What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-15 compared with 2021-08-16 · 287 added, 294 removed, 327 unchanged (64% of the section changed)

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 six months ended June 30, 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,”

“plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,”

“intend,” “may,” “will,” “should,” “could,” and similar expressions to identify

forward-looking statements.

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

30, 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,” “plan,” “project,” “continuing,” “ongoing,” “expect,”

“believe,” “intend,” “may,” “will,” “should,” “could,” and similar

expressions to identify forward-looking statements.

of COVID-19 on Our Operations, Financial Condition, Liquidity and Results of Operations

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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 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 technology (ACTEX™), and regenerative 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 technology (ACTEX™),

and regenerative therapeutics.

achieves and fosters seamless integration of unique verticals to bridge and accelerate innovative research, bio-process development,

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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.

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.

Strategic partnership with the University of Natural Resources and Life Sciences (BOKU) in Vienna, Austria to develop an S-layer based mucosal vaccine that can be administered by an intranasal or oral route against SARS-CoV-2, the novel coronavirus that causes COVID-19 disease, and other respiratory infections.

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

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full capacity.

However, the Company expects to slowly increase operations during 2021.

However, the Company expects to slowly increase operations in the near future.

downstream medical team and facility consists of top-rated affiliated hospital network and experts specialized in hematology, oncology,

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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.

Ltd) 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.

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.

is currently expanding the patient recruitment for AVA-001 to include relapsed/refractory non-Hodgkin lymphoma patients.

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.

Ltd) 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.

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.

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™ 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.

Our leading candidate,

AVA-011, is currently at process development stage to generate clinical-grade cell-therapy products for subsequent clinical studies.

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

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.

Using 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.

been co-developed by Avalon GloboCare and Dr.

Yen-Michael Hsu at University of Pittsburgh Medical Center (UPMC).

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.

FLASH-CAR™ / AVA-011:

The Company advanced its next generation immune cell therapy using mRNA-based, non-viral FLASH-CAR™ technology co-developed with the Company’s strategic partner Arbele Limited.

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.

Our leading candidate, AVA-011, is currently at process development stage to generate clinical-grade cell-therapy products for subsequent clinical studies.

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.

Using 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

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in New Jersey, where we are headquartered.

During the three and six months ended June 30, 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 and six months ended June 30, 2021.

Currently, we are negotiating with our potential customers and consulting services agreements

are not finalized.

In addition, during the three and six months ended June 30, 2021, we did not receive any revenue from our COVID 19

testing distribution agreements and the Company discontinued plans to develop its own testing kits at this time.

The competitive landscape

for these products made sales difficult during this period and there can be no assurance that there will be sales of these testing kits

in the future.

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.

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 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 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

and six months ended June 30, 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.

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 technology (ACTEX™),

and regenerative therapeutics.

addition, the Company owns commercial real estate that houses its headquarters in Freehold, New Jersey and provides outsourced and

customized international healthcare services to the rapidly changing health care industry primarily focused in the People’s Republic

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

reflected in the accompanying condensed consolidated financial statements, the Company had working capital deficit of $3,277,946 as of

June 30, 2021 and has incurred recurring net loss and generated negative cash flow from operating activities of $4,732,028 and $2,593,548

for the six months ended June 30, 2021, respectively.

September 30, 2021 and has incurred recurring net loss and generated negative cash flow from operating activities of $6,756,247 and $3,307,520

for the nine months ended September 30, 2021, respectively.

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

46 unchanged sentences

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

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

2 unchanged sentences

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).

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).

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

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OF OPERATIONS

of Results of Operations for the Three and Six Months Ended June 30, 2021 and 2020

the three months ended June 30, 2021, we had real property rental revenue of $280,232, as compared to $301,267 for the three months ended

June 30, 2020, a decrease of $21,035, or 7.0%.

For the six months ended June 30, 2021, we had real property rental revenue of $570,006,

as compared to $598,223 for the six months ended June 30, 2020, a decrease of $28,217, or 4.7%.

The decrease was primarily attributable

to two tenants moved out in August 2020 and March 2021, respectively.

We expect that our revenue from real property rent will remain

in its current quarterly level with minimal increase in the near future.

of Results of Operations for the Three and Nine Months Ended September 30, 2021 and 2020

the three months ended September 30, 2021, we had real property rental revenue of $355,459, as compared to $324,982 for the three months

ended September 30, 2020, an increase of $30,477, or 9.4%.

For the nine months ended September 30, 2021, we had real property rental

revenue of $925,465, as compared to $923,205 for the nine months ended September 30, 2020, an increase of $2,260, or 0.2%.

was primarily attributable to the increase of tenants in 2021.

We expect that our revenue from real property rent will remain in its

current quarterly level with minimal increase in the near future.

the three and nine months ended September 30, 2021, we had medical related consulting services revenue from related party of $131,305.

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.

We expect that our revenue from medical related consulting services will 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 June 30, 2021, our real property operating expenses amounted to $205,147, as compared to $272,764 for the three

months ended June 30, 2020, a decrease of $67,617, or 24.8%.

The decrease was mainly due to a decrease in utilities of approximately

$19,000, a decrease in janitorial supplies of approximately $4,000, and a decrease in other miscellaneous items of approximately $44,000.

For the six months ended June 30, 2021, our real property operating expenses amounted to $422,041, as compared to $527,265 for the six

months ended June 30, 2020, a decrease of $105,224, or 20.0%.

The decrease was mainly due to a decrease in repairs and maintenance fees

of approximately $21,000, a decrease in utilities of approximately $17,000, a decrease in janitorial supplies of approximately $7,000,

and a decrease in other miscellaneous items of approximately $60,000.

the three months ended September 30, 2021, our real property operating expenses amounted to $215,622, as compared to $135,821 for the

three months ended September 30, 2020, an increase of $79,801, or 58.8%.

The increase was mainly due to an increase in repairs and maintenance

fees of approximately $16,000, an increase in janitorial supplies of approximately $3,000, an increase in utilities of approximately

$8,000, and an increase in other miscellaneous items of approximately $52,000.

For the nine months ended September 30, 2021, our real

property operating expenses amounted to $637,663, as compared to $663,086 for the nine months ended September 30, 2020, a decrease of

$25,423, or 3.8%.

The decrease was mainly due to a decrease in air conditioner maintenance fees of approximately $3,000, a decrease in

janitorial supplies of approximately $4,000, and a decrease in other miscellaneous items of approximately $18,000.

of medical related consulting services include the cost of labor and related benefits, travel expenses related to medical related consulting

services, and other overhead costs.

the three and nine months ended September 30, 2021, costs of medical related consulting services amounted to $102,442.

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 and there was no order for our medical related

consulting services from third party in these periods.

Property Operating Income

real property operating income for the three months ended June 30, 2021 was $75,085, representing an increase of $46,582, or 163.4%,

as compared to $28,503 for the three months ended June 30, 2020.

Our real property operating income for the six months ended June 30,

2021 was $147,965, representing an increase of $77,007, or 108.5%, as compared to $70,958 for the six months ended June 30, 2020.

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.

real property operating income for the three months ended September 30, 2021 was $139,837, representing a decrease of $49,324, or 26.1%,

as compared to $189,161 for the three months ended September 30, 2020.

The decrease was mainly attributable to the increase in real property

operating expenses as described above.

Our real property operating income for the nine months ended September 30, 2021 was $287,802,

representing an increase of $27,683, or 10.6%, as compared to $260,119 for the nine months ended September 30, 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.

Profit from Medical Related Consulting Services and Gross Margin

gross profit from medical related consulting services for the three and nine months ended September 30, 2021 was $28,863, with a

gross margin of 22.0%.

We did not generate any gross profit from medical related consulting services in the three and nine months ended

September 30, 2020.

We estimate that our gross margin from medical related consulting services segment will remain at its current level.

Operating Expenses

the three and six months ended June 30, 2021 and 2020, other operating expenses consisted of the following:

the three and nine months ended September 30, 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

Directors and officers liability

insurance premium

Directors and officers liability insurance premium

Travel and entertainment

3 unchanged sentences

● 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 June 30, 2021, professional fees decreased by

$204,571, or 13.1%, as compared to the three months ended June 30, 2020.

The decrease was

primarily attributable to a decrease in consulting fees of approximately $430,000 mainly

due to the decrease in use of consulting service providers, a decrease in investor relations

service fees of approximately $124,000 mainly due to the decrease in use of investor relations

service providers, and a decrease in other miscellaneous items of approximately $8,000, offset

by an increase in legal service fees of approximately $357,000 mainly due to increased legal

service related to our potential acquisition.

For the six months ended June 30, 2021, professional

fees decreased by $377,091, or 12.1%, as compared to the six months ended June 30, 2020.

The decrease was primarily attributable to a decrease in consulting fees of approximately

$422,000 mainly due to the decrease in use of consulting service providers, and a decrease

in investor relations service fees of approximately $295,000 mainly due to the decrease in

use of investor relations service providers, offset by an increase in legal service fees

of approximately $297,000 mainly due to increased legal service related to our potential

acquisition, and an increase in other miscellaneous items of approximately $43,000.

that our professional fees will remain in its current quarterly level with minimal increase

in the near future.

the three months ended June 30, 2021, compensation and related benefits decreased by $506,223,

or 48.0%, as compared to the three months ended June 30, 2020.

The significant decrease was

primarily attributable to a decrease in stock-based compensation of approximately $516,000

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 $10,000.

six months ended June 30, 2021, compensation and related benefits decreased by $1,072,685,

or 49.1%, as compared to the six months ended June 30, 2020.

The significant decrease was

primarily attributable to a decrease in stock-based compensation of approximately $1,094,000

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 $21,000.

that our compensation and related benefits will remain in its current quarterly level with

minimal increase in the near future.

the three months ended June 30, 2021, research and development expenses increased by $77,692,

or 48.2%, as compared to the three months ended June 30, 2020.

For the six months ended June

30, 2021, research and development expenses increased by $15,478, or 3.5%, as compared to

the six months ended June 30, 2020.

The increase was primarily attributable to the start

of a new project in August 2020.

the three months ended June 30, 2021, Directors and Officers Liability Insurance premium

increased by $23,129, or 39.9%, as compared to the three months ended June 30, 2020.

the six months ended June 30, 2021, Directors and Officers Liability Insurance premium increased

by $46,257, or 39.9%, as compared to the six months ended June 30, 2020.

The increase was

mainly due to different insurance provider with different premium.

the three months ended June 30, 2021, travel and entertainment expense increased by $8,836,

or 28.3%, as compared to the three months ended June 30, 2020.

The slight increase was primarily

due to the increased business travel activities in the second quarter of 2021.

months ended June 30, 2021, travel and entertainment expense decreased by $32,594, or 31.1%,

as compared to the six months ended June 30, 2020.

The decrease was mainly due to decreased

business travel activities and decreased entertainment expenditure resulting from COVID-19

in the first half of 2021.

the three months ended June 30, 2021, rent and related utilities expenses decreased by $3,875,

or 17.2%, as compared to the three months ended June 30, 2020.

For the six months ended June

30, 2021, rent and related utilities expenses decreased by $3,989, or 8.8%, as compared to

the six months ended June 30, 2020.

The decrease was mainly attributable to the decreased

monthly rent in Avalon Shanghai’s office.

the three months ended June 30, 2021, advertising expenses decreased by $35,442 or 82.5%

as compared to the three months ended June 30, 2020.

For the six months ended June 30, 2021,

advertising expenses decreased by $97,522 or 85.7% as compared to the six months ended June

The significant decrease was primarily due to reduced 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 June 30, 2021, other general and

administrative expenses decreased by $13,511, or 13.5%, as compared to the three months ended

June 30, 2020.

For the six months ended June 30, 2021, other general and administrative expenses

decreased by $19,998, or 11.0%, as compared to the six months ended June 30, 2020.

resulted from our efforts at stricter controls on corporate expenditure.

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, 2021, professional fees decreased

by $531,230, or 30.3%, as compared to the three months ended September 30, 2020.

The decrease was primarily attributable to a decrease

in consulting fees of approximately $738,000 mainly due to the decrease in use of consulting service providers, and a decrease in investor

relations service fees of approximately $183,000 mainly due to the decrease in use of investor relations service providers, offset by

an increase in legal service fees of approximately $316,000 mainly due to increased legal service related to our potential acquisition,

and an increase in other miscellaneous items of approximately $74,000.

For the nine months ended September 30, 2021, professional fees

decreased by $908,321, or 18.7%, as compared to the nine months ended September 30, 2020.

The decrease was primarily attributable to

a decrease in consulting fees of approximately $1,160,000 mainly due to the decrease in use of consulting service providers, a decrease

in investor relations service fees of approximately $479,000 mainly due to the decrease in use of investor relations service providers,

and a decrease in other miscellaneous items of approximately $63,000, offset by an increase in legal service fees of approximately $613,000

mainly due to increased legal service related to our potential acquisition, and an increase in valuation fee for our potential acquisition

We expect that our professional fees will remain in its current quarterly level with minimal decrease in the near future.

the three months ended September 30, 2021, compensation and related benefits decreased by $623,968, or 58.9%, as compared to the three

months ended September 30, 2020.

The significant decrease was primarily attributable to a decrease in stock-based compensation of approximately

$520,000 which reflected the value of options granted and vested to our management, and a decrease in management’s compensation

and related benefits of approximately $104,000.

For the nine months ended September 30, 2021, compensation and related benefits decreased

by $1,696,653, or 52.3%, as compared to the nine months ended September 30, 2020.

The significant decrease was primarily attributable

to a decrease in stock-based compensation of approximately $1,614,000 which reflected the value of options granted and vested to our

management, and a decrease in management’s compensation and related benefits of approximately $83,000.

We expect that our compensation

and related benefits will remain in its current quarterly level with minimal increase in the near future.

the three months ended September 30, 2021, research and development expenses decreased by $14,360, or 6.0%, as compared to the three

months ended September 30, 2020.

For the nine months ended September 30, 2021, research and development expenses increased by $1,118,

or 0.2%, as compared to the nine months ended September 30, 2020.

We expect that our research and development expenses will remain in

its current quarterly level with minimal increase in the near future.

the three months ended September 30, 2021, Directors and Officers Liability Insurance premium increased by $22,637, or 28.7%, as compared

to the three months ended September 30, 2020.

For the nine months ended September 30, 2021, Directors and Officers Liability Insurance

premium increased by $68,894, or 35.4%, as compared to the nine months ended September 30, 2020.

The increase was mainly due to different

insurance provider with different premium.

the three months ended September 30, 2021, travel and entertainment expense increased by $15,911, or 48.6%, as compared to the three

months ended September 30, 2020.

The increase was primarily due to the increased business travel activities in the third quarter of 2021.

For the nine months ended September 30, 2021, travel and entertainment expense decreased by $16,683, or 12.1%, as compared to the nine

months ended September 30, 2020.

The decrease was mainly due to decreased business travel activities and decreased entertainment expenditure

resulting from COVID-19.

the three months ended September 30, 2021, rent and related utilities expenses decreased by $4,528, or 19.7%, as compared to the three

months ended September 30, 2020.

For the nine months ended September 30, 2021, rent and related utilities expenses decreased by $8,517,

or 12.5%, as compared to the nine months ended September 30, 2020.

The decrease was mainly attributable to the decreased monthly rent

in Avalon Shanghai’s office.

the three months ended September 30, 2021, advertising expenses decreased by $74,639 or 72.8% as compared to the three months ended September

For the nine months ended September 30, 2021, advertising expenses decreased by $172,161 or 79.6% as compared to the nine months

ended September 30, 2020.

The significant decrease was primarily due to reduced 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 September 30, 2021, other general and administrative expenses decreased by $35,871, or 38.8%, as compared to the three months

ended September 30, 2020.

For the nine months ended September 30, 2021, other general and administrative expenses decreased by $55,869,

or 20.4%, as compared to the nine months ended September 30, 2020.

The decrease resulted from our efforts at stricter controls on corporate

from Operations

a result of the foregoing, for the three months ended June 30, 2021, loss from operations amounted to $2,302,280, as compared to $3,002,827

for the three months ended June 30, 2020, a decrease of $700,547, or 23.3%.

a result of the foregoing, for six months ended June 30, 2021, loss from operations amounted to $4,605,868, as compared to $6,225,019

for the six months ended June 30, 2020, a decrease of $1,619,151, or 26.0%.

a result of the foregoing, for the three months ended September 30, 2021, loss from operations amounted to $1,964,971, as compared to

$3,190,558 for the three months ended September 30, 2020, a decrease of $1,225,587, or 38.4%.

a result of the foregoing, for nine months ended September 30, 2021, loss from operations amounted to $6,570,839, as compared to $9,415,577

for the nine months ended September 30, 2020, a decrease of $2,844,738, or 30.2%.

Income (Expense)

income (expense) mainly includes interest expense and loss from equity method investment.

expense, net, totaled $62,630 for the three months ended June 30, 2021, as compared to $53,555 for the three months ended June 30, 2020,

an increase of $9,075, or 16.9%, which was primarily attributable to an increase in loss from equity method investment of approximately

$4,000, an increase in interest expense of approximately $4,000, and a decrease in miscellaneous income of approximately $1,000.

expense, net, totaled $126,160 for the six months ended June 30, 2021, as compared to $102,144 for the six months ended June 30, 2020,

an increase of $24,016, or 23.5%, which was primarily attributable to an increase in loss from equity method investment of approximately

$13,000, an increase in interest expense of approximately $7,000, and a decrease in miscellaneous income of approximately $4,000.

did not have any income taxes expense for the three months ended June 30, 2021 and 2020 since we incurred losses in these periods.

did not have any income taxes expense for the six months ended June 30, 2021 and 2020 since we incurred losses in these periods.

a result of the factors described above, our net loss was $2,364,910 for the three months ended June 30, 2021, as compared to $3,056,382

for the three months ended June 30, 2020, a decrease of $691,472 or 22.6%.

a result of the factors described above, our net loss was $4,732,028 for the six months ended June 30, 2021, as compared to $6,327,163

for the six months ended June 30, 2020, a decrease of $1,595,135 or 25.2%.

expense, net, totaled $59,248 for the three months ended September 30, 2021, as compared to $61,401 for the three months ended September

30, 2020, a decrease of $2,153, or 3.5%, which was primarily attributable to a decrease in other miscellaneous expense of approximately

$10,000, and a decrease in loss from equity method investment of approximately $1,000, offset by an increase in interest expense of approximately

expense, net, totaled $185,408 for the nine months ended September 30, 2021, as compared to $163,545 for the nine months ended September

30, 2020, an increase of $21,863, or 13.4%, which was primarily attributable to an increase in interest expense of approximately $15,000,

and an increase in loss from equity method investment of approximately $13,000, offset by a decrease in other miscellaneous expense of

approximately $6,000.

did not have any income taxes expense for the three and nine months ended September 30, 2021 and 2020 since we incurred losses in

these periods.

a result of the factors described above, our net loss was $2,024,219 for the three months ended September 30, 2021, as compared to $3,251,959

for the three months ended September 30, 2020, a decrease of $1,227,740 or 37.8%.

a result of the factors described above, our net loss was $6,756,247 for the nine months ended September 30, 2021, as compared to $9,579,122

for the nine months ended September 30, 2020, a decrease of $2,822,875 or 29.5%.

Loss Attributable to Avalon GloboCare Corp.

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common shareholders was $2,024,219 or $0.02 per share (basic and diluted) for the three

months ended June 30, 2021, as compared with $3,056,382, or $0.04 per share (basic and diluted) for the three months ended June 30, 2020,

months ended September 30, 2021, as compared with $3,251,959, or $0.04 per share (basic and diluted) for the three months ended September

30, 2020, a change of $1,227,740 or 37.8%.

net loss attributable to Avalon GloboCare Corp.

common shareholders was $4,732,028 or $0.06 per share (basic and diluted) for the six

months ended June 30, 2021, as compared with $6,327,163, or $0.08 per share (basic and diluted) for the six months ended June 30, 2020,

common shareholders was $6,756,247 or $0.08 per share (basic and diluted) for the nine

months ended September 30, 2021, as compared with $9,579,122, or $0.12 per share (basic and diluted) for the nine months ended September

30, 2020, a change of $2,822,875 or 29.5%.

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As a result of foreign currency translations, which are a non-cash adjustment, we reported a foreign currency translation gain of $1,285

and $3,309 for the three months ended June 30, 2021 and 2020, respectively.

As a result of foreign currency translations, which are a

non-cash adjustment, we reported a foreign currency translation gain of $12,064 and a foreign currency translation loss of $18,757 for

the six months ended June 30, 2021 and 2020, respectively.

This non-cash gain/loss had the effect of decreasing/increasing our reported

comprehensive loss.

and $39,698 for the three months ended September 30, 2021 and 2020, respectively.

As a result of foreign currency translations, which

are a non-cash adjustment, we reported a foreign currency translation gain of $13,349 and $20,941 for the nine months ended September

30, 2021 and 2020, respectively.

This non-cash gain had the effect of decreasing our reported comprehensive loss.

Comprehensive

a result of our foreign currency translation adjustment, we had comprehensive loss of $2,022,934 and $3,212,261 for the three months

ended June 30, 2021 and 2020, respectively.

As a result of our foreign currency translation adjustment, we had comprehensive loss of

$4,719,964 and $6,345,920 for the six months ended June 30, 2021 and 2020, respectively.

ended September 30, 2021 and 2020, respectively.

As a result of our foreign currency translation adjustment, we had comprehensive loss

of $6,742,898 and $9,558,181 for the nine months ended September 30, 2021 and 2020, respectively.

and Capital Resources

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on an ongoing basis.

At June 30, 2021 and December 31, 2020, we had cash balance of approximately $685,000 and $727,000, respectively.

At September 30, 2021 and December 31, 2020, we had cash balance of approximately $532,000 and $727,000, respectively.

These funds are kept in financial institutions located as follows:

June 30, 2021

December 31, 2020

September 30,

United States

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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, 2020 to June 30, 2021:

following table sets forth a summary of changes in our working capital from December 31, 2020 to September 30, 2021:

September 30,

Working capital deficit:

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$ (1,971,890 )

working capital deficit increased by $1,048,747 to $2,354,803 at June 30, 2021 from $1,306,056 at December 31, 2020.

in working capital deficit was primarily attributable to a decrease in deferred financing costs of approximately $54,000, an increase

in accrued professional fees of approximately $476,000, an increase in accrued research and development fees of approximately $74,000,

an increase in accrued liabilities and other payables – related parties of approximately $91,000, an increase in operating lease

obligation of approximately $65,000, and an increase in note payable – related party of $390,000, offset by an increase in prepaid

expenses and other current assets of approximately $146,000.

working capital deficit increased by $1,971,890 to $3,277,946 at September 30, 2021 from $1,306,056 at December 31, 2020.

in working capital deficit was primarily attributable to a decrease in cash of approximately $194,000, an increase in accrued professional

fees of approximately $994,000, mainly due to an increase in professional services providers, an increase in accrued research and development

fees of approximately $227,000, an increase in accrued payroll liability and directors’ compensation of approximately $147,000,

an increase in accrued liabilities and other payables – related parties of approximately $142,000, and an increase in note payable

– related party of $390,000, offset by an increase in prepaid professional fees of approximately $256,000.

the exchange rate conversion is different for the condensed consolidated balance sheets and the condensed consolidated statements of

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identical with the comparable changes reflected on the condensed consolidated balance sheets.

Flows for the Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020

following summarizes the key components of our cash flows for the six months ended June 30, 2021 and 2020:

Six Months Ended

Flows for the Nine Months Ended September 30, 2021 Compared to the Nine Months Ended September 30, 2020

following summarizes the key components of our cash flows for the nine months ended September 30, 2021 and 2020:

Nine Months Ended

September 30,

Net cash used in operating activities

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Net (decrease) increase in cash

Net cash flow used in operating activities for the

six months ended June 30, 2021 was $2,593,548, which primarily reflected our consolidated net loss of approximately $4,732,000, and the

changes in operating assets and liabilities, primarily consisting of a decrease in operating lease obligation of approximately $60,000,

offset by an increase accrued liabilities and other payables of approximately $714,000, and an increase in accrued liabilities and other

payables – related parties of approximately $91,000, and the non-cash items adjustment primarily consisting of depreciation of approximately

$141,000, amortization of right-of-use asset of approximately $60,000, and stock-based compensation and service expense of approximately

cash flow used in operating activities for the six months ended June 30, 2020 was $3,924,902, which primarily reflected our consolidated

net loss of approximately $6,327,000, and the changes in operating assets and liabilities, primarily consisting of an increase in prepaid

expenses and other current assets of approximately $124,000, and a decrease in accrued liabilities and other payables of approximately

$386,000, offset by a decrease in accounts receivable – related party of approximately $213,000, an increase in accrued liabilities

and other payables – related parties of approximately $84,000, and the non-cash items adjustment primarily consisting of depreciation

of approximately $153,000, and stock-based compensation and service expense of approximately $2,449,000.

cash flow used in operating activities for the nine months ended September 30, 2021 was $3,307,520, which primarily reflected our consolidated

net loss of approximately $6,756,000, and the changes in operating assets and liabilities, primarily consisting of a decrease in operating

lease obligation of approximately $87,000, offset by an increase accrued liabilities and other payables of approximately $1,436,000,

and an increase in accrued liabilities and other payables – related parties of approximately $142,000, and the non-cash items adjustment

primarily consisting of depreciation of approximately $227,000, amortization of right-of-use asset of approximately $93,000, and stock-based

compensation and service expense of approximately $1,621,000.

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 $680,000, 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 of approximately $233,000, and stock-based compensation and service expense of approximately $3,965,000.

expect our cash used in operating activities to increase due to the following:

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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 $50,511 for the six months ended June 30, 2021 as

compared to $28,437 for the six months ended June 30, 2020 .

During the six months ended June 30,

2021, we made payment for improvement of commercial real estate of approximately $10,000 and made additional investment in equity method

investment of approximately $40,000.

During the six months ended June 30, 2020, we made additional investment in equity method

investment of approximately $28,000.

cash flow provided by financing activities was $2,600,151 for the six months ended June 30, 2021 as compared to $4,441,943 for the six

months ended June 30, 2020.

During the six months ended June 30, 2021, we received proceeds from related party borrowings of approximately

$193,000 and net proceeds from equity offering of approximately $2,407,000 (net of cash paid for commission of approximately $74,000).

During the six months ended June 30, 2020, we received proceeds from related party borrowings of $300,000 and net proceeds from equity

offering of approximately $4,342,000 (net of cash paid for commission and offering costs of approximately $362,000), offset by repayments

made for note payable – related party of $200,000.

increase in public relations and/or sales promotions for existing and/or new brands as we expand within existing markets or enter new

cash flow used in investing activities was $67,960 for the nine months ended September 30, 2021 as compared to $28,594 for the nine

months ended September 30, 2020.

During the nine months ended September 30, 2021, we made payments for purchase of property and equipment

of approximately $17,000 and for improvement of commercial real estate of approximately $10,000, and made additional investment in equity

method investment of approximately $40,000.

During the nine months ended September 30, 2020, we made additional investment in equity

method investment of approximately $29,000.

cash flow provided by financing activities was $3,178,336 for the nine months ended September 30, 2021 as compared to $6,841,783 for

the nine months ended September 30, 2020.

During the nine months ended September 30, 2021, we received proceeds from related party borrowings

of approximately $763,000 and net proceeds from equity offering of approximately $2,415,000 (net of cash paid for commission and other

offering costs of approximately $104,000).

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 other offering costs

of approximately $492,000), offset by repayments made for note payable – related party of $200,000.

capital requirements for the next twelve months primarily relate to working capital requirements, including salaries, fees related to

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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 June 30, 2021, the total principal amount outstanding under the Credit Line was approximately $3.4

million and we have approximately $16.6 million remaining available under the Line Credit.

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 November 4, 2021,

the Company drew down an additional aggregate of $1,000,000 from the Line of Credit.

As a result of these draw downs, the Company

has approximately $15.3 million remaining available under the Line of Credit.

This draw down increased the total principal

amount outstanding under the Line of Credit to $4.7 million.

December 13, 2019, we entered into an Open Market Sale Agreement SM (the “Sales Agreement”) with Jefferies

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in accordance with the terms of the sales agreement.

As of June 30, 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.

As of September 30, 2021, we sold a total of 5,936,044 shares of our common

stock through Jefferies with an aggregate offering price of $9,596,542 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

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of operations, and cash flows.

The following tables summarize our contractual obligations as of June 30, 2021, and the effect these obligations

are expected to have on our liquidity and cash flows in future periods.

The following tables summarize our contractual obligations as of September 30, 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

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between RMB and US dollars.

For the three months ended June 30, 2021 and 2020, we had an unrealized foreign currency translation gain

of approximately $15,000 and $3,000, respectively, because of changes in the exchange rate.

For the six months ended June 30, 2021 and

2020, we had an unrealized foreign currency translation gain of approximately $12,000 and an unrealized foreign currency translation

loss of approximately of $19,000, respectively, because of changes in the exchange rate.

For the three months ended September 30, 2021 and 2020, we had an unrealized foreign currency translation

gain of approximately $1,000 and $40,000, respectively, because of changes in the exchange rate.

For the nine months ended September

30, 2021 and 2020, we had an unrealized foreign currency translation gain of approximately $13,000 and $21,000, respectively, because

of changes in the exchange rate.

effect of inflation on our revenue and operating results was not significant.

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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 2. Management’s Discussion and Analysis