What changed in this filing

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Item 1. Financial Statements

2022-11-14 compared with 2022-08-05 · 994 added, 896 removed, 575 unchanged (77% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

CURRENT ASSETS:

2 unchanged sentences

Deferred financing costs, net

Prepaid expenses and other current assets

Other current assets

Total Current Assets

NON-CURRENT ASSETS:

Rent receivable - noncurrent portion

Deferred financing costs - noncurrent portion, net

Security deposit

Deferred leasing costs

Operating lease right-of-use assets, net

2 unchanged sentences

Equity method investment

Other non-current assets

Total Non-current Assets

9 unchanged sentences

Operating lease obligation

Convertible note payable, net

Derivative liability

Note payable - related party

3 unchanged sentences

Accrued settlement of lawsuit - noncurrent portion

Note payable, net

Loan payable - related party

4 unchanged sentences

10,000,000 shares authorized;

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

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

Common stock, $ 0.0001 par value;

490,000,000 shares authorized;

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

99,735,208 shares issued and 99,215,208 shares outstanding at September 30, 2022;

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

Common stock to be issued

Additional paid-in capital

common stock held in treasury, at cost;

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

520,000 shares at September 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 LOSS

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

CONDENSED CONSOLIDATED STATEMENTS OF

OPERATIONS AND COMPREHENSIVE LOSS

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Real property rental

Medical related consulting services - related party

Total Revenues

1 unchanged sentence

Real property operating expenses

Medical related consulting services - related party

Total Costs and Expenses

Real property operating income

Gross profit from medical related consulting services

Total Gross Profit

13 unchanged sentences

OTHER (EXPENSE) INCOME

Interest expense

Interest expense - amortization of debt discount and debt issuance cost

( 3,248,597 )

( 3,303,282 )

Interest expense - other

Interest expense - related party

Conversion inducement expense

Loss from equity method investment

Change in fair value of derivative liability

Other income (expense)

Total Other Income (Expense), net

Total Other Expense, net

( 3,825,055 )

( 2,953,554 )

LOSS BEFORE INCOME TAXES

43 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

For the Three and Six Months Ended June 30, 2022

For the Three and Nine Months Ended September 30,

GloboCare Corp.

1 unchanged sentence

Comprehensive

Non-controlling

January 1, 2022

17 unchanged sentences

( 55,230,886 )

of convertible note payable and accrued interest into common stock

Reclassification

of derivative liability to equity

of common stock for settlement of loan payable and accrued interest - related party

of common stock - related party

of common stock

currency translation adjustment

loss for the three months ended September 30, 2022

( 5,414,154 )

September 30, 2022

$ ( 522,500 )

$ ( 60,645,040 )

$ ( 243,781 )

See accompanying notes to the condensed consolidated

2 unchanged sentences

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

For the Three and Six Months Ended June 30, 2021

CONDENSED CONSOLIDATED STATEMENTS OF

CHANGES IN EQUITY

For the Three and Nine Months Ended September

GloboCare Corp.

1 unchanged sentence

Comprehensive

Balance, January 1, 2021

Non-controlling

January 1, 2021

$ ( 522,500 )

1 unchanged sentence

$ ( 190,510 )

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

of common stock, net

of common stock for services

currency translation adjustment

loss for the three months ended March 31, 2021

( 2,367,118 )

Balance, March 31, 2021

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

of common stock for settlement of accrued professional fees

of common stock for services

currency translation adjustment

loss for the three months ended June 30, 2021

( 2,364,910 )

Balance, June 30, 2021

June 30, 2021

( 46,773,403 )

of common stock, net

of common stock for services

currency translation adjustment

loss for the three months ended September 30, 2021

( 2,024,219 )

See accompanying notes to the condensed consolidated

financial statements.

September 30, 2021

$ ( 522,500 )

$ ( 48,797,622 )

$ ( 177,161 )

See accompanying notes to the condensed consolidated financial

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months

Ended June 30,

CONDENSED CONSOLIDATED STATEMENTS OF

For the Nine Months

Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

2 unchanged sentences

Adjustments to reconcile net loss to net cash used in operating activities:

Bad debt provision

Change in straight-line rent receivable

3 unchanged sentences

Amortization of debt discount

Amortization of debt issuance costs

Conversion inducement expense

Change in fair market value of derivative liability

4 unchanged sentences

Deferred leasing costs

Prepaid expenses and other assets

Accounts payable

9 unchanged sentences

Additional investment in equity method investment

CASH USED IN INVESTING ACTIVITIES

NET CASH USED IN INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

3 unchanged sentences

Proceeds from issuance of convertible debt and warrants

Proceeds from issuance of balloon promissory note

Payments of debt issuance costs

Proceeds from equity offering

5 unchanged sentences

CASH - end of period

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for:

NON-CASH INVESTING AND FINANCING ACTIVITIES:

3 unchanged sentences

Accrued professional fees relieved for shares issued

Warrants issued with convertible note payable

Derivative liability

See accompanying notes to the condensed consolidated financial statements.

Warrants issued with convertible note payable recorded as debt discount

Bifurcated embedded conversion feature recorded as derivative liability and debt discount

Conversion of convertible note payable and accrued interest into common stock

Reclassification of derivative liability to equity

Related party loan and accrued interest settled in shares

See accompanying notes to the condensed consolidated financial

AVALON GLOBOCARE CORP.

3 unchanged sentences

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”).

Avalon GloboCare

(the “Company” or “ALBT”) 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.

For 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”).

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

immune effector cell therapy, exosome technology, as well as cell therapy related 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 verticals from innovative R&D to automated

bioproduction and accelerated clinical development, the Company is establishing a leading role in the fields of cellular immunotherapy

(including CAR-T/NK), exosome technology (ACTEX™), and regenerative therapeutics.

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,

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

There was no activity for the subsidiary since

its incorporation through September 30, 2022.

Avalon (BVI) Ltd.

is dormant and is in process of being dissolved.

On February 7, 2017, the Company formed Avalon

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

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

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

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

7, 2017, the Company formed Avalon RT 9 Properties, LLC (“Avalon RT 9”), a New Jersey limited liability company.

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.

In addition, the property generates rental income.

Avalon RT 9 owns this office building.

Avalon RT 9’s business consists of the

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

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

On 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.

September 30, 2022, the occupancy rate of the building is 87.0 %.

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”) which was dissolved in June 2022, 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

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.

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.

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.

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

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

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.

Since the fourth quarter

of 2019, the non-controlling interest has remained inactive.

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.

The subsidiary is designed to integrate and optimize our

global scientific and clinical resources to further advance the use of cellular therapies to treat certain cancers.

Commencing on April

6, 2022, the Company owns 60 % of Avactis and Arbele Biotherapeutics Limited (“Arbele Biotherapeutics”) owns 40 %

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

There was no activity

for the subsidiary since its incorporation through September 30, 2022.

AVALON GLOBOCARE CORP.

4 unchanged sentences

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

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

Name of Subsidiary

Place and date of Incorporation

Percentage of Ownership

Principal Activities

Avalon Healthcare System, Inc.

100% held by AVCO

100% held by ALBT

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

3 unchanged sentences

January 23, 2017

100% held by AVCO

100% held by ALBT

is in process of being dissolved

2 unchanged sentences

February 7, 2017

100% held by AVCO

100% held by ALBT

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

3 unchanged sentences

100% held by AHS

Provides medical related consulting services

Ceased operations

Genexosome Technologies Inc.

1 unchanged sentence

July 31, 2017

60% held by AVCO

60% held by ALBT

Avactis Biosciences Inc.

July 18, 2018

60% held by AVCO

60% held by ALBT

Integrate and optimize global scientific and clinical resources to further advance cellular therapies, including regenerative medicine with stem/progenitor cells as well as cellular immunotherapy including CAR-T, CAR-NK, TCR-T and others to treat certain cancers

Avactis Nanjing Biosciences Ltd.

(“Avactis Nanjing”)

Owns a patent

International Exosome Association LLC

June 13, 2019

100% held by AVCO

100% held by ALBT

Promotes standardization related to exosome industry

NOTE 2 – BASIS OF PRESENTATION

AND GOING CONCERN CONDITION

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.

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.

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.

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.

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – BASIS OF PRESENTATION

AND GOING CONCERN CONDITION (continued)

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.

immune effector cell therapy, exosome technology, as well as cell therapy related 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 verticals from innovative R&D to automated

bioproduction and accelerated clinical development, the Company is establishing a leading role in the fields of cellular immunotherapy

(including CAR-T/NK), exosome technology (ACTEX™), and regenerative therapeutics.

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.

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.

in the accompanying condensed consolidated financial statements, the Company has incurred recurring net losses and generated negative

cash flow from operating activities of $ 9,513,166 and $ 5,072,932 for the nine months ended September 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

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.

However, there is no assurance

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

The occurrence

of an uncontrollable event such as the COVID-19 pandemic had negatively impact on the Company’s operations.

Our general development

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

However, we are uncertain if the COVID-19

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

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

Given the dynamic nature of these circumstances, the duration

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

adversely impact the Company’s business for the 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

8 unchanged sentences

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.

during the three and nine months ended September 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.

5 unchanged sentences

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 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

2 unchanged sentences

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

and liabilities measured at fair value on a recurring basis.

Certain assets and liabilities are measured at fair value

on a recurring basis.

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

These assets and liabilities include derivative liability.

These assets and liabilities include

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

Derivative 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 nine months ended September 30, 2022:

Balance of derivative liability as of January 1, 2022

1 unchanged sentence

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.

Reclassification of derivative liability to equity

Balance of derivative liability as of September 30, 2022

ASC 825-10 “Financial Instruments”,

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

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

At September 30, 2022

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

September 30, 2022

December 31, 2021

United States

For purposes of the condensed consolidated statements

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

accounts to be cash equivalents.

The Company had no cash equivalents at June 30, 2022 and December 31, 2021.

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 September 30, 2022 and

December 31, 2021.

AVALON GLOBOCARE CORP.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

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 $70,000) 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.

September 30, 2022, cash balances held in the PRC are RMB 2,559,525 (approximately $ 360,000 ), of which, RMB 2,034,731 (approximately

$ 286,000 ) 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.

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 September 30, 2022, the Company’s

cash balances in United States bank accounts had approximately $ 2,951,000 in excess of the federally-insured limits.

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

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.

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.

Revenue Recognition

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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

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

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

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Determine the transaction price

Allocate the transaction price to the performance obligations in the contract

Recognize revenue when the company satisfies a performance obligation

Allocate the transaction price to the performance

obligations in the contract

Recognize revenue when the company satisfies a performance

AVALON GLOBOCARE CORP.

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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).

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

● The entity’s promise to transfer the goods or service

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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.

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

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.

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 entity.

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 and nine months

ended September 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).

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.

AVALON GLOBOCARE CORP.

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Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Stock options

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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.

(*) Assumed the c onvertible

note was converted into shares of common stock of the Company at a conversion price of $ 0.65 per share.

Financing Costs

financing costs consist of legal, accounting and other costs that are directly related to the Company’s open market sale equity

financing and will be charged to stockholders’ equity upon the completion of the equity offering.

As of September 30, 2022 and December

31, 2021, deferred financing costs amounted to $ 214,107 and $ 213,279 , of which $ 74,937 and $ 74,648 were included in other noncurrent

assets, respectively.

Debt Issuance Costs

Debt issuance costs are

those costs that have been incurred in connection with the issuance of balloon promissory note payable and are offset against note payable

in the condensed consolidated balance sheets.

Such costs are being amortized to interest expense over the term of the underlying debt

using the straight-line method, as the difference between that and the effective interest method are immaterial.

of September 30, 2022, debt issuance costs amounted to $ 244,250 .

Segment Reporting

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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.

the three and nine months ended September 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

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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.

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

of operations and cash flows.

AVALON GLOBOCARE CORP.

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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:

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):

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

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.

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 15, 2020.

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.

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 – OTHER CURRENT AND

NON-CURRENT ASSETS

At September 30, 2022 and December 31, 2021,

other current and non-current assets consisted of the following:

September 30,

Prepaid directors and officers liability insurance premium

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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

Prepaid property tax

Long-term straight-line rent receivable

Long-term deferred financing costs

Current portion

Non-current portion

AVALON GLOBOCARE CORP.

2 unchanged sentences

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:

As of September

30, 2022 and December 31, 2021, the equity method investment amounted to $ 478,362 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.

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.

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.

three months ended September 30, 2022 and 2021, the Company’s share of Epicon’s net loss was $ 9,011 and $ 14,203 , respectively,

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

For the nine months ended September 30, 2022 and 2021, the Company’s share of Epicon’s net loss was $ 33,809 and

$ 48,135 , respectively, which was included in loss from equity method investment in the accompanying condensed consolidated statements

of operations and comprehensive loss.

months ended September 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

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Foreign currency fluctuation

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:

Equity investment carrying amount at September 30, 2022

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

September 30,

Current assets

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For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

Ended September 30,

For the Nine Months

Ended September 30,

Loss from operation

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – ACCRUED

LIABILITIES AND OTHER PAYABLES

At June 30, 2022 and

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

At September 30, 2022

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

September 30,

Accrued tenants’ improvement reimbursement

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Accrued utilities

Advance from customer

Deferred rental income

1 unchanged sentence

Taxes payable

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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”).

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

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

The financing closed

with respect to:

The financing closed with respect to:

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

2 unchanged sentences

● $ 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

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 dated May 18, 2022, and

a 2022 Convertible Note in the principal amount of $ 190,000 and a 2022 Warrant to acquire 63,333 shares of common stock

dated May 25, 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

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

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.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – CONVERTIBLE NOTE PAYABLE

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.

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:

volatility 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).

3 unchanged sentences

and expected life of 10 years.

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 had been 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 , was recorded as a discount on the convertible

note payable and had been 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 , which had been amortized over the term of the convertible

note payable.

On July 25, 2022, the Company and the investor

entered into a Conversion Agreement (“Conversion Agreement”) pursuant to which the investor converted all of 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 (see Note 11 - Common Shares Issued for Debt Conversion).

The Company recorded a conversion

inducement charge of $344,264 as a result of the Conversion Agreement, representing the value of common stock issued upon conversion in

excess of the common stock issuable under the original terms of the 2022 Convertible Note.

three months ended September 30, 2022, amortization of debt discount and interest expense related to the 2022 Convertible Note amounted

to $3,226,393 and $2,547, respectively, both of which have been reflected as interest expense on the accompanying condensed consolidated

statements of operation and comprehensive loss.

For the nine months ended September 30, 2022, amortization of debt discount and interest

expense related to the 2022 Convertible Note amounted to $3,281,078 and $9,751, respectively, both of which have been reflected as

interest expense on the accompanying condensed consolidated statements of operation and comprehensive loss.

NOTE 8 – DERIVATIVE LIABILITY

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:

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

On July 25, 2022, the Company and the 2022 Convertible

Note holder entered into a Conversion Agreement pursuant to which the investor converted all of its Convertible Notes into shares

of common stock of the Company.

The estimated

fair value of the derivative feature of convertible debt was $2,181,820 on July 25, 2022, which was computed using the following assumptions:

volatility of 95.53%, risk-free rate of 2.81%, annual dividend yield of 0% and expected life of 9.7 – 9.8 years.

AVALON GLOBOCARE CORP.

1 unchanged sentence

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.

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 change to the derivative liability

for the embedded conversion option from July 1, 2022 through July 25, 2022 resulted in an increase of $ 168,520 in the derivative liability

and the corresponding increase in other expense as a loss for the three months ended September 30, 2022.

The change to the derivative

liability for the embedded conversion option from commitment dates through July 25, 2022 resulted in a decrease of $ 600,749 in the

derivative liability and the corresponding increase in other income as a gain for the nine months ended September 30, 2022.

was no derivative liability in the three and nine months ended September 30, 2021.

NOTE 9 – NOTE PAYABLE, NET

On September 1, 2022,

the Company issued a balloon promissory note to a third party company in the principal amount of $ 4,800,000 which carries interest of

11.0 % per annum (the “2022 Note Payable”).

Interest is due in monthly payments of $44,000 beginning November 1, 2022 and payable

monthly thereafter until September 1, 2025 when the principal outstanding and all remaining interest is due.

The 2022 Note Payable can

be extended for an additional 36 months provided that the Company has not defaulted.

The Company may not prepay the 2022 Note Payable

for a period of 12 months.

The 2022 Note Payable is secured by a first mortgage on the Company’s 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.

As of September 30, 2022,

the carrying balance of the 2022 Note Payable was $ 4,555,750 and the remaining unamortized debt issuance costs balance was $ 244,250 .

the three and nine months ended September 30, 2022, the interest expense related to the 2022 Note Payable (including amortization of debt

issuance costs of $ 22,204 ) totaled $ 66,204 .

NOTE 10 – RELATED PARTY TRANSACTIONS

Rental Revenue from Related Party and Rent

Receivable – Related Party

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.

property located in New Jersey to a company, D.P.

Capital Investments LLC, 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 both the three months ended September 30,

2022 and 2021, 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 loss.

For the nine months ended September 30, 2022 and 2021, the related

party rental revenue amounted to $ 37,800 and $ 21,000 , respectively, and has been included in real property rental on the accompanying

condensed consolidated statements of operations and comprehensive loss.

The related party rent receivable totaled $ 71,400 and

$ 33,600 , respectively, and no allowance for doubtful accounts was deemed to be required on rent receivable – related party

at September 30, 2022 and December 31, 2021.

Medical Related Consulting

Services Revenue from Related Party

During the three and nine months ended September

30, 2022 and 2021, medical related consulting services revenue from related party was as follows:

Three Months Ended

Nine Months Ended

September 30,

Medical related consulting services provided to:

Hebei Daopei *

* Hebei Daopei is subsidiary of an entity whose chairman is Wenzhao

Lu, the largest shareholder of the Company.

AVALON GLOBOCARE CORP.

2 unchanged sentences

NOTE 10 – RELATED PARTY TRANSACTIONS

Services Provided by Related Party

Provided by Related Party

From time to time, Wilbert Tauzin, a director

1 unchanged sentence

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.

recognized consulting expenses of $ 29,121 and $ 52,596 for the three months ended September 30, 2022 and 2021, respectively,

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

As compensation for professional services provided, the Company recognized consulting expenses of $ 116,719 and $ 164,546 for

the nine months ended September 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.

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.

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

As of September 30, 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

As of September

30, 2022 and December 31, 2021, $ 0 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

6 unchanged sentences

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.

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 September 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

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.

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 (see Note 11 -

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

The total amount of the debt settled of $ 2,888,593 exceeded the fair

market value of the shares issued by $ 888,353 which was treated as a capital transaction due to Mr.

Lu's relationship with the Company.

AVALON GLOBOCARE CORP.

2 unchanged sentences

NOTE 10 – RELATED PARTY TRANSACTIONS

months ended September 30, 2022, activity recorded for the Line of Credit is summarized in the following table:

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).

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

Draw down from Line of Credit

Repayment of Line of Credit

Settlement of Line of Credit in shares

( 2,440,262 )

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

three months ended September 30, 2022 and 2021, the interest expense related to above borrowings amounted to $ 8,358 and $ 50,248 ,

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

operations and comprehensive loss.

For the nine months ended September 30, 2022 and 2021, the interest expense related to above borrowings

amounted to $ 79,898 and $ 141,528 , respectively, and has been included in interest expense – related party on the accompanying

condensed consolidated statements of operations and comprehensive loss.

As of September

30, 2022 and December 31, 2021, the related accrued and unpaid interest for above borrowings was $ 0 and $ 368,433 , respectively, has

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

Common Shares Sold

to Related Party for Cash

On August 5, 2022, the Company sold 448,718 shares

of common stock at a purchase price of $ 0.78 per share to Wenzhao Lu pursuant to a subscription agreement.

The Company received proceeds

of $ 350,000 (see Note 11 - Common Shares Sold for Cash).

As of September 30, 2022, the shares have not been issued and have been

included in common stock to be issued at a value of $ 350,000 on the accompanying condensed consolidated balance sheets.

NOTE 11 – EQUITY

3 unchanged sentences

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:

During the nine months

ended September 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 .

On August 5, 2022, the Company sold 448,718 shares

of common stock at a purchase price of $ 0.78 per share to Wenzhao Lu pursuant to a subscription agreement.

The Company received proceeds

of $ 350,000 (see Note 10 - Common Shares Sold to Related Party for Cash).

As of September 30, 2022, the shares have not been issued

and have been included in common stock to be issued at a value of $ 350,000 on the accompanying condensed consolidated balance sheets.

On August 5, 2022, the Company sold 320,513 shares

of common stock at a purchase price of $ 0.78 per share to an investor pursuant to a subscription agreement.

The Company received proceeds

of $ 250,000 .

As of September 30, 2022, the shares have not been issued and have been included in common stock to be issued at a value

of $ 250,000 on the accompanying condensed consolidated balance sheets.

Shares Issued for Services

During the nine months ended September 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 $ 291,270 for the nine months ended September 30, 2022 and reduced accrued liabilities

of $ 30,000 and recorded prepaid expense of $ 19,680 as of September 30, 2022 which will be amortized over the rest of corresponding

service periods.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – EQUITY

Shares Issued for Debt Conversion

25, 2022, the Company and 2022 Convertible Note holder entered into a Conversion Agreement pursuant to which the investor 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 (see Note 7).

The Company recorded a conversion inducement charge of $ 344,264

as a result of the Conversion Agreement, representing the value of common stock issued upon conversion in excess of the common stock issuable

under the original terms of the 2022 Convertible Note.

Shares Issued Pursuant to Related Party Debt Settlement Agreement and Release

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 of the Company (see Note 10 - Line of Credit ).

The total amount of the debt

settled of $2,888,593 exceeded the fair market value of the shares issued by $888,353 which was treated as a capital transaction due to

Lu's relationship with the Company.

The following table summarizes the shares of the

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

Options Outstanding

Options Exercisable

Exercise Price

Outstanding at

June 30, 2022

September 30,

Weighted Average

1 unchanged sentence

Exercisable at

June 30, 2022

September 30,

$ 0.50 – 0.82

$ 0.50 – 4.76

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

for the nine months ended September 30, 2022 were as follows:

Outstanding at January 1, 2022

Expired/forfeited/exercised

Outstanding at June 30, 2022

Options exercisable at June 30, 2022

Outstanding at September 30, 2022

Options exercisable at September 30, 2022

Options expected to vest

The aggregate intrinsic value of both stock options

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

The aggregate intrinsic value of stock options

outstanding and stock options exercisable at September 30, 2022 was $ 303,800 and $ 292,597 , respectively.

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 .

nine months ended September 30, 2022 were estimated at the date of grant using the Black-Scholes option-pricing model with the following

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 nine months ended

September 30, 2022 was $ 373,982 .

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – EQUITY

Options (continued)

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.

nine months ended September 30, 2021 were estimated at the date of grant using the Black-Scholes option-pricing model with the following

volatility of 121.52 % - 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 nine months ended

September 30, 2021 was $ 594,401 .

For the three months ended September 30, 2022

and 2021, stock-based compensation expense associated with stock options granted amounted to $ 110,442 and $ 188,859 , of which,

$ 87,300 and $ 134,833 was recorded as compensation and related benefits, $ 14,121 and $ 37,596 was recorded as professional

fees, and $ 9,021 and $ 16,430 was recorded as research and development expenses, respectively.

For the nine months ended September

30, 2022 and 2021, stock-based compensation expense associated with stock options granted amounted to $ 389,066 and $ 586,573 ,

of which, $ 285,384 and $ 410,732 was recorded as compensation and related benefits, $ 71,719 and $ 120,584 was recorded as

professional fees, and $ 31,963 and $ 55,257 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 stock options granted as of September 30, 2022 and changes during the nine months ended September 30, 2022 is presented below:

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.

Nonvested at September 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”).

In addition 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 .

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:

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

expected life of 5 years.

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 had been amortized over the

term of the 2022 Convertible Note.

Stock warrant

activities for the nine months ended September 30, 2022 were as follows:

Outstanding at January 1, 2022

Expired/exercised

Outstanding and exercisable at September 30, 2022

AVALON GLOBOCARE CORP.

2 unchanged sentences

NOTE 11 – EQUITY

The following table summarizes the shares of the

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

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

Exercise Price

Outstanding at

June 30, 2022

September 30,

Weighted Average

1 unchanged sentence

Exercisable at

June 30, 2022

September 30,

The aggregate intrinsic value of both stock warrants

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

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

NOTE 12 – 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 .

The Company’s

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

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.

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 nine months ended September 30,

2022 as it incurred net loss in the periods.

As of both September 30, 2022 and December 31, 2021, the restricted amount as determined

pursuant to PRC statutory laws totaled $ 6,578 .

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.

As of September 30, 2022 and December 31, 2021, total restricted net assets amounted to $ 1,006,578 and $ 706,578 ,

respectively.

NOTE 13 – 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.

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.

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 14 – 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

to each customer that accounted for 10 % or more of the Company’s revenues for the three and nine months ended September 30,

2022 and 2021.

Three Months Ended

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.

September 30,

Nine Months Ended

September 30,

A (Hebei Daopei, a related party)

* Less than 10 %

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 September 30, 2022, accounted for 82.3 % of the Company’s

total outstanding rent receivable and rent receivable – related party at September 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.

accounted for 10 % or more of the Company’s purchase during the three and nine months ended September 30, 2022 and 2021.

One supplier,

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

accounted for 100.0 % of the Company’s total outstanding accounts payable at September 30, 2022.

NOTE 15 – 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.

For the three and nine months ended September

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.

4 unchanged sentences

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:

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

Information with respect to these reportable business segments for the three and nine months ended September 30, 2022 and 2021 was as

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Real property operations

Medical related consulting services

Costs and expenses

Real property operations

Medical related consulting services

Real property operations

Medical related consulting services

Other operating expenses

5 unchanged sentences

Corporate/Other

( 3,303,502 )

( 3,436,931 )

( 3,303,502 )

( 3,436,931 )

Other income (expense)

3 unchanged sentences

Total other expense, net

( 3,825,055 )

( 2,953,554 )

Net (loss) income

10 unchanged sentences

$ ( 6,756,247 )

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

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

September 30, 2022

December 31, 2021

Real property operations

1 unchanged sentence

Corporate/Other

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

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

September 30,

United States

4 unchanged sentences

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.

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.

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

In consideration of the assets, Genexosome paid Dr.

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

Zhou and issued Dr.

Zhou 400 shares of common stock of Genexosome.

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.

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

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

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

Hospital (“Research Institute”) filed a Complaint in the United States District Court for the Southern District of Ohio Eastern

Division against Dr.

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

The criminal proceedings against Dr.

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 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.

1 unchanged sentence

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

These lease agreements will expire through February 2023.

Rent expense under all operating leases amounted to approximately $ 107,000 and

$ 108,000 for the nine months ended September 30, 2022 and 2021, respectively.

Supplemental cash flow information related to leases

for the nine months ended September 30, 2022 and 2021 is as follows :

Nine Months Ended

September 30,

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

3 unchanged sentences

The following table summarizes the lease term

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

Operating Lease

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

Weighted average remaining lease term (in years)

Weighted average discount rate

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 – COMMITMENTS

AND CONTINCENGIES (continued)

Operating Leases Commitment (continued)

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

operating lease as of September 30, 2022:

For the Twelve-month Period Ending September 30:

2024 and thereafter

3 unchanged sentences

Current portion

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

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

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.

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 $1.1 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

$1.4 million).

Epicon is focused on cell preparation, third party testing, biological sample repository for commercial and scientific

research purposes and the clinical transformation of scientific achievements.

As of September 30, 2022, Avalon Shanghai has contributed

RMB 5,110,000 (approximately $0.7 million) that was included in equity method investment on the accompanying condensed consolidated balance

The Company intends to use its present working capital together with borrowings from related party and equity raises to fund

the project cost.

Joint Venture – Avactis Biosciences Inc.

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.

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:

● Contributing registered capital of RMB 5,000,000 (approximately $0.7 million) for working capital purposes as required by local regulation, which is not required to be contributed immediately and will be contributed subject to the Company’s discretion;

Avactis in setting up its business operations and obtaining all required permits and licenses

from the Chinese government;

Avactis in recruiting, hiring and retaining personnel;

Avactis with access to various hospital networks in China to assist in the testing and commercialization

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

Avactis in managing the Good Manufacturing Practices (GMP) facility and clinic to be developed

Avactis with advice pertaining to conducting clinicals in China;

● Within 6 days of signing the AVAR Agreement, the Company is required to pay to Arbele Biotherapeutics $300,000 as a research and development fee with an additional two payments of $300,000 (for a total of $900,000) to be paid upon mutually agreed upon milestones.

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 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.

AVALON GLOBOCARE CORP.

2 unchanged sentences

NOTE 16 – COMMITMENTS AND CONTINCENGIES (continued)

Joint Venture – Avactis Biosciences

Joint Venture – Avactis Biosciences Inc.

the Company is responsible for :

● Contributing

registered capital of RMB 5,000,000 (approximately $0.7 million) for working capital purposes as required by local regulation, which

is not required to be contributed immediately and will be contributed subject to the Company’s discretion;

Avactis in setting up its business operations and obtaining all required permits and licenses from the Chinese government;

Avactis in recruiting, hiring and retaining personnel;

Avactis with access to various hospital networks in China to assist in the testing and commercialization of the CAR-T/CAR-NK/TCR-T/universal

cellular immunotherapy technology in China;

Avactis in managing the Good Manufacturing Practices (GMP) facility and clinic to be developed by Avactis;

Avactis with advice pertaining to conducting clinicals in China;

6 days of signing the AVAR Agreement, the Company is required to pay to Arbele Biotherapeutics $300,000 as a research and development

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

Under AVAR Agreement, as amended, Arbele Biotherapeutics

1 unchanged sentence

Entering into a License Agreement with Avactis;

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,

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

As of both September 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.

29, 2019, the Company entered into a Line of Credit Agreement (the “Line of Credit Agreement”) providing the Company with

a $ 20 million line of credit (the “Line of Credit”) from Wenzhao Lu (the “Lender”), a significant shareholder

and director of the Company.

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

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

The loans are unsecured and are not convertible

into equity of the Company.

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

will be payable three years from the date of issuance.

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

of the related party Lender.

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

time prior to maturity, without premium or penalty.

The Line of Credit Agreement includes customary events of default.

If any such event of default

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

As of June 30, 2022,

If any such event

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

As of September

30, 2022, $ 0 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 17 – SUBSEQUENT

3 unchanged sentences

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

New Subsidiary

In October 2022, the Company formed a wholly owned

subsidiary, Avalon Laboratory Services, Inc., a Delaware company.

AVALON GLOBOCARE CORP.

1 unchanged sentence

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.

NOTE 17 – SUBSEQUENT

EVENTS (continued)

Cease all operations in the People’s

Republic of China

In November of 2022,

the Company decided to cease all operations in the People’s Republic of China with the exception of a small administrative office,

Avalon Shanghai.

The Company, through its Nevada Subsidiary Avactis Biosciences Inc., will continue to own Avactis Nanjing Biosciences

However, Avactis Nanjing Biosciences Ltd.

only owns a patent and is not considered an operating entity.

The Company does not expect

nor does it plan that there will be further revenue generated from PRC operations in the foreseeable future.

The impact of ceasing operations

will not have a material effect on the Company’s operations.

Membership Interest Purchase Agreement

7, 2022, Avalon Laboratory Services, Inc.

(the “ Buyer ”), a wholly-owned subsidiary of Avalon GloboCare Corp.

(the “ Company ”),

entered into a Membership Interest Purchase Agreement (the “ MIPA ”), by and among SCBC Holdings LLC (the “ Seller ”),

the Zoe Family Trust, and Bryan Cox and Sarah Cox as individuals (each an “ Owner ” and collectively, the “ Owners ”),

and Laboratory Services MSO, LLC (“ Laboratory Services MSO ”), pursuant to which, subject to the terms and conditions

set forth in the MIPA, the Buyer will acquire from the Seller, sixty percent (60%) of all the issued and outstanding equity interests

of the Laboratory Services MSO (the “ Purchased Interests ”), free and clear of all liens (the “ Transaction ”).

The consideration to be paid for the Purchased Interests consists of up to thirty-one million dollars ($31,000,000), of which (i) five

million dollars ($5,000,000) was paid as a refundable prepayment at signing, (ii) ten million dollars ($10,000,000) will be paid in cash

at the closing, (iii) fifteen million dollars ($15,000,000) will be paid pursuant to the issuance of 15,000 shares of the Company’s

newly designated Series B Convertible Preferred Stock (the “ Series B Preferred Stock ”), stated value $1,000 (the “ Series

B Stated Value ”), which Series B Preferred Stock will be convertible into shares of the Company’s common stock at a conversion

price per share equal to $0.575 or an aggregate of 26,086,957 shares of the Company’s common stock, which are subject to the Lock

Up Period and the restrictions on sale set forth under Item 5.03 Amendments to Articles of Incorporation or Bylaws:

Change in Fiscal Year

- Series B Preferred Stock - Conversion, and (iv) one million dollars ($1,000,000) will be paid on the first anniversary of the closing

date (the “ Anniversary Payment ”).

The Seller is also eligible to receive certain earnout payments upon achievement

of certain operating results, which may be comprised of up to ten million dollars ($10,000,000) of which (x) five million dollars ($5,000,000)

will be paid in cash and (y) five million dollars ($5,000,000) will be paid pursuant to the issuance of the number of shares of Company

common stock valued at five million dollars ($5,000,000), calculated using the closing price of the Company’s common stock on December

31, 2023 (collectively, the “ Earnout Payments ”).

Headquartered

in Costa Mesa California, Laboratory Services MSO provides a broad portfolio of diagnostic tests including drug testing, toxicology, and

a broad array of test services, from general bloodwork to anatomic pathology, and urine toxicology.

Specific capabilities include STAT

blood testing, qualitative drug screening, genetic testing, urinary testing, sexually transmitted disease testing and more.

Services MSO has developed a premier reputation for customer service and fast turnaround times in the industry.

Laboratory Services MSO

is the parent company of Laboratory Services, LLC, a Wyoming limited liability company and Laboratory Services DME, LLC, a Delaware limited

liability company.

of directors of the Company and the managing member of the Buyer have approved the MIPA and certain ancillary documents related to the

Purchased Interests of Laboratory Services MSO, as discussed above.

The MIPA contains customary representations and warranties and covenants.

The Anniversary Payment and the Earnout Payments will be available to compensate the Buyer for certain losses it may incur as a result

of any breach of the representations, warranties or covenants of the Seller and Laboratory Services MSO and for post-closing working capital

In connection

with the closing of the Transaction, Sarah Cox will become the Chief Operating Officer of the Company, replacing Meng Li, who will continue

to serve as a Chief Operating Officer of Avalon (Shanghai) Healthcare Technology Co., Ltd, a subsidiary of the Company.

In addition, Ms.

Cox will be appointed as a director of the Company and Ms.

Li will resign as a director of the Company.

Cox, age 46, has continuously

served as the Chief Executive Officer of Laboratory Services MSO for the past five years.

Cox co-founded Laboratory Services MSO in

Cox earned her undergraduate degree from the University of Deakin, in Australia where she studied business and received a degree

in financial planning.

At the closing of the Transaction, Ms.

Cox and the Company will enter into an employment agreement providing for

an annual salary of three hundred and fifty thousand dollars ($ 350,000 ) and other customary compensation.

of the Transaction is subject to customary conditions to closing, including completion of financing for the remainder of the cash purchase

The transaction is expected to close in 30 days, subject to a 90 day right of extension by the Company.

Private Placement

In conjunction

with the Transaction, on November 7, 2022, the Company conducted a private placement offering (the “ Private Placement ”)

of 5,000 shares of its newly designated Series A Convertible Preferred Stock (the “ Series A Preferred Stock ”), stated

value $ 1,000 , and entered into a securities purchase agreement (the “ Securities Purchase Agreement ”), with an accredited

investor named therein (the “ Investor ”), pursuant to which the Company sold to the Investor 5,000 shares of its Series

A Preferred Stock for gross proceeds of $ 5,000,000 .

The Series A Preferred Stock is convertible into shares of the Company’s common

stock at a conversion price per share equal to the greater of (i) one dollar ($ 1.00 ), and (ii) ninety percent ( 90 %) of the closing price

of the Company’s common stock on the Nasdaq Stock Market (“ Nasdaq ”) on the day prior to receipt of the conversion

notice from the Investor, subject to adjustment for stock splits and similar matters.

The Company intends to complete the financing for

the Transaction through the sale and issuance of an additional 10,000 shares of the Series A Preferred Stock.

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