What changed in this filing

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Item 1. Financial Statements

2022-08-05 compared with 2022-05-11 · 1115 added, 674 removed, 356 unchanged (83% of the section changed)

21 unchanged sentences

CURRENT LIABILITIES:

Accounts payable

Accrued professional fees

1 unchanged sentence

Accrued payroll liability and directors’ compensation

Accrued settlement of lawsuit

Accrued liabilities and other payables

1 unchanged sentence

Operating lease obligation

Convertible note payable, net

Derivative liability

Note payable - related party

2 unchanged sentences

Operating lease obligation - noncurrent portion

Note payable - related party

Accrued settlement of lawsuit - noncurrent portion

Loan payable - related party

4 unchanged sentences

10,000,000 shares authorized;

no shares issued and outstanding at March 31, 2022 and December 31, 2021

no shares issued and outstanding at June 30, 2022 and December 31, 2021

Common stock, $0.0001 par value;

490,000,000 shares authorized;

89,145,809 shares issued and 88,625,809 shares outstanding at March 31, 2022;

89,554,766 shares issued and 89,034,766 shares outstanding at June 30, 2022;

88,975,169 shares issued and 88,455,169 shares outstanding at December 31, 2021

1 unchanged sentence

common stock held in treasury, at cost;

520,000 shares at March 31, 2022 and December 31, 2021

520,000 shares at June 30, 2022 and December 31, 2021

Accumulated deficit

7 unchanged sentences

Total Liabilities and Equity

See accompanying notes to the condensed consolidated financial statements.

See accompanying notes to the condensed consolidated

financial statements.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

For the Three Months

Ended March 31,

Ended June 30,

For the Six Months

Ended June 30,

Real property rental

10 unchanged sentences

Research and development expenses

Litigation settlement

Other general and administrative

3 unchanged sentences

( 2,302,280 )

( 4,970,513 )

( 4,605,868 )

OTHER (EXPENSE) INCOME

Interest expense

Interest expense - related party

Loss from equity method investment

Change in fair value of derivative liability

Other income (expense)

Total Other Income (Expense), net

4 unchanged sentences

( 4,732,028 )

$ ( 2,028,474 )

$ ( 2,364,910 )

$ ( 4,099,012 )

$ ( 4,732,028 )

NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST

3 unchanged sentences

$ ( 2,364,910 )

$ ( 4,099,012 )

$ ( 4,732,028 )

COMPREHENSIVE LOSS:

1 unchanged sentence

$ ( 2,364,910 )

OTHER COMPREHENSIVE INCOME (LOSS)

Unrealized foreign currency translation gain (loss)

$ ( 4,099,012 )

$ ( 4,732,028 )

OTHER COMPREHENSIVE (LOSS) INCOME

Unrealized foreign currency translation (loss) gain

COMPREHENSIVE LOSS

1 unchanged sentence

( 2,350,124 )

( 4,140,494 )

( 4,719,964 )

COMPREHENSIVE LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST

3 unchanged sentences

$ ( 2,350,124 )

$ ( 4,140,494 )

$ ( 4,719,964 )

NET LOSS PER COMMON SHARE ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

3 unchanged sentences

Basic and diluted

accompanying notes to the condensed consolidated financial statements.

See accompanying notes to the condensed consolidated

financial statements.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three Months Ended March 31, 2022

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

For the Three and Six Months Ended June 30, 2022

GloboCare Corp.

1 unchanged sentence

Comprehensive

Non-controlling

January 1, 2022

9 unchanged sentences

( 53,202,412 )

issued with convertible debt offering

of common stock for services

currency translation adjustment

loss for the three months ended June 30, 2022

( 2,028,474 )

See accompanying notes to the condensed consolidated financial statements.

June 30, 2022

$ ( 522,500 )

$ ( 55,230,886 )

$ ( 206,748 )

See accompanying notes to the condensed consolidated

financial statements.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three Months Ended March 31, 2021

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

For the Three and Six Months Ended June 30, 2021

GloboCare Corp.

1 unchanged sentence

Comprehensive

Non-controlling

January 1, 2021

Balance, January 1, 2021

$ ( 522,500 )

1 unchanged sentence

$ ( 190,510 )

of common stock, net

of common stock for services

currency translation adjustment

loss for the three months ended March 31, 2021

Sale of common stock, net

Issuance of common stock for

Stock-based compensation

Foreign currency translation

Net loss for the three

months ended March 31, 2021

( 2,367,118 )

March 31, 2021

Balance, March 31, 2021

( 44,408,493 )

Issuance of common stock for

settlement of accrued professional fees

Issuance of common stock for

Stock-based compensation

Foreign currency translation

Net loss for the three

months ended June 30, 2021

( 2,364,910 )

See accompanying notes to the condensed

consolidated financial statements.

Balance, June 30, 2021

$ ( 522,500 )

$ ( 46,773,403 )

$ ( 178,446 )

See accompanying notes to the condensed consolidated

financial statements.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

For the Three Months Ended

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months

Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

6 unchanged sentences

Loss on equity method investment

Amortization of debt discount

Change in fair market value of derivative liability

Changes in operating assets and liabilities:

4 unchanged sentences

Prepaid expenses and other assets

Accounts payable

Accrued liabilities and other payables

3 unchanged sentences

( 2,686,722 )

( 2,593,548 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

Improvement of commercial real estate

Additional investment in equity method investment

1 unchanged sentence

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds received from loan payable - related party

Proceeds received from equity offering

Repayments of note payable - related party

Proceeds from loan payable - related party

Repayments of loan payable - related party

Proceeds from issuance of convertible debt and warrants

Proceeds from equity offering

Disbursements for equity offering costs

1 unchanged sentence

EFFECT OF EXCHANGE RATE ON CASH

NET (DECREASE) INCREASE IN CASH

NET INCREASE (DECREASE) IN CASH

CASH - beginning of period

1 unchanged sentence

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Common stock issued for future services

Common stock issued for accrued liabilities

Deferred financing costs in accrued liabilities

See accompanying notes to the condensed

consolidated financial statements.

Accrued professional fees relieved for shares issued

Warrants issued with convertible note payable

Derivative liability

See accompanying notes to the condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 – ORGANIZATION AND NATURE OF OPERATIONS

GloboCare Corp.

(the “Company” or “AVCO”) is a Delaware corporation.

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”).

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

accounting purposes, AHS was the surviving entity.

The transaction was accounted for as a recapitalization of AHS pursuant to which AHS

was treated as the accounting acquirer, surviving and continuing entity although the Company is the legal acquirer.

The Company did not

recognize goodwill or any intangible 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.

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 COVID-19 related vaccine and therapeutics.

January 23, 2017, the Company incorporated Avalon (BVI) Ltd., a British Virgin Island company.

There was no activity for the subsidiary

since its incorporation through March 31, 2022.

NOTE 1 – ORGANIZATION

AND NATURE OF OPERATIONS

Avalon GloboCare Corp.

(the “Company”

or “AVCO”) is a Delaware corporation.

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”).

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

For accounting purposes, AHS was the surviving

The transaction was accounted for as a recapitalization of AHS pursuant to which AHS was treated as the accounting acquirer,

surviving and continuing entity although the Company is the legal acquirer.

The Company did not recognize goodwill or any intangible

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”).

Avalon Shanghai was incorporated on

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

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 companion diagnostics.

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 vertical segments 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.

On January 23, 2017, the Company incorporated

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

There was no activity for the subsidiary since its incorporation through June 30,

Avalon (BVI) Ltd.

is dormant and is in process of being dissolved.

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.

March 31, 2022, the occupancy rate of the building is 83.5 %.

July 31, 2017, the Company formed Genexosome Technologies Inc.

Avalon RT 9’s business consists of the

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

As of June 30, 2022, the occupancy rate of the building

On July 31, 2017, the Company formed Genexosome

Technologies Inc.

(“Genexosome”) in Nevada.

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 and Dr.

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”) which was dissolved in June 2022, and the

Company holds 60 % of Genexosome and Dr.

Yu Zhou holds 40 % of Genexosome.

The 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.

The 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

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

Since the fourth quarter of 2019, the non-controlling

interest has remained inactive.

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

Since the fourth quarter of 2019, the non-controlling interest

has remained inactive.

On July 18, 2018, the Company formed a wholly

owned subsidiary, Avactis Biosciences Inc.

(“Avactis”), 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.

1 unchanged sentence

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

on April 6, 2022, the Company owns 60 % of Avactis

Biosciences Inc.

June 13, 2019, the Company formed a wholly owned subsidiary, International Exosome Association LLC, a Delaware company.

activity for the subsidiary since its incorporation through March 31, 2022.

Commencing on April 6, 2022, the Company owns 60 % of Avactis

and Arbele Biotherapeutics Limited (“Arbele Biotherapeutics”) owns 40 % of Avactis.

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 June 30, 2022.

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 – ORGANIZATION AND NATURE OF OPERATIONS (continued)

of the Company’s subsidiaries which are included in these condensed consolidated financial statements as of March 31, 2022 are

Name of Subsidiary

Place and date of Incorporation

Percentage of Ownership

Principal Activities

NOTE 1 – ORGANIZATION

AND NATURE OF OPERATIONS (continued)

Details of the Company’s subsidiaries which

are included in these condensed consolidated financial statements as of June 30, 2022 are as follows:

date of Incorporation

Avalon Healthcare System, Inc.

6 unchanged sentences

100% held by AVCO

Dormant, is in process of being dissolved

is in process of being dissolved

Avalon RT 9 Properties LLC

3 unchanged sentences

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

Avalon (Shanghai) Healthcare Technology Co., Ltd.

Avalon (Shanghai) Healthcare Technology Co.,

(“Avalon Shanghai”)

1 unchanged sentence

100% held by AHS

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

Provides medical related consulting services

Genexosome Technologies Inc.

2 unchanged sentences

60% held by AVCO

Beijing Jieteng (Genexosome) Biotech Co., Ltd.

(“Beijing Genexosome”)

August 7, 2015

100% held by Genexosome

Avactis Biosciences Inc.

6 unchanged sentences

Promotes standardization related to exosome industry

2 – BASIS OF PRESENTATION AND GOING CONCERN CONDITION

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.

The Company’s condensed consolidated financial statements include the accounts

of the Company and its subsidiaries.

NOTE 2 – BASIS OF 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 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.

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.

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,

2021 filed with the Securities and Exchange Commission on March 30, 2022.

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, 2021 filed

with the Securities and Exchange Commission on March 30, 2022.

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

2 – BASIS OF PRESENTATION AND GOING CONCERN CONDITION (continued)

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 COVID-19 related vaccine and 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

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 a working capital deficit of $ 4,234,370 as

of March 31, 2022 and has incurred recurring net losses and generated negative cash flow from operating activities of $ 2,070,538 and

$ 511,208 for the three months ended March 31, 2022, respectively.

The Company has a limited operating history and its continued

growth is dependent upon the continuation of providing medical related 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.

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.

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 2022.

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.

3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 estimates.

Significant estimates during the three months ended March 31, 2022 and 2021 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.

NOTE 2 – BASIS OF PRESENTATION

AND GOING CONCERN CONDITION (continued)

Going Concern

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 companion diagnostics.

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

Through its subsidiary structure with unique integration of vertical segments 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.

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 a working capital deficit of $ 5,557,470 as of June 30, 2022 and has incurred recurring net

losses and generated negative cash flow from operating activities of $ 4,099,012 and $ 2,686,722 for the six months ended June

30, 2022, respectively.

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

medical related 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.

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 had negatively impact on the Company’s operations.

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 rest of 2022.

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 – SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

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 estimates.

Significant estimates

during the three and six months ended June 30, 2022 and 2021 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,

valuation of stock-based compensation, and assumptions used to determine fair value of warrants and embedded conversion features of convertible

note payable.

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Value of Financial Instruments and Fair Value Measurements

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:

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.

fair value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value

Measurement,” approximates the carrying amounts represented in the accompanying condensed consolidated financial statements, primarily

due to their short-term nature.

825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities

at fair value (fair value option).

The fair 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

and Cash Equivalents

March 31, 2022 and December 31, 2021, the Company’s cash balances by geographic area were as follows:

March 31, 2022

NOTE 3 – SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

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 market data.

● 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 fair value of the

Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,”

approximates the carrying amounts represented in the accompanying condensed consolidated financial statements, primarily due to their

short-term nature.

Assets and liabilities

measured at fair value on a recurring basis.

Certain assets and liabilities are measured at fair value on a recurring

These assets and liabilities are measured at fair value on an ongoing basis.

These assets and liabilities include derivative liability.

Derivative liability.

liability is carried at fair value and measured on an ongoing basis.

The table below reflects the activity of derivative liability measured

at fair value for the six months ended June 30, 2022:

Significant Unobservable Inputs

Balance of derivative liability as of January 1, 2022

Initial fair value of derivative liability attributable to embedded conversion feature of convertible note payable

Gain from change in the fair value of derivative liability

Balance of derivative liability as of June 30, 2022

ASC 825-10 “Financial

Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value

The fair 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.

Cash and Cash Equivalents

At June 30, 2022 and

December 31, 2021, the Company’s cash balances by geographic area were as follows:

June 30, 2022

December 31, 2021

United States

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, 2022 and December 31, 2021.

Risk and Uncertainties

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 $79,000) per bank.

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

At March 31, 2022, cash balances held in the PRC are RMB 810,451 (approximately $ 128,000 ), of which, RMB 284,408 (approximately

$ 45,000 ) 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.

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 .

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, 2022, there were

no balances in excess of the federally-insured limits.

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 June 30, 2022 and December 31, 2021.

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Risk and Uncertainties (continued)

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.

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;

however, 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.

in Unconsolidated Company – Epicon Biosciences Co., Ltd.

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.

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.

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

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

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.

NOTE 3 – SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

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

$75,000) per bank.

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

At June 30, 2022, cash balances held in the PRC

are RMB 3,108,354 (approximately $ 464,000 ), of which, RMB 2,582,643 (approximately $ 385,000 ) 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 .

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 June 30, 2022, the Company’s cash balances in United

States bank accounts had approximately $ 137,000 in excess of the federally-insured limits.

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 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 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:

4 unchanged sentences

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 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

services is identified that is distinct.

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Recognition (continued)

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 at a point in time when service is rendered.

Any payments received in advance of the performance

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

Company has 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 consolidated balance sheets.

Company does not offer promotional payments, customer coupons, rebates or other cash redemption offers to its customers.

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.

NOTE 3 – SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

Revenue Recognition (continued)

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”

goods 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 distinct.

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

at a point in time when service is rendered.

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 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 dilution.

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 the

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.

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.

For the three months ended

March 31, 2022 and 2021, potentially dilutive common shares consist of the common shares issuable upon the exercise of common stock options

(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.

following table summarizes the securities that were excluded from the diluted per share calculation because the effect of including these

potential shares was antidilutive:

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 and six months ended June 30, 2022 and 2021, potentially

dilutive common shares consist of the common shares issuable upon the conversion of convertible note (using the if-converted method)

and 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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

Per Share Data (continued)

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

Six Months Ended

Stock options

Convertible note (*)

Potentially dilutive securities

(*) Assumed the convertible note was converted

into shares of common stock of the Company at a conversion price of $ 0.75 per share.

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 three and six months ended June 30, 2022 and 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 Standards

In August 2020, the

Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06, Debt

- Debt with Conversion and Other Options (Subtopic 470-20 ) and Derivatives and Hedging - Contracts in Entity’s Own

Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”),

which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity.

This ASU (1) simplifies

the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt:

Debt with Conversion and Other Options , that requires entities to account for beneficial conversion features and cash conversion

features in equity, separately from the host convertible debt or preferred stock;

(2) revises the scope exception from derivative accounting

in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and

classified in stockholders’ equity, by removing certain criteria required for equity classification;

and (3) revises the guidance

in ASC 260, Earnings Per Share , to require entities to calculate diluted earnings per share (EPS) for convertible instruments

by using the if-converted method.

In addition, entities must presume share settlement for purposes of calculating diluted EPS when an

instrument may be settled in cash or shares.

ASU 2020-06 is effective for public business entities for fiscal years beginning after December

15, 2021 (or December 15, 2023 for companies who meet the SEC definition of Smaller Reporting Companies), and interim periods within

those fiscal years.

The guidance is to be adopted through either a fully retrospective or modified retrospective method of transition.

However, early adoption is permitted as early as fiscal years, and interim periods within those fiscal years, beginning after December

The Company adopted the new standard on January 1, 2022, which adoption required the Company to bifurcate the embedded conversion

feature from the convertible note it issued during the second quarter of 2022.

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

During the three months ended March 31, 2022 and 2021, the

Company operates through two business segments:

real property operating segment and medical related consulting services segment.

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

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.

Accounting Standards

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 condensed consolidated financial statements.

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.

4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

March 31, 2022 and December 31, 2021, prepaid expenses and other current assets consisted of the following:

NOTE 3 – SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

Recent Accounting Standards (continued)

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

condensed 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.

NOTE 4 – PREPAID EXPENSES

AND OTHER CURRENT ASSETS

At June 30, 2022 and December 31, 2021, prepaid

expenses and other current assets consisted of the following:

Prepaid directors and officers liability insurance premium

3 unchanged sentences

Security deposit

Advance to supplier

5 – EQUITY METHOD INVESTMENT

of March 31, 2022 and December 31, 2021, the equity method investment amounted to $ 503,994 and $ 515,632 , respectively.

The investment

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

was incorporated on August 14, 2018 in PRC.

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

(“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.

Prepaid NASDAQ listing fee

NOTE 5 – EQUITY

METHOD INVESTMENT

As of June 30, 2022 and December 31, 2021, the

equity method investment amounted to $ 517,442 and $ 515,632 , respectively.

The investment represents the Company’s subsidiary,

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

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

condensed 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 June 30, 2022 and

2021, the Company’s share of Epicon’s net loss was $ 11,882 and $ 15,418 , respectively, which was included in loss from

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

For the six months

ended June 30, 2022 and 2021, the Company’s share of Epicon’s net loss was $ 24,798 and $ 33,932 , respectively, which

was included in loss from equity method investment in the accompanying condensed consolidated statements of operations and comprehensive

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5 – EQUITY METHOD INVESTMENT (continued)

Company treats the equity investment in the condensed 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

the three months ended March 31, 2022 and 2021, the Company’s share of Epicon’s net loss was $ 12,916 and $ 18,514 , respectively,

which was included in loss from equity method investment in the accompanying condensed consolidated statements of operations and comprehensive

In the three months ended March 31, 2022, activity recorded for the Company’s equity method investment in Epicon

is summarized in the following table:

NOTE 5 – EQUITY METHOD INVESTMENT

In the six months ended June 30, 2022, activity

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

Equity investment carrying amount at January 1, 2022

Payment made for equity method investment

Epicon’s net loss attributable to the Company

Foreign currency fluctuation

Equity investment carrying amount at March 31, 2022

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

Equity investment carrying amount at June 30, 2022

The tables below present

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

Current assets

3 unchanged sentences

For the Three Months

Ended March 31,

Ended June 30,

For the Six Months

Ended June 30,

Loss from operation

6 – ACCRUED LIABILITIES AND OTHER PAYABLES

March 31, 2022 and December 31, 2021, accrued liabilities and other payables consisted of the following:

March 31, 2022

NOTE 6 – ACCRUED

LIABILITIES AND OTHER PAYABLES

At June 30, 2022 and

December 31, 2021, accrued liabilities and other payables consisted of the following:

Accrued tenants’ improvement reimbursement

1 unchanged sentence

Accrued business expense reimbursement

Accounts payable

Accrued utilities

1 unchanged sentence

Deferred rental income

Refundable deposit

Accrued equity offering costs

Taxes payable

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7 – RELATED PARTY TRANSACTIONS

Revenue from Related Party and Rent Receivable – Related Party

Company leases space of its commercial real property located in New Jersey to a company, which is controlled by Wenzhao Lu, the Company’s

largest shareholder and chairman of the Board of Directors.

The term of the related party lease agreement is five years commencing on

May 1, 2021 and will expire on April 30, 2026.

For the three months ended March 31, 2022, the related party rental revenue amounted to

$ 12,600 , and has been included in real property rental on the accompanying condensed consolidated statements of operations and comprehensive

The related party rent receivable totaled $ 46,200 and $ 33,600 , respectively, and no allowance for doubtful accounts was deemed

to be required on rent receivable – related party at March 31, 2022 and December 31, 2021.

Provided by Related Party

time to time, Wilbert Tauzin, a director of the Company, and his son provide consulting services to the Company.

As compensation for

professional services provided, the Company recognized consulting expenses of $ 51,138 and $ 57,405 for the three months ended

March 31, 2022 and 2021, respectively, which have been included in professional fees on the accompanying condensed consolidated statements

of operations and comprehensive loss.

Liabilities and Other Payables – Related Parties

2017, the Company acquired Beijing Genexosome for a cash payment of $ 450,000 .

As of March 31, 2022 and December 31, 2021, the unpaid

acquisition consideration of $ 100,000 , was payable to Dr.

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.

of March 31, 2022 and December 31, 2021, 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 $ 408,120 and $ 368,433 , respectively, and have been included in accrued

NOTE 7 – CONVERTIBLE NOTE PAYABLE

On March 28, 2022, the

Company entered into Securities Purchase Agreement with an accredited investor, which was amended on June 8, 2022, providing for the

sale by the Company to the investor of a Convertible Note in the amount of $ 3,718,943 (“2022 Convertible Note”).

to the 2022 Convertible Note, the investor also received a Stock Purchase Warrant (“2022 Warrant”) to acquire an aggregate

of 1,239,647 shares of common stock.

The 2022 Warrant is exercisable for five years at an exercise price of $ 1.25 .

The financing closed

with respect to:

● $ 2,669,522 of the financing on April 15, 2022,

● $ 659,581 of the financing on April 29, 2022,

● $ 199,840 of the financing on May 18, 2022 and

● $ 190,000 of the financing on May 25, 2022.

As a result of each

of the closings, the Company issued the investor a 2022 Convertible Note in the principal amount of $ 2,669,522 and a 2022 Warrant to

acquire 889,840 shares of common stock dated April 15, 2022, a 2022 Convertible Note in the principal amount of $ 659,581 and a 2022 Warrant

to acquire 219,860 shares of common stock dated April 29, 2022, a 2022 Convertible Note in the principal amount of $ 199,840 and a 2022

Warrant to acquire 66,614 shares of common stock and a 2022 Convertible Note in the principal amount of $ 190,000 and a 2022 Warrant to

acquire 63,333 shares of common stock.

The 2022 Convertible

Note bears interest at 1 % per annum payable at maturity and matures ten years from issuance.

The investor may elect to convert all or

part of the 2022 Convertible Note, plus accrued interest, at any time into shares of common stock of the Company at a conversion price

equal to 95 % of the average of the highest three trading prices for the common stock during the 20-trading day period ending one trading

day prior to the conversion date but in no event will the conversion price be lower than $ 0.75 per share.

The investor agreed

to restrict its ability to convert the 2022 Convertible Note and exercise the 2022 Warrant and receive shares of common stock such that

the number of shares of common stock held by the investor after such conversion or exercise does not exceed 4.99 % of the then issued

and outstanding shares of common stock.

Further, the investor agreed to not sell or transfer any or all of the shares of common stock

underlying the 2022 Convertible Note or the 2022 Warrant for a period of 90 days beginning on the closing date (the “Lock-Up Period”).

Following the expiration of the Lock-Up Period, the investor has agreed to limit its sale or transfer of such shares of common stock

to a maximum monthly amount equal to 20 % of the shares of common stock issuable upon conversion of the 2022 Convertible Note.

agreed to use its reasonable best efforts to file a registration statement on Form S-3 (or other appropriate form) providing for the

resale by the investor of the shares of common stock underlying the 2022 Convertible Note and the 2022 Warrant.

Based upon the Company’s

analysis of the criteria contained in ASC Topic 815-40, “Derivatives and Hedging - Contracts in an Entity’s Own Equity”,

the Company determined that all the warrants issued to the investor with this private placement are classified as equity in additional

paid in-capital.

In accordance with ASC

470-20-25-2, proceeds from the sale of a debt instrument with stock purchase warrants are allocated to the two elements based on the relative

fair values of the debt instrument without the warrants and of the warrants themselves at time of issuance.

The portion of the proceeds

so allocated to the warrants are accounted for as additional paid-in capital.

The remainder of the proceeds are allocated to the debt

instrument portion of the transaction.

The fair values of the warrants issued to

the investor with this private placement were computed using the Black-Scholes option-pricing model with the following assumptions:

of 111.94 %, risk-free rate of 2.71 % - 2.92 %, annual dividend yield of 0 % and expected life of 5 years.

In accordance with ASC

480-10-25-14, the Company determined that the conversion provisions contain an embedded derivative feature and the Company valued the

derivative feature separately, recording debt discount and derivative liabilities in accordance with the provisions of the convertible

debt (see Note 8).

The Company calculates the fair value of conversion option at the commitment dates using the Black-Scholes valuation

model with the following assumptions:

volatility of 95.97 %, risk-free rate of 2.75 % - 2.89 %, annual dividend yield of 0 %

and expected life of 10 years.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – CONVERTIBLE NOTE PAYABLE

The warrants issued

to the investor to purchase 1,239,647 shares of the Company’s common stock were treated as a discount on the convertible note

payable and were valued at $ 498,509 and will be amortized over the term of the 2022 Convertible Note.

Additionally, the fair value

of embedded conversion option at commitment dates, which was valued at $ 2,782,569 , is recorded as a discount on the convertible note

payable and will be amortized over the term of the 2022 Convertible Note.

Hence, in connection with the issuance of the 2022

Convertible Note and 2022 Warrant, the Company recorded a total debt discount of $ 3,281,078 to be amortized over the term of the

convertible note payable.

For the three and six months ended June 30, 2022, amortization of debt discount and interest expense

related to the 2022 Convertible Note amounted to $ 54,685 and $ 7,204 , respectively, which have been reflected as interest expense on

the accompanying condensed consolidated statements of operation and comprehensive loss.

At June 30, 2022, convertible note payable consisted

of the following:

Principal amount

unamortized debt discount

( 3,226,393 )

Convertible note payable, net

In accordance with an agreement signed on July

25, 2022, all outstanding principal and unpaid interest were converted into common stock of the Company at a conversion

price of $ 0.65 per share (see Note 16 - Common Shares Issued for Debt Conversion).

NOTE 8 – DERIVATIVE LIABILITY

As stated in Note 7,

2022 Convertible Note, the Company determined that the convertible note payable contained an embedded derivative feature in the form

of a conversion provision which was adjustable based on future prices of the Company’s common stock.

In accordance with ASC 815-10-25,

each derivative feature was initially recorded at its fair value using the Black-Scholes option valuation method and then re-valued at

each reporting date, with changes in the fair value reported in the statements of operations.

The estimated fair value

of the derivative feature of convertible debt was $2,782,569 at commitment dates, which was calculated using the following assumptions:

volatility of 95.97%, risk-free rate of 2.75% - 2.89%, annual dividend yield of 0% and expected life of 10 years.

The estimated fair value

of the derivative feature of convertible debt was $2,013,300 at June 30, 2022, which was computed using the following assumptions:

of 95.71%, risk-free rate of 2.98%, annual dividend yield of 0% and expected life of 9.8 – 9.9 years.

Increases or decreases

in fair value of the derivative liability is included as a component of total other (expenses) income in the accompanying condensed consolidated

statements of operations and comprehensive loss for the respective period.

The changes to the derivative liability resulted in a decrease

of $ 769,269 in the derivative liability and the corresponding increase in other income as a gain for the three and six months ended

June 30, 2022.

There was no derivative liability in the three and six months ended June 30, 2021.

NOTE 9 – RELATED PARTY TRANSACTIONS

Rental Revenue from Related Party and Rent

Receivable – Related Party

The Company leases space of its commercial real

property located in New Jersey to a company, which is controlled by Wenzhao Lu, the Company’s largest shareholder and chairman

of the Board of Directors.

The term of the related party lease agreement is five years commencing on May 1, 2021 and will expire on April

For the three months ended June 30, 2022 and 2021, the related party rental revenue amounted to $ 12,600 and $ 8,400 , respectively,

and has been included in real property rental on the accompanying condensed consolidated statements of operations and comprehensive loss.

For the six months ended June 30, 2022 and 2021, the related party rental revenue amounted to $ 25,200 and $ 8,400 , respectively, and has

been included in real property rental on the accompanying condensed consolidated statements of operations and comprehensive loss.

related party rent receivable totaled $ 58,500 and $ 33,600 , respectively, and no allowance for doubtful accounts was deemed to be

required on rent receivable – related party at June 30, 2022 and December 31, 2021.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – RELATED PARTY TRANSACTIONS

Services Provided by Related Party

From time to time, Wilbert Tauzin, a director

of the Company, and his son provide consulting services to the Company.

As compensation for professional services provided, the Company

recognized consulting expenses of $ 36,460 and $ 54,545 for the three months ended June 30, 2022 and 2021, respectively, which

have been included in professional fees on the accompanying condensed consolidated statements of operations and comprehensive loss.

compensation for professional services provided, the Company recognized consulting expenses of $ 87,598 and $ 111,950 for the

six months ended June 30, 2022 and 2021, respectively, which have been included in professional fees on the accompanying condensed consolidated

statements of operations and comprehensive loss.

Accrued Liabilities and Other Payables –

Related Parties

In 2017, the Company acquired Beijing Genexosome

for a cash payment of $ 450,000 .

As of June 30, 2022 and December 31, 2021, the unpaid acquisition consideration of $ 100,000 , was payable

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.

from Related Party

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.

In March 2022, the Company and Wenzhao

Lu entered into a Loan Extension and Modification Agreement (the “Extension”) to extend the maturity date to March 19, 2024.The

Company repaid principal of $ 410,000 and $ 200,000 in the third quarter of 2019 and second quarter of 2020, respectively.

of both March 31, 2022 and December 31, 2021, the outstanding principal balance was $ 390,000 .

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 .

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.

For the three months ended March 31, 2022 and 2021, the interest

expense related to above borrowings amounted to $ 39,686 and $ 45,149 , respectively, and has been included in interest expense –

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

of March 31, 2022 and December 31, 2021, the related accrued and unpaid interest for above borrowings was $ 408,120 and $ 368,433 , respectively,

and has been included in accrued liabilities and other payables – related parties on the accompanying condensed consolidated balance

As of June 30, 2022 and December 31, 2021, $ 439,974

and $ 368,433 of accrued and unpaid interest related to borrowings from Wenzhao Lu, the Company’s largest shareholder and chairman

of the Board of Directors, respectively, have been included in accrued liabilities and other payables – related parties on the

accompanying condensed consolidated balance sheets.

Borrowings from Related Party

Promissory Note

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.

In March 2022, the Company and Wenzhao Lu entered into a Loan Extension and Modification Agreement (the “Extension”)

to extend the maturity date to March 19, 2024 .The Company repaid principal of $ 410,000 , $ 200,000 and $ 390,000 in the third quarter

of 2019, second quarter of 2020 and second quarter of 2022, respectively.

As of June 30, 2022 and December 31, 2021, the outstanding

principal balance was $ 0 and $ 390,000 , 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.

In the six months ended June 30, 2022, activity

recorded for the Line of Credit is summarized in the following table:

Outstanding principal under the Line of Credit at January 1, 2022

Draw down from Line of Credit

Repayment of Line of Credit

Outstanding principal under the Line of Credit at June 30, 2022

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Shares Sold for Cash

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, 2022, Jefferies sold an aggregate of 170,640 shares

of common stock at an average price of $ 0.79 per share to investors and the Company recorded net proceeds of $ 112,328 , net of commission

and other offering costs of $ 23,239 .

following table summarizes the shares of the Company’s common stock issuable upon exercise of options outstanding at March 31,

NOTE 9 – RELATED PARTY TRANSACTIONS

Borrowings from Related Party (continued)

For the three months ended June 30, 2022 and

2021, the interest expense related to above borrowings amounted to $ 31,854 and $ 46,131 , respectively, and has been included in interest

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

months ended June 30, 2022 and 2021, the interest expense related to above borrowings amounted to $ 71,540 and $ 91,280 , respectively,

and has been included in interest expense – related party on the accompanying condensed consolidated statements of operations and

comprehensive loss.

As of June 30, 2022 and December 31, 2021, the

related accrued and unpaid interest for above borrowings was $ 439,974 and $ 368,433 , respectively, has been included in accrued liabilities

and other payables – related parties on the accompanying condensed consolidated balance sheets.

On July 25, 2022, the outstanding principal

and related accrued and unpaid interest were settled by issuance of the Company’s common stock (see Note 16 - Common Shares

Issued Pursuant to Related Party Debt Settlement Agreement and Release).

NOTE 10 – EQUITY

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 six months

ended June 30, 2022, Jefferies sold an aggregate of 170,640 shares of common stock at an average price of $ 0.79 per share

to investors and the Company recorded net proceeds of $ 112,328 , net of commission and other offering costs of $ 23,239 .

Common Shares Issued for Services

During the six months ended June 30, 2022, the

Company issued a total of 408,957 shares of its common stock for services rendered and to be rendered.

These shares were valued

at $ 340,950 , 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 $ 254,923 for the six months ended June 30, 2022 and reduced accrued liabilities of

$ 30,000 and recorded prepaid expense of $ 56,027 as of June 30, 2022 which will be amortized over the rest of corresponding service

The following table summarizes the shares of

the Company’s common stock issuable upon exercise of options outstanding at June 30, 2022:

Options Outstanding

1 unchanged sentence

Outstanding at

March 31, 2022

June 30, 2022

Weighted Average

1 unchanged sentence

Exercisable at

March 31, 2022

June 30, 2022

$ 0.50 – 0.82

$ 0.50 – 4.76

option activities for the three months ended March 31, 2022 were as follows:

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – EQUITY

Options (continued)

Stock option activities

for the six months ended June 30, 2022 were as follows:

Number of Options

Weighted Average Exercise Price

Outstanding at January 1, 2022

Expired/forfeited/exercised

Outstanding at March 31, 2022

Options exercisable at March 31, 2022

Outstanding at June 30, 2022

Options exercisable at June 30, 2022

Options expected to vest

aggregate intrinsic value of both stock options outstanding and stock options exercisable at March 31, 2022 was $ 401,400 .

fair values of options granted during the three months ended March 31, 2022 were estimated at the date of grant using the Black-Scholes

option-pricing model with the following assumptions:

volatility of 117.46 %, risk-free rate of 1.37 % - 1.53 %, 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, 2022 was $ 315,145 .

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 assumptions:

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 three months ended March 31, 2022 and 2021, stock-based compensation expense associated with stock options granted amounted

to $ 152,323 and $ 202,505 , of which, $ 104,913 and $ 139,507 was recorded as compensation and related benefits, $ 36,138 and

$ 43,443 was recorded as professional fees, and $ 11,272 and $ 19,555 was recorded as research and development expenses,

respectively.

The aggregate intrinsic value of both stock options

outstanding and stock options exercisable at June 30, 2022 was $ 0 .

The fair values of options granted during the

six months ended June 30, 2022 were estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

volatility of 74.8 % - 117.46 %, risk-free rate of 1.37 % - 3.56 %, annual dividend yield of 0 %, and expected life of 3.00

- 5.00 years.

The aggregate fair value of the options granted during the six months ended June 30, 2022 was $ 373,982 .

The fair values of options granted during the

six months ended June 30, 2021 were estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

volatility of 123.27 % - 128.42 %, risk-free rate of 0.33 % - 0.80 %, annual dividend yield of 0 % and expected life

of 3.00 - 5.00 years.

The aggregate fair value of the options granted during the six months ended June 30, 2021 was

For the three months ended June 30, 2022 and

2021, stock-based compensation expense associated with stock options granted amounted to $ 126,301 and $ 195,209 , of which, $ 93,171 and

$ 136,392 was recorded as compensation and related benefits, $ 21,460 and $ 39,545 was recorded as professional fees, and

$ 11,670 and $ 19,272 was recorded as research and development expenses, respectively.

For the six months ended June 30, 2022 and 2021, stock-based

compensation expense associated with stock options granted amounted to $ 278,624 and $ 397,714 , of which, $ 198,084 and $ 275,899 was

recorded as compensation and related benefits, $ 57,598 and $ 82,988 was recorded as professional fees, and $ 22,942 and $ 38,827 was

recorded as research and development expenses, respectively.

A summary of the status of the Company’s

nonvested stock options granted as of June 30, 2022 and changes during the six months ended June 30, 2022 is presented below:

Number of Options

Weighted Average Exercise Price

Nonvested at January 1, 2022

Nonvested at June 30, 2022

On March 28, 2022, the

Company entered into Securities Purchase Agreement with an accredited investor, which was amended on June 8, 2022, providing for the

sale by the Company to the investor of a Convertible Note in the amount of $ 3,718,943 (“2022 Convertible Note”).

to the 2022 Convertible Note, the investor also received a Stock Purchase Warrant (“2022 Warrant”) to acquire an aggregate

of 1,239,647 shares of common stock.

The 2022 Warrant is exercisable for five years at an exercise price of $ 1.25 .

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8 – EQUITY (continued)

A summary of the status of the Company’s

nonvested stock options granted as of March 31, 2022 and changes during the three months ended March 31, 2022 is presented below:

Nonvested at January 1, 2022

Nonvested at March 31, 2022

9 – STATUTORY RESERVE AND RESTRICTED NET ASSETS

Company’s PRC subsidiaries, Avalon Shanghai and Beijing Genexosome, are restricted in their ability to transfer a portion

of their net assets to the Company.

The payment of dividends by entities organized in China is subject to limitations, procedures and

Regulations in the PRC currently permit payment of dividends only out of accumulated profits as determined in accordance

with accounting standards and regulations in China.

Company is required to make appropriations to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus

reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC

Appropriations to the statutory surplus reserve are required to be at least 10 % of the after-tax net income determined

in accordance with PRC GAAP until the reserve is equal to 50 % of the entity’s registered capital.

Appropriations to the discretionary

surplus reserve are made at the discretion of the Board of Directors.

The statutory reserve may be applied against prior year losses,

if any, and may be used for general business expansion and production or increase in registered capital, but are not distributable as

cash dividends.

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

three months ended March 31, 2022 as they incurred net losses in the period.

As of both March 31, 2022 and December 31, 2021, the

restricted amounts as determined pursuant to PRC statutory laws totaled $ 6,578 .

PRC laws and regulations restrict the Company’s PRC subsidiaries, Avalon Shanghai and Beijing Genexosome, from transferring

a portion of their net assets, equivalent to their statutory reserves and their share capital, to the Company’s shareholders in

the form of loans, advances or cash dividends.

Only PRC entities’ accumulated profits may be distributed as dividends to the Company’s

shareholders without the consent of a third party.

As of both March 31, 2022 and December 31, 2021, total restricted net assets amounted

to $ 783,984 .

10 – CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

to the requirements of Rule 12-04(a), 5-04(c) and 4-08(e)(3) of Regulation S-X, the condensed financial information of the parent company

shall be filed when the restricted net assets of consolidated subsidiary 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 subsidiary shall

mean that amount of the Company’s proportionate share of net assets of consolidated subsidiary (after intercompany eliminations)

which as of the end of the most recent fiscal year may not be transferred to the parent company by subsidiary in the form of loans, advances

or cash dividends without the consent of a third party.

Company performed a test on the restricted net assets of consolidated subsidiary in accordance with such requirement and concluded that

it was not applicable to the Company as the restricted net assets of the Company’s PRC subsidiaries did not exceed 25 % of

the consolidated net assets of the Company, therefore, the condensed financial statements for the parent company have not been required.

NOTE 10 – EQUITY

Warrants (continued)

The fair values of the

warrants issued to the investor with this private placement were computed using the Black-Scholes option-pricing model with the following

volatility of 111.94 %, risk-free rate of 2.71 % - 2.92 %, annual dividend yield of 0 % and expected life

The warrants issued to the investor to purchase 1,239,647 shares of the Company’s common stock were treated

as a discount on the convertible note payable and were valued at $ 498,509 and will be amortized over the term of the 2022 Convertible

Stock warrant activities

for the six months ended June 30, 2022 were as follows:

Number of Warrants

Exercise Price

Outstanding at January 1, 2022

Expired/exercised

Outstanding and exercisable at June 30, 2022

The following table summarizes the shares of

the Company’s common stock issuable upon exercise of warrants outstanding at June 30, 2022:

Warrants Outstanding

Warrants Exercisable

Outstanding at

June 30, 2022

Weighted Average

Contractual Life

Exercisable at

June 30, 2022

The aggregate intrinsic value of both stock warrants

outstanding and stock warrants exercisable at June 30, 2022 was $ 0 .

NOTE 11 – STATUTORY

RESERVE AND RESTRICTED NET ASSETS

The Company’s PRC subsidiary, Avalon

Shanghai, is restricted in its ability to transfer a portion of its net asset to the Company.

The payment of dividends by entities

organized in China is subject to limitations, procedures and formalities.

Regulations in the PRC currently permit payment of dividends

only out of accumulated profits as determined in accordance with accounting standards and regulations in China.

The Company is required to make appropriations

to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus reserve, based on after-tax net income

determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”).

Appropriations to the statutory

surplus reserve are required to be at least 10 % of the after-tax net income determined in accordance with PRC GAAP until the reserve

is equal to 50 % of the entity’s registered capital.

Appropriations to the discretionary surplus reserve are made at the discretion

of the Board of Directors.

The statutory reserve may be applied against prior year losses, if any, and may be used for general business

expansion and production or increase in registered capital, but are not distributable as cash dividends.

The Company did not make any

appropriation to statutory reserve for Avalon Shanghai during the three and six months ended June 30, 2022 as it incurred net loss in

As of both June 30, 2022 and December 31, 2021, the restricted amount as determined pursuant to PRC statutory laws

totaled $ 6,578 .

Relevant PRC laws and regulations restrict the

Company’s PRC subsidiary, Avalon Shanghai, from transferring a portion of its net assets, equivalent to their statutory reserves

and their share capital, to the Company’s shareholders in the form of loans, advances or cash dividends.

Only PRC entity’s

accumulated profit may be distributed as dividend to the Company’s shareholders without the consent of a third party.

June 30, 2022 and December 31, 2021, total restricted net assets amounted to $ 706,578 .

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

11 – CONCENTRATIONS

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, 2022 and 2021.

NOTE 12 – CONDENSED

FINANCIAL INFORMATION OF THE PARENT COMPANY

Pursuant to the requirements of Rule 12-04(a),

5-04(c) and 4-08(e)(3) of Regulation S-X, the condensed financial information of the parent company shall be filed when the restricted

net assets of consolidated subsidiary exceed 25 percent of consolidated net assets as of the end of the most recently completed

For purposes of this test, restricted net assets of consolidated subsidiary shall mean that amount of the Company’s

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

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

of a third party.

The Company performed a test on the restricted

net assets of consolidated subsidiary in accordance with such requirement and concluded that it was not applicable to the Company as

the restricted net assets of the Company’s PRC subsidiary did not exceed 25 % of the consolidated net assets of the Company,

therefore, the condensed financial statements for the parent company have not been required.

NOTE 13 – 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 six months ended June 30, 2022

Three Months Ended

Two customers,

of which, one is a related party and the other is a third party, whose outstanding receivable accounted for 10 % or more of the Company’s

total outstanding rent receivable and rent receivable – related party at March 31, 2022, accounted for 74.1 % of the Company’s

total outstanding rent receivable and rent receivable – related party at March 31, 2022.

Two customers,

of which, one is a related party and the other is a third party, whose outstanding receivable accounted for 10 % or more of the Company’s

total outstanding rent receivable and rent receivable – related party at December 31, 2021, accounted for 80.6 % of the Company’s

total outstanding rent receivable and rent receivable – related party at December 31, 2021.

supplier accounted for 10 % or more of the Company’s purchase during the three months ended March 31, 2022 and 2021.

One supplier,

whose outstanding payable accounted for 10 % or more of the Company’s total outstanding accounts payable at March 31, 2022,

accounted for 100.0 % of the Company’s total outstanding accounts payable at March 31, 2022.

12 – SEGMENT INFORMATION

the three months ended March 31, 2022 and 2021, the Company operated in two reportable business segments - (1) the real property

operating segment, and (2) the medical related consulting services segment.

Six Months Ended

Two customers, of which, one is a related

party and the other is a third party, whose outstanding receivable accounted for 10 % or more of the Company’s total outstanding

rent receivable and rent receivable – related party at June 30, 2022, accounted for 81.0 % of the Company’s total outstanding

rent receivable and rent receivable – related party at June 30, 2022.

Two customers, of which, one is a related

party and the other is a third party, whose outstanding receivable accounted for 10 % or more of the Company’s total outstanding

rent receivable and rent receivable – related party at December 31, 2021, accounted for 80.6 % of the Company’s total

outstanding rent receivable and rent receivable – related party at December 31, 2021.

No supplier accounted for 10 % or more of

the Company’s purchase during the three and six months ended June 30, 2022 and 2021.

One supplier, whose outstanding payable

accounted for 10 % or more of the Company’s total outstanding accounts payable at June 30, 2022, accounted for 100.0 %

of the Company’s total outstanding accounts payable at June 30, 2022.

NOTE 14 – SEGMENT

For the three and six months ended June 30, 2022

and 2021, the Company operated in two reportable business segments - (1) the real property operating segment, and (2) the medical

related consulting services segment.

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

12 – SEGMENT INFORMATION (continued)

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

months ended March 31, 2022 and 2021 was as follows:

NOTE 14 – SEGMENT INFORMATION

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 and six months ended June 30, 2022 and 2021

was as follows:

Three Months Ended

Six Months Ended

Real property operations

13 unchanged sentences

Corporate/Other

Total other income (expense), net

Total other expense, net

Net (loss) income

6 unchanged sentences

( 4,336,031 )

Identifiable long-lived tangible assets at March 31, 2022 and December 31, 2021

$ ( 2,028,474 )

$ ( 2,364,910 )

$ ( 4,099,012 )

$ ( 4,732,028 )

Identifiable long-lived tangible assets at June 30, 2022 and December 31, 2021

Real property operations

1 unchanged sentence

Corporate/Other

Identifiable long-lived tangible assets at March 31, 2022 and December 31, 2021

March 31, 2022

Identifiable long-lived tangible assets at June 30, 2022 and December 31, 2021

United States

2 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13 – COMMITMENTS AND CONTINGENCIES

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.

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.

Zhou and issued Dr.

NOTE 15 – COMMITMENTS

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.

Zhou and issued

Zhou 400 shares of common stock of Genexosome.

Further, The 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.

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

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.

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 Act.

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 criminal proceedings against Dr.

Zhou and Li Chen have been concluded and the civil litigation continue.

and Nationwide Children’s Hospital have reached a verbal settlement agreement.

Both parties are in the process of drafting the

related written agreements.

There can be no assurances that these settlement agreements will be signed.

Leases Commitment

Company is a party to leases for office space.

Rent expense under all operating leases amounted to approximately $ 36,000 and $ 39,000 for

the three months ended March 31, 2022 and 2021, respectively.

Supplemental cash flow information related to leases for the three

months ended March 31, 2022 and 2021 is as follows:

Three Months Ended

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.

The criminal proceedings

Zhou and Li Chen have been concluded.

The Company, Genexosome and the Research Institute entered into a Settlement Agreement

dated June 7, 2022 (the “Settlement Date”) whereby the Company agreed to pay the Research Institute $ 450,000 on each of the

sixty-day, one year and two-year anniversaries of the Settlement Date.

In addition, the Company agreed to pay the Research Institute

30% of the Company’s initial pre-tax profit of $3,333,333, 20% of the Company’s second pre-tax profit of $3,333,333 and 10%

of the Company’s third pre-tax profit of $3,333,333.

The parties provided a mutual release as well.

Operating Leases Commitment

The Company is a party to leases for office space.

Rent expense under all operating leases amounted to approximately $ 72,000 and $ 73,000 for the six months ended June 30, 2022

and 2021, respectively.

Supplemental cash flow information related to leases for the six months ended June 30, 2022 and 2021 is as follows:

Six Months Ended

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

2 unchanged sentences

Operating lease

following table summarizes the lease term and discount rate for the Company’s operating lease as of March 31, 2022:

The following table summarizes the lease term

and discount rate for the Company’s operating lease as of June 30, 2022:

Operating Lease

Weighted average remaining lease term (in years)

Weighted average discount rate

following table summarizes the maturity of lease liabilities under operating lease as of March 31, 2022:

For the Twelve-month Period Ending March 31:

The following table summarizes the maturity of lease liabilities under

operating lease as of June 30, 2022:

For the Twelve-month Period Ending June 30:

Operating Lease

2024 and thereafter

6 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13 – COMMITMENTS AND CONTINCENGIES (continued)

Investment Commitment

May 29, 2018, Avalon Shanghai entered into a Joint Venture Agreement with Jiangsu Unicorn Biological Technology Co., Ltd.

pursuant to which a company named Epicon Biotech Co., Ltd.

NOTE 15 – COMMITMENTS

AND CONTINCENGIES (continued)

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.

(“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 $1.3 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 $1.6 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, 2022, Avalon Shanghai has

contributed RMB 4,760,000 (approximately $0.8 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.

Venture – Avactis Biosciences Inc.

July 18, 2018, the Company formed Avactis Biosciences Inc.

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

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 June 30, 2022, Avalon Shanghai has contributed RMB 5,110,000 (approximately

$0.8 million) that was included in equity method investment on the accompanying condensed consolidated balance sheets.

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

Joint Venture – Avactis Biosciences

On July 18, 2018, the Company formed Avactis

Biosciences Inc.

(“Avactis”), a Nevada corporation, as a wholly owned subsidiary.

On October 23, 2018, Avactis 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 was to be owned 60% by Avactis and 40% by Arbele.

On April 6, 2022, the Company, Acactis, Arbele and Arbele Biotherapeutics Limited

(“Arbele Biotherapeutics”), a wholly owned subsidiary of Arbele, entered into an Amendment No.

1 to the Equity Joint Venture

Agreement pursuant to which Arbele Biotherapeutics acquired 40% of Avactis for the purpose of the Company and Arbele establishing a joint

venture in the United States and the parties agreed that they would no longer pursue AVAR as a joint venture.

Further, all rights and

obligations under the AVAR Agreement were assigned by Avactis to Avalon and by Arbele to Arbele Biotherapeutics.

Avactis established

Avactis Nanjing Biosciences Ltd., a wholly owned foreign entity in the PRC.

Further, the parties agreed that the Exclusive Patent License

Agreement dated January 3, 2019 entered between Arbele, as licensor, and AVAR, as licensee (the “Arbele License Agreement”),

was assigned to Avactis and Avalon and Arbele agreed to enter into a new Arbele License Agreement with Avactis on the same/similar terms

as the Arbele License Agreement.

Anthony Chan was appointed to the Board of Directors of Avactis and as the Chief Scientific

Officer of Avactis.

Avactis purpose and business scope is to research, research, develop, produce, sell, distribute and generally commercialize

CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy globally including in the PRC.

The Company 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 Avactis

and the Company in writing subject to the Company’s cash reserves.

Within 30 days, Arbele Biotherapeutics shall make contribution

of $6.66 million in the form of entering into a License Agreement with Avactis granting Avactis 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 the Company and Avactis and services.

As of the date hereof, the License Agreement has not been finalized.

On October 23, 2018, Avactis 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 was to be owned 60% by

Avactis and 40% by Arbele.

On April 6, 2022, the Company, Acactis, Arbele and Arbele Biotherapeutics Limited (“Arbele Biotherapeutics”),

a wholly owned subsidiary of Arbele, entered into an Amendment No.

1 to the Equity Joint Venture Agreement pursuant to which Arbele Biotherapeutics

acquired 40% of Avactis for the purpose of the Company and Arbele establishing a joint venture in the United States and the parties agreed

that they would no longer pursue AVAR as a joint venture.

Further, all rights and obligations under the AVAR Agreement were assigned

by Avactis to Avalon and by Arbele to Arbele Biotherapeutics.

Avactis established Avactis Nanjing Biosciences Ltd., a wholly owned foreign

entity in the PRC.

Further, the parties agreed that the Exclusive Patent License Agreement dated January 3, 2019 entered between Arbele,

as licensor, and AVAR, as licensee (the “Arbele License Agreement”), was assigned to Avactis and Avalon and Arbele agreed

to enter into a new Arbele License Agreement with Avactis on the same/similar terms as the Arbele License Agreement.

Chan was appointed to the Board of Directors of Avactis and as the Chief Scientific Officer of Avactis.

Avactis purpose and business

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

immunotherapy globally including in the PRC.

The Company 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 Avactis and the Company in writing

subject to the Company’s cash reserves.

Within 30 days, Arbele Biotherapeutics shall make contribution of $6.66 million in the

form of entering into a License Agreement with Avactis granting Avactis 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 the Company and Avactis and services.

As of the date hereof,

the License Agreement has not been finalized.

In addition, the Company is responsible for:

11 unchanged sentences

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13 – COMMITMENTS AND CONTINCENGIES (continued)

Venture – Avactis Biosciences Inc.

AVAR Agreement, as amended, Arbele Biotherapeutics shall be responsible for the following:

NOTE 15 – COMMITMENTS AND CONTINCENGIES (continued)

Joint Venture – Avactis Biosciences

Under AVAR Agreement, as amended, Arbele Biotherapeutics

shall be responsible for the following:

Entering into a License Agreement with Avactis;

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

of both March 31, 2022 and December 31, 2021, the Company paid the $ 900,000 to Arbele Biotherapeutics as research and development

As of March 31, 2022, License Agreement has not been finalized.

of Credit Agreement

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.

Providing Avactis with research and development expertise pertaining to clinical laboratory medicine

when hired by Avactis.

As of both June 30, 2022 and December 31, 2021,

the Company paid the $ 900,000 to Arbele Biotherapeutics as research and development fee.

As of June 30, 2022, 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

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.

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, 2022, $ 2,850,262 was outstanding under the Line of Credit.

14 – SUBSEQUENT EVENTS

Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements

Based upon this review, other than as described below, the Company did not identify any subsequent events that would have

required adjustment or disclosure in the financial statements.

Convertible Note

March 28, 2022, the Company entered into Securities Purchase Agreement with an accredited investor providing for the sale by the Company

to the investor of a Convertible Note in the amount of $ 4,000,000 (the “2022 Convertible Note”).

In addition to the 2022

Convertible Note, the investor will also receive a Stock Purchase Warrant (the “2022 Warrant”) to acquire an aggregate of

1,333,333 shares of common stock.

The 2022 Warrants will be exercisable for five years at an exercise price of $ 1.25 .

The financing closed

with respect to $ 2,669,521.60 of the financing on April 15, 2022 and with respect to $ 659,580.64 of the financing on April 29, 2022.

The Company and the investor expect to close on the balance of the $ 4,000,000 in funding no later than May 15, 2022.

As a result of the

first closing, the Company issued the investor a 2022 Convertible Note in the principal amount of $ 2,669,521.60 and a 2022 Warrant to

acquire 889,840 shares of common stock and as a result of the second closing, the Company issued the investor a 2022 Convertible Note

in the principal amount of $ 659,580.64 and a 2022 Warrant to acquire 219,860 shares of common stock.

2022 Convertible Note bears interest at 1 % per annum payable at maturity and matures ten years from issuance.

The investor may elect

to convert all or part of the 2022 Convertible Note, plus accrued interest, at any time into shares of common stock of the Company at

a conversion price equal to 95 % of the average of the highest three trading prices for the common stock during the 20-trading day period

ending one trading day prior to the conversion date but in no event will the conversion price be lower than $ 0.75 per share.

investor agreed to restrict its ability to convert the 2022 Convertible Note and exercise the 2022 Warrants and receive shares of common

stock such that the number of shares of common stock held by the investor after such conversion or exercise does not exceed 4.99 % of

the then issued and outstanding shares of common stock.

Further, the investor agreed to not sell or transfer any or all of the shares

of common stock underlying the 2022 Convertible Note or the 2022 Warrant for a period of 90 days beginning on the closing date (the “Lock-Up

Following the expiration of the Lock-Up Period, the investor has agreed to limit its sale or transfer of such shares

of common stock to a maximum monthly amount equal to 20 % of the shares of common stock issuable upon conversion of the 2022 Convertible

The Company agreed to use its reasonable best efforts to file a registration statement on Form S-3 (or other appropriate form)

providing for the resale by the investor of the shares of common stock underlying the 2022 Convertible Note and the 2022 Warrant.

Shares Issued for Services

April 2022, the Company issued a total of 329,592 shares of its common stock for services rendered and to be rendered.

shares were valued at $ 290,950 , the fair market values on the grant dates using the reported closing share prices on the dates of grant,

and the Company reduced accrued liabilities of $ 251,590 and recorded prepaid expense of $ 39,360 which will be amortized over the

rest of corresponding service periods.

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 June 30, 2022,

$ 2,440,262 was outstanding under the Line of Credit.

On July 25, 2022, the outstanding principal and related accrued and unpaid interest were settled

by issuance of the Company’s common stock (see Note 16 - Common Shares Issued Pursuant to Related Party Debt Settlement Agreement

and Release).

NOTE 16 – SUBSEQUENT

The Company evaluated subsequent events and transactions

that occurred after the balance sheet date up to the date that the financial statements were issued.

Based upon this review, other than

as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the financial

Common Shares Issued for Debt Conversion

25, 2022, the Company and a convertible note holder entered into a Conversion Agreement pursuant to which the convertible note holder

converted its Convertible Notes in the principal amount of $ 3,718,943 and unpaid interest of $ 9,751 into

5,736,452 shares of common stock of the Company at a per share price of $ 0.65 .

Common Shares Issued Pursuant to Related Party

Debt Settlement Agreement and Release

On July 25, 2022, the Company and Mr.

Lu entered into

and closed a Debt Settlement Agreement and Release pursuant to which the Company settled $ 2,440,262 debt owed under the Line of Credit

and unpaid interest of $ 448,331 by issuance of 4,443,990 shares of common stock, with a fair value of $ 2,888,593 , of the Company at a

per share price of $ 0.65 .

Unaudited Pro Forma Condensed Consolidated Balance Sheet As of June

25, 2022, the Company and a convertible note holder entered into a Conversion Agreement pursuant to which the convertible note holder

converted its Convertible Notes in the principal amount of $ 3,718,943 and unpaid interest of $ 9,751 into

5,736,452 shares of common stock of the Company at a per share price of $ 0.65 .

On July 25, 2022, the Company and Mr.

into and closed a Debt Settlement Agreement and Release pursuant to which the Company settled $ 2,440,262 debt owed under the Line

of Credit and unpaid interest of $ 448,331 by issuance of 4,443,990 shares of common stock of the Company at a per share price of $ 0.65 .

The 4,443,990 shares issued had a fair value of $ 2,888,593 .

The unaudited pro forma

condensed consolidated balance sheet as of June 30, 2022 combines the historical unaudited condensed consolidated balance sheet as of

June 30, 2022 and the debt conversion transactions mentioned above, giving effect to the conversions as if they had been consummated on

June 30, 2022.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE

As of June 30, 2022

Pro Forma Adjustments

CURRENT ASSETS:

Rent receivable

Rent receivable - related party

Deferred financing costs, net

Prepaid expenses and other current assets

Total Current Assets

NON-CURRENT ASSETS:

Rent receivable - noncurrent portion

Deferred financing costs - noncurrent portion, net

Deferred leasing costs

Operating lease right-of-use assets, net

Property and equipment, net

Investment in real estate, net

Equity method investment

Total Non-current Assets

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:

Accounts payable

Accrued professional fees

Accrued research and development fees

Accrued payroll liability and directors' compensation

Accrued settlement of lawsuit

Accrued liabilities and other payables

Accrued liabilities and other payables - related parties

Operating lease obligation

Convertible note payable, net

Derivative liability

Total Current Liabilities

NON-CURRENT LIABILITIES:

Accrued settlement of lawsuit - noncurrent portion

Loan payable - related party

Total Non-current Liabilities

Total Liabilities

STOCKHOLDERS' EQUITY:

Preferred stock, $ 0.0001 par value;

10,000,000 shares authorized;

no shares issued and outstanding

Common stock, $ 0.0001 par value;

490,000,000 shares authorized;

89,554,766 shares issued and 89,034,766 shares outstanding;

99,735,208 pro forma shares issued and 99,215,208 pro forma shares outstanding

Additional paid-in capital

common stock held in treasury, at cost;

520,000 shares

Accumulated deficit

( 55,230,886 )

( 58,457,279 )

Statutory reserve

Accumulated other comprehensive loss

Total Stockholders' Equity

Total Liabilities and Stockholders' Equity

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Unaudited Pro Forma Adjustment Reflects the Following Four Transactions:

Transaction 1:

Derivative liability

Additional paid-in capital

The transaction reflects the embedded conversion

option derivative liability was reclassified to additional paid-in capital upon the related note conversion.

Transaction 2:

Interest expense

Discount on convertible note payable

To amortize the discount upon conversion.

Transaction 3:

Convertible note payable

Interest payable

Additional paid-in capital

The transaction reflects the principal and u npaid

interest were converted into shares of common stock of the Company pursuant to a Conversion

Transaction 4:

Loan payable - related party

Accrued liabilities and other payables - related parties

Additional paid-in capital

The transaction reflects debt owed under the Line of Credit and unpaid

interest were settled by issuance of shares of common stock of the Company pursuant to a Debt Settlement Agreement and Release.

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