei Yanda Lu Daopei Hospital and Beijing Lu Daopei Hospital in China

(the world’s single largest CAR-T treatment network with over 600 patients being treated

with CAR-T) for the indication of relapsed/refractory B-cell acute lymphoblastic leukemia

and non-Hodgkin Lymphoma.

The AVA-001 candidate (co-developed with China Immunotech Co.

is characterized by the utilization of 4-1BB (CD137) co-stimulatory signaling pathway, conferring a strong anti-cancer activity

during pre-clinical study.

It also features a shorter bio-manufacturing time which leads to the advantage of prompt treatment to

patients where timing is important related hematologic malignancies.

Avalon has plans to recruit 20 patients (under registered

clinical trial NCT03952923) for safety and efficacy studies.

Avalon’s transposon-based, multi-targeted CAR-T candidate, AVA-101 (co-developed

with Arbele Corp.) will enter pre-clinical process development and validation phase.

AVA-101 features non-viral, transposon-engineered

CAR-T with multiple anti-cancer targets, as well as possessing molecular safety-switch mechanism to minimize the side effects,

such as cytokine release syndrome and neurotoxicity, often associated with conventional CAR-T cellular therapy.

Following the pre-clinical

process development and validation phase, Avalon anticipates that it intends to pursue first-in-human clinical study of this next

generation of potentially more effective and safer CAR-T candidate.

is characterized by the utilization of 4-1BB (CD137) co-stimulatory signaling pathway, conferring

a strong anti-cancer activity during pre-clinical study.

It also features a shorter bio-manufacturing

time which leads to the advantage of prompt treatment to patients where timing is important

related hematologic malignancies.

Avalon has successfully completed the first-in-human clinical

trial of its AVA-001 anti-CD19 CAR-T cell therapy as a bridge to allogeneic bone marrow transplantation

for patients with relapsed/refractory B-cell acute lymphoblastic leukemia at the Lu Daopei

Hospital (registered clinical trial number NCT03952923) with excellent efficacy (90% complete

remission rate) and minimal adverse side effects.

Avalon is currently expanding the patient

recruitment for AVA-001 to include relapsed/refractory non-Hodgkin lymphoma patients.

● ACTEX™:

Stem cell-derived Avalon Clinical-grade Tissue-specific Exosomes (ACTEX™) is

one of the core technology platforms that has been co-developed by Avalon GloboCare and Weill Cornell Medicine.

The Company formed

a strategic partnership with HydroPeptide, LLC, a leading epigenetics skin care company, to engage in co-development and commercialization

of a series of clinical-grade, exosome-based cosmeceutical and orthopedic products.

As part of this agreement, the Company signed

a three-way Material Transfer Agreement between Avalon GloboCare, HydroPeptide and Weill Cornell Medicine.

Stem cell-derived Avalon Clinical-grade Tissue-specific Exosomes (ACTEX™) is one of

the core technology platforms that has been co-developed by Avalon GloboCare and Weill Cornell

The Company formed a strategic partnership with HydroPeptide, LLC, a leading epigenetics

skin care company, to engage in co-development and commercialization of a series of clinical-grade,

exosome-based cosmeceutical and orthopedic products.

As part of this agreement, the Company

signed a three-way Material Transfer Agreement between Avalon GloboCare, HydroPeptide and

Weill Cornell Medicine.

● FLASH-CAR™:

The Company advanced its next generation immune cell therapy using FLASH-CAR™

The Company advanced its next generation immune cell therapy using RNA-based, non-viral FLASH-CAR™

technology co-developed with the Company’s strategic partner Arbele Limited.

The adaptable FLASH-CAR™

be used to create personalized cell therapy from a patient’s own cells, as well as off-the-shelf cell therapy from a universal

The adaptable

FLASH-CAR™

platform can be used to create personalized cell therapy from a patient’s

own cells, as well as off-the-shelf cell therapy from a universal donor.

candidate, AVA-011, is currently at process development stage to generate clinical-grade

cell-therapy products for subsequent clinical studies.

● AVA-Trap™:

Avalon’s AVA-Trap™

therapeutic program plans to enter animal model

testing followed by expedited clinical studies with the goal of providing an effective therapeutic option to combat COVID-19 and

other life-threatening conditions involving cytokine storms.

The Company initiated a sponsored research and co-development project

with Massachusetts Institute of Technology (MIT) led by Professor Shuguang Zhang as Principal Investigator in May 2019.

unique QTY code protein design platform, six water-soluble variant cytokine receptors have been successfully designed and tested

to show binding affinity to the respective cytokines.

We generated revenue by providing medical

related consulting services in advanced areas of immunotherapy and second opinion/referral services through our wholly-owned subsidiary

Avalon (Shanghai) Healthcare Technology Co., Ltd., or Avalon Shanghai.

therapeutic program plans to enter animal model testing followed

by expedited clinical studies with the goal of providing an effective therapeutic option

to combat COVID-19 and other life-threatening conditions involving cytokine storms.

initiated a sponsored research and co-development project with Massachusetts Institute of

Technology (MIT) led by Professor Shuguang Zhang as Principal Investigator in May 2019.

the unique QTY code protein design platform, six water-soluble variant cytokine receptors

have been successfully designed and tested to show binding affinity to the respective cytokines.

provide medical related consulting services in advanced areas of immunotherapy and second opinion/referral services through our wholly-owned

subsidiary Avalon (Shanghai) Healthcare Technology Co., Ltd., or Avalon Shanghai.

We also own and operate rental commercial real property

in New Jersey, where we are headquartered.

We discontinued sales of exosome isolation systems in China and the United States through

our joint venture Genexosome Technologies, Inc.

However, we are actively developing other unrelated proprietary exosome related

products for sale or licensure.

The value of the Renminbi (“RMB”),

the main currency used in China, fluctuates and is affected by, among other things, changes in China’s political and economic

the first quarter of 2021, we did not have any revenue from medical related consulting services.

Although we maintain close working relationships

with our related parties, the consulting agreements with our related parties expired as of December 31, 2020.

There was no order from

related party and third party customers in the three months ended March 31, 2021.

Currently, we are negotiating with our potential customers

and consulting services agreements are not finalized.

value of the Renminbi (“RMB”), the main currency used in China, fluctuates and is affected by, among other things, changes

in China’s political and economic conditions.

The conversion of RMB into foreign currencies such as the U.S.

dollar have generally been based on rates set by the

People’s Bank of China, which are set daily based on the previous day’s interbank foreign exchange market rates and

current exchange rates on the world financial markets.

dollar have generally

been based on rates set by the People’s Bank of China, which are set daily based on the previous day’s interbank foreign

exchange market rates and current exchange rates on the world financial markets.

Company is a clinical-stage, vertically integrated, leading CellTech bio-developer dedicated to advancing and empowering innovative,

transformative immune effector cell therapy, exosome technology, as well as COVID-19 related diagnostics and therapeutics.

also provides strategic advisory and outsourcing services to facilitate and enhance its clients' growth and development, as well as competitiveness

in healthcare and CellTech industry markets.

Through its subsidiary structure with unique integration of verticals from innovative R&D

to automated bioproduction and accelerated clinical development, the Company is establishing a leading role in the fields of cellular

immunotherapy (including CAR-T/NK), exosome technology (ACTEX™), and regenerative therapeutics.

addition, the Company owns commercial real estate that houses its headquarters in Freehold, New Jersey and provides

outsourced, customized international healthcare services to the rapidly changing health care industry primarily focused in the People’s

Republic of China.

The Company did not generate any revenue from medical related consulting services segment during the three

months ended March 31, 2021.

These condensed consolidated financial statements have been prepared assuming that the Company will continue

as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal

course of business.

reflected in the accompanying condensed consolidated financial statements, the Company had working capital deficit of $1,059,606 as of

March 31, 2021 and has incurred recurring net loss and generated negative cash flow from operating activities of $2,367,118 and $1,515,525

for the three months ended March 31, 2021, respectively.

The Company has a limited operating history and its continued growth is dependent

upon the continuation of providing medical consulting services to its only few clients who are related parties and generating rental

revenue from its income-producing real estate property in New Jersey;

hence generating revenues, and obtaining additional financing to

fund future obligations and pay liabilities arising from normal business operations.

In addition, the current cash balance cannot be

projected to cover the operating expenses for the next twelve months from the release date of this report.

These matters raise substantial

doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern is

dependent on the Company’s ability to raise additional capital, implement its business plan, and generate significant revenues.

There are no assurances that the Company will be successful in its efforts to generate significant revenues, maintain sufficient cash

balance or report profitable operations or to continue as a going concern.

The Company plans on raising capital through the sale of equity

to implement its business plan.

However, there is no assurance these plans will be realized and that any additional financings will be

available to the Company on satisfactory terms and conditions, if any.

occurrence of an uncontrollable event such as the COVID-19 pandemic had negatively impact on the Company’s operations.

have delayed on rent payment.

Our general development operations have continued during the COVID-19 pandemic and we have not had significant

However, we are uncertain if the COVID-19 pandemic will impact future operations at our laboratory, or our ability to collaborate

with other laboratories and universities.

In addition, we are unsure if the COVID-19 pandemic will impact future clinical trials.

the dynamic nature of these circumstances, the duration of business disruption and reduced traffic, the related financial effect cannot

be reasonably estimated at this time but is expected to adversely impact the Company’s business for the rest of 2021.

accompanying condensed consolidated financial statements do not include any adjustments related to the recoverability or classification

of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as

a going concern.

Accounting Policies

Use of Estimates

Our discussion and analysis of our financial

condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance

with accounting principles generally accepted in the United States.

The preparation of these consolidated financial statements

requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and

related disclosure of contingent assets and liabilities.

We continually evaluate our estimates, including those related to the allowance

for doubtful accounts, the useful life of property and equipment and investment in real estate, assumptions used in assessing impairment

of long-term assets, valuation of deferred tax assets and the associated valuation allowances, and valuation of stock-based compensation.

We base our estimates on historical

experience and on various other assumptions that we believed to be reasonable under the circumstances, the results of which form

the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, expenses,

assets and liabilities.

discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements,

which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these condensed

consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities,

revenues and expenses, and related disclosure of contingent assets and liabilities.

We continually evaluate our estimates, including

those related to the useful life of property and equipment and investment in real estate, assumptions used in assessing impairment of

long-term assets, valuation of deferred tax assets and the associated valuation allowances, and valuation of stock-based compensation.

our estimates on historical experience and on various other assumptions that we believed to be reasonable under the circumstances, the

results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent

from other sources.

Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues,

expenses, assets and liabilities.

Actual results may differ from these estimates under different assumptions or conditions.

Revenue Recognition

We recognize revenue

under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”).

The core principle of this new revenue standard is that a company should recognize revenue to depict the transfer of promised goods

or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for

recognize revenue under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC

The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised

goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for

those goods or services.

The following five steps are applied to achieve that core principle:

Identify the contract with the customer

Identify the performance obligations in the

Determine the transaction price

Allocate the transaction price to the performance

Identify the contract

with the customer

Identify the performance

obligations in the contract

Recognize revenue when the company satisfies

a performance obligation

In order to identify the performance obligations

in a contract with a customer, a company must assess the promised goods or services in the contract and identify each promised

goods or service that is distinct.

A performance obligation meets ASC 606’s definition of a “distinct”

or service (or bundle of goods or services) if both of the following criteria are met:

● The customer can benefit from the goods or service

either on its own or together with other resources that are readily available to the customer (i.e., the goods or service is capable

of being distinct).

● The entity’s promise to transfer the goods or

service to the customer is separately identifiable from other promises in the contract (i.e., the promise to transfer the goods

or service is distinct within the context of the contract).

If a goods or service is not distinct,

the goods or service is combined with other promised goods or services until a bundle of goods or services is identified that is

The transaction price is the amount of

consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer,

excluding amounts collected on behalf of third parties (for example, some sales taxes).

The consideration promised in a contract

with a customer may include fixed amounts, variable amounts, or both.

Variable consideration is included in the transaction price

only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur

when the uncertainty associated with the variable consideration is subsequently resolved.

The transaction price is allocated to each

performance obligation on a relative standalone selling price basis.

The transaction price allocated to each performance obligation

is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

Types of revenue:

● Service fees under consulting agreements with related

parties to provide medical related consulting services to our clients.

We are paid for our services by our clients pursuant

to the terms of the written consulting agreements.

Each contract calls for a fixed payment.

● Service fees under agreements to perform development

services for hospitals and other customers.

We do not perform contracts that are contingent upon successful results.

● Sales of developed products to hospitals and other

Revenue recognition criteria:

● We recognize revenue by providing medical related

consulting services under written service contracts with our customers.

Revenue related to our service offerings is recognized

as the services are performed.

● Revenue from development services performed under

written contracts is recognized as services are provided.

● Revenue from sales of developed items to hospitals

and other customers is recognized when items are shipped to customers and titles are transferred.

We have determined that the ASC 606 does

not apply to rental contracts, which are within the scope of other revenue recognition accounting standards.

Rental income from operating leases is

recognized on a straight-line basis under the guidance of ASC 842.

Lease payments under tenant leases are recognized on a straight-line

basis over the term of the related leases.

The cumulative difference between lease revenue recognized under the straight-line method

and contractual lease payments are included in rent receivable on the consolidated balance sheets.

We do not offer promotional payments, customer

coupons, rebates or other cash redemption offers to our customers.

We are governed by the income tax laws

of China and the United States.

Income taxes are accounted for pursuant to ASC 740 “Accounting for Income Taxes,”

is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future

tax consequences of events that have been recognized in our financial statements or tax returns.

The charge for taxes is based

on the results for the period as adjusted for items, which are non-assessable or disallowed.

It is calculated using tax rates that

have been enacted or substantively enacted by the balance sheet date.

Deferred tax is accounted for using the

balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets

and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit.

principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized

to the extent that it is probably that taxable profit will be available against which deductible temporary differences can be utilized.

Deferred tax is calculated using tax rates

that are expected to apply to the period when the asset is realized or the liability is settled.

Deferred tax is charged or credited

in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred

tax is changed to equity.

Deferred tax assets and liabilities are offset when they related to income taxes levied by the same taxation

authority and we intend to settle its current tax assets and liabilities on a net basis.

Recent Accounting Standards

For details of applicable new accounting

standards, please, refer to Recent Accounting Standards in Note 3 of our unaudited condensed consolidated financial

statements accompanying this report.

RESULTS OF OPERATIONS

Comparison of Results of Operations

for the Three and Nine Months Ended September 30, 2020 and 2019

For the three months ended September 30,

2020, we had real property rental revenue of $324,982, as compared to $264,141 for the three months ended September 30, 2019, an

increase of $60,841, or 23.0%.

For the nine months ended September 30, 2020, we had real property rental revenue of $923,205, as

compared to $795,656 for the nine months ended September 30, 2019, an increase of $127,549, or 16.0%.

The increase was primarily

attributable to the increase of tenants in 2020 periods.

We expect that our revenue from real property rent will remain in its

current quarterly level with minimal increase in the near future.

We are unsure of the short and long term financial impact of

COVID -19 on our ability to collect rental income or on our overall building occupancy rate.

For the three and nine months ended September

30, 2020, we did not have any medical related consulting services revenue since there was no demand for our consulting service

from our related parties and there was no order for our medical related consulting services from third party in these periods.

Although we maintain close working relationships with our related parties, the consulting agreements with our related parties expired

as of December 31, 2019.

There was no order from related party and third party customers in the nine months ended September 30,

Currently, we are negotiating with our potential customers and expect to enter consulting services agreements in the first

quarter of 2021.

For the three and nine months ended September 30, 2019, we had medical related consulting services revenue from

related parties of $108,520 and $234,214, respectively.

For the three and nine months ended September

30, 2020, we did not have any revenue from contract services through performing development services for hospitals and other customers

and sales of developed products to hospitals and other customers.

For the three and nine months ended September 30, 2019, we had

revenue from contract services through performing development services for hospitals and other customers and sales of developed

products to hospitals and other customers of $10,555 and $37,237, respectively.

Feedback received from our research partners is

that our exosome isolation system does not produce consistent results and does not deliver high exosome yields and concentrations

and needs revision.

We have discontinued sales of our exosome isolation system product.

However, we are actively developing other

unrelated proprietary exosome related products for sale or licensure.

Real property operating expenses consist

of property management fees, property insurance, real estate taxes, depreciation, repairs and maintenance fees, utilities and other

expenses related to our rental properties.

For the three months ended September 30,

2020, our real property operating expenses amounted to $135,821, as compared to $193,738 for the three months ended September 30,

2019, a decrease of $57,917, or 29.9%.

The decrease was mainly due to a decrease in maintenance fees of approximately $10,000,

and a decrease in other miscellaneous items of approximately $48,000.

For the nine months ended September 30,

2020, our real property operating expenses amounted to $663,086, as compared to $617,173 for the nine months ended September 30,

2019, an increase of $45,913, or 7.4%.

The increase was mainly due to an increase in real property repairs and maintenance expenses

of approximately $9,000, an increase in electric utility of approximately $14,000, and an increase in other miscellaneous items

of approximately $23,000.

Costs of medical related consulting services

include the cost of internal labor and related benefits, travel expenses related to medical related consulting services, subcontractor

costs, other related consulting costs, and other overhead costs.

Subcontractor costs were costs related to medical related consulting

services incurred by our subcontractor, such as medical professional’s compensation and travel costs.

For the three and nine months ended September

30, 2019, costs of medical related consulting services amounted to $94,442 and $202,908, respectively.

There were no comparative

revenue and related costs of revenue from our medical related consulting services for the three and nine months ended September

30, 2020 since there was no demand for our consulting service from our related parties in these periods and there was no order

for our medical related consulting services from third party.

Costs of development services and sales

of developed products include inventory costs, materials and supplies costs, internal labor and related benefits, depreciation,

other overhead costs and shipping and handling costs incurred.

For the three and nine months ended September

30 2019, costs of development services for hospitals and other customers and sales of developed products to hospitals and other

customers amounted to $41,808 and $103,899, respectively.

We had neither revenue nor cost of revenue from this segment in the three

and nine months ended September 30, 2020.

Real Property Operating Income

Our real property operating income for

the three months ended September 30, 2020 was $189,161, representing an increase of $118,758, or 168.7%, as compared to $70,403

for the three months ended September 30, 2019.

The increase was mainly attributable to the increase in rental revenue resulting

from the increase of tenants and the decrease in real property operating expenses as described above.

Our real property operating

income for the nine months ended September 30, 2020 was $260,119, representing an increase of $81,636, or 45.7%, as compared to

$178,483 for the nine months ended September 30, 2019.

The increase was mainly attributable to the increase in rental revenue resulting

from the increase of tenants as described above, offset by the increase in real property operating expenses.

We expect our real

property operating income will remain in its current quarterly level with minimal decrease in the near future.

We are unsure of

the short and long term financial impact of COVID -19 on our ability to collect rental income or on our overall building occupancy

Gross Profit from Medical Related

Consulting Services and Gross Margin

We did not generate any gross profit from

medical related consulting services in the three months ended September 30, 2020.

Our gross profit from medical related consulting

services for the three months ended September 30, 2019 was $14,078, with a gross margin of 13.0%.

We did not generate any gross profit from

medical related consulting services in the nine months ended September 30, 2020.

Our gross profit from medical related consulting

services for the nine months ended September 30, 2019 was $31,306, with a gross margin of 13.4%.

Gross Loss from Development Services

and Sales of Developed Products and Gross Margin

We did not generate any gross profit from

development services and sales of developed products in the three months ended September 30, 2020.

Our gross loss from development

services and sales of developed products for the three months ended September 30, 2019 was $31,253, with a gross margin of (296.1)%.

We did not generate any gross profit from

development services and sales of developed products in the nine months ended September 30, 2020.

Our gross loss from development

services and sales of developed products for the nine months ended September 30, 2019 was $66,662, with a gross margin of (179.0)%.

Other Operating Expenses

For the three

and nine months ended September 30, 2020 and 2019, other operating expenses consisted of the following:

Determine the transaction

Allocate the transaction

price to the performance obligations in the contract

Recognize revenue

when the company satisfies a performance obligation

order to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in

the contract and identify each promised goods or service that is distinct.

A performance obligation meets ASC 606’s definition

of a “distinct”

goods or service (or bundle of goods or services) if both of the following criteria are met:

customer can benefit from the goods or service either on its own or together with other resources

that are readily available to the customer (i.e., the goods or service is capable of being

entity’s promise to transfer the goods or service to the customer is separately identifiable

from other promises in the contract (i.e., the promise to transfer the goods or service is

distinct within the context of the contract).

a goods or service is not distinct, the goods or service is combined with other promised goods or services until a bundle of goods or

services is identified that is distinct.

transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods

or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes).

The consideration

promised in a contract with a customer may include fixed amounts, variable amounts, or both.

Variable consideration is included in the

transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will

not occur when the uncertainty associated with the variable consideration is subsequently resolved.

transaction price is allocated to each performance obligation on a relative standalone selling price basis.

The transaction price allocated

to each performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

Company’s revenues are derived from providing medial related consulting services for its’

related parties.

Revenues related

to its service offerings are recognized as the services are performed.

Any payments received in

advance of the performance of services are recorded as deferred revenue until such time as the services are performed.

have determined that the ASC 606 does not apply to rental contracts, which are within the scope of other revenue recognition accounting

income from operating leases is recognized on a straight-line basis under the guidance of ASC 842.

Lease payments under tenant leases

are recognized on a straight-line basis over the term of the related leases.

The cumulative difference between lease revenue recognized

under the straight-line method and contractual lease payments are included in rent receivable on the condensed consolidated balance sheets.

do not offer promotional payments, customer coupons, rebates or other cash redemption offers to our customers.

are governed by the income tax laws of China and the United States.

Income taxes are accounted for pursuant to ASC 740 “Accounting

for Income Taxes,”

which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities

for the expected future tax consequences of events that have been recognized in our financial statements or tax returns.

The charge for

taxes is based on the results for the period as adjusted for items, which are non-assessable or disallowed.

It is calculated using tax

rates that have been enacted or substantively enacted by the balance sheet date.

tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the

carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable

In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are

recognized to the extent that it is probably that taxable profit will be available against which deductible temporary differences can

tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled.

tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which

case the deferred tax is changed to equity.

Deferred tax assets and liabilities are offset when they related to income taxes levied by

the same taxation authority and we intend to settle its current tax assets and liabilities on a net basis.

Accounting Standards

details of applicable new accounting standards, please, refer to Recent Accounting Standards in Note 3 of our condensed

consolidated financial statements accompanying this report.

OF OPERATIONS

of Results of Operations for the Three Months Ended March 31, 2021 and 2020

the three months ended March 31, 2021, we had real property rental revenue of $289,774, as compared to $296,956 for the three months

ended March 31, 2020, a decrease of $7,182, or 2.4%.

The slight decrease was primarily attributable to a tenant moved out in August 2020.

We expect that our revenue from real property rent will remain in its current quarterly level with minimal increase in the near future.

property operating expenses consist of property management fees, property insurance, real estate taxes, depreciation, repairs and maintenance

fees, utilities and other expenses related to our rental properties.

the three months ended March 31, 2021, our real property operating expenses amounted to $216,894, as compared to $254,501 for the three

months ended March 31, 2020, a decrease of $37,607, or 14.8%.

The decrease was mainly due to a decrease in repairs and maintenance fees

of approximately $22,000, and a decrease in other miscellaneous items of approximately $16,000.

Property Operating Income

real property operating income for the three months ended March 31, 2021 was $72,880, representing an increase of $30,425, or 71.7%,

as compared to $42,455 for the three months ended March 31, 2020.

The increase was mainly attributable to the decrease in real property

operating expenses as described above.

We expect our real property operating income will remain in its current quarterly level with minimal

increase in the near future.

Operating Expenses

the three months ended March 31, 2021 and 2020, other operating expenses consisted of the following:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Professional fees

1 unchanged sentence

Research and development

Advertising expenses

Travel and entertainment

Directors and officers liability insurance premium

Travel and entertainment

Rent and related utilities

Advertising expenses

Other general and administrative

Impairment loss

● Professional fees primarily consisted of accounting

fees, audit fees, legal service fees, consulting fees, investor relations service charges and other fees incurred for service

related to being a public company.

For the three months ended September 30, 2020, professional fees increased by $122,355, or

7.5%, as compared to the three months ended September 30, 2019.

The increase was primarily attributable to an increase in consulting

fees of approximately $690,000 mainly due to the increase in use of consulting service providers, offset by a decrease in legal

services fees of approximately $486,000 primarily due to the decrease in use of legal service providers, and a decrease in other

miscellaneous items of approximately $82,000.

For the nine months ended September 30, 2020, professional fees increased by $976,991,

or 25.1%, as compared to the nine months ended September 30, 2019.

The increase was primarily attributable to an increase in consulting

fees of approximately $840,000 mainly due to the increase in stock-based consulting fees, an increase in accounting service charges

of approximately $89,000 as a result of the increase in stock-based accounting fees and an increase in other miscellaneous items

of approximately $48,000.

We expect that our professional fees will remain in its current quarterly level with minimal increase

in the near future.

● For the three months ended September 30, 2020, compensation

and related benefits decreased by $1,129,389, or 51.6%, as compared to the three months ended September 30, 2019.

The significant

decrease was primarily attributable to a decrease in stock-based compensation of approximately $1,198,000 which reflected the

value of options granted and vested to our management.

For the nine months ended September 30, 2020, compensation and related

benefits decreased by $3,147,202, or 49.3%, as compared to the nine months ended September 30, 2019.

● Professional

fees primarily consisted of accounting fees, audit fees, legal service fees, consulting fees,

investor relations service charges and other fees incurred for service related to being a

public company.

For the three months ended March 31, 2021, professional fees decreased by

$172,520, or 11.1%, as compared to the three months ended March 31, 2020.

The decrease was

primarily attributable to a decrease in investor relations service fees of approximately

$171,000 mainly due to the decrease in use of investor relations service providers, and a

decrease in other miscellaneous items of approximately $1,000.

We expect that our professional

fees will remain in its current quarterly level with minimal increase in the near future.

the three months ended March 31, 2021, compensation and related benefits decreased by $566,462,

or 50.2%, as compared to the three months ended March 31, 2020.

The significant decrease

was primarily attributable to a decrease in stock-based compensation of approximately $3,181,000 which reflected the value of

options granted and vested to our management.

We expect that our compensation and related benefits will remain at its current

quarterly level in the rest of 2020.

● For the three months ended September 30, 2020, research

and development expenses decreased by $26,707, or 10.1%, as compared to the three months ended September 30, 2019.

months ended September 30, 2020, research and development expenses decreased by $692,375, or 50.6%, as compared to the nine months

ended September 30, 2019.

Our first project with Arbele was completed in January 2020 and no further research and development

project was incurred in the nine months ended September 30, 2020.

Our research and development contract with Weill Cornell Medicine

expired as of November 2019 and expect to enter another agreement by the end of fourth quarter of 2020.

Therefore, our research

and development expenses in 2020 periods decreased as compared to the corresponding periods of 2019.

We expect our research and

development expenses will increase in the near future.

● For the three months ended September 30, 2020, advertising

expenses decreased by $38,628 or 27.4% as compared to the three months ended September 30, 2019.

For the nine months ended September

30, 2020, advertising expenses decreased by $390,605 or 64.4% as compared to the nine months ended September 30, 2019.

was primarily due to decreased advertising activities incurred as a result of stricter control on corporation spending.

that our advertising expenses will continue to decrease in the near future.

● For the three months ended September 30, 2020, amortization

expense from intangible assets decreased by $81,892, or 100.0%, as compared to the three months ended September 30, 2019.

the nine months ended September 30, 2020, amortization expense from intangible assets decreased by $245,678, or 100.0%, as compared

to the nine months ended September 30, 2019.

At the end of September 2019, our intangible assets were impaired to zero and therefore,

no amortization expense was recorded related to intangible assets in the nine months ended September 30, 2020.

● For the three months ended September 30, 2020, travel

and entertainment expense decreased by $59,352, or 64.5%, as compared to the three months ended September 30, 2019.

months ended September 30, 2020, travel and entertainment expense decreased by $251,553, or 64.6%, as compared to the nine months

ended September 30, 2019.

The decrease was mainly due to decreased business travel activities and decreased entertainment expenditure

resulting from COVID-19.

In the nine months ended September 30, 2020, the spread of COVID-19 has caused public health officials

to recommend precautions to mitigate the spread of the virus, such as, cease traveling to non-essential jobs and curtail all unnecessary

travel, and stay at home as much as possible.

● For the three months ended September 30, 2020, directors

and officers liability insurance premium increased by $23,805, or 43.2%, as compared to the three months ended September 30, 2019.

For the nine months ended September 30, 2020, directors and officers liability insurance premium increased by $72,167, or 58.8%,

as compared to the nine months ended September 30, 2019.

The increase was mainly due to different insurance provider with different

● Other general and administrative expenses mainly consisted

of NASDAQ listing fee, academic sponsorship, and other miscellaneous items.

For the three months ended September 30, 2020, other

general and administrative expenses increased by $49,963, or 76.3%, as compared to the three months ended September 30, 2019,

which was mainly due to an increase in fee from NASDAQ of approximately $29,000, and an increase in other miscellaneous items

of approximately $21,000.

For the nine months ended September 30, 2020, other general and administrative expenses decreased by

$64,577, or 15.9%, as compared to the nine months ended September 30, 2019, which was mainly due to a decrease in academic sponsorship

expenditure of approximately $95,000, offset by an increase in other miscellaneous items of approximately $30,000.

● In September 2019, we assessed our intangible assets

for any impairment and concluded that there were indicators of impairment as of September 30, 2019 and we calculated that the

estimated undiscounted cash flows were less than the carrying amount of those intangible assets.

We have not been able to realize

the financial projections provided by Dr.

Zhou at the time of the intangible assets purchase and have decided to impair the intangible

assets to zero.

Based on our analysis, we recognized an impairment loss of $1,010,011 for the three and nine months ended September

30, 2019, which reduced the value of intangible assets purchased to zero.

We did not record any impairment charge for the three

and nine months ended September 30, 2020.

a result of the foregoing, for the three months ended September 30, 2020, loss from operations amounted to $3,190,558, as compared

to $5,476,347 for the three months ended September 30, 2019, a decrease of $2,285,789, or 41.7%.

a result of the foregoing, for the nine months ended September 30, 2020, loss from operations amounted to $9,415,577, as compared

to $14,285,412 for the nine months ended September 30, 2019, a decrease of $4,869,835, or 34.1%.

Other income (expense) mainly includes

interest expense, change in fair value of warrants liabilities, allocated financing

costs, and loss from equity-method investment .

Other expense, net, totaled $61,401 for

the three months ended September 30, 2020, as compared to other income, net, of $1,142,289 for the three months ended September

30, 2019, a decrease of $1,203,690, or 105.4%, which was primarily attributable to a decrease in change in fair value of warrants

liabilities of approximately $1,160,000, an increase in interest expense of approximately $30,000, a decrease in other income approximately

$24,000, offset by a decrease in loss from equity method investment of approximately $10,000.

Other expense, net, totaled $163,545 for

the nine months ended September 30, 2020, as compared to other income, net, of $1,007,602 for the nine months ended September 30,

2019, a decrease of $1,171,147, or 116.2%, which was primarily attributable to a decrease in change in fair value of warrants liabilities

of approximately $1,622,000, an increase in interest expense of approximately $66,000, a decrease in other income approximately

$22,000, offset by a decrease in allocated financing expense of approximately $525,000 and a decrease in loss from equity method

investment of approximately $13,000.

We did not have any income taxes expense

for the three and nine months ended September 30, 2020 and 2019 since we incurred losses in the periods.

As a result of the factors described above,

our net loss was $3,251,959 for the three months ended September 30, 2020, as compared to $4,334,058 for the three months ended

September 30, 2019, a decrease of $1,082,099 or 25.0%.

As a result of the factors described above,

our net loss was $9,579,122 for the nine months ended September 30, 2020, as compared to $13,277,810 for the nine months ended

September 30, 2019, a decrease of $3,698,688 or 27.9%.

Net Loss Attributable to Avalon GloboCare

was primarily attributable to a decrease in stock-based compensation of approximately $578,000

which reflected the value of options granted and vested to our management, offset by an increase

in compensation and related benefits for other employees of approximately $12,000.

that our compensation and related benefits will remain in its current quarterly level with

minimal increase in the near future.

the three months ended March 31, 2021, research and development expenses decreased by $62,214,

or 22.6%, as compared to the three months ended March 31, 2020.

The decrease was primarily

attributable to our first project with Arbele was completed in 2020 and no further research

and development project was incurred in 2021.

We expect our research and development expenses

will increase in the near future.

the three months ended March 31, 2021, Directors and Officers Liability Insurance premium

increased by $23,128, or 39.9%, as compared to the three months ended March 31, 2020.

increase was mainly due to different insurance provider with different premium.

the three months ended March 31, 2021, travel and entertainment expense decreased by $41,430,

or 56.3%, as compared to the three months ended March 31, 2020.

The decrease was mainly due

to decreased business travel activities and decreased entertainment expenditure resulting

from COVID-19.

The spread of COVID-19 has caused public health officials to recommend precautions

to mitigate the spread of the virus, such as, cease traveling to non-essential jobs and curtail

all unnecessary travel, and stay at home as much as possible.

the three months ended March 31, 2021, rent and related utilities expenses decreased by $114,

or 0.5%, as compared to the three months ended March 31, 2020.

the three months ended March 31, 2021, advertising expenses decreased by $62,080 or 87.6%

as compared to the three months ended March 31, 2020.

The decrease was primarily due to decreased

advertising activities incurred as a result of stricter control on corporation spending.

We expect that our advertising expenses will increase in the near future.

general and administrative expenses mainly consisted of NASDAQ listing fee, office supplies,

and other miscellaneous items.

For the three months ended March 31, 2021, other general and

administrative expenses decreased by $6,487, or 7.9%, as compared to the three months ended

March 31, 2020, reflecting our efforts at stricter controls on corporate expenditure.

from Operations

a result of the foregoing, for the three months ended March 31, 2021, loss from operations amounted to $2,303,588, as compared to $3,222,192

for the three months ended March 31, 2020, a decrease of $918,604, or 28.5%.

Income (Expense)

income (expense) mainly includes interest expense and loss from equity method investment .

expense, net, totaled $63,530 for the three months ended March 31, 2021, as compared to $48,589 for the three months ended March 31,

2020, an increase of $14,941, or 30.7%, which was primarily attributable to an increase in loss from equity method investment of approximately

$9,000, an increase in interest expense of approximately $3,000, and a decrease in miscellaneous income of approximately $3,000.

did not have any income taxes expense for the three months ended March 31, 2021 and 2020 since we incurred losses in these periods.

a result of the factors described above, our net loss was $2,367,118 for the three months ended March 31, 2021, as compared to $3,270,781

for the three months ended March 31, 2020, a decrease of $903,663 or 27.6%.

Loss Attributable to Avalon GloboCare Corp.

Common Shareholders

The net loss attributable to Avalon GloboCare

common shareholders was $3,251,959 or $(0.04) per share (basic and diluted) for the three months ended September 30, 2020,

as compared with $3,858,195, or $(0.05) per share (basic and diluted) for the three months ended September 30, 2019, a change of

$606,236 or 15.7%.

The net loss attributable to Avalon GloboCare

common shareholders was $9,579,122 or $(0.12) per share (basic and diluted) for the nine months ended September 30, 2020,

as compared with $12,621,235, or $(0.17) per share (basic and diluted) for the nine months ended September 30, 2019, a change of

$3,042,113 or 24.1%.

Foreign Currency Translation Adjustment

Our reporting currency is the U.S.

The functional currency of our parent company, AHS, Avalon RT 9, Genexosome, Avactis, and Exosome, is the U.S.

dollar and the functional

currency of Avalon Shanghai and Beijing Genexosome, is the Chinese Renminbi (“RMB”).

The financial statements of our

subsidiaries whose functional currency is the RMB are translated to U.S.

dollars using period end rates of exchange for assets

and liabilities, average rate of exchange for revenues, costs, and expenses and cash flows, and at historical exchange rates for

net loss attributable to Avalon GloboCare Corp.

common shareholders was $2,367,118 or $(0.03) per share (basic and diluted) for the three

months ended March 31, 2021, as compared with $3,270,781, or $(0.04) per share (basic and diluted) for the three months ended March 31,

2020, a change of $903,663 or 27.6%.

Currency Translation Adjustment

reporting currency is the U.S.

The functional currency of our parent company, AHS, Avalon RT 9, Genexosome, Avactis, and Exosome,

dollar and the functional currency of Avalon Shanghai and Beijing Genexosome is the Chinese Renminbi (“RMB”).

The financial statements of our subsidiaries whose functional currency is the RMB are translated to U.S.

dollars using period end rates

of exchange for assets and liabilities, average rate of exchange for revenues, costs, and expenses and cash flows, and at historical

exchange rates for equity.

Net gains and losses resulting from foreign exchange transactions are included in the results of operations.

of foreign currency translations, which are a non-cash adjustment, we reported a foreign currency translation gain of $39,698 and

a foreign currency translation loss of $69,388 for the three months ended September 30, 2020 and 2019, respectively.

of foreign currency translations, which are a non-cash adjustment, we reported a foreign currency translation gain of $20,941 and

a foreign currency translation loss of $60,009 for the nine months ended September 30, 2020 and 2019, respectively.

This non-cash

gain/loss had the effect of decreasing/increasing our reported comprehensive loss.

As a result of foreign currency translations, which are a non-cash adjustment, we reported a foreign currency translation loss of $2,722

and $22,066 for the three months ended March 31, 2021 and 2020, respectively.

This non-cash loss had the effect of increasing our reported

comprehensive loss.

As a result of our foreign currency translation

adjustment, we had comprehensive loss of $3,212,261 and $4,403,446 for the three months ended September 30, 2020 and 2019, respectively.

As a result of our foreign currency translation

adjustment, we had comprehensive loss of $9,558,181 and $13,337,819 for the nine months ended September 30, 2020 and 2019, respectively.

Liquidity and Capital Resources

The Company has a limited operating history

and its continued growth is dependent upon the re-commencing of medical consulting services which was completed in December 2019

to its only few clients who are related parties and generating rental revenue from its income-producing real estate property in

New Jersey and performing development services for hospitals and other customers and sales of developed products to hospitals and

other customers;

hence generating revenues, and obtaining additional financing to fund future obligations and pay liabilities arising

from normal business operations.

In addition, the current cash balance cannot be projected to cover the operating expenses for

the next twelve months from the release date of this report.

These matters raise substantial doubt about the Company’s ability

to continue as a going concern.

The ability of the Company to continue as a going concern is dependent on the Company’s ability

to raise additional capital, implement its business plan, and generate significant revenues.

There are no assurances that the Company

will be successful in its efforts to generate significant revenues, maintain sufficient cash balance or report profitable operations

or to continue as a going concern.

The Company plans on raising capital through the sale of equity to implement its business plan.

However, there is no assurance these plans will be realized and that any additional financings will be available to the Company

on satisfactory terms and conditions, if any.

The occurrence of an uncontrollable event

such as the COVID-19 pandemic is likely to negatively affect the Company’s operations.

Efforts to contain the spread of the coronavirus have

intensified, including social distancing, travel bans and quarantine, and these are likely to negatively impact our tenants, employees

and consultants.

These, in turn, will not only impact our operations, financial condition and demand for our medical related consulting

services but our overall ability to react timely to mitigate the impact of this event.

Given the dynamic nature of these circumstances,

the duration of business disruption and reduced traffic, the related financial effect cannot be reasonably estimated at this time

but is expected to adversely impact our business for the year of 2020.

Liquidity is the ability of a company to

generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis.

At September 30, 2020 and December 31, 2019, we had cash balance of approximately $1,396,000 and $765,000, respectively.

funds are kept in financial institutions located as follows:

September 30,

Comprehensive

a result of our foreign currency translation adjustment, we had comprehensive loss of $2,369,840 and $3,292,847 for the three months

ended March 31, 2021 and 2020, respectively.

and Capital Resources

Company has a limited operating history and its continued growth is dependent upon the continuation of providing medical consulting services

to its only few clients who are related parties and generating rental revenue from its income-producing real estate property in New Jersey;

hence generating revenues, and obtaining additional financing to fund future obligations and pay liabilities arising from normal business

In addition, the current cash balance cannot be projected to cover the operating expenses for the next twelve months from

the release date of this report.

These matters raise substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital, implement

its business plan, and generate significant revenues.

There are no assurances that the Company will be successful in its efforts to generate

significant revenues, maintain sufficient cash balance or report profitable operations or to continue as a going concern.

plans on raising capital through the sale of equity to implement its business plan.

However, there is no assurance these plans will be

realized and that any additional financings will be available to the Company on satisfactory terms and conditions, if any.

occurrence of an uncontrollable event such as the COVID-19 pandemic is likely to negatively affect the Company’s operations.

to contain the spread of the coronavirus have intensified, including social distancing, travel bans and quarantine, and these

are likely to negatively impact our tenants, employees and consultants.

These, in turn, will not only impact our operations, financial

condition and demand for our medical related consulting services but our overall ability to react timely to mitigate the impact of this

Given the dynamic nature of these circumstances, the duration of business disruption and reduced traffic, the related financial

effect cannot be reasonably estimated at this time but is expected to adversely impact our business for the rest of 2021.

is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate

on an ongoing basis.

At March 31, 2021 and December 31, 2020, we had cash balance of approximately $1,693,000 and $727,000, respectively.

These funds are kept in financial institutions located as follows:

United States

Under applicable PRC regulations, foreign

invested enterprises, or FIEs, in China may pay dividends only out of their accumulated profits, if any, determined in accordance

with PRC accounting standards and regulations.

In addition, a foreign invested enterprise in China is required to set aside at

least 10% of its after-tax profit based on PRC accounting standards each year to its general reserves until the cumulative amount

of such reserves reach 50% of its registered capital.

applicable PRC regulations, foreign invested enterprises, or FIEs, in China may pay dividends only out of their accumulated profits,

if any, determined in accordance with PRC accounting standards and regulations.

In addition, a foreign invested enterprise in China is

required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its general reserves until

the cumulative amount of such reserves reach 50% of its registered capital.

These reserves are not distributable as cash dividends.

In addition, a portion of our businesses

and assets are denominated in RMB, which is not freely convertible into foreign currencies.

All foreign exchange transactions take

place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange

rates quoted by the People’s Bank of China.

Approval of foreign currency payments by the People’s Bank of China or

other regulatory institutions requires submitting a payment application form together with suppliers’

invoices, shipping

documents and signed contracts.

addition, a portion of our businesses and assets are denominated in RMB, which is not freely convertible into foreign currencies.

foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign

currencies at the exchange rates quoted by the People’s Bank of China.

Approval of foreign currency payments by the People’s

Bank of China or other regulatory institutions requires submitting a payment application form together with suppliers’

shipping documents and signed contracts.

These currency exchange control procedures imposed by the PRC government authorities may restrict

the ability of our PRC subsidiary to transfer its net assets to the Parent Company through loans, advances or cash dividends.

The current PRC Enterprise Income Tax (“EIT”)

Law and its implementing rules generally provide that a 10% withholding tax applies to China-sourced income derived by non-resident

enterprises for PRC enterprise income tax purposes unless the jurisdiction of incorporation of such enterprises’

has a tax treaty with China that provides for a different withholding arrangement.

The following table sets forth a summary

of changes in our working capital from December 31, 2019 to September 30, 2020:

September 30,

current PRC Enterprise Income Tax (“EIT”) Law and its implementing rules generally provide that a 10% withholding tax applies

to China-sourced income derived by non-resident enterprises for PRC enterprise income tax purposes unless the jurisdiction of incorporation

of such enterprises’

shareholder has a tax treaty with China that provides for a different withholding arrangement.

following table sets forth a summary of changes in our working capital from December 31, 2019 to September 30, 2020:

Working capital deficit:

3 unchanged sentences

$ (1,059,606 )

Our working capital deficit decreased by

$978,373 to $285,995 at September 30, 2020 from $1,264,368 at December 31, 2019.

The decrease in working capital deficit was primarily

attributable to an increase in cash of approximately $631,000, an increase in rent receivable of approximately $74,000, an increase

in prepaid expenses and other current assets of approximately $181,000, a decrease in accrued professional fees of approximately

$280,000, a decrease in accrued research and development fees of approximately $208,000, a decrease in accrued payroll liability

of approximately $127,000, offset by a decrease in accounts receivable –

related party of approximately $215,000, a decrease

in deferred financing costs of approximately $83,000, an increase in accrued liabilities and other payables of approximately

$66,000, an increase in accrued liabilities and other payables –

related parties of approximately $75,000, and an increase

in operating lease obligation of approximately $76,000.

Because the exchange rate conversion is

different for the consolidated balance sheets and the consolidated statements of cash flows, the changes in assets and liabilities

reflected on the consolidated statements of cash flows are not necessarily identical with the comparable changes reflected on the

consolidated balance sheets.

Cash Flows for the Nine Months Ended

September 30, 2020 Compared to the Nine Months Ended September 30, 2019

The following summarizes the key components

of our cash flows for the nine months ended September 30, 2020 and 2019:

Nine Months Ended

September 30,

$ (1,306,056 )

working capital deficit decreased by $246,450 to $1,059,606 at March 31, 2021 from $1,306,056 at December 31, 2020.

in working capital deficit was primarily attributable to an increase in cash of approximately $966,000, and a decrease in accrued research

and development fees of approximately $81,000, offset by a decrease in deferred financing costs of approximately $70,000, an increase

in accrued professional fees of approximately $232,000, an increase in accrued liabilities and other payables –

related parties

of approximately $45,000, an increase in operating lease obligation of approximately $56,000, and an increase in note payable –

related party of $390,000.

the exchange rate conversion is different for the condensed consolidated balance sheets and the condensed consolidated statements of

cash flows, the changes in assets and liabilities reflected on the condensed consolidated statements of cash flows are not necessarily

identical with the comparable changes reflected on the condensed consolidated balance sheets.

Flows for the Three Months Ended March 31, 2021 Compared to the Three Months Ended March 31, 2020

following summarizes the key components of our cash flows for the three months ended March 31, 2021 and 2020:

Three Months Ended

Net cash used in operating activities

5 unchanged sentences

Net increase (decrease) in cash

$ (1,179,947 )

Net cash flow used in operating activities

for the nine months ended September 30, 2020 was $6,185,198, which primarily reflected our consolidated net loss of approximately

$9,579,000, and the changes in operating assets and liabilities, primarily consisting of an increase in rent receivable of approximately

$94,000, an increase in prepaid expenses and other current assets of approximately $353,000, a decrease in accrued liabilities

and other payables of approximately $681,000, offset by a decrease in accounts receivable –

cash flow used in operating activities for the three months ended March 31, 2021 was $1,515,525, which primarily reflected our consolidated

net loss of approximately $2,367,000, and the changes in operating assets and liabilities, primarily consisting of an increase in prepaid

expenses and other current assets of approximately $41,000, and a decrease in operating lease obligation of approximately $33,000, offset

by an increase in accrued liabilities and other payables of approximately $163,000, an increase in accrued liabilities and other payables

related parties of approximately $45,000, and the non-cash items adjustment primarily consisting of depreciation of approximately

$79,000, and stock-based compensation and service expense of approximately $574,000.

cash flow used in operating activities for the three months ended March 31, 2020 was $1,998,796, which primarily reflected our consolidated

net loss of approximately $3,271,000, and the changes in operating assets and liabilities, primarily consisting of an increase in prepaid

expenses and other current assets of approximately $97,000, offset by a decrease in accounts receivable –

related party of approximately

$214,000, an increase in accrued liabilities and other payables –

related parties of approximately $75,000, and the non-cash

items adjustment primarily consisting of depreciation and amortization of approximately $233,000, and stock-based compensation

$86,000, and the non-cash items adjustment primarily consisting of depreciation of approximately $77,000, and stock-based compensation

and service expense of approximately $1,189,000.

Net cash flow used in operating activities

for the nine months ended September 30, 2019 was $5,318,165, which primarily reflected our consolidated net loss of approximately

$13,278,000, the non-cash item adjustment consisting of change in warrants derivative liabilities of approximately $1,622,000,

and the changes in operating assets and liabilities, primarily consisting of an increase in accounts receivable –

parties of approximately $175,000, offset by a decrease in prepaid expenses and other current assets of approximately $241,000,

a decrease in security deposit of approximately $101,000, and an increase in accrued liabilities and other payables of approximately

$327,000, and the add-back of non-cash items mainly consisting of depreciation and amortization of approximately $430,000, stock-based

compensation and service expense of approximately $7,003,000, allocated financing costs of approximately $525,000, and impairment

loss of approximately $1,010,000.

We expect our cash used in operating activities

to increase due to the following:

● the development and commercialization of new products;

● an increase in professional staff and services;

● an increase in public relations and/or sales promotions

for existing and/or new brands as we expand within existing markets or enter new markets.

Net cash flow used in investing activities

was $28,594 for the nine months ended September 30, 2020 as compared to $538,368 for the nine months ended September 30, 2019.

During the nine months ended September 30, 2020, we made additional investment in equity method investment of approximately $29,000.

During the nine months ended September 30, 2019, we made payment for purchase of property and equipment of approximately $379,000,

made payment for improvement of commercial real estate of approximately $16,000, made prepayment for purchase of long-term assets

of approximately $26,000, and made payment for equity method investment of approximately $117,000.

Net cash flow provided by financing activities

was $6,841,783 for the nine months ended September 30, 2020 as compared to $4,693,704 for the nine months ended September 30, 2019.

During the nine months ended September 30, 2020, we received proceeds from related party borrowings of $300,000 and net proceeds

from equity offering of approximately $6,742,000 (net of cash paid for commission and offering costs of approximately $492,000),

offset by repayments made for note payable –

related party of $200,000.

During the nine months ended September 30, 2019,

we received proceeds from note payable –

related party of $1,000,000, and net proceeds for equity offering of approximately

$5,104,000, offset by repayments made for note payable –

related party of $410,000, and repayments for loan payable of $1,000,000.

Our capital requirements for the next twelve

months primarily relate to working capital requirements, including salaries, fees related to third parties’

services, reduction of accrued liabilities, mergers, acquisitions and the development of business opportunities.

These uses of

cash will depend on numerous factors including our sales and other revenues, and our ability to control costs.

All funds received

have been expended in the furtherance of growing the business.

expect our cash used in operating activities to increase due to the following:

development and commercialization of new products;

increase in professional staff and services;

increase in public relations and/or sales promotions for existing and/or new brands as we

expand within existing markets or enter new markets.

cash flow used in investing activities was $30,844 for the three months ended March 31, 2021.

During the three months ended March 31,

2021, we made additional investment in equity method investment of approximately $31,000.

There were no investing activities during

the three months ended March 31, 2020.

cash flow provided by financing activities was $2,512,212 for the three months ended March 31, 2021 as compared to $1,874,877 for the

three months ended March 31, 2020.

During the three months ended March 31, 2021, we received proceeds from related party borrowings of

approximately $105,000 and net proceeds from equity offering of approximately $2,407,000 (net of cash paid for commission of approximately

During the three months ended March 31, 2020, we received proceeds from related party borrowings of $300,000 and net proceeds

from equity offering of approximately $1,575,000 (net of cash paid for commission of approximately $49,000).

capital requirements for the next twelve months primarily relate to working capital requirements, including salaries, fees related to

third parties’

professional services, reduction of accrued liabilities, mergers, acquisitions and the development of business opportunities.

These uses of cash will depend on numerous factors including our sales and other revenues, and our ability to control costs.

received have been expended in the furtherance of growing the business.

The following trends are reasonably likely to result in a material

decrease in our liquidity over the near to long term:

● an increase in working capital requirements to finance

our current business, including ongoing research and development programs, clinical studies, as well as commercial strategies;

● the use of capital for mergers, acquisitions and the

development of business opportunities;

● addition of administrative personnel as the business

● the cost of being a public company.

In the third quarter of 2019, we had secured

a $20 million credit facility (Line of Credit) provided by our Chairman, Wenzhao Lu.

The unsecured credit facility bears

interest at a rate of 5% and provides for maturity on drawn loans 36 months after funding.

The note is not convertible to equity.

As of September 30, 2020, the total principal amount outstanding under the Credit Line was $2.9 million and we have approximately

$17.1 million remaining available under the Line Credit.

On December 13, 2019, we entered into

an Open Market Sale Agreement SM (the “Sales Agreement”) with Jefferies LLC, as sales agent (“Jefferies”),

pursuant to which we may offer and sell, from time to time, through Jefferies, shares of our common stock, par value $0.0001 per

share, having an aggregate offering price of up to $20.0 million.

On April 6, 2020, the date on which we filed our Annual Report

on Form 10-K for the fiscal year ended December 31, 2019, our registration statement became subject to the offering

limits set forth in General Instruction I.B.6 of Form S-3.

As of April 6, 2020, the aggregate market value of our outstanding

common stock held by non-affiliates, or public float, was $39,564,237, based on 23,691,160 shares of our outstanding

common stock that were held by non-affiliates on such date and a price of $1.67 per share, which was the price at which

our common stock was last sold on The Nasdaq Capital Market on February 19, 2020 (a date within 60 days of the date hereof), calculated

in accordance with General Instruction I.B.6 of Form S-3.

We have not offered any securities pursuant to General

Instruction I.B.6 of Form S-3 in the 12 calendar months preceding the date of this prospectus supplement.

prospectus supplement to amend and supplement the information in our prospectus and original prospectus supplement based on the

amount of securities that we are eligible to sell under General Instruction I.B.6 of Form S-3.

an increase in working

capital requirements to finance our current business, including ongoing research and development programs, clinical studies, as well

as commercial strategies;

the use of capital for

mergers, acquisitions and the development of business opportunities;

addition of administrative

personnel as the business grows;

the cost of being a public

the third quarter of 2019, we had secured a $20 million credit facility (Line of Credit) provided by our Chairman, Wenzhao Lu.

The unsecured credit facility bears interest at a rate of 5% and provides for maturity on drawn loans 36 months after funding.

is not convertible to equity.

As of March 31, 2021, the total principal amount outstanding under the Credit Line was approximately $3.3

million and we have approximately $16.7 million remaining available under the Line Credit.

December 13, 2019, we entered into an Open Market Sale Agreement SM (the “Sales Agreement”) with Jefferies

LLC, as sales agent (“Jefferies”), pursuant to which we may offer and sell, from time to time, through Jefferies, shares

of our common stock, par value $0.0001 per share, having an aggregate offering price of up to $20.0 million.

On April 6, 2020, the date

on which we filed our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, our registration statement

became subject to the offering limits set forth in General Instruction I.B.6 of Form S-3.

As of April 6, 2020, the aggregate

market value of our outstanding common stock held by non-affiliates, or public float, was $39,564,237, based on 23,691,160

shares of our outstanding common stock that were held by non-affiliates on such date and a price of $1.67 per share, which

was the price at which our common stock was last sold on The Nasdaq Capital Market on February 19, 2020 (a date within 60 days of the

date hereof), calculated in accordance with General Instruction I.B.6 of Form S-3.

We have not offered any securities

pursuant to General Instruction I.B.6 of Form S-3 in the 12 calendar months preceding the date of this prospectus supplement.

We filed a prospectus supplement to amend and supplement the information in our prospectus and original prospectus supplement based on

the amount of securities that we are eligible to sell under General Instruction I.B.6 of Form S-3.

After giving effect

to the $13,000,000 offering limit imposed by General Instruction I.B.6 of Form S-3, we may offer and sell additional

shares of our common stock having an aggregate offering price of up to $13,000,000 from time to time through Jefferies acting as

our sales agent in accordance with the terms of the sales agreement.

As of September 30, 2020, we sold a total of 3,606,910

shares of our common stock through Jefferies with an aggregate offering price of $6,507,414 and we have approximately $8.5 million

offering price remaining available under the Sales Agreement.

We estimate that based on current plans

and assumptions, that our available cash will be insufficient to satisfy our cash requirements under our present operating expectations

through cash available under our Credit Line and sales of equity through our Sales Agreement.

Other than funds received from the

sale of our equity and advances from our related party, and cash resource generating from our operations, we presently have no

other significant alternative source of working capital.

We have used these funds to fund our operating expenses, pay our obligations

and grow our company.

We will need to raise significant additional capital to fund our operations and to provide working capital

for our ongoing operations and obligations.

Therefore, our future operation is dependent on our ability to secure additional financing.

Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms.

to the $13,000,000 offering limit imposed by General Instruction I.B.6 of Form S-3, we may offer and sell additional shares

of our common stock having an aggregate offering price of up to $13,000,000 from time to time through Jefferies acting as our sales agent

in accordance with the terms of the sales agreement.

As of March 31, 2021, we sold a total of 5,900,275 shares of our common stock

through Jefferies with an aggregate offering price of $9,559,240 and we have approximately $5.4 million offering price remaining available

under the Sales Agreement.

estimate that based on current plans and assumptions, that our available cash will be insufficient to satisfy our cash requirements under

our present operating expectations through cash available under our Credit Line and sales of equity through our Sales Agreement.

than funds received from the sale of our equity and advances from our related party, and cash resource generating from our operations,

we presently have no other significant alternative source of working capital.

We have used these funds to fund our operating expenses,

pay our obligations and grow our company.

We will need to raise significant additional capital to fund our operations and to provide

working capital for our ongoing operations and obligations.

Therefore, our future operation is dependent on our ability to secure additional

Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing

However, the trading price of our common stock and a downturn in the U.S.

3 unchanged sentences

that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek alternative

Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the

new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock.

The inability

to obtain additional capital may restrict our ability to grow and may reduce our ability to continue to conduct business operations.

If we are unable to obtain additional financing, we will be required to cease our operations.

To date, we have not considered this

alternative, nor do we view it as a likely occurrence.

Contractual Obligations and Off-Balance

Sheet Arrangements

Contractual Obligations

We have certain fixed contractual obligations

and commitments that include future estimated payments.

Changes in our business needs, cancellation provisions, and other factors

may result in actual payments differing from the estimates.

We cannot provide certainty regarding the timing and amounts of payments.

We have presented below a summary of the most significant assumptions used in our determination of amounts presented in the tables,

in order to assist in the review of this information within the context of our consolidated financial position, results of operations,

and cash flows.

The following tables summarize our contractual obligations as of September 30, 2020, and the effect these obligations

are expected to have on our liquidity and cash flows in future periods.

Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new

equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock.

The inability to

obtain additional capital may restrict our ability to grow and may reduce our ability to continue to conduct business operations.

we are unable to obtain additional financing, we will be required to cease our operations.

To date, we have not considered this alternative,

nor do we view it as a likely occurrence.

Obligations and Off-Balance Sheet Arrangements

have certain fixed contractual obligations and commitments that include future estimated payments.

Changes in our business needs, cancellation

provisions, and other factors may result in actual payments differing from the estimates.

We cannot provide certainty regarding the timing

and amounts of payments.

We have presented below a summary of the most significant assumptions used in our determination of amounts presented

in the tables, in order to assist in the review of this information within the context of our consolidated financial position, results

of operations, and cash flows.

The following tables summarize our contractual obligations as of March 31, 2021, and the effect these

obligations are expected to have on our liquidity and cash flows in future periods.

Payments Due by Period

Contractual obligations:

Less than 1 year

Operating lease commitment

5 unchanged sentences

AVAR joint venture commitment

Off-balance Sheet Arrangements

We presently do not have off-balance sheet arrangements.

Foreign Currency Exchange Rate Risk

A portion of our operations are in China.

Thus, a portion of our revenues and operating results may be impacted by exchange rate fluctuations between RMB and US dollars.

For the three months ended September 30, 2020 and 2019, we had an unrealized foreign currency translation gain of approximately

$40,000 and an unrealized foreign currency translation loss of approximately $69,000, respectively, because of changes in the exchange

For the nine months ended September 30, 2020 and 2019, we had an unrealized foreign currency translation gain of approximately

$21,000 and an unrealized foreign currency translation loss of approximately $60,000, respectively, because of changes in the exchange

The effect of inflation on our revenue

and operating results was not significant.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

As a smaller reporting

company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item .

Sheet Arrangements

presently do not have off-balance sheet arrangements.

Currency Exchange Rate Risk

portion of our operations are in China.

Thus, a portion of our revenues and operating results may be impacted by exchange rate fluctuations

between RMB and US dollars.

For the three months ended March 31, 2021 and 2020, we had an unrealized foreign currency translation loss

of approximately $3,000 and $22,000, respectively, because of changes in the exchange rate.

effect of inflation on our revenue and operating results was not significant.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

a smaller reporting company, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements