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Item 9A. Controls and Procedures

2023-03-30 compared with 2022-03-30 · 2522 added, 1892 removed, 639 unchanged (87% of the section changed)

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Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls

and procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed under the

Securities Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and reported within the time periods specified

in the SEC’s rules and forms and to ensure that such information is accumulated and communicated to our management, including our

Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) as appropriate, to allow timely decisions

regarding required disclosure.

We carried out an evaluation, under the supervision and with the participation of our management, including

the principal executive officer and the principal financial officer (principal financial officer), of the effectiveness of the design

and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e) under the 1934 Act, as of the end of the period

covered by this report.

During evaluation of disclosure controls and procedures as of December 31, 2021 conducted as part of our annual

audit and preparation of our annual financial statements, the CEO and CFO conducted an evaluation of the effectiveness of the design and

operations of our disclosure controls and procedures and concluded that our disclosure controls and procedures were not effective due

to the lack of segregation of duties resulting from our small size.

We maintain disclosure controls and procedures

that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Securities Exchange

Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s

rules and forms and to ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer

(“CEO”) and Chief Financial Officer (“CFO”) as appropriate, to allow timely decisions regarding required disclosure.

We carried out an evaluation, under the supervision and with the participation of our management, including the principal executive officer

and the principal financial officer (principal financial officer), of the effectiveness of the design and operation of our disclosure

controls and procedures, as defined in Rule 13(a)-15(e) under the 1934 Act, as of the end of the period covered by this report.

Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance

of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible

controls and procedures.

evaluation of disclosure controls and procedures as of December 31, 2022 conducted as part of our annual audit and preparation of our

annual financial statements, our management, including our CEO and CFO, conducted an evaluation of the effectiveness of the design and operations of our disclosure

controls and procedures and concluded that our disclosure controls and procedures were not effective due to the reasons set forth below.

Management’s Report on Internal Control

over Financial Reporting

Management is responsible

for the preparation and fair presentation of the financial statements included in this annual report.

The financial statements have been

prepared in conformity with accounting principles generally accepted in the United States of America and reflect management’s judgment

and estimates concerning effects of events and transactions that are accounted for or disclosed.

Management is also responsible

for establishing and maintaining adequate internal control over financial reporting.

Our internal control over financial reporting includes

those policies and procedures that pertain to our ability to record, process, summarize and report reliable data.

Management recognizes

that there are inherent limitations in the effectiveness of any internal control over financial reporting, including the possibility of

human error and the circumvention or overriding of internal control.

Accordingly, even effective internal control over financial reporting

can provide only reasonable assurance with respect to financial statement presentation.

Further, because of changes in conditions, the

effectiveness of internal control over financial reporting may vary over time.

Management regularly assesses

controls and did so most recently for our financial reporting as of December 31, 2021.

This assessment was based on criteria for effective

internal control over financial reporting described in the Internal Control Integrated Framework issued by the Committee of Sponsoring

Organizations (COSO) of the Treadway Commission.

Based on this assessment, management has concluded that our internal control over financial

reporting was not effective as of December 31, 2021 due to the lack of segregation of duties resulting from our small size.

due to the lack of segregation of duties and limited resources, the Company has a small accounting staff to prepare and review its financial

In light of the material weakness,

we performed additional analyses and procedures in order to conclude that our consolidated financial statements for the year ended December

Management is responsible for the preparation

and fair presentation of the financial statements included in this annual report.

The financial statements have been prepared in conformity

with accounting principles generally accepted in the United States of America and reflect management’s judgment and estimates concerning

effects of events and transactions that are accounted for or disclosed.

Management is also responsible for establishing

and maintaining adequate internal control over financial reporting.

Our internal control over financial reporting includes those policies

and procedures that pertain to our ability to record, process, summarize and report reliable data.

Management recognizes that there are

inherent limitations in the effectiveness of any internal control over financial reporting, including the possibility of human error and

the circumvention or overriding of internal control.

Accordingly, even effective internal control over financial reporting can provide

only reasonable assurance with respect to financial statement presentation.

Further, because of changes in conditions, the effectiveness

of internal control over financial reporting may vary over time.

Management regularly assesses controls and did

so most recently for our financial reporting as of December 31, 2022.

This assessment was based on criteria for effective internal control

over financial reporting described in the Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations (COSO)

of the Treadway Commission.

Based on this assessment, management has concluded that our internal control over financial reporting was

not effective as of December 31, 2022, due to the lack of segregation of duties resulting from our small size and testing of the operating

effectiveness of the controls.

As a result of our Lab Services transaction in February 2023, we intend to retain additional accounting

staff and support to enhance our controls and procedures and, in February 2023, we retained a third party with relevant expertise to

support us and assist us in enhancing our internal controls and procedures.

In light of the material weaknesses described above, we performed

additional analyses and procedures in order to conclude that our consolidated financial statements for the year ended December 31, 2022

included in this Annual Report on Form 10-K were fairly stated in accordance with US GAAP.

Accordingly, management believes that

despite our material weakness, our consolidated financial statements for the year ended December 31, 2021 are fairly stated, in all material

respects, in accordance with US GAAP.

Accordingly, management believes that despite

our material weakness, our consolidated financial statements for the year ended December 31, 2022 are fairly stated, in all material respects,

in accordance with US GAAP.

Changes in Internal Control over Financial

There were no changes in

our internal control over financial reporting, as such term is defined in Rules 13a-15(f) under the Exchange Act, during the quarter ended

December 31, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There were no changes in our internal control

over financial reporting, as such term is defined in Rules 13a-15(f) under the Exchange Act, during the quarter ended December 31, 2022

that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Attestation Report of the Registered Public Accounting Firm

This Annual Report on Form

10-K does not include an attestation report by our independent registered public accounting firm, regarding internal control over financial

As a smaller reporting company, our internal control over financial reporting was not subject to audit by our independent registered

public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report.

This Annual Report on Form 10-K does not include

an attestation report by our independent registered public accounting firm, regarding internal control over financial reporting.

smaller reporting company, our internal control over financial reporting was not subject to audit by our independent registered public

accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report.

OTHER INFORMATION

Nasdaq Notice

On February 9, 2022, the

Company received notice from The Nasdaq Stock Market (“Nasdaq”) that the closing bid price for the Company’s common

stock had been below $1.00 per share for the previous 30 consecutive business days, and that the Company is therefore not in compliance

with the minimum bid price requirement for continued inclusion on The Nasdaq Capital Market under Nasdaq Listing Rule 5550(a)(2) (the

Nasdaq’s notice has no immediate effect on the listing or trading of the Company’s common stock on The

Nasdaq Capital Market.

The notice indicates that the Company will have 180 calendar days, until August 8, 2022, to regain compliance with

this requirement.

The Company can regain compliance with the $1.00 minimum bid listing requirement if the closing bid price of its common

stock is at least $1.00 per share for a minimum of ten (10) consecutive business days during the 180-day compliance period.

If the Company

does not regain compliance during the initial compliance period, it may be eligible for additional time to regain compliance.

the Company will be required to meet the continued listing requirement for market value of its publicly held shares and all other Nasdaq

initial listing standards, except the bid price requirement, and will need to provide written notice to Nasdaq of its intention to cure

the deficiency during the second compliance period by effecting a reverse stock split, if necessary.

If the Company is not eligible or

it appears to Nasdaq that the Company will not be able to cure the deficiency during the second compliance period, Nasdaq will provide

written notice to the Company that the Company’s common stock will be subject to delisting.

In the event of such notification, the

Company may appeal Nasdaq’s determination to delist its securities, but there can be no assurance that Nasdaq would grant the Company’s

request for continued listing.

The Company intends to actively monitor the minimum bid price of its common stock and may, as appropriate,

consider available options to regain compliance with the Rule.

There can be no assurance that the Company will be able to regain compliance

with the Rule or will otherwise be in compliance with other Nasdaq listing criteria.

A delisting of our common stock is likely to reduce

the liquidity of our common stock and may inhibit or preclude our ability to raise additional financing.

2022 Convertible Note

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

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

In addition to the 2022 Convertible

Note, the investor will also receive a Stock Purchase Warrant (the “2022 Warrant”) to acquire an aggregate of 1,333,333 shares

of common stock.

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

The financing will close on or about

April 15, 2022.

2022 Convertible Note will bear 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 Warrants and receive shares of common stock such that the number

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

shares of common stock.

Further, 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”).

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.

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.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS

THAT PREVENT INSPECTIONS.

Not applicable.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

Below are the names of and

certain information regarding our executive officers and directors as of the date hereof:

Below are the names of and certain information

regarding our executive officers and directors as of the date hereof:

Chairman of the Board of Directors

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Chief Executive Officer, President and Director

Chief Operating Officer, Secretary and Director

Chief Operating Officer and Secretary

Luisa Ingargiola

Chief Financial Officer

Yue “Charles” Li

Officers are elected annually

by the Board of Directors (subject to the terms of any employment agreement), at our annual meeting, to hold such officer until an officer’s

successor has been duly appointed and qualified, unless an officer sooner dies, resigns or is removed by the Board.

The principal occupation

and business experience during at least the past five years for our executive officers and directors is as follows:

Lourdes Felix

Officers are elected annually by the Board of

Directors (subject to the terms of any employment agreement), at our annual meeting, to hold such officer until an officer’s successor

has been duly appointed and qualified, unless an officer sooner dies, resigns or is removed by the Board.

The principal occupation and business experience

during at least the past five years for our executive officers and directors is as follows:

Wenzhao Lu, Chairman of the Board of Directors

Wenzhao Lu is our Chairman

of the Board.

He is a seasoned healthcare entrepreneur with extensive operational knowledge and experience in China.

He has been serving

as Chairman of the Board for the Daopei Medical Group, or DPMG, since 2010.

Under his leadership, DPMG has recently expanded its clinical

network involving a state-of-the-art stem cell bank at Wuhan Biolake, three top-ranked private hospitals (located in Beijing, Shanghai,

and Hebei), specialty hematology laboratories, as well as a hematology research institute, with more than 100 partnering and collaborating

hospitals in China.

DPMG was founded by Professor Daopei Lu, a renowned hematologist pioneering in hematopoietic stem cell transplant

and member of the Academy of Engineering in China.

Wenzhao Lu received a Bachelor of Arts from Temple University Tyler School of Arts

in 1988 and subsequently worked as senior Art Director at Ogilvy & Mather Advertising Company.

Wenzhao Lu has served

as our Chairman of the Board since October 10, 2016.

He is a seasoned healthcare entrepreneur with extensive operational knowledge and

experience in US & Asia.

He has served as Chairman of the Board for the Daopei Medical Group, or DPMG, since 2010 to December, 2021.

Under his leadership, DPMG is operating three top-ranked private hospitals (located in Beijing and Hebei), specialty hematology laboratories,

as well as a hematology research institute, with more than 100 partnering and collaborating hospitals in China.

DPMG was founded by Professor

Daopei Lu, a renowned hematologist pioneering in hematopoietic stem cell transplant and member of the Academy of Engineering in China.

Wenzhao Lu received a Bachelor of Arts from Temple University Tyler School of Arts in 1988 and subsequently worked as senior Art Director

at Ogilvy & Mather Advertising Company.

Prior to joining DPMG, Mr.

as Chief Operating Officer for BioTime Asia Limited, which is a subsidiary of BioTime, Inc.

Lu served as Chief Operating Officer for BioTime Asia Limited,

which is a subsidiary of BioTime, Inc.

(NYSE American:

BTX) in 2009.

Lu is qualified

to serve as a director because of his extensive operational knowledge of, and executive level management experience in, the healthcare

Lu is qualified to serve as a director because of his extensive

operational knowledge of, and executive level management experience in, the healthcare industry.

David Jin, Chief Executive Officer, President

David Jin, MD, PhD, is

our Chief Executive Officer, President and a member of the Board of Directors.

David Jin, MD, PhD, has served as our Chief

Executive Officer, President and a member of the Board of Directors since September 14, 2016.

From 2009 to 2017, Dr.

Jin has served as the Chief Medical

Officer of BioTime, Inc.

Jin has served as

the Chief Medical Officer of BioTime, Inc.

(NYSE American:

BTX), a clinical stage regenerative medicine company with a focus on pluripotent stem cell technology.

Jin also acts as a senior translational clinician-scientist at the Howard Hughes Medical Institute and the Ansary Stem Cell Center

at Weill Cornell Medical College of Cornell University.

BTX), a clinical stage regenerative medicine company with a focus on pluripotent

stem cell technology.

Jin also acts as a senior translational clinician-scientist at the Howard Hughes Medical Institute and the Ansary

Stem Cell Center at Weill Cornell Medical College of Cornell University.

Prior to his current endeavors, Dr.

Jin was Chief Consultant/Advisor for various

biotech/pharmaceutical companies regarding hematology, oncology, immunotherapy and stem cell-based technology development.

been Principle Investigator in more than 15 pre-clinical and clinical trials, as well as author/co-author of over 80 peer-reviewed scientific

abstracts, articles, reviews, and book chapters.

Jin studied medicine at SUNY Downstate College of Medicine in Brooklyn, New York.

He received his clinical training and subsequent faculty tenure at the New York-Presbyterian Hospital (the teaching hospital for both

Cornell and Columbia Universities) in the areas of internal medicine, hematology, and clinical oncology.

Jin was honored as Top Chief

Medical Officer by ExecRank in 2012, as well as recognized by Leading Physicians of the World in 2015.

Jin is qualified to serve as

a director because of his role with us, and his extensive operational knowledge of, and executive level management experience in, the

healthcare industry.

Jin was Chief Consultant/Advisor

for various biotech/pharmaceutical companies regarding hematology, oncology, immunotherapy and stem cell-based technology development.

Jin has been Principle Investigator in more than 15 pre-clinical and clinical trials, as well as author/co-author of over 80 peer-reviewed

scientific abstracts, articles, reviews, and book chapters.

Jin studied medicine at SUNY Downstate College of Medicine in Brooklyn,

He received his clinical training and subsequent faculty tenure at the New York-Presbyterian Hospital (the teaching hospital

for both Cornell and Columbia Universities) in the areas of internal medicine, hematology, and clinical oncology.

Jin was honored

as Top Chief Medical Officer by ExecRank in 2012, as well as recognized by Leading Physicians of the World in 2015.

Jin is qualified

to serve as a director because of his role with us, and his extensive operational knowledge of, and executive level management experience

in, the healthcare industry.

Meng Li, Chief Operating Officer and Secretary

Meng Li is our Chief

Operating Officer and Secretary and a former member of the Board of Directors.

Li has over 15 years of executive experience in international

marketing, branding, communications, and media investment consultancy.

Li served as Managing Director at Maxus/GroupM (a WPP Group

company) where she was responsible for business P&L and corporate management from 2006 to 2015.

Meng Li has served as our Chief Operating

Officer and Secretary since October 10, 2016 and served as a member of the Board of Directors from October 10, 2016 to July 9, 2018 and

from April 5, 2019 through December 30, 2022.

Li has over 15 years of executive experience in international marketing, branding, communications,

and media investment consultancy.

Li served as Managing Director at Maxus/GroupM (a WPP Group company) where she was responsible for

business P&L and corporate management from 2006 to 2015.

Prior to joining Maxus/Group M, Ms.

Li worked for Zenith Media (a Publicis Group company) from 2000 to 2006 as Senior Manager.

Li received a Bachelor of Arts in International

Economic Law from Dalian Maritime University in China.

Li worked for Zenith Media (a Publicis

Group company) from 2000 to 2006 as Senior Manager.

Li received a Bachelor of Arts in International Economic Law from Dalian Maritime

University in China.

Luisa Ingargiola, Chief Financial Officer

Luisa Ingargiola is our Chief

Financial Officer.

Ms Ingargiola has significant experience serving as Chief Financial Officer or Audit Chair for multiple NASDAQ and

NYSE companies.

Luisa Ingargiola has served as our Chief Financial

Officer since February 21, 2017.

Ms Ingargiola has significant experience serving as Chief Financial Officer or Audit Chair for multiple

NASDAQ and NYSE companies.

She currently serves as Director and Audit Chair for several public companies including ElectraMeccanica (NASDAQ:SOLO),

AgEagle (NYSE:UAVS) and Progress Acquisition Corporation (NASDAQ:PGRWU).

Dragonfly Energy (DFLI) andVision Marine (VMAR).

From 2007 through 2016, Ms.

Ingargiola served as the Chief Financial

Officer and then Director at MagneGas Corporation (Nasdaq:

Ingargiola served as the Chief Financial Officer and then

Director at MagneGas Corporation (Nasdaq:

Prior to 2007, Ms.

Ingargiola held various roles as Budget Director and

Investment Analyst in several private companies.

Ingargiola graduated in 1989 from Boston University with a Bachelor’s degree

in Business Administration and a concentration in Finance.

In 1996, she received her MBA in Health Administration from the University

of South Florida.

Ingargiola is qualified to serve as a Chief Financial Officer because of her extensive knowledge corporate governance,

regulatory requirements, executive leadership and knowledge of, and experience in, financing and M&A transactions.

Ingargiola held various roles as Budget Director and Investment Analyst

in several private companies.

Ingargiola graduated in 1989 from Boston University with a Bachelor’s degree in Business Administration

and a concentration in Finance.

In 1996, she received her MBA in Health Administration from the University of South Florida.

is qualified to serve as a Chief Financial Officer because of her extensive knowledge corporate governance, regulatory requirements, executive

leadership and knowledge of, and experience in, financing and M&A transactions.

Sanders, Director

Sanders is a member

of the Board of Directors.

Sanders has served as a member of the

Board of Directors since July 30, 2018.

Since January 2017, Mr.

Sanders has been Of Counsel to the law firm of Ortoli Rosenstadt LLP.

From July 2007

until January 2017, Mr.

From July 2007 until January 2017, Mr.

Sanders was a Senior Partner of Ortoli Rosenstadt LLP.

From January 1, 2004 until June 30, 2007, he was Of Counsel

to the law firm of Rubin, Bailin, Ortoli, LLP.

From January 1, 2001 to December 31, 2003, he was Counsel to the law firm of Spitzer &

From January 1, 2004 until June 30, 2007,

he was Of Counsel to the law firm of Rubin, Bailin, Ortoli, LLP.

From January 1, 2001 to December 31, 2003, he was Counsel to the law

firm of Spitzer & Feldman PC.

Sanders also serves as a Director of Helijet International, Inc.

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(NASDAQ:SOLO).

Additionally,

he has been a director at the American Academy of Dramatic Arts since October 2013 and has been a director of the Bay Street Theater since

February 2015.

Sanders received his JD from Cornell University and his BBA from The City College of New York.

Sanders is qualified

to serve as a director because of his corporate, securities and international law experience, including working with companies in the

life sciences industry.

Yancen Lu, Director

Yancen Lu is a member of

the Board of Directors.

Lu has more than 20 years of experience in investment banking and equity investment management.

Founder and CEO of PagodaTree Partners, a healthcare PE fund.

Before this, Mr.

Lu was the Managing Director of FountainVest Partners.

In addition to his professionalism in securities, investment and capital management, Mr.

Lu has a special focus and comprehensive understanding

of the global medical and healthcare industry.

He served as Director of leading healthcare corporations including Sino Hospital Investment

Corporation (Hong Kong), Chang’an Hospital (the largest private hospital in Northwest China), and DIH Medical Technologies.

Lu received Bachelor’s and Master’s degrees in Engineering Economics from Tianjin University.

Lu is qualified to serve

as a director because of his extensive operational knowledge of, and executive level management experience in, the healthcare industry.

Additionally, he has been a director at the American Academy of Dramatic Arts since October 2013 and has been a director

of the Bay Street Theater since February 2015.

Sanders received his JD from Cornell University and his BBA from The City College of

Sanders is qualified to serve as a director because of his corporate, securities and international law experience, including

working with companies in the life sciences industry.

Lourdes Felix, Director

Felix has served as a member of the Board

of the Directors since January 9, 2023.

Felix is an entrepreneur and corporate finance executive with 30 years of combined experience

in capital markets, public accounting and in the private sector.

She presently serves as Chief Executive Officer, Chief Financial Officer,

and Director of BioCorRx Inc, a company focused on addiction treatment solutions and related disorders.

She has been with BioCorRx since

October 2012.

Felix is one of the founders and President of BioCorRx Pharmaceuticals Inc., a majority owned subsidiary of BioCorRx

Prior to joining BioCorRx, her experience was in the private sector and public accounting.

She has expertise in finance, accounting,

company-wide operations, budgeting, and internal control principles including GAAP, SEC, and SOX Compliance.

She has thorough knowledge

of federal and state regulations and has successfully managed and produced SEC regulatory filings.

She also has extensive experience in

developing and managing financial operations.

Lourdes holds a Bachelor of Science degree in Accounting from the University of Phoenix.

She continued her education and is an MBA candidate at D’Amore-McKim School of Business, Northeastern University.

Felix is qualified

to serve as a director because of her extensive investment and executive level management experience.

Tauzin II, Director

Tauzin II is a

member of the Board of Directors.

From December 2010 until March 1, 2014, Congressman Tauzin served as Special Legislative Counsel to

Alston & Bird LLP.

From December 2004 to June 2010, Congressman Tauzin was President and Chief Executive Officer of the Pharmaceutical

Research and Manufacturers of America, a trade group that serves as one of the pharmaceutical industry’s top lobbying groups.

served 12.5 terms in the U.S.

Tauzin II has served as a member of

the Board of Directors since November 1, 2017.

From December 2010 until March 1, 2014, Congressman Tauzin served as Special Legislative

Counsel to Alston & Bird LLP.

From December 2004 to June 2010, Congressman Tauzin was President and Chief Executive Officer of the

Pharmaceutical Research and Manufacturers of America, a trade group that serves as one of the pharmaceutical industry’s top lobbying

He served 12.5 terms in the U.S.

House of Representatives, representing Louisiana’s 3rd Congressional District.

From January 2001 through

February 2004, Congressman Tauzin served as Chairman of the House Committee on Energy and Commerce.

He also served as a senior member

of the House Resources Committee and Deputy Majority Whip.

Prior to serving as a member of Congress, Congressman Tauzin was a member of

the Louisiana State Legislature, where he served as Chairman of the House Natural Resources Committee and Chief Administration Floor Leader.

He served as Lead Independent Director of LHC Group, a publicly traded provider of quality home health care, from 2005 to 2021 and retains

the role of Lead Independent Emeritus today.

2001 through February 2004, Congressman Tauzin served as Chairman of the House Committee on Energy and Commerce.

He also served as a senior

member of the House Resources Committee and Deputy Majority Whip.

Prior to serving as a member of Congress, Congressman Tauzin was a member

of the Louisiana State Legislature, where he served as Chairman of the House Natural Resources Committee and Chief Administration Floor

He served as Lead Independent Director of LHC Group, a publicly traded provider of quality home health care, from 2005 to 2021

and retains the role of Lead Independent Emeritus today.

The Congressman also served on the Board of Entergy, a Fortune 500 company.

the Congressman chartered a Louisiana State Savings and Loan Association and Chaired its first Board.

He received a Bachelor of Arts Degree

from Nicholls State University and a Juris Doctor degree from Louisiana State University.

Congressman Tauzin is qualified to serve as

a director because of his extensive knowledge of the pharmaceutical industry and his experience as a director of several publicly-traded

addition, the Congressman chartered a Louisiana State Savings and Loan Association and Chaired its first Board.

He received a Bachelor

of Arts Degree from Nicholls State University and a Juris Doctor degree from Louisiana State University.

Congressman Tauzin is qualified

to serve as a director because of his extensive knowledge of the pharmaceutical industry and his experience as a director of several publicly-traded

and privately-held companies.

Stilley, III, Director

Stilley is a member

of the Board of Directors.

Stilley has been the chief executive officer and member of the board of directors of Adial Pharmaceuticals,

since December 2010.

From August 2008 until December 2010, he was the vice president, business development and strategic projects

at Clinical Data, Inc.

Stilley has served as a member of the

Board of Directors since July 5, 2018.

Stilley has been the chief executive officer of Purnovate, Inc., a subsidiary of Adial Pharmaceuticals,

(Adial) since January 2021, was chief executive officer of Adial from December 2010 until August 2022, and continues as a member

of Adial’s board of directors, which he joined in December 2010.

From August 2008 until December 2010, he was the vice president,

business development and strategic projects at Clinical Data, Inc.

In September 2021, Mr.

Stilley was appointed to serve as a member of the board of directors of Sysorex,

Inc., where he serves as chair of the audit committee.

Stilley was appointed to serve

as a member of the board of directors of Sysorex, Inc., where he serves as chair of the audit committee.

From February 2002, Mr.

Stilley was the COO and CFO of Adenosine Therapeutics,

LLC until certain assets of Adenosine Therapeutics were acquired by Clinical Data, Inc.

was the COO and CFO of Adenosine Therapeutics, LLC until certain assets of Adenosine Therapeutics were acquired by Clinical Data, Inc.

in August 2008.

Stilley has advised both public

and private companies on financing and M&A transactions, has been the interim CFO of a public company, the interim Chief Business

Officer and then Advisor for Diffusion Pharmaceuticals from September 2015 through March 2018, and the COO and CFO of a number of private

Stilley has advised both public and private companies on financing and M&A transactions, has been the interim

CFO of a public company, the interim Chief Business Officer and then Advisor for Diffusion Pharmaceuticals from September 2015 through

March 2018, and the COO and CFO of a number of private companies.

Before entering the business community, Mr.

Stilley served as Captain in the U.S.

Stilley served as Captain

Marine Corps.

Stilley has an MBA with

honors from the Darden School of Business and a B.S.

in Commerce/Marketing from the McIntire School of Commerce at the University of Virginia.

He currently serves on the Advisory Board of Virginia BIO, the statewide biotechnology organization.

Stilley is qualified to serve

as a director because of his extensive knowledge of the biotechnology industry, significant executive leadership and operational experience,

and knowledge of, and experience in, financing and M&A transactions.

Stilley has an MBA with honors from the Darden School of Business and a B.S.

in Commerce/Marketing from

the McIntire School of Commerce at the University of Virginia.

He currently serves on the Advisory Board of Virginia BIO, the statewide

biotechnology organization.

Stilley is qualified to serve as a director because of his extensive knowledge of the biotechnology industry,

significant executive leadership and operational experience, and knowledge of, and experience in, financing and M&A transactions.

Tevi Troy, Director

Tevi Troy is a member of

the Board of Directors and a former Deputy Secretary of the U.S.

Tevi Troy has served as a member of the Board

of Directors since June 4, 2018.

Troy is a former Deputy Secretary of the U.S.

Department of Health and Human Services.

Troy is a Senior Fellow

at the Bipartisan Policy Center in Washington.

He has previously been the founder and CEO of the American Health Policy Institute and

a Senior Fellow at Hudson Institute.

a Senior Fellow at the Bipartisan Policy Center in Washington.

He has previously been the founder and CEO of the American Health Policy

Institute and a Senior Fellow at Hudson Institute.

On August 3, 2007, Dr.

Troy was unanimously confirmed by the U.S.

Senate as the Deputy Secretary

Senate as the Deputy

Secretary of HHS.

As Deputy Secretary, Dr.

Troy was the chief operating officer of the largest civilian department in the federal government, with

a budget of $716 billion and over 67,000 employees.

Troy was the chief operating officer of the largest civilian department in the federal government,

with a budget of $716 billion and over 67,000 employees.

Troy has extensive White House experience, having served in several high-level

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industry and his significant leadership experience.

Yue “Charles” Li

Li has about 20 years

of experience in M&A and capital markets in China and the U.S.

Li currently is a Managing Director at PagodaTree Partners, a private

equity company with a focus on healthcare in Beijing.

Prior to PagodaTree, he was a senior executive at a major conglomerate in China

where he successfully closed $2 billion M&A transactions in healthcare and insurance areas.

Previously, Mr.

Li spent 8 years in Deloitte,

as a director of financial advisory services in Beijing and capital markets in New York.

His key clients included Merrill Lynch, Blackrock,

In his early career, Mr.

Li served for top tier financial institutions such as Credit Suisse and Fannie Mae, responsible for

asset allocation strategy and risk management for multibillion USD portfolios.

Li received Master’s degree from the Olin School

of Business at Washington University in 2000 and a Bachelor of Engineering from Tianjin University in 1996.

He is a CFA charter holder.

Li is qualified to serve as a director because of his extensive investment and executive level management experience.

Board Composition

Our business and affairs

are organized under the direction of our board of directors, which currently consists of nine members.

The primary responsibility of our

board of directors is to provide oversight, strategic guidance, counseling, and direction to our management team.

Our board of directors

meets on a regular basis and additionally as required.

A majority of the authorized

number of directors constitutes a quorum of the Board of Directors for the transaction of business.

The directors must be present at the

meeting to constitute a quorum.

However, any action required or permitted to be taken by the Board of Directors may be taken without a

meeting if all members of the Board of Directors individually or collectively consent in writing to the action.

Our business and affairs are organized under the

direction of our board of directors, which currently consists of nine members.

The primary responsibility of our board of directors is

to provide oversight, strategic guidance, counseling, and direction to our management team.

Our board of directors meets on a regular

basis and additionally as required.

A majority of the authorized number of directors

constitutes a quorum of the Board of Directors for the transaction of business.

The directors must be present at the meeting to constitute

However, any action required or permitted to be taken by the Board of Directors may be taken without a meeting if all members

of the Board of Directors individually or collectively consent in writing to the action.

Director Independence

board of directors currently consists of nine members.

Our board of directors has determined that Yancen Lu, William B.

III, Steven A.

Sanders, Tevi Troy and Yue “Charles” Li, qualify as independent directors in accordance with the Nasdaq Capital

Market (“Nasdaq”) listing requirements.

Wenzhao Lu, Dr.

Jin, Meng Li and Wilbert Tauzin II are not considered independent.

Nasdaq’s independence definition includes a series of objective tests, such as that the director is not, and has not been for at

least three (3) years, one of our employees and that neither the director nor any of his or her family members has engaged in

various types of business dealings with us.

In addition, as required by Nasdaq rules, our board of directors has made a subjective determination

as to each independent director that no relationships exist that, in the opinion of our board of directors, would interfere with the exercise

of independent judgment in carrying out the responsibilities of a director.

In making these determinations, our board of directors reviewed

and discussed information provided by the directors and us with regard to each director’s business and personal activities and relationships

as they may relate to us and our management.

There are no family relationships among any of our directors or executive officers.

required under Nasdaq rules and regulations, our independent directors meet in regularly scheduled executive sessions at which only independent

directors are present.

Our board of directors currently consists of seven

Our board of directors has determined that William B.

Stilley, III, Steven A.

Sanders, Tevi Troy, and Lourdes Felix, qualify

as independent directors in accordance with the Nasdaq Capital Market (“Nasdaq”) listing requirements.

As required under Nasdaq rules and regulations,

our independent directors meet in regularly scheduled executive sessions at which only independent directors are present.

Family Relationships

There are no family relationships

among our directors or executive officers.

There are no family relationships among our directors

or executive officers.

Board Leadership Structure and Role in Risk

Our Board of Directors, or

the Board, is primarily responsible for overseeing our risk management processes on behalf of our company.

The Board receives and reviews

periodic reports from management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment

In addition, the Board focuses on the most significant risks facing our company and our company’s general risk management

strategy, and also ensures that risks undertaken by our company are consistent with the board’s appetite for risk.

While the Board

oversees our company’s risk management, management is responsible for day-to-day risk management processes.

We believe this division

of responsibilities is the most effective approach for addressing the risks facing our company and that our board leadership structure

supports this approach.

Involvement in Certain Legal Proceedings

To our knowledge, our directors

and executive officers have not been involved in any of the following events during the past ten years:

any bankruptcy petition filed by or against such person or any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;

any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);

being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from or otherwise limiting his involvement in any type of business, securities or banking activities or to be associated with any person practicing in banking or securities activities;

being found by a court of competent jurisdiction in a civil action, the SEC or the Commodity Futures Trading Commission to have violated a Federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

being subject of, or a party to, any Federal or state judicial or administrative order, judgment decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of any Federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity;

being subject of or party to any sanction or order, not subsequently reversed, suspended, or vacated, of any self-regulatory organization, any registered entity or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Our Board of Directors, or the Board, is primarily

responsible for overseeing our risk management processes on behalf of our company.

The Board receives and reviews periodic reports from

management, auditors, legal counsel, and others, as considered appropriate regarding our company’s assessment of risks.

the Board focuses on the most significant risks facing our company and our company’s general risk management strategy, and also

ensures that risks undertaken by our company are consistent with the board’s appetite for risk.

While the Board oversees our company’s

risk management, management is responsible for day-to-day risk management processes.

We believe this division of responsibilities is the

most effective approach for addressing the risks facing our company and that our board leadership structure supports this approach.

Board Committees

Establishment of Board Committees and Adoption of Charters

In November 2018, the Company

established a Nominating and Corporate Governance Committee, a Compensation Committee and an Audit Committee (collectively, the “Committees”)

and approved and adopted charters to govern each of the Committees.

In connection with the establishment

of the Nominating and Corporate Governance Committee, Compensation Committee and Audit Committee, the Board of Directors

of the Company appointed members to each such committee.

Currently, all three committees are comprised of at least three (3) directors

meeting the requirements set forth in each applicable charter.

The membership of these three standing committees of the Board of

Directors of the Company is as follows:

Nominating and Corporate

In November 2018, the Company established a Nominating

and Corporate Governance Committee, a Compensation Committee and an Audit Committee (collectively, the “Committees”) and approved

and adopted charters to govern each of the Committees.

In connection with the establishment of the Nominating

and Corporate Governance Committee, Compensation Committee and Audit Committee, the Board of Directors of the Company appointed

members to each such committee.

Currently, all three committees are comprised of at least three (3) directors meeting the requirements

set forth in each applicable charter.

The membership of these three standing committees of the Board of Directors of the Company is

and Corporate

Governance Committee

Compensation Committee

Audit Committee

Steven Sanders (Chairman)

Yancen Lu (Chairman)

Lourdes Felix (Chairwoman)

William Stilley (Chairman)

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Nominating and Corporate Governance Committee

Our board of directors has

determined that each of the members of the Nominating and Governance Committee (the “Governance Committee”) are “independent

directors” as defined by Nasdaq.

The Governance Committee generally responsible for recommending to our full board of directors’

policies, procedures, and practices designed to help ensure that our corporate governance policies, procedures, and practices continue

to assist the board of directors and our management in effectively and efficiently promoting the best interests of our stockholders.

Governance Committee is also responsible for selecting and recommending for approval by our board of directors and our stockholders a

slate of director nominees for election at each of our annual meetings of stockholders, and otherwise for determining the board committee

members and chairmen, subject to board of directors ratification, as well as recommending to the board director nominees to fill vacancies

or new positions on the board of directors or its committees that may occur or be created from time to time, all in accordance with our

bylaws and applicable law.

Our board of directors has determined that each

of the members of the Nominating and Governance Committee (the “Governance Committee”) are “independent directors”

as defined by Nasdaq.

The Governance Committee is generally responsible for recommending to our full board of directors’ policies,

procedures, and practices designed to help ensure that our corporate governance policies, procedures, and practices continue to assist

the board of directors and our management in effectively and efficiently promoting the best interests of our stockholders.

The Governance

Committee is also responsible for selecting and recommending for approval by our board of directors and our stockholders a slate of director

nominees for election at each of our annual meetings of stockholders, and otherwise for determining the board committee members and chairmen,

subject to board of directors ratification, as well as recommending to the board director nominees to fill vacancies or new positions

on the board of directors or its committees that may occur or be created from time to time, all in accordance with our bylaws and applicable

The Governance Committee’s principal functions include:

developing and maintaining our corporate governance policy guidelines;

developing and maintaining our codes of conduct and ethics;

overseeing the interpretation and enforcement of our Code of Conduct and our Code of Ethics for Chief Executive Officer and Senior Financial and Accounting Officers;

evaluating the performance of our board of directors, its committees, and committee chairmen and our directors;

selecting and recommending a slate of director nominees for election at each of our annual meetings of the stockholders and recommending to the board director nominees to fill vacancies or new positions on the board of directors or its committees that may occur from time to time.

During 2021, the Nominating

and Corporate Governance Committee did not meet.

● developing and maintaining our corporate governance

policy guidelines;

● developing and maintaining our codes of conduct

● overseeing the interpretation and enforcement

of our Code of Conduct and our Code of Ethics for Chief Executive Officer and Senior Financial and Accounting Officers;

● evaluating the performance of our board of directors,

its committees, and committee chairmen and our directors;

● selecting and recommending a slate of director

nominees for election at each of our annual meetings of the stockholders and recommending to the board director nominees to fill vacancies

or new positions on the board of directors or its committees that may occur from time to time.

During 2022, the Nominating and Corporate Governance

Committee did not meet.

The Governance Committee is governed by a written charter approved by our board of directors.

A copy of the Governance Committee’s charter is posted on the Company’s website at www.avalon-globocare.com in the “Investors”

section of the website.

In identifying potential independent board of directors’ candidates with significant senior-level professional

experience, the Governance Committee solicits candidates from the board of directors, senior management and others and may engage a search

firm in the process.

A copy of the Governance

Committee’s charter is posted on the Company’s website at www.avalon-globocare.com in the “Investors” section

of the website.

In identifying potential independent board of directors’ candidates with significant senior-level professional experience,

the Governance Committee solicits candidates from the board of directors, senior management and others and may engage a search firm in

The Governance Committee reviews and narrows the list of candidates and interviews potential nominees.

candidate is also introduced and interviewed by the board of directors and the lead director if one has been appointed.

In general, in

considering whether to recommend any particular candidate for inclusion in our board of directors’ slate of recommended director

nominees, the Governance Committee will apply the criteria set forth in our corporate governance guidelines.

These criteria include the

candidate’s integrity, business acumen, commitment to understanding our business and industry, experience, conflicts of interest

and the ability to act in the interests of our stockholders.

Further, specific consideration is given to, among other things, diversity

of background and experience that a candidate would bring to our board of directors.

The Governance Committee does not assign specific

weights to particular criteria and no particular criterion is a prerequisite for each prospective nominee.

We believe that the backgrounds

and qualifications of our directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that

will allow our board of directors to fulfill its responsibilities.

Stockholders may recommend individuals to the Governance Committee

for consideration as potential director candidates by submitting their names, together with appropriate biographical information and background

materials to our Governance Committee.

Assuming that appropriate biographical and background material has been provided on a timely basis,

the Governance Committee will evaluate stockholder recommended candidates by following substantially the same process, and applying substantially

the same criteria, as it follows for candidates submitted by others.

The final candidate

is also introduced and interviewed by the board of directors and the lead director if one has been appointed.

In general, in considering

whether to recommend any particular candidate for inclusion in our board of directors’ slate of recommended director nominees, the

Governance Committee will apply the criteria set forth in our corporate governance guidelines.

These criteria include the candidate’s

integrity, business acumen, commitment to understanding our business and industry, experience, conflicts of interest and the ability to

act in the interests of our stockholders.

Further, specific consideration is given to, among other things, diversity of background and

experience that a candidate would bring to our board of directors.

The Governance Committee does not assign specific weights to particular

criteria and no particular criterion is a prerequisite for each prospective nominee.

We believe that the backgrounds and qualifications

of our directors, considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow our board

of directors to fulfill its responsibilities.

Stockholders may recommend individuals to the Governance Committee for consideration as

potential director candidates by submitting their names, together with appropriate biographical information and background materials to

our Governance Committee.

Assuming that appropriate biographical and background material has been provided on a timely basis, the Governance

Committee will evaluate stockholder recommended candidates by following substantially the same process, and applying substantially the

same criteria, as it follows for candidates submitted by others.

Audit Committee

We have a separately-designated

standing Audit Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange

Our board of directors has determined that the members are all “independent directors” as defined by the rules

of Nasdaq applicable to members of an audit committee and Rule 10A-3(b)(i) under the Exchange Act.

We have a separately-designated standing Audit

Committee established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

Our board of directors has determined that the members are all “independent directors” as defined by the rules of Nasdaq applicable

to members of an audit committee and Rule 10A-3(b)(i) under the Exchange Act.

In addition, Mr.

Stilley is an “audit

committee financial expert” as defined in Item 407(d)(5) of Regulation S-K and demonstrates “financial sophistication”

as defined by the rules of The NASDAQ Stock Market, Inc.

The Audit Committee is appointed by our board of directors to assist our board

of directors in monitoring (1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements, and

(3) the independence and performance of our internal and external auditors.

Stilley is an “audit committee financial

expert” as defined in Item 407(d)(5) of Regulation S-K and demonstrates “financial sophistication” as defined by the

rules of The NASDAQ Stock Market, Inc.

The Audit Committee is appointed by our board of directors to assist our board of directors in

monitoring (1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements, and (3) the independence

and performance of our internal and external auditors.

The Audit Committee’s principal functions include:

reviewing our annual audited financial statements with management and our independent auditors, including major issues regarding accounting and auditing principles and practices and financial reporting that could significantly affect our financial statements;

reviewing our quarterly financial statements with management and our independent auditor prior to the filing of our Quarterly Reports on Form 10-Q, including the results of the independent auditors’ reviews of the quarterly financial statements;

recommending to the board of directors the appointment of, and continued evaluation of the performance of, our independent auditor;

approving the fees to be paid to our independent auditor for audit services and approving the retention of our independent auditor for non-audit services and all fees for such services;

reviewing periodic reports from our independent auditor regarding our auditor’s independence, including discussion of such reports with the auditor;

reviewing the adequacy of our overall control environment, including internal financial controls and disclosure controls and procedures;

reviewing with our management and legal counsel legal matters that may have a material impact on our financial statements or our compliance policies and any material reports or inquiries received from regulators or governmental agencies.

During the year ended December

31, 2021, the audit committee met four times.

A copy of the Audit Committee’s charter is posted on the Company’s website at

www.avalon-globocare.com in the “Investors” section of the website.

Meetings may be held from

time to time to consider matters for which approval of our Board of Directors is desirable or is required by law.

● reviewing our annual audited financial statements

with management and our independent auditors, including major issues regarding accounting and auditing principles and practices and financial

reporting that could significantly affect our financial statements;

● reviewing our quarterly financial statements

with management and our independent auditor prior to the filing of our Quarterly Reports on Form 10-Q, including the results of the independent

auditors’ reviews of the quarterly financial statements;

● recommending to the board of directors the appointment

of, and continued evaluation of the performance of, our independent auditor;

● approving the fees to be paid to our independent

auditor for audit services and approving the retention of our independent auditor for non-audit services and all fees for such services;

● reviewing periodic reports from our independent

auditor regarding our auditor’s independence, including discussion of such reports with the auditor;

● reviewing the adequacy of our overall control

environment, including internal financial controls and disclosure controls and procedures;

● reviewing with our management and legal counsel

legal matters that may have a material impact on our financial statements or our compliance policies and any material reports or inquiries

received from regulators or governmental agencies.

During the year ended December 31, 2022, the audit

committee met four times.

A copy of the Audit Committee’s charter is posted on the Company’s website at www.avalon-globocare.com

in the “Investors” section of the website.

Meetings may be held from time to time to consider

matters for which approval of our Board of Directors is desirable or is required by law.

Compensation Committee

Our compensation committee

consists of Yancen Lu, Steven Sanders and Tevi Troy.

Our board of directors has determined that each of the members are an “independent

director” as defined by the Nasdaq rules applicable to members of a compensation committee.

The Compensation Committee is responsible

for establishing the compensation of our senior management, including salaries, bonuses, termination arrangements, and other executive

officer benefits as well as director compensation.

Our compensation committee consists of Lourdes

Felix, Steven Sanders and Tevi Troy.

Our board of directors has determined that each of the members are an “independent director”

as defined by the Nasdaq rules applicable to members of a compensation committee.

The Compensation Committee is responsible for establishing

the compensation of our senior management, including salaries, bonuses, termination arrangements, and other executive officer benefits

as well as director compensation.

The Compensation Committee also administers our equity incentive plans.

year ended December 31, 2021, the Compensation Committee did not meet.

The Compensation Committee is governed by a written charter approved

by the board of directors.

During the year ended December

31, 2022, the Compensation Committee did not meet.

The Compensation Committee is governed by a written charter approved by the board of

A copy of the Compensation Committee’s charter is posted on the Company’s website at www.avalon-globocare.com in

7 unchanged sentences

responsibilities.

The responsibilities of the

Compensation Committee, as stated in its charter, include the following:

review and approve the Company’s compensation guidelines and structure;

review and approve on an annual basis the corporate goals and objectives with respect to compensation for the Chief Executive Officer;

review and approve on an annual basis the evaluation process and compensation structure for the Company’s other officers, including salary, bonus, incentive and equity compensation;

periodically review and make recommendations to the Board of Directors regarding the compensation of non-management directors.

The Compensation Committee

is responsible for developing the executive compensation philosophy and reviewing and recommending to the Board of Directors for approval

all compensation policies and compensation programs for the executive team.

The responsibilities of the Compensation Committee,

as stated in its charter, include the following:

● review and approve the Company’s compensation

guidelines and structure;

● review and approve on an annual basis the corporate

goals and objectives with respect to compensation for the Chief Executive Officer;

● review and approve on an annual basis the evaluation

process and compensation structure for the Company’s other officers, including salary, bonus, incentive and equity compensation;

● periodically review and make recommendations

to the Board of Directors regarding the compensation of non-management directors.

The Compensation Committee is responsible for

developing the executive compensation philosophy and reviewing and recommending to the Board of Directors for approval all compensation

policies and compensation programs for the executive team.

Compensation Committee Interlocks and Insider

Participation

of our executive officers currently serves, or in the past year has served, as a member of the board of directors or compensation committee

of any entity that has one or more executive officers on our board of directors or compensation committee.

None of our executive officers currently serves,

or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive

officers on our board of directors or compensation committee.

Code of Ethics

We have a code of ethics

that applies to all of our employees, including our principal executive officer, principal financial officer and principal accounting

officer, and the Board.

A copy of this code is available in our employee handbook and under the “About Us – Code of Conduct”

section of our website at www.avalon-globocare.com.

In addition, we intend to post on our website all disclosures that are required by

law or the listing standards of our applicable trading market concerning any amendments to, or waivers from, any provision of the code.

The reference to our website address does not constitute incorporation by reference of the information contained at or available through

our website, and you should not consider it to be a part of this report.

We have a code of ethics that applies to all of

our employees, including our principal executive officer, principal financial officer and principal accounting officer, and the Board.

A copy of this code is available in our employee handbook and under the “About Us – Code of Conduct” section of our

website at www.avalon-globocare.com.

In addition, we intend to post on our website all disclosures that are required by law or the listing

standards of our applicable trading market concerning any amendments to, or waivers from, any provision of the code.

The reference to

our website address does not constitute incorporation by reference of the information contained at or available through our website, and

you should not consider it to be a part of this report.

Indemnification of Directors and Officers

Our directors and executive

officers are indemnified as provided by the Delaware law and our Bylaws.

These provisions state that our directors may cause us to indemnify

a director or former director against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment,

actually and reasonably incurred by him or her as a result of him or her acting as a director.

The indemnification of costs can include

an amount paid to settle an action or satisfy a judgment.

Such indemnification is at the discretion of our board of directors and is subject

to the Securities and Exchange Commission’s policy regarding indemnification.

Insofar as indemnification

for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers or persons controlling us pursuant to

the foregoing provisions, or otherwise.

We have been advised that in the opinion of the Securities and Exchange Commission, such indemnification

is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

Our directors and executive officers are indemnified

as provided by the Delaware law and our Bylaws.

These provisions state that our directors may cause us to indemnify a director or former

director against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably

incurred by him or her as a result of him or her acting as a director.

The indemnification of costs can include an amount paid to settle

an action or satisfy a judgment.

Such indemnification is at the discretion of our board of directors and is subject to the Securities

and Exchange Commission’s policy regarding indemnification.

Insofar as indemnification for liabilities arising

under the Securities Act of 1933 may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions,

or otherwise.

We have been advised that in the opinion of the Securities and Exchange Commission, such indemnification is against public

policy as expressed in the Securities Act and is, therefore, unenforceable.

Delinquent Section 16(a) Reports

11 unchanged sentences

Executive Officers’ Compensation

The following table sets

forth information concerning all cash and non-cash compensation awarded to, earned by or paid to our Chief Executive Officer, Chief Financial

Officer and Chief Operation Officer during the last two (2) years.

No other executive officer received compensation in excess of $100,000

during the fiscal year ended December 31, 2021.

The following table sets forth information concerning

all cash and non-cash compensation awarded to, earned by or paid to our Chief Executive Officer, Chief Financial Officer and Chief Operation

Officer during the last two (2) years.

No other executive officer received compensation in excess of $100,000 during the fiscal year ended

December 31, 2022.

Summary Annual Compensation Table

Name and Principal Position

Incentive Plan

2 unchanged sentences

Employment Agreements

On December 1, 2016, the

Company entered into an Executive Employment Agreement with David Jin, the Company’s CEO and President.

Pursuant to the agreement,

Jin will be employed as President and Chief Executive Officer of the Company which agreement had a term initially through November

30, 2017 unless earlier terminated pursuant to the terms of the agreement.

On February 20, 2020, the Company entered into a Letter Agreement

Jin pursuant to which the term of Dr.

Jin’s Executive Employment Agreement was extended an additional three years and granted

Jin a Stock Option to acquire 400,000 shares of common stock at an exercise price of $1.52 per share for a period of ten years.

During the term of the agreement,

Jin is entitled to a base salary and will be eligible for a discretionary performance bonus, equity awards and to participate in employee

benefits plans as the Company may institute from time to time at the discretion of the Company’s Board of Directors.

3, 2019, the Company entered into a Letter Agreement with Dr.

Jin, pursuant to which his annual base salary set forth in his employment

agreement was increased to $360,000 effective January 1, 2019.

Further, the Company agreed to grant Dr.

Jin additional stock options to

acquire 150,000 shares of common stock at an exercise price of $2.00 per share.

On December 1, 2016, the Company entered into

an Executive Employment Agreement with David Jin, the Company’s CEO and President.

Pursuant to the agreement, Mr.

Jin may be terminated for

“cause” as defined and Mr.

Jin was employed

as President and Chief Executive Officer of the Company which agreement had a term initially through November 30, 2017 unless earlier

terminated pursuant to the terms of the agreement.

On February 20, 2020, the Company entered into a Letter Agreement with Dr.

to which the term of Dr.

Jin’s Executive Employment Agreement was extended an additional three years.

During the term of the agreement, Mr.

Jin is entitled

to a base salary and will be eligible for a discretionary performance bonus, equity awards and to participate in employee benefits plans

as the Company may institute from time to time at the discretion of the Company’s Board of Directors.

On January 3, 2019, the Company

entered into a Letter Agreement with Dr.

Jin, pursuant to which his annual base salary set forth in his employment agreement was increased

to $360,000 effective January 1, 2019.

Pursuant to the agreement, Mr.

Jin may be terminated for “cause” as defined and Mr.

Jin may resign for “good reason” as defined.

In the event Mr.

Jin is terminated without

cause or resigns for good reason, the Company will be required to pay Mr.

Jin all accrued salary and bonuses, reimbursement for all business

expenses and Mr.

Jin’s salary for one year.

Jin is terminated without cause or resigns for good reason,

the Company will be required to pay Mr.

Jin all accrued salary and bonuses, reimbursement for all business expenses and Mr.

salary for one year.

In the event Mr.

Jin is terminated with cause, resigns without good reason, dies or

is disabled, the Company will be required to pay Mr.

Jin is terminated with cause, resigns without good reason, dies or is disabled, the Company will

be required to pay Mr.

Jin all accrued salary and bonuses and reimbursement for all business expenses.

the agreement Mr.

Jin is subject to confidentiality, non-compete and non-solicitation restrictions.

On January 11, 2017, Avalon

Shanghai entered into an Executive Employment Agreement with Meng Li, the Company’s COO and Secretary.

Pursuant to the agreement,

Li will be employed as Chief Operating Officer and President of Avalon Shanghai initially through November 30, 2019, unless earlier

terminated pursuant to the terms of the agreement.

On February 20, 2020, the Company entered into a Letter Agreement with Meng Li pursuant

to which the term of Ms.

Under the agreement Mr.

subject to confidentiality, non-compete and non-solicitation restrictions.

On January 11, 2017, Avalon Shanghai entered into

an Executive Employment Agreement with Meng Li, the Company’s COO and Secretary.

Pursuant to the agreement, Ms.

Li was employed

as Chief Operating Officer and President of Avalon Shanghai initially through November 30, 2019, unless earlier terminated pursuant to

the terms of the agreement.

On February 20, 2020, the Company entered into a Letter Agreement with Meng Li pursuant to which the term

Li’s Executive Employment Agreement entered between the Company’ subsidiary and Ms.

Li dated January

11, 2017 was extended an additional three years and granted Ms.

Li a Stock Option to acquire 300,000 shares of common stock at an exercise

price of $1.52 per share for a period of ten years.

During the term of the agreement,

Li is be entitled to a base salary and will be eligible for a discretionary performance bonus, equity awards and to participate in

employee benefits plans as the Avalon Shanghai may institute from time to time at the discretion of its Board of Directors.

3, 2019, the Company entered into a Letter Agreement with Ms.

Li, pursuant to which her annual base salary set forth in her employment

agreement was increased to $340,000 effective January 1, 2019.

Further, the Company agreed to grant Ms.

Li stock options to acquire 150,000

shares of common stock at an exercise price of $2.00 per share.

Li dated January 11, 2017 was extended

an additional three years.

During the term of the agreement, Ms.

entitled to a base salary and will be eligible for a discretionary performance bonus, equity awards and to participate in employee benefits

plans as the Avalon Shanghai may institute from time to time at the discretion of its Board of Directors.

On January 3, 2019, the Company

entered into a Letter Agreement with Ms.

Li, pursuant to which her annual base salary set forth in her employment agreement was increased

to $340,000 effective January 1, 2019.

Pursuant to the agreement, Ms.

Li may be terminated for “cause”

as defined and Ms.

Li may be terminated for “cause” as defined and Ms.

Li may resign for “good reason” as defined.

In the event Ms.

Li is terminated without cause or resigns

for good reason, Avalon Shanghai will be required to pay Ms.

Li all accrued salary and bonuses, reimbursement for all business expenses

Li’s salary for one year.

Li is terminated without cause or resigns for good reason, Avalon

Shanghai will be required to pay Ms.

Li all accrued salary and bonuses, reimbursement for all business expenses and Ms.

for one year.

In the event Ms.

Li is terminated with cause, resigns without good reason, dies or is disabled,

Avalon Shanghai will be required to pay Ms.

Li is terminated with cause, resigns without good reason, dies or is disabled, Avalon Shanghai will be

required to pay Ms.

Li all accrued salary and bonuses and reimbursement for all business expenses.

Under the agreement

Li is subject to confidentiality, non-compete and non-solicitation restrictions.

Under the agreement Ms.

Li is subject

to confidentiality, non-compete and non-solicitation restrictions.

Luisa Ingargiola

On February 21, 2017, Ms.

Ingargiola and the Company entered into an Executive Retention Agreement effective February 9, 2017 pursuant to which Ms.

Ingargiola agreed

to serve as Chief Financial Officer in consideration of an annual salary.

On January 3, 2019, the Company entered into a Letter Agreement

Ingargiola, pursuant to which her annual base salary set forth in her employment agreement was increased to $350,000 effective

January 1, 2019.

The Company has agreed to provide a bonus of 50% of her base salary upon the Company timely filing its annual report

on Form 10-K for the year ended December 31, 2017 and the Company raising gross proceeds of $20 million in debt and/or equity capital

and a bonus of 100% of her base salary upon the Company achieving (i) any merger or sale of the Company or its assets, (ii) the Company

achieving adjusted EBITDA of $10 million in a fiscal year, (iii) the Company achieving a listing on a national exchange and then or subsequently

raising gross proceeds in the amount of $10 million.

The Company also granted Ms.

Ingargiola a Stock Option to acquire two million shares

of common stock of the Company at an exercise price of $0.50 per share for a period of ten years.

The Stock Options vest in 36 equal tranches

commencing on the grant date.

The Company and Ms.

Ingargiola also entered into an Indemnification Agreement.

Ingargiola and the Company

entered into an Executive Retention Agreement effective February 9, 2017 pursuant to which Ms.

Ingargiola agreed to serve as Chief Financial

Officer in consideration of an annual salary.

On January 3, 2019, the Company entered into a Letter Agreement with Ms.

Ingargiola, pursuant

to which her annual base salary set forth in her employment agreement was increased to $350,000 effective January 1, 2019.

The employment of Ms.

is at will and may be terminated at any time, with or without formal cause.

Pursuant to the terms of executive retention agreement with

Ingargiola, the Company has agreed to provide specified severance and bonus amounts and to accelerate the vesting on their equity

awards upon termination upon a change of control or an involuntary termination, as each term is defined in the agreements.

In the event of a termination

upon a change of control, Ms.

Ingargiola is entitled to receive an amount equal to 12 months of her base salary and the target bonus then

in effect for the executive officer for the year in which such termination occurs, such bonus payment to be pro-rated to reflect the full

number of months the executive remained in the Company’s employ.

In addition, the vesting on any stock option held by the executive

officer will be accelerated in full.

At the election of the executive officer, the Company will also continue to provide health related

employee insurance coverage for twelve months, at the Company’s expense.

In the event of an involuntary

termination, Ms.

Ingargiola is entitled to receive an amount equal to six months of her base salary and the target bonus then in effect

for the executive officer for the six months in which such termination occurs, such bonus payment to be pro-rated to reflect the full

number of months the executive remained in the Company’s employ.

Such payment will be increased to 12 months upon the one-year anniversary

of the retention agreement.

Ingargiola is at will and

may be terminated at any time, with or without formal cause.

Pursuant to the terms of executive retention agreement with Ms.

the Company has agreed to provide specified severance and bonus amounts and to accelerate the vesting on their equity awards upon termination

upon a change of control or an involuntary termination, as each term is defined in the agreements.

In the event of a termination upon a change of

Ingargiola is entitled to receive an amount equal to 12 months of her base salary and the target bonus then in effect for

the executive officer for the year in which such termination occurs, such bonus payment to be pro-rated to reflect the full number of

months the executive remained in the Company’s employ.

In addition, the vesting on any stock option held by the executive officer

will be accelerated in full.

At the election of the executive officer, the Company will also continue to provide health related employee

insurance coverage for twelve months, at the Company’s expense.

In the event of an involuntary termination, Ms.

Ingargiola is entitled to receive an amount equal to six months of her base salary and the target bonus then in effect for the executive

officer for the six months in which such termination occurs, such bonus payment to be pro-rated to reflect the full number of months the

executive remained in the Company’s employ.

Such payment will be increased to 12 months upon the one-year anniversary of the retention

In addition, the vesting on any stock option held by the executive officer will be accelerated in full.

the election of the executive officer, the Company will also continue to provide health related employee insurance coverage for twelve

months, at the Company’s expense.

On February 20, 2020, the

Company entered into a Letter Agreement with Ms.

Ingargiola granting Ms.

Ingargiola a Stock Option to acquire 400,000 shares of common

stock at an exercise price of $1.52 per share for a period of ten years.

At the election of

the executive officer, the Company will also continue to provide health related employee insurance coverage for twelve months, at the

Company’s expense.

Option Exercises and Stock Vested

There were no options exercised

by our executive officers or stock vested to our executive officers during the year ended December 31, 2021.

Outstanding Equity Awards

The following table sets

forth information with respect to the outstanding equity awards of our principal executive officers and principal financial officer during

2021, and each person who served as an executive officer of the Company as of December 31, 2021:

There were no options exercised by our executive

officers or stock vested to our executive officers during the year ended December 31, 2022.

Outstanding Equity Awards

Option Awards

Name and principal position

Number of securities underlying unexercised options

Number of securities underlying unexercised options Unexercisable

Equity incentive plan awards:

Number of securities underlying unexercised options

Options exercise price

Option expiration Date

Number of shares or units of stock that have not vested

Market value of shares or units of stock that have not vested

Equity incentive plan awards:

Number of unearned shares, units or other rights that have not vested

incentive plan

shares, units

The following table sets forth information with

respect to the outstanding equity awards of our principal executive officers and principal financial officer during 2022, and each person

who served as an executive officer of the Company as of December 31, 2022:

Equity Awards

and principal position

Unexercisable

Luisa Ingargiola, CFO

1 unchanged sentence

No Pension Benefits

The Company does not maintain

any plan that provides for payments or other benefits to its executive officers at, following or in connection with retirement and including,

without limitation, any tax-qualified defined benefit plans or supplemental executive retirement plans.

The Company does not maintain any plan that provides

for payments or other benefits to its executive officers at, following or in connection with retirement and including, without limitation,

any tax-qualified defined benefit plans or supplemental executive retirement plans.

No Nonqualified Deferred Compensation

The Company does not maintain

any defined contribution or other plan that provides for the deferral of compensation on a basis that is not tax-qualified.

The Company does not maintain any defined contribution

or other plan that provides for the deferral of compensation on a basis that is not tax-qualified.

Director Compensation

Fees Earned or Paid in Cash

Option Awards

Non-equity Incentive Plan Compensation

Change in Pension Value and Non-Qualified Deferred Compensation Earnings

All Other Compensation

Earned or Paid in

Incentive Plan

Pension Value

Yue (Charles) Li (1)

4 unchanged sentences

William Stilley (7)

Li’s 2021 compensation consisted of cash of $60,000 and 80,000 options vested and valued at

Lu’s 2021 compensation consisted of cash of $70,000 and 80,000 options vested and valued at

Tauzin’s 2021 compensation consisted of 200,000 options vested and valued at $163,858.

Sanders’s 2021 compensation consisted of cash of $70,000 and 80,000 options vested and valued

Troy’s 2021 compensation consisted of cash of $60,000 and 80,000 options vested and valued at

Stilley’s 2021 compensation consisted of cash of $70,000 and 80,000 options vested and valued

Li’s 2022 compensation consisted of cash of $60,000

and 8,000 options vested and valued at $31,667.

Li resigned as a director on December 30, 2022.

Lu’s 2022 compensation consisted of cash of $70,000

and 8,000 options vested and valued at $31,667.

Lu resigned as a director on December 30, 2022.

Tauzin’s 2022 compensation consisted of 200,000 options

vested and valued at $94,890.

Li resigned as a director on December 30, 2022.

Sanders’s 2022 compensation consisted of cash of $70,000

and 8,000 options vested and valued at $55,274.

Troy’s 2022 compensation consisted of cash of $60,000

and 8,000 options vested and valued at $55,274.

Stilley’s 2022 compensation consisted of cash of $70,000

and 8,000 options vested and valued at $55,274.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL

OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.

accordance with SEC rules, shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently

exercisable or which become exercisable within 60 days of the date of the applicable table below are deemed beneficially owned by the

holders of such options and warrants and are deemed outstanding for the purpose of computing the percentage of ownership of such person,

but are not treated as outstanding for the purpose of computing the percentage of ownership of any other person.

Subject to community

property laws, where applicable, the persons or entities named in the tables below have sole voting and investment power with respect

to all shares of our common stock indicated as beneficially owned by them.

The following table sets forth

certain information, as of March 29, 2022 with respect to the beneficial ownership of the outstanding common stock by (i) any holder of

more than five (5%) percent;

Beneficial ownership is determined in accordance

with the rules of the SEC and generally includes voting or investment power with respect to securities.

In accordance with SEC rules,

shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become

exercisable within 60 days of the date of the applicable table below are deemed beneficially owned by the holders of such options and

warrants and are deemed outstanding for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding

for the purpose of computing the percentage of ownership of any other person.

Subject to community property laws, where applicable, the

persons or entities named in the tables below have sole voting and investment power with respect to all shares of our common stock indicated

as beneficially owned by them.

The following table sets forth certain information,

as of March 29, 2023 with respect to the beneficial ownership of the outstanding common stock by (i) any holder of more than five (5%)

(ii) each of our executive officers and directors;

and (iii) our directors and executive officers as a group.

The numbers below reflect a 1:4 reverse stock split implemented on October 18, 2016.

Except as otherwise indicated, each of the stockholders

listed below has sole voting and investment power over the shares beneficially owned.

Name of Beneficial Owner (1)

Common Stock Beneficially

The numbers below

reflect a 1:10 reverse stock split implemented on January 5, 2023.

Except as otherwise indicated, each of the stockholders listed below

has sole voting and investment power over the shares beneficially owned.

of Beneficial Owner (1)

Beneficially Owned

Common Stock (2)

2 unchanged sentences

Luisa Ingargiola* (6)

Yancen Lu* (7)

Tauzin II* (8)

1 unchanged sentence

Tevi Troy* (10)

Yue (Charles) Li* (12)

Lourdes Felix* (11)

All officers and directors as a group (9 persons)

Shareholder owning 5% or more:

FSUNSHINE TRADING PTE LTD

Officer and/or director of our company.

1 unchanged sentence

Except as otherwise indicated, the address of each beneficial owner is c/o Avalon GloboCare Corp., 4400 Route 9 South, Suite 3100, Freehold, New Jersey 07728.

Applicable percentage ownership is based on 88,625,709 shares of common

stock outstanding as of March 29, 2022, together with securities exercisable or convertible into shares of common stock within 60 days

of March 29, 2022 for each stockholder.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange

Commission and generally includes voting or investment power with respect to securities.

Shares of common stock that are currently exercisable

or exercisable within 60 days of March 29, 2022 are deemed to be beneficially owned by the person holding such securities for the purpose

of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage

ownership of any other person.

Applicable percentage ownership is based on 10,164,307 shares of common stock outstanding as of March 29, 2023, together with securities exercisable or convertible into shares of common stock within 60 days of March 29, 2023 for each stockholder.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.

Shares of common stock that are currently exercisable or exercisable within 60 days of March 29, 2023 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

Wenzhao Lu holds (i) 3,583,788 shares of common stock and (ii) 150,000 vested options to acquire 150,000 shares of common stock of our company.

2 unchanged sentences

Represents 240,000 vested options to acquire 240,000 shares of common stock of our company.

Yancen Lu holds (i) 5,000,000 shares of common stock and (ii) 450,000 options, of which 430,000 shares have vested and an additional 20,000 shares shall vest within 60 days.

Represents stock option to acquire 33,000 shares of common stock of our company, which included 2,000 shares to be vested within 60 days.

2 unchanged sentences

Represents stock option to acquire 33,000 shares of common stock of our company, which included 2,000 shares to be vested within 60 days.

Represents stock option to acquire 210,000 shares of common stock of our company, which included 20,000 shares to be vested within 60 days.

Represents stock option to acquire 3,803 shares of common stock of our company.

CERTAIN RELATIONSHIPS AND RELATED

2 unchanged sentences

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 year ended December 31, 2021, the related party rental revenue amounted to $33,600, and has been included in real property

rental on the accompanying consolidated statements of operations and comprehensive loss.

As of December 31, 2021, the related party rent

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

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 the years ended December 31, 2022 and 2021,

the related party rental revenue amounted to $50,400 and $33,600, respectively, and has been included in real property rental on

the accompanying consolidated statements of operations and comprehensive loss.

The related party rent receivable totaled $74,100 and

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

at December 31, 2022 and 2021.

Medical Related Consulting

Services Revenue from Related Parties

Services Revenue from Related Party

During the years ended December 31, 2022 and 2021,

medical related consulting services revenue from related parties was as follows:

medical related consulting services revenue from related party was as follows:

Years Ended December 31,

1 unchanged sentence

Hebei Daopei *

Shanghai Daopei *

* Hebei Daopei and Shanghai Daopei are subsidiaries of an entity

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

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

Wenzhao Lu, the largest shareholder of the Company.

Provided by Related Party

From time to time, Wilbert Tauzin, a director

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

As compensation for professional services provided, the Company

recognized consulting expenses of $144,064 and $216,169 for the years ended December 31, 2022 and 2021, respectively, which

have been included in professional fees on the accompanying 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 December 31, 2021 and 2020, 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 consolidated balance sheets.

As of December 31, 2021 and 2020, the accrued

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

amounted to $368,433 and $167,956, respectively, and have been included in accrued liabilities and other payables – related

parties on the accompanying consolidated balance sheets.

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

As of December 31, 2022 and 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 consolidated balance sheets.

As of December

31, 2022 and 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 consolidated balance sheets.

Borrowings from Related Party

5 unchanged sentences

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

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

the third quarter of 2019 and second quarter of 2020, respectively.

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

was $390,000.

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 December

31, 2022 and 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.

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.

In the years ended December 31, 2022 and 2021,

2 unchanged sentences

Draw down from Line of Credit

Settlement of Line of Credit in shares

Outstanding principal under the Line of Credit at December 31, 2021

Draw down from Line of Credit

Settlement pursuant to Debt Settlement Agreement and Release *

Repayment of Line of Credit

Settlement of Line of Credit in shares

Outstanding principal under the Line of Credit at December 31, 2022

* On December 21, 2021,

the Company and Mr.

Lu entered into and closed a Debt Settlement Agreement and Release pursuant to which the $3.0 million debt was settled

by issuance of the Company’s 2,400,000 shares of common stock.

The 2.4 million shares issued had a fair value of $3 million.

For the years ended December 31, 2021 and 2020,

the interest expense related to above borrowings amounted to $200,477 and $168,762, respectively, and has been included in interest expense

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

years ended December 31, 2022 and 2021, the interest expense related to above borrowings amounted to $79,898 and $200,477, respectively,

and has been reflected as interest expense – related party on the accompanying consolidated statements of operations and comprehensive

As of December

2 unchanged sentences

Common Shares Sold

to Related Party

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

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

at a price per share of $1.55, the fair market value on transaction date, for an aggregate purchase price of $1,000,000.

to Related Party for Cash

On August 5, 2022, the Company sold 44,872 shares

of its common stock at a purchase price of $7.8 per share, the fair market value on transaction date, to Wenzhao Lu pursuant to a subscription

The Company received proceeds of $350,000 .

Series A Convertible

Preferred Stock Sold to Related Party for Cash

On December 14, 2022,

the Company entered into a Securities Purchase Agreement with Wenzhao Lu, the Company’s Chairman of the Board, pursuant to which

the Company sold to Mr.

Lu 4,000 shares of its Series A Preferred Stock, stated value $1,000, for the gross proceeds of $4,000,000.

PRINCIPAL ACCOUNTING FEES AND SERVICES

Marcum LLP served as our

independent auditors for the years ended December 31, 2021 and 2020.

Aggregate fees billed to

the Company for professional services rendered by Marcum LLP during the last two years were as follows:

Years Ended December 31,

Marcum LLP served as our independent auditors

for the years ended December 31, 2022 and 2021.

Aggregate fees billed to the Company for professional

services rendered by Marcum LLP during the last two years were as follows:

Ended December 31,

Audit Related Fees

All Other Fees

Consists of fees

billed for professional services rendered for the audit of our annual consolidated financial statements, review of the Form 10-K, and

review of the interim consolidated financial statements included in quarterly reports, and services that are normally provided by our

independent auditors in connection with statutory and regulatory filings or engagements, including registration statements.

Consists of fees billed for professional

services rendered for the audit of our annual consolidated financial statements, review of the Form 10-K, and review of the interim consolidated

financial statements included in quarterly reports, and services that are normally provided by our independent auditors in connection

with statutory and regulatory filings or engagements, including registration statements.

AUDIT-RELATED FEES.

of fees billed for assurance and related services that are reasonably related to the performance of the audit and or review of our consolidated

financial statements and are not reported under “Audit Fees”, such as audits and reviews in connection with acquisitions.

Consists of fees

billed for professional services for tax compliance, tax advice and tax planning.

Consists of fees billed for

assurance and related services that are reasonably related to the performance of the audit and or review of our consolidated financial

statements and are not reported under “Audit Fees”, such as audits and reviews in connection with acquisitions.

Consists of fees billed for professional

services for tax compliance, tax advice and tax planning.

ALL OTHER FEES.

of fees for products and services other than the services reported above.

There were no management consulting services provided in 2021

POLICY ON AUDIT COMMITTEE

PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT AUDITORS

The current policy of the

directors, acting as the audit committee, is to approve the appointment of the principal auditing firm and any permissible audit-related

The audit and audit related fees include fees for the annual audit of the financial statements and review of financial statements

included in 10Q filings.

Fees charged by the auditor were approved by the Board with engagement letters signed by the audit committee

The Audit Committee is responsible

for the pre-approval of audit and permitted non-audit services to be performed by the Company’s independent auditor.

The Audit Committee

will, on an annual basis, consider and, if appropriate, approve the provision of audit and non-audit services by the auditor.

the Audit Committee will, as necessary, consider and, if appropriate, approve the provision of additional audit and non-audit services

by the auditor which are not encompassed by the Audit Committee’s annual pre-approval and are not prohibited by law.

The Audit Committee

has delegated to the Chair of the Audit Committee the authority to pre-approve, on a case-by-case basis, non-audit services to be performed

by the auditor.

The Audit Committee has approved all audit and permitted non-audit services performed by the auditor for the year ended

December 31, 2021.

Consists of fees for products

and services other than the services reported above.

There were no management consulting services provided in 2022 or 2021.

POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT

AND PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT AUDITORS

The current policy of the directors, acting as

the audit committee, is to approve the appointment of the principal auditing firm and any permissible audit-related services.

and audit related fees include fees for the annual audit of the financial statements and review of financial statements included in Form

10-Q filings.

Fees charged by the auditor were approved by the Board with engagement letters signed by the audit committee chairman.

The Audit Committee is responsible for the pre-approval

of audit and permitted non-audit services to be performed by the Company’s independent auditor.

The Audit Committee will, on an

annual basis, consider and, if appropriate, approve the provision of audit and non-audit services by the auditor.

Thereafter, the Audit

Committee will, as necessary, consider and, if appropriate, approve the provision of additional audit and non-audit services by the auditor

which are not encompassed by the Audit Committee’s annual pre-approval and are not prohibited by law.

The Audit Committee has delegated

to the Chair of the Audit Committee the authority to pre-approve, on a case-by-case basis, non-audit services to be performed by the auditor.

The Audit Committee has approved all audit and permitted non-audit services performed by the auditor for the year ended December 31, 2022.

Open Market Sale Agreement SM , dated as of December 13, 2019, by and between Avalon GloboCare Corp.

1 unchanged sentence

(incorporated by reference to Exhibit 1.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on December 13, 2019)

Membership Interest Purchase Agreement, dated November 7, 2022, by and among the Registrant, Laboratory Services MSO, LLC, SCBC Holdings LLC, Avalon Laboratory Services, Inc., The Zoe Family Trust, Bryan Cox and Sarah Cox (incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K filed on November 8, 2022).

Amended and Restated Membership Interest Purchase Agreement, dated February 9, 2023 by and among the Registrant, Laboratory Services MSO, LLC, SCBC Holdings LLC, Avalon Laboratory Services, Inc., the Zoe Family Trust, Bryan Cox and Sarah Cox (incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K filed on February 13, 2023).

Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on April 26, 2018)

Certificate of Amendment to the Amended and Restated Certificate of Incorporation, as amended, of Avalon GloboCare Corp.

(incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed on January 4, 2023).

Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on April 26, 2018)

Certificate of Designation of Preferences, Rights and Limitations of the Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed on November 8, 2022).

Form of Subscription Agreement by and between Avalon GloboCare Corp.

5 unchanged sentences

and Daron Liang (incorporated by reference to Exhibit 4.2 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 7, 2017)

Warranty Agreement between Lu Wenzhao and Beijing DOING Biomedical Technology Co., Ltd.

(incorporated by reference to Exhibit 4.3 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 7, 2017)

Agreement by and between Lu Wenzhao and Beijing DOING Biomedical Technology Co., Ltd., dated February 27, 2017 (incorporated by

reference to Exhibit 4.3 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 7,

Form of Subscription Agreement between Avalon GloboCare Corp.

3 unchanged sentences

Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934

Form of Subscription Agreement by and between Avalon GloboCare Corp.

and Wenzhao “Daniel” Lu dated August 5, 2022 (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on August 8, 2022).

Form of Subscription Agreement by and between Avalon GloboCare Corp.

and Emma Li Xu Qingbo dated August 5, 2022 (incorporated by reference to Exhibit 4.2 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on August 8, 2022).

Share Exchange Agreement dated as of October 19, 2016 by and among Avalon Healthcare System, Inc., the shareholders of Avalon Healthcare System, Inc.

3 unchanged sentences

and David Jin (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on December 2, 2016)

Agreement of Sale by and between Freehold Craig Road Partnership, as Seller, and Avalon GloboCare Corp., as Buyer dated as of December 22, 2016 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on December 23, 2016)

of Sale by and between Freehold Craig Road Partnership and Avalon GloboCare Corp., dated December 22, 2016

(incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on

December 23, 2016)

Executive Employment Agreement by and between Avalon (Shanghai) Healthcare Technology Ltd.

and Meng Li, dated January 11, 2017 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 11, 2017)

Executive Retention Agreement by and between Avalon GloboCare Corp.

and Luisa Ingargiola dated February 21, 2017 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on February 21, 2017)

Retention Agreement by and between Avalon GloboCare Corp.

and Luisa Ingargiola, dated February 21, 2017 (incorporated by

reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on February 21,

Indemnification Agreement by and between Avalon GloboCare Corp.

36 unchanged sentences

and David Jin dated April 3, 2018 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 4, 2018)

Agreement by and between Avalon GloboCare Corp.

and Meng Li dated April 3, 2018 (incorporated by reference to Exhibit 10.2

of the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 4, 2018)

Service Contract between Ludaopei Hematology Research Institute Co., Ltd.

and Avalon (Shanghai) Healthcare Technology Co.,

dated April 1, 2018 (English translation) (Incorporated by reference to that Form S-1 Registration Statement filed with

the Securities and Exchange Commission on April 19, 2018)

of Subscription Agreement by and between Avalon GloboCare Corp.

and the April 2018 Accredited Investors (incorporated by reference

to Exhibit 4.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 18, 2018)

Supplementary

Agreement Related to Share Subscription by and between Avalon GloboCare Corp., Avalon (Shanghai) Healthcare Technology Co.,

Ltd., Beijing DOING Biomedical Technology Co., Ltd.

and Daron Liang dated April 23, 2018 (English translation) (incorporated

by reference to Exhibit 4.2 of the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on April

Extension Agreement between Lotus Capital Overseas Limited and Avalon (Shanghai) Healthcare Technology Co., Ltd.

3, 2018 (English translation) (incorporated by reference to Exhibit 10.18 of the Quarterly Report on Form 10-Q filed with

the Securities and Exchange Commission on May 11, 2018)

Agreement by and between Avalon GloboCare Corp.

and Tevi Troy dated June 4, 2018 (incorporated by reference to Exhibit

10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on June 6, 2018)

Venture Agreement by and between Avalon (Shanghai) Healthcare Technology Co., Ltd.

and Jiangsu Unicorn Biological Technology

dated May 29, 2018 (English translation) (incorporated by reference to Exhibit 99.1 of the Current Report on Form

8-K filed with the Securities and Exchange Commission on June 6, 2018)

Agreement by and between Avalon GloboCare Corp.

and William Stilley, III dated July 5, 2018 (incorporated by reference

to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 10, 2018)

Agreement by and between Avalon GloboCare Corp.

Letter Agreement by and between Avalon GloboCare Corp.

and Meng Li dated April 3, 2018 (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 4, 2018)

Advisory Service Contract between Ludaopei Hematology Research Institute Co., Ltd.

and Avalon (Shanghai) Healthcare Technology Co., Ltd.

dated April 1, 2018 (English translation) (incorporated by reference to that Form S-1 Registration Statement filed with the Securities and Exchange Commission on April 19, 2018)

Form of Subscription Agreement by and between Avalon GloboCare Corp.

and the April 2018 Accredited Investors (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 18, 2018)

Supplementary Agreement Related to Share Subscription by and between Avalon GloboCare Corp., Avalon (Shanghai) Healthcare Technology Co., Ltd., Beijing DOING Biomedical Technology Co., Ltd.

and Daron Liang dated April 23, 2018 (English translation) (incorporated by reference to Exhibit 4.2 of the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on April 26, 2018)

Loan Extension Agreement between Lotus Capital Overseas Limited and Avalon (Shanghai) Healthcare Technology Co., Ltd.

dated May 3, 2018 (English translation) (incorporated by reference to Exhibit 10.18 of the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 11, 2018)

Director Agreement by and between Avalon GloboCare Corp.

and Tevi Troy dated June 4, 2018 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on June 6, 2018)

Joint Venture Agreement by and between Avalon (Shanghai) Healthcare Technology Co., Ltd.

and Jiangsu Unicorn Biological Technology Co., Ltd.

dated May 29, 2018 (English translation) (incorporated by reference to Exhibit 99.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on June 6, 2018)

Director Agreement by and between Avalon GloboCare Corp.

and William Stilley, III dated July 5, 2018 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 10, 2018)

Director Agreement by and between Avalon GloboCare Corp.

and Steven A.

Sanders dated July 30, 2018 (incorporated by reference

to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 31, 2018)

Extension Agreement between Lotus Capital Overseas Limited and Avalon (Shanghai) Healthcare Technology Co., Ltd.

3, 2018 (English translation) (incorporated by reference to Exhibit 10.30 of the Registration Statement on Form S-1/A filed

with the Securities and Exchange Commission on August 7, 2018)

Sanders dated July 30, 2018 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 31, 2018)

Loan Extension Agreement between Lotus Capital Overseas Limited and Avalon (Shanghai) Healthcare Technology Co., Ltd.

dated August 3, 2018 (English translation) (incorporated by reference to Exhibit 10.30 of the Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on August 7, 2018)

Strategic Partnership Agreement between Avalon GloboCare Corp.

25 unchanged sentences

and Wenzhao “Daniel” Lu (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on December 22, 2021)

Corporate Research Agreement by and between Avalon GloboCare Corp.

Corporate Research Agreement between Avalon GloboCare Corp.

and the University of Pittsburgh of the Commonwealth System of Higher Education dated July 8, 2021 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 14, 2021)

Form of Securities Purchase Agreement dated March 28, 2022

Form of Convertible Note – March 2022

Loan Extension and Modification Agreement between Avalon GloboCare

and Wenzhao Lu dated March 28, 2022

Form of Securities Purchase Agreement dated March 28, 2022 (incorporated by reference to Exhibit 10.47 of the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2022).

Form of Convertible Note – March 2022 (incorporated by reference to Exhibit 10.48 of the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2022).

Loan Extension and Modification Agreement between Avalon GloboCare Corp.

and Wenzhao Lu dated March 28, 2022 (incorporated by reference to Exhibit 10.49 of the Form 10-K filed with the Securities and Exchange Commission on March 30, 2022).

Consulting Agreement, dated February 9, 2023, by and between Laboratory Services MSO, LLC and Sarah Cox.

Form of Warrant – March 2022 (incorporated by reference to Exhibit 10.3 of the Form 8-K filed with the Securities and Exchange Commission on April 29, 2022).

Amendment No.

1 to the Equity Joint Venture Agreement entered between Avalon GloboCare Corp., Avactis Biosciences Inc., Arbele Limited and Arbele Biotherapeutics Limited dated April 6, 2022 (incorporated by reference to Exhibit 10.53 of the Form 10-Q filed with the Securities and Exchange Commission on May 11, 2022).

Letter Agreement between Avalon GloboCare Corp.

and Fsunshine Trading PTE.

dated June 8, 2022 (incorporated by reference to Exhibit 10.4 of the Form 8-K filed with the Securities and Exchange Commission on June 8, 2022).

Debt Settlement Agreement and Release between Avalon GloboCare Corp.

and Wenzhao “Daniel” Lu dated July 25, 2022 (incorporated by reference to Exhibit 10.2 of the Form 8-K filed with the Securities and Exchange Commission on July 27, 2022).

Conversion Agreement between Avalon GloboCare Corp.

and Fsunshine Trading PTE.

Dated July 25, 2022 (incorporated by reference to Exhibit 10.3 of the Form 8-K filed with the Securities and Exchange Commission on July 27, 2022).

Form of Balloon Promissory Note issued to S&P Principal LLC (incorporated by reference to Exhibit 10.1 of the Form 8-K filed with the Securities and Exchange Commission on September 8, 2022).

Form of Mortgage and Security Agreement (incorporated by reference to Exhibit 10.2 of the Form 8-K filed with the Securities and Exchange Commission on September 8, 2022).

Form of Guaranty (incorporated by reference to Exhibit 10.3 of the Form 8-K filed with the Securities and Exchange Commission on September 8, 2022).

Form of Securities Purchase Agreement for the purchase of Series A Convertible Preferred Stock (incorporated by reference to Exhibit 10.1 of the Form 8-K filed with the Securities and Exchange Commission on November 8, 2022).

List of Subsidiaries (incorporated by reference to Exhibit 21.1 of the Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on July 20, 2018)

Consent of Independent Registered Accounting Firm

Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes Oxley Act

Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act

Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a)

and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a)

and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Principal Executive Officer Pursuant to 18 U.S.C.

Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Certification of Principal Financial Officer Pursuant to 18 U.S.C.

Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Inline XBRL Instance Document.

Inline XBRL Taxonomy Extension Schema Document.

Inline XBRL Taxonomy Extension Calculation Linkbase Document.

Inline XBRL Taxonomy Extension Definition Linkbase Document.

Inline XBRL Taxonomy Extension Calculation Linkbase

Inline XBRL Taxonomy Extension Definition Linkbase

Inline XBRL Taxonomy Extension Label Linkbase Document.

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Filed herewith

Management contract or compensatory plan or arrangement.

Inline XBRL Taxonomy Extension Presentation Linkbase

Cover Page Interactive Data File (formatted as Inline

XBRL and contained in Exhibit 101).

** This certification will not be deemed “filed”

for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liability

of that section.

Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933,

as amended, or the Exchange Act, except to the extent specifically incorporated by reference into such filing.

contract or compensatory plan or arrangement.

FORM 10-K SUMMARY.

Pursuant to the requirements

of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf

by the undersigned hereunto duly authorized.

Pursuant to the requirements of Section 13 or

15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned

hereunto duly authorized.

AVALON GLOBOCARE CORP.

March 30, 2023

/s/ David Jin

Chief Executive Officer, President and Director

1 unchanged sentence

March 30, 2023

/s/ Luisa Ingargiola

Luisa Ingargiola

1 unchanged sentence

(Principal Financial and Accounting Officer)

In accordance with the Exchange

Act, this report has been signed below by the following persons on March 30, 2022, on behalf of the registrant and in the capacities indicated.

/s/ David Jin

In accordance with the Exchange Act, this report

has been signed below by the following persons on March 30, 2023, on behalf of the registrant and in the capacities indicated.

Chief Executive Officer, President and Director

(Principal Executive Officer)

/s/ Luisa Ingargolia

Chief Financial Officer

Luisa Ingargolia

(Principal Financial Officer)

/s/ Wenzhao Lu

(Principal Financial and Accounting

Chairman of the Board of Directors

Chief Operating Officer, Secretary and Director

/s/ Steven A.

/s/ Yancen Lu

/s/ Wilbert J.

/s/ William B.

Chief Operating Officer and Secretary

Lourdes Felix

/s/ Tevi Troy

/s/ Yue “Charles” Li

Yue “Charles” Li

GLOBOCARE CORP.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

31, 2021 and 2020

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2022 and 2021

Report of Independent Registered Public Accounting Firm (PCAOB No.

5 unchanged sentences

Notes to Consolidated Financial Statements F-7

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

To the Shareholders and Board of Directors of

1 unchanged sentence

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheets of Avalon GloboCare Corp.

(the “Company”) as of December 31, 2021 and 2020, the related consolidated statements

We have audited the accompanying consolidated balance

sheet of Avalon GloboCare Corp.

(the “Company”) as of December 31, 2022 and 2021, and the related consolidated statements

of operations and comprehensive loss , changes in equity and cash flows for each of the two years in the period ended December 31,

2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present

fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations

and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally

accepted in the United States of America.

In our opinion, the financial statements

present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its

operations and its cash flows for each of the two years in the period ended December 31, 2022, in conformity with accounting principles

generally accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated financial statements

have been prepared assuming that the Company will continue as a going concern.

As more fully described in Note 2, the Company has a significant

working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its

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

Management's plans in

regard to these matters are also described in Note 2.

The consolidated financial statements do not include any adjustments that might

result from the outcome of this uncertainty.

The accompanying consolidated

financial statements have been prepared assuming that the Company will continue as a going concern.

As more fully described in Note 2

the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet

its obligations and sustain its operations.

These conditions raise substantial doubt about the Company's ability to continue as a going

Management's plans in regard to these matters are also described in Note 2.

The consolidated financial statements do not include

any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

6 unchanged sentences

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal

control over financial reporting.

We conducted our audits in accordance with the standards

of the PCAOB.

Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements

are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform,

an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal

control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control

over financial reporting.

Accordingly, we express no such opinion.

7 unchanged sentences

Critical Audit Matters

Critical Audit Matters are matters arising from

the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,

subjective, or complex judgments.

Critical audit matters are matters arising from the

current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective,

or complex judgments.

We determined that there are no critical audit matters.

1 unchanged sentence

We have served as the Company’s auditor since 2019.

New York , NY

March 30, 2023

GLOBOCARE CORP.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

BALANCE SHEETS

CURRENT ASSETS:

receivable - related party

financing costs, net

professional fees

expenses and other current assets

CONSOLIDATED BALANCE SHEETS

CURRENT ASSETS:

receivable - noncurrent portion

financing costs - noncurrent portion, net

leasing costs

lease right-of-use assets, net

and equipment, net

in real estate, net

method investment

Rent receivable

Rent receivable - related party

Other current assets

Total Current Assets

NON-CURRENT ASSETS:

professional fees

research and development fees

payroll liability and directors’ compensation

liabilities and other payables

liabilities and other payables - related parties

lease obligation

payable - related party

Operating lease right-of-use assets, net

Property and equipment, net

Investment in real estate, net

Equity method investment

Advances for equity interest purchase

Other non-current assets

Total Non-current Assets

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

lease obligation - noncurrent portion

payable - related party

Accrued professional fees

Accrued research and development fees

Accrued payroll liability and directors’ compensation

Accrued litigation settlement

Accrued liabilities and other payables

Accrued liabilities and other payables - related parties

Operating lease obligation

Note payable - related party

Total Current Liabilities

NON-CURRENT LIABILITIES:

and Contingencies (Note 17)

Preferred stock,

$0.0001 par value;

Operating lease obligation - noncurrent portion

Accrued litigation settlement - noncurrent portion

Note payable, net

Loan payable - related party

Total Non-current Liabilities

Total Liabilities

Commitments and Contingencies (Note 20)

Preferred stock, $0.0001 par value;

10,000,000 shares authorized;

no shares issued and outstanding at December 31, 2021 and 2020

stock, $ 0.0001 par value;

Series A Convertible Preferred Stock, $ 0.0001 par value;

9,000 and 0 shares issued and outstanding at December 31, 2022 and 2021, respectively.

Liquidation preference $ 9 million at December 31, 2022

Series B Convertible Preferred Stock, $ 0.0001 par value;

0 shares issued and outstanding at December 31, 2022 and 2021

Common stock, $ 0.0001 par value;

490,000,000 shares authorized;

1 unchanged sentence

8,897,518 shares issued and 8,845,518 shares outstanding at December 31, 2021

paid-in capital

Additional paid-in capital

common stock held in treasury, at cost;

520,000 shares at and December 31, 2021 and 2020

52,000 shares at December 31, 2022 and 2021

Accumulated deficit

( 63,062,721 )

( 51,131,874 )

other comprehensive loss - foreign currency translation adjustment

Avalon GloboCare Corp.

Statutory reserve

Accumulated other comprehensive loss - foreign currency translation adjustment

Total Avalon GloboCare Corp.

stockholders’ equity

Non-controlling

Liabilities and Equity

accompanying notes to the consolidated financial statements.

GLOBOCARE CORP.

Non-controlling interest

Total Liabilities and Equity

See accompanying notes to the consolidated financial statements.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

property rental

related consulting services - related party

property operating expenses

related consulting services - related party

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the Years Ended

Real property rental

Medical related consulting services - related party

Total Revenues

COSTS AND EXPENSES

property operating income

profit from medical related consulting services - related party

OPERATING EXPENSES:

and related benefits

and development expenses

general and administrative

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

OTHER OPERATING EXPENSES:

FROM OPERATIONS

Advertising and marketing

Professional fees

Compensation and related benefits

Research and development expenses

Litigation settlement

Other general and administrative

Total Other Operating Expenses

LOSS FROM OPERATIONS

( 8,792,895 )

( 8,833,830 )

INCOME (EXPENSE)

expense - related party

from equity method investment

income (expense)

Other Expense, net

BEFORE INCOME TAXES

OTHER (EXPENSE) INCOME

Interest expense- amortization of debt discount and debt issuance cost

( 3,310,684 )

Interest expense- other

Interest expense - related party

Conversion inducement expense

Loss from equity method investment

Change in fair value of derivative liability

Total Other Expense, net

( 3,137,952 )

LOSS BEFORE INCOME TAXES

( 11,930,847 )

( 9,090,499 )

$ ( 11,930,847 )

$ ( 9,090,499 )

NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST

LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

NET LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

COMMON SHAREHOLDERS

1 unchanged sentence

$ ( 9,090,499 )

COMPREHENSIVE

COMPREHENSIVE LOSS:

NET LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

COMMON SHAREHOLDERS

$ ( 11,930,847 )

$ ( 9,090,499 )

COMPREHENSIVE INCOME

foreign currency translation gain

COMPREHENSIVE

OTHER COMPREHENSIVE (LOSS) INCOME

Unrealized foreign currency translation (loss) gain

COMPREHENSIVE LOSS

( 11,978,718 )

1 unchanged sentence

COMPREHENSIVE LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST

COMPREHENSIVE

LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

COMPREHENSIVE LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

COMMON SHAREHOLDERS

1 unchanged sentence

$ ( 9,065,255 )

LOSS PER COMMON SHARE ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

NET LOSS PER COMMON SHARE ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

COMMON SHAREHOLDERS:

WEIGHTED AVERAGE

COMMON SHARES OUTSTANDING:

accompanying notes to the consolidated financial statements.

AVALON GLOBOCARE

Basic and diluted

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic and diluted

See accompanying notes to the consolidated financial statements.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

3 unchanged sentences

Stockholders’ Equity

A Preferred Stock

Comprehensive

January 1, 2020

Balance, January 1, 2021

$ ( 522,500 )

1 unchanged sentence

$ ( 190,510 )

of common stock, net

of common stock for services

currency translation adjustment

loss for the year

Sale of common stock, net

Issuance of common stock for settlement of accrued

professional fees

Issuance of common stock for settlement of loan payable

- related party

Issuance of common stock for services

Stock-based compensation

Foreign currency translation adjustment

Net loss for the year

( 9,090,499 )

December 31, 2020

Balance, December 31, 2021

( 51,131,874 )

of common stock, net

of common stock for settlement of accrued professional fees

of common stock for settlement of loan payable - related party

of common stock for services

currency translation adjustment

loss for the year

Sale of common stock, net

Warrants issued with convertible debt offering

Conversion of convertible note payable and accrued

interest into common stock

Reclassification of derivative liability to equity

Issuance of common stock for settlement of loan payable

and accrued interest - related party

Sale of common stock - related party

Sale of Series A Convertible Preferred Stock

Issuance of common stock for services

Stock-based compensation

Shares issued for adjustments for 1:10 reverse split

Foreign currency translation adjustment

Net loss for the year

( 11,930,847 )

December 31, 2021

Balance, December 31, 2022

$ ( 522,500 )

1 unchanged sentence

$ ( 213,137 )

accompanying notes to the consolidated financial statements.

AVALON GLOBOCARE

See accompanying notes to the consolidated financial statements.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

CASH FLOWS FROM

OPERATING ACTIVITIES:

For the Years Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

$ ( 11,930,847 )

$ ( 9,090,499 )

to reconcile net loss to net

cash used in operating activities:

debt provision

in straight-line rent receivable

of right-of-use asset

compensation and service expense

on equity method investment

on fixed assets disposal

in operating assets and liabilities:

receivable - related party

leasing costs

expenses and other assets

liabilities and other payables

liabilities and other payables - related parties

lease obligation

CASH USED IN OPERATING ACTIVITIES

Adjustments to reconcile net loss to

net cash used in operating activities:

Bad debt provision

Change in straight-line rent receivable

Amortization of right-of-use asset

Stock-based compensation and service expense

Loss on equity method investment

Loss on impairment of equipment held for sale

Amortization of debt discount

Amortization of debt issuance costs

Conversion inducement expense

Change in fair market value of derivative liability

Changes in operating assets and liabilities:

Rent receivable

Rent receivable - related party

Security deposit

Deferred leasing costs

Accrued liabilities and other payables

Accrued liabilities and other payables - related parties

Operating lease obligation

NET CASH USED IN OPERATING ACTIVITIES

( 7,037,224 )

( 5,024,479 )

FLOWS FROM INVESTING ACTIVITIES:

of property and equipment

of commercial real estate

investment in equity method investment

USED IN INVESTING ACTIVITIES

FLOWS FROM FINANCING ACTIVITIES

of note payable - related party

received from loan payable - related party

received from equity offering

Disbursements

for equity offering costs

CASH PROVIDED BY FINANCING ACTIVITIES

OF EXCHANGE RATE ON CASH

INCREASE (DECREASE) IN CASH

beginning of year

- end of year

DISCLOSURE OF CASH FLOW INFORMATION:

INVESTING AND FINANCING ACTIVITIES:

stock issued for future services

stock issued for accrued liabilities

financing costs in accrued liabilities

professional fees relieved for shares issued

party loan settled in shares

accompanying notes to the consolidated financial statements.

GLOBOCARE CORP.

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

Improvement of commercial real estate

Additional investment in equity method investment

Payments for equity interest purchase

( 8,999,722 )

NET CASH USED IN INVESTING ACTIVITIES

( 9,053,470 )

CASH FLOWS FROM FINANCING ACTIVITIES

Repayments of note payable - related party

Proceeds from loan payable - related party

Repayments of loan payable - related party

Proceeds from issuance of convertible debt and warrants

Proceeds from issuance of balloon promissory note

Payments of debt issuance costs

Proceeds from equity offering

Disbursements for equity offering costs

Proceeds from issuance of convertible preferred stock

NET CASH PROVIDED BY FINANCING ACTIVITIES

EFFECT OF EXCHANGE RATE ON CASH

NET INCREASE IN CASH

CASH - beginning of year

CASH - end of year

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Cash paid for:

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Common stock issued for future services

Common stock issued for accrued liabilities

Deferred financing costs in accrued liabilities

Accrued professional fees relieved for shares issued

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 consolidated financial

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

1 – ORGANIZATION AND NATURE OF OPERATIONS

GloboCare Corp.

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

The Company was incorporated under the laws

of the State of Delaware on July 28, 2014.

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

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

Shareholders”) pursuant to which we acquired 100 % of the outstanding securities of AHS in exchange for 50,000,000 shares

of the Company’s common stock (the “AHS Acquisition”).

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

accounting purposes, AHS was the surviving entity.

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

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

The Company did not

recognize goodwill or any intangible assets in connection with this transaction.

Accordingly, the Company’s historical financial

statements are those of AHS and its wholly-owned subsidiary, Avalon (Shanghai) Healthcare Technology Co., Ltd.

(“Avalon Shanghai”)

immediately following the consummation of this reverse merger transaction.

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

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

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

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

transformative immune effector cell therapy, exosome technology, as well as COVID-19 related diagnostics and therapeutics.

also provides strategic advisory and outsourcing services to facilitate and enhance its clients’ growth and development, as well

as competitiveness in healthcare and CellTech industry markets.

Through its subsidiary structure with unique integration of verticals

from innovative R&D to automated bioproduction and accelerated clinical development, the Company is establishing a leading role in

the fields of cellular immunotherapy (including CAR-T/NK), exosome technology (ACTEX™), and COVID-19 related vaccine and therapeutics.

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

There was no activity for the subsidiary

since its incorporation through December 31, 2021.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND NATURE OF

Avalon GloboCare Corp.

(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 was engaged

in medical related consulting services for customers.

Due to the winding down of the medical related consulting services in 2022, the

Company decided to cease all operations of Avalon Shanghai and no longer has any material revenues or expenses in Avalon Shanghai.

a result, Avalon Shanghai is no longer an operating entity.

The Company is a clinical-stage biotechnology

company dedicated to developing and delivering innovative, transformative cellular therapeutics, precision diagnostics, and clinical laboratory

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 research and development 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 December

Avalon (BVI) Ltd.

is dormant and is in process of being dissolved.

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

On May 5, 2017, Avalon RT 9 purchased a real property located in Township of Freehold, County of Monmouth, State of New Jersey, having

a street address of 4400 Route 9 South, Freehold, NJ 07728.

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

for all corporate administration and operations.

On February 7, 2017, the Company formed Avalon

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

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

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

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

In addition, the property generates rental income.

Avalon RT 9 owns this office building.

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

March 24, 2022, the occupancy rate of the building is 83.5 %.

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

(“Genexosome”) in Nevada.

Genexosome was engaged in developing

proprietary diagnostic and therapeutic products using exosomes.

Genexosome owns 100 % of the capital stock of Beijing Jieteng (Genexosome)

Biotech Co., Ltd., a corporation incorporated in the People’s Republic of China on August 7, 2015 (“Beijing Genexosome”),

and the Company holds 60 % of Genexosome and Dr.

Yu Zhou holds 40 % of Genexosome.

The Company had not been able to realize the

financial projections provided by Dr.

Zhou at the time of the acquisition and has decided to impair the intangible asset associated with

this acquisition to zero.

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

Since the fourth quarter of 2019, the non-controlling

interest has remained inactive.

July 18, 2018, the Company formed a wholly owned subsidiary, Avactis Biosciences Inc., a Nevada corporation, which will focus on accelerating

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

Avalon RT 9’s business consists of the

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

As of December 31, 2022, the occupancy rate of the

building is 82.7 %.

On July 18, 2018, the Company formed a wholly

owned subsidiary, Avactis Biosciences Inc.

(“Avactis”), a Nevada corporation, which will focus on accelerating commercial

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

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

1 unchanged sentence

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

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

activity for the subsidiary since its incorporation through December 31, 2021.

GLOBOCARE CORP.

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

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

Avactis owns 100 % of the capital stock

of Avactis Nanjing Biosciences Ltd., a company incorporated in the People’s Republic of China on May 8, 2020 (“Avactis Nanjing”),

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

order to purchase a membership interest, on October 14, 2022, the Company formed a wholly owned subsidiary, Avalon Laboratory Services,

Inc., a Delaware company.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

1 – ORGANIZATION AND NATURE OF OPERATIONS (continued )

of the Company’s subsidiaries which are included in these consolidated financial statements as of December 31, 2021 are as follows:

of Subsidiary

and date of Incorporation

Healthcare System, Inc.

100% held by AVCO

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND NATURE OF

OPERATIONS (continued)

Details of the Company’s subsidiaries which

are included in these consolidated financial statements as of December 31, 2022 are as follows:

Name of Subsidiary

Place and date of Incorporation

Percentage of Ownership

Principal Activities

Avalon Healthcare System, Inc.

100% held by ALBT

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

Avalon (BVI) Ltd.

(“Avalon BVI”)

British Virgin Island

January 23, 2017

100% held by AVCO

100% held by ALBT

is in process of being dissolved

RT 9 Properties LLC

Avalon RT 9 Properties LLC

(“Avalon RT 9”)

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

(Shanghai) Healthcare Technology Co., Ltd.

Avalon (Shanghai) Healthcare Technology Co., Ltd.

(“Avalon Shanghai”)

April 29, 2016

100% held by AHS

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

Technologies Inc.

Ceased operations and is not considered an operating entity

Genexosome Technologies Inc.

(“Genexosome”)

July 31, 2017

60% held by AVCO

Jieteng (Genexosome) Biotech Co., Ltd.

August 7, 2015

100% held by Genexosome

Biosciences Inc.

60% held by ALBT

Avactis Biosciences Inc.

July 18, 2018

100% 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

International

Exosome Association LLC

Avactis Nanjing Biosciences Ltd.

(“Avactis Nanjing”)

100% held by Avactis

Owns a patent and is not considered an operating entity

International Exosome Association LLC

June 13, 2019

100% held by AVCO

100% held by ALBT

Promotes standardization related to exosome industry

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

Avalon Laboratory Services, Inc.

October 14, 2022

100% held by ALBT

Purchases a membership interest

2 – BASIS OF PRESENTATION AND GOING CONCERN CONDITION

of Presentation

accompanying consolidated financial statements and related notes have been prepared in accordance with accounting principles generally

accepted in the United States of America (“U.S.

Basis of Presentation

The accompanying consolidated financial statements

and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”) and with the rules and regulations of the U.S.

Securities and Exchange

Commission for financial information.

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

All significant intercompany

accounts and transactions have been eliminated in consolidation.

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

transformative immune effector cell therapy, exosome technology, as well as COVID-19 related diagnostics and therapeutics.

also provides strategic advisory and outsourcing services to facilitate and enhance its clients’ growth and development, as well

as competitiveness in healthcare and CellTech industry markets.

Through its subsidiary structure with unique integration of verticals

from innovative R&D to automated bioproduction and accelerated clinical development, the Company is establishing a leading role in

the fields of cellular immunotherapy (including CAR-T/NK), exosome technology (ACTEX™), and COVID-19 related vaccine and therapeutics.

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

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

Republic of China.

These consolidated financial statements have been prepared assuming that the Company will continue as

a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal

course of business.

reflected in the accompanying consolidated financial statements, the Company had a working capital deficit of $ 3,078,616 as of December

31, 2021 and has incurred recurring net losses and generated negative cash flow from operating activities of $ 9,090,499 and $ 5,024,479 for

the year ended December 31, 2021, respectively.

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

the continuation of providing medical related consulting services to its only few clients who are related parties and generating rental

revenue from its income-producing real estate property in New Jersey;

hence generating revenues, and obtaining additional financing to

fund future obligations and pay liabilities arising from normal business operations.

In addition, the current cash balance cannot be

projected to cover the operating expenses for the next twelve months from the release date of this report.

These matters raise substantial

doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going concern is

dependent on the Company’s ability to raise additional capital, implement its business plan, and generate significant revenues.

There are no assurances that the Company will be successful in its efforts to generate significant revenues, maintain sufficient cash

balance or report profitable operations or to continue as a going concern.

The Company plans on raising capital through the sale of equity

to implement its business plan.

However, there is no assurance these plans will be realized and that any additional financings will be

available to the Company on satisfactory terms and conditions, if any.

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

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

However, we are uncertain

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

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

Given the dynamic nature of these circumstances,

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

is expected to adversely impact the Company’s business for the year of 2022.

accompanying 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.

GLOBOCARE CORP.

Securities and Exchange Commission for financial information.

The Company’s consolidated financial statements

include the accounts of the Company and its subsidiaries.

All significant intercompany accounts and transactions have been eliminated

in consolidation.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

preparation of the consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions

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

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

Actual results could differ from these estimates.

Significant estimates during the years ended December 31, 2021 and 2020 include the useful life of property and equipment and investment

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

allowances, and valuation of stock-based compensation.

Value of Financial Instruments and Fair Value Measurements

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Going Concern

The Company is a clinical-stage biotechnology

company dedicated to developing and delivering innovative, transformative cellular therapeutics, precision diagnostics, and clinical laboratory

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 research and development 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.

These 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 consolidated financial statements,

the Company had working capital deficit of $ 1,206,279 at December 31, 2022 and had incurred recurring net losses and generated negative

cash flow from operating activities of $ 11,930,847 and $ 7,037,224 for the year ended December 31, 2022, respectively.

The Company has

a limited operating history and its continued growth is dependent upon generating rental revenue from its income-producing real estate

property in New Jersey and obtaining additional financing to fund future obligations and pay liabilities arising from normal business

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

the release date of this report.

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

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

its business plan, and generate significant revenues.

There are no assurances that the Company will be successful in its efforts to generate

significant revenues, maintain sufficient cash balance or report profitable operations or to continue as a going concern.

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

However, there is no assurance these plans will be

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

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.

The accompanying

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

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

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

Use of Estimates

The preparation of the consolidated financial statements in conformity

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure

of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during

the reporting period.

Changes in these estimates and assumptions may have a material impact on the consolidated financial statements and

accompanying notes.

Making estimates requires management to exercise significant judgment.

It is at least reasonably possible that the

estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management

considered in formulating its estimate, could change in the near term due to one or more future confirming events.

Accordingly, the actual

results could differ significantly from those estimates.

Significant estimates during the years ended December 31, 2022 and 2021 include

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

valuation of deferred tax assets and the associated valuation allowances, 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.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (continued)

Fair Value of Financial Instruments and

Fair Value Measurements

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

11 unchanged sentences

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

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

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

to their short-term nature.

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

at fair value (fair value option).

The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless

a new election date occurs.

If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should

be reported in earnings at each subsequent reporting date.

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

and Cash Equivalents

December 31, 2021 and 2020, the Company’s cash balances by geographic area were as follows:

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.

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

The Company did not have any derivative

liability during the year ended December 31, 2021.

The table below reflects the activity of derivative liability measured at fair value

for the year ended December 31, 2022:

Balance of derivative liability as of January 1, 2022

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

Gain from change in the fair value of derivative liability

Reclassification of derivative liability to equity

( 2,181,820 )

Balance of derivative liability as of December 31, 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 December 31, 2022 and 2021, the Company’s

cash balances by geographic area were as follows:

December 31, 2022

December 31, 2021

United States

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

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

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

when purchased and money market accounts to be cash equivalents.

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

GLOBOCARE CORP.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued )

Risk and Uncertainties

portion of the Company’s cash is maintained with state-owned banks within the PRC.

Balances at state-owned banks within the

PRC are covered by insurance up to RMB 500,000 (approximately $79,000) per bank.

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

At December 31, 2021, cash balances held in the PRC were RMB 253,813 (approximately $ 40,000 ), which were covered

by such limited insurance.

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

its cash in bank accounts.

Company maintains a portion of its cash in bank and financial institution deposits within U.S.

that at times may exceed federally-insured

limits of $ 250,000 .

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

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

The Company has not experienced

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

At December 31, 2021, the

Company’s cash balances in United States bank accounts had approximately $ 228,000 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 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (continued)

Advances for Equity Interest Purchase

In the fourth quarter of 2022, the Company sold

9,000 shares of its Series A Preferred Stock, stated value $ 1,000 , for the gross proceeds of $ 9,000,000 (the “Private Placement”),

which funds were recorded as advances for equity interest purchase at December 31, 2022 and were used to pay the cash purchase price for

the purchased interests of Laboratory Services MSO, LLC in February 2023.

As of December 31, 2022 and 2021, advances for equity interest

purchase amounted to $ 8,999,722 and $0 , respectively.

Credit Risk and Uncertainties

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 $72,000) per bank.

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

December 31, 2022, cash balances held in the PRC are RMB 1,274,920 (approximately $ 185,000 ), of which, RMB 722,573 (approximately

$ 105,000 ) 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 December 31, 2022, the Company’s

cash and restricted cash balances in United States bank accounts had approximately $ 4,952,000 in excess of the federally-insured

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

A portion of the Company’s sales are credit sales which is to the customer whose ability to pay is dependent upon the industry

economics prevailing in these areas;

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

to short-term payment terms.

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.

Receivable and Allowance for Doubtful Accounts

receivable is presented net of an allowance for doubtful accounts.

Rent receivable balance consists of base rents, tenant reimbursements

and receivables arising from straight-lining of rents represent amounts accrued and unpaid from tenants in accordance with the terms

of the respective leases, subject to the Company’s revenue recognition policy.

An allowance for the uncollectible portion of rent

receivable is determined based upon an analysis of the tenant’s payment history, the financial condition of the tenant, business

conditions in the industry in which the tenant operates and economic conditions in Freehold, New Jersey in which the property is located.

Rent Receivable and Allowance for Doubtful

Rent receivable

is presented net of an allowance for doubtful accounts.

Rent receivable balance consists of base rents, tenant reimbursements and receivables

arising from straight-lining of rents represent amounts accrued and unpaid from tenants in accordance with the terms of the respective

leases, subject to the Company’s revenue recognition policy.

An allowance for the uncollectible portion of rent receivable is determined

based upon an analysis of the tenant’s payment history, the financial condition of the tenant, business conditions in the industry

in which the tenant operates and economic conditions in Freehold, New Jersey in which the property is located.

believes that the rent receivable is fully collectable.

Therefore, no allowance for doubtful accounts is deemed to be required on its

rent receivable at December 31, 2021 and 2020.

Therefore, no material allowance for doubtful accounts is deemed to be required

on its rent receivable at December 31, 2022 and 2021.

Deferred financing costs

2 unchanged sentences

As of December 31, 2022 and 2021,

deferred financing costs amounted to $ 213,279 and $ 222,141 , respectively.

Deferred Leasing Costs

incurred to obtain tenant leases are amortized using the straight-line method over the term of the related lease agreement.

include lease incentives and leasing commissions.

If the lease is terminated early, the remaining unamortized deferred leasing cost is

GLOBOCARE CORP.

deferred financing costs amounted to $ 174,107 and $ 213,279 , of which $ 34,821 and $ 138 ,631were included in other current assets and $ 139,286

and $ 74,648 were included in other non-current 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 in 2022 and are offset against

note payable in the 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 December 31, 2022, debt issuance costs amounted to $ 236,848 .

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued )

and Equipment

and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets.

of repairs and maintenance is expensed as incurred;

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (continued)

Deferred leasing costs

Costs incurred

to obtain tenant leases are amortized using the straight-line method over the term of the related lease agreement.

Such costs include

lease incentives and leasing commissions.

If the lease is terminated early, the remaining unamortized deferred leasing cost is written

Property and Equipment

Property and equipment are carried at cost and

are depreciated on a straight-line basis over the estimated useful lives of the assets.

The cost of repairs and maintenance is expensed

major replacements and improvements are capitalized.

When assets are retired or disposed

of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in

the period of disposition.

The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances

reflect the fact that their recorded value may not be recoverable.

In Real Estate and Depreciation

in real estate is carried at cost less accumulated depreciation and consists of building and improvement.

The Company depreciates real

estate building and improvement on a straight-line basis over estimated useful life.

Expenditures for ordinary repair and maintenance

costs are charged to expense as incurred.

Expenditure for improvements, renovations, and replacements of real estate asset is capitalized

and depreciated over its estimated useful life if the expenditure qualifies as betterment.

in Unconsolidated Company – Epicon Biosciences Co., Ltd.

Company uses the equity method of accounting for its investment in, and earning or loss of, company that it does not control but over

When assets are retired or disposed of, the cost and accumulated depreciation

are removed from the accounts, and any resulting gains or losses are included in income in the period of disposition.

The Company examines

the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded

value may not be recoverable.

Investment In Real

Estate and Depreciation

Investment in real estate is carried at cost less

accumulated depreciation and consists of building and improvement.

The Company depreciates real estate building and improvement on a straight-line

basis over estimated useful life.

Expenditures for ordinary repair and maintenance costs are charged to expense as incurred.

for improvements, renovations, and replacements of real estate asset is capitalized and depreciated over its estimated useful life if

the expenditure qualifies as betterment.

Impairment of Long-lived Assets

In accordance with ASC Topic 360, the Company

reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may

not be fully recoverable, or at least annually.

The Company recognizes an impairment loss when the sum of expected undiscounted future

cash flows is less than the carrying amount of the asset.

The amount of impairment is measured as the difference between the asset’s

estimated fair value and its book value.

The Company did not record any impairment charge for the years ended December 31, 2022 and 2021.

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.

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

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

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

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

See Note 7 for discussion of equity method

of Long-lived Assets

accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate

that the carrying amount of the assets may not be fully recoverable, or at least annually.

The Company recognizes an impairment loss

when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset.

The amount of impairment is measured

as the difference between the asset’s estimated fair value and its book value.

The Company did not record any impairment charge

for the years ended December 31, 2021 and 2020.

Rental Income

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

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

If the Company

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

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

See Note 7 for discussion of equity method investment.

Deferred Rental Income

rental income represents rental income collected but not earned as of the reporting date.

1 unchanged sentence

payments received from tenants in advance of their due dates.

As of December 31, 2021 and 2020, deferred rental income totaled $ 8,638

and $ 23,510 , respectively, which were included in accrued liabilities and other payables on the accompanying consolidated balance sheets.

Shanghai is subject to a value added tax (“VAT”) for providing medical related consulting services.

The amount of VAT liability

is determined by applying the applicable tax rates to the invoiced amount of medical related consulting services provided (output VAT)

less VAT paid on purchases made with the relevant supporting invoices (input VAT).

The Company reports revenue net of PRC’s value

added tax for all the periods presented in the consolidated statements of operations and comprehensive loss.

GLOBOCARE CORP.

As of December 31, 2022 and 2021, deferred rental income totaled $ 27,685 and

$ 8,638 , respectively, which were included in accrued liabilities and other payables on the accompanying consolidated balance sheets .

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued )

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

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

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

exchange for those goods or services.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (continued)

Revenue Recognition

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

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

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

those goods or services.

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

Identify the contract with

Identify the performance

obligations in the contract

Determine the transaction

Allocate the transaction

price to the performance obligations in the contract

Recognize revenue when

the company satisfies a performance obligation

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

the contract and identify each promised goods or service that is distinct.

A performance obligation meets ASC 606’s definition

Identify the contract with the customer

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to the performance obligations in the contract

Recognize revenue when the company satisfies a performance obligation

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 defi nition

of a “distinct” goods or service (or bundle of goods or services) if both of the following criteria are met:

The customer can benefit

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

goods or service is capable of being distinct).

The entity’s promise

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

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

customer can benefit from the goods or service either on its own or together with other resources

that are readily available to the customer (i.e., the goods or service is capable of being

entity’s promise to transfer the goods or service to the customer is separately identifiable

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

distinct within the context of the contract).

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

services is identified that is distinct.

transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods

or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes).

The consideration

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

Variable consideration is included in the

transaction price only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will

not occur when the uncertainty associated with the variable consideration is subsequently resolved.

transaction price is allocated to each performance obligation on a relative standalone selling price basis.

The transaction price allocated

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

Company’s revenues are derived from providing medial related consulting services for its’ related parties.

Revenues related

to its service offerings are recognized at a point in time when service is rendered.

Any payments received in advance of the performance

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

Company has determined that the ASC 606 does not apply to rental contracts, which are within the scope of other revenue recognition accounting

income from operating leases is recognized on a straight-line basis under the guidance of ASC 842.

Lease payments under tenant leases

are recognized on a straight-line basis over the term of the related leases.

The cumulative difference between lease revenue recognized

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

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

GLOBOCARE CORP.

The transaction

price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services

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

The consideration promised in a

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

Variable consideration is included in the transaction price

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

the uncertainty associated with the variable consideration is subsequently resolved.

The transaction

price is allocated to each performance obligation on a relative standalone selling price basis.

The transaction price allocated to each

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

The Company’s

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

Revenues related to its service

offerings are recognized at a point in time when service is rendered.

Any payments received in advance of the performance of services

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

has determined that the ASC 606 does not apply to rental contracts, which are within the scope of other revenue recognition accounting

Rental income

from operating leases is recognized on a straight-line basis under the guidance of ASC 842.

Lease payments under tenant leases are recognized

on a straight-line basis over the term of the related leases.

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

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

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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued )

a lease contains “rent holidays”, the Company records rental expense on a straight-line basis over the term of the lease.

The Company begins recording rent expense on the lease possession date.

Real Property

Operating Expenses

property operating expenses consist of property management fees, property insurance, real estate taxes, depreciation, repairs and maintenance

fees, utilities and other expenses related to the Company’s rental properties.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (continued)

When a lease contains “rent holidays”,

the Company records rental expense on a straight-line basis over the term of the lease.

The Company begins recording rent expense on the

lease possession date.

Real Property Operating Expenses

Real property operating expenses consist of property

management fees, property insurance, real estate taxes, depreciation, repairs and maintenance fees, utilities and other expenses related

to the Company’s rental properties.

Related Consulting Services Costs

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

and other overhead costs.

and Development

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

other overhead costs.

Research and Development

for research and product development costs are expensed as incurred.

1 unchanged sentence

and $ 1,025,009 in the years ended December 31, 2022 and 2021, respectively .

costs related to advertising are expensed as incurred.

For the years ended December 31, 2021 and 2020, advertising costs amounted to

$ 328,565 and $ 294,352 , respectively.

Company accounts for its stock-based compensation awards in accordance with Accounting Standards Codification (“ASC”) Topic

718, Compensation—Stock Compensation (“ASC 718”).

ASC 718 requires all stock-based payments to employees and non-employees

including grants of stock options, to be recognized as expense in the statements of operations based on their grant date fair values.

The Company estimates the grant date fair value of each option award using the Black-Scholes option-pricing model.

Company periodically issues common stock and common stock options to consultants for various services.

Costs of these transactions are

measured at the fair value of the service received or the fair value of the equity instruments issued, whichever is more reliably measurable.

The value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty

to earn the equity instruments is reached or (ii) the date at which the counterparty’s performance is complete.

Company is governed by the income tax laws of China and the United States.

The Company accounts for income taxes using the asset/liability

method prescribed by ASC 740, “Income Taxes.” Under this method, deferred tax assets and liabilities are determined based

on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect

in the period in which the differences are expected to reverse.

The Company records a valuation allowance to offset deferred tax assets

if, based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will

not be realized.

The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the

enactment date.

Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”.

that guidance, the benefit for tax positions taken can only be recognized in the financial statements when it is more likely than not

the position will be sustained upon examination by the tax authorities.

As of December 31, 2021 and 2020, the Company had no significant

uncertain tax positions which would require either recognition of a liability or disclosure in the financial statements.

For United States

entities, tax year that remains subject to examination is the years ended December 31, 2021, 2020, 2019 and 2018.

For China entities,

income tax returns for the tax years ended December 31, 2017 through December 31, 2021 remain open for statutory examination by PRC tax

The Company recognizes interest and penalties related to significant uncertain income tax positions in income

tax expense .

However, no such interest and penalties were recorded as of December 31, 2021 and 2020.

GLOBOCARE CORP.

Advertising and Marketing Costs

related to advertising and marketing are expensed as incurred.

For the years ended December 31, 2022 and 2021, advertising and marketing

costs amounted to $ 1,325,313 and $ 328,565 , respectively .

Stock-based Compensation

accounts for its stock-based compensation awards in accordance with Accounting Standards Codification (“ASC”) Topic 718, Compensation—Stock

Compensation (“ASC 718”).

ASC 718 requires all stock-based payments to employees and non-employees including grants of stock

options, to be recognized as expense in the statements of operations based on their grant date fair values.

The Company estimates the

grant date fair value of each option award using the Black-Scholes option-pricing model.

periodically issues common stock and common stock options to consultants for various services.

Costs of these transactions are measured

at the fair value of the service received or the fair value of the equity instruments issued, whichever is more reliably measurable.

value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to

earn the equity instruments is reached or (ii) the date at which the counterparty’s performance is complete.

is governed by the income tax laws of China and the United States.

The Company accounts for income taxes using the asset/liability method

prescribed by ASC 740, “Income Taxes.” Under this method, deferred tax assets and liabilities are determined based on the

difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the

period in which the differences are expected to reverse.

The Company records a valuation allowance to offset deferred tax assets if, based

on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized.

The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”.

guidance, the benefit for tax positions taken can only be recognized in the financial statements when it is more likely than not the position

will be sustained upon examination by the tax authorities.

As of December 31, 2022 and 2021, the Company had no significant uncertain

tax positions which would require either recognition of a liability or disclosure in the financial statements.

For United States entities,

tax year that remains subject to examination is the years ended December 31, 2022, 2021, 2020 and 2019.

For China entities, income tax

returns for the tax years ended December 31, 2018 through December 31, 2022 remain open for statutory examination by PRC tax authorities.

The Company recognizes interest and penalties related to significant uncertain income tax positions in income tax expense.

no such interest and penalties were recorded as of December 31, 2022 and 2021.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued )

Currency Translation

reporting currency of the Company is the U.S.

The functional currency of the parent company, AHS, Avalon RT 9, Genexosome, Avactis,

and Exosome, is the U.S.

dollar and the functional currency of Avalon Shanghai and Beijing Genexosome, is the Chinese Renminbi (“RMB”).

For the subsidiaries whose functional currency is the RMB, result of operations and cash flows are translated at average exchange rates

during the period, assets and liabilities are translated at the unified exchange rate at the end of the period, and equity is translated

at historical exchange rates.

As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not

necessarily agree with the changes in the corresponding balances on the balance sheets.

Translation adjustments resulting from the process

of translating the local currency financial statements into U.S.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (continued)

Foreign Currency Translation

The reporting

currency of the Company is the U.S.

The functional currency of the parent company, AHS, Avalon RT 9, Genexosome, Avactis, and

Exosome, is the U.S.

dollar and the functional currency of Avalon Shanghai is the Chinese Renminbi (“RMB”).

For the subsidiaries

whose functional currency is the RMB, result of operations and cash flows are translated at average exchange rates during the period,

assets and liabilities are translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange

As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with

the changes in the corresponding balances on the balance sheets.

Translation adjustments resulting from the process of translating the

local currency financial statements into U.S.

dollars are included in determining comprehensive income/loss.

denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates.

Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing

at the balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated

in a currency other than the functional currency are included in the results of operations as incurred.

All of the Company’s revenue

transactions are transacted in the functional currency of the operating subsidiaries.

The Company does not enter into any material transaction

in foreign currencies.

Transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations

of the Company.

and liability accounts at December 31, 2021 and 2020 were translated at 6.3559 RMB and 6.5306 RMB to $1.00, respectively, which were

the exchange rates on the balance sheet dates.

Transactions denominated

in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates.

liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance

sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency

other than the functional currency are included in the results of operations as incurred.

All of the Company’s revenue transactions

are transacted in the functional currency of the operating subsidiaries.

The Company does not enter into any material transaction in foreign

Transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of

liability accounts at December 31, 2022 and 2021 were translated at 6.8979 RMB and 6.3559 RMB to $1.00, respectively, which were the exchange

rates on the balance sheet dates.

Equity accounts were stated at their historical rates.

The average translation rates applied

to the statements of operations for the years ended December 31, 2021 and 2020 were 6.4515 RMB and 6.8999 RMB to $1.00, respectively.

Cash flows from the Company’s operations are calculated based upon the local currencies using the average translation rate.

Comprehensive

loss is comprised of net loss and all changes to the statements of equity, except those due to investments by stockholders, changes in

paid-in capital and distributions to stockholders.

For the Company, comprehensive loss for the years ended December 31, 2021 and 2020

consisted of net loss and unrealized gain from foreign currency translation adjustment.

Topic 260 “Earnings per Share,” requires presentation of both basic and diluted earnings per share (“EPS”) with

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

Basic EPS excludes dilution.

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

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

net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common

stock outstanding during the period.

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

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

The average translation rates applied to the

statements of operations for the years ended December 31, 2022 and 2021 were 6.7309 RMB and 6.4515 RMB to $1.00, respectively.

flows from the Company’s operations are calculated based upon the local currencies using the average translation rate.

Comprehensive Loss

Comprehensive loss is comprised of net loss and

all changes to the statements of equity, except those due to investments by stockholders, changes in paid-in capital and distributions

to stockholders.

For the Company, comprehensive loss for the years ended December 31, 2022 and 2021 consisted of net loss and unrealized

(loss) gain from foreign currency translation adjustment.

Per Share Data

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 years ended December

31, 2021 and 2020, potentially dilutive common shares consist of the common shares issuable upon the exercise of common stock options

(using the treasury stock method).

Common stock equivalents are not included in the calculation of diluted net loss per share if their

effect would be anti-dilutive.

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

the computation of diluted shares outstanding as they would have had an anti-dilutive impact.

GLOBOCARE CORP.

31, 2022 and 2021, potentially dilutive common shares consist of the common shares issuable upon the conversion of Series A convertible

preferred stock (using the if-converted method) and exercise of common stock options and warrants (using the treasury stock method).

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

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

as they would have had an anti-dilutive impact.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued )

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

potential shares was antidilutive:

Stock options

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (continued)

Per Share Data (continued)

The following table summarizes the securities

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

Years Ended December 31,

Options to purchase common stock

Warrants to purchase common stock

Convertible note (*)

Series A convertible preferred stock (**)

Potentially dilutive securities

Non-controlling

of December 31, 2021, Dr.

Yu Zhou, former director and former Co-Chief Executive Officer of Genexosome, who owns 40 % of the equity interests

of Genexosome, which is not under the Company’s control.

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

Company uses “the management approach” in determining reportable operating segments.

The management approach considers the

internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing

performance as the source for determining the Company’s reportable segments.

The Company’s chief operating decision maker

is the Chief Executive Officer (“CEO”) and president of the Company, who reviews operating results to make decisions about

allocating resources and assessing performance for the entire Company.

During the year ended December

31, 2021, the Company operates through two business segments:

real property operating segment and medical related consulting services

During the year ended December 31, 2020, the Company operates through three reportable business segments:

real property

operating segment, medical related consulting services segment, and development services and sales of developed products segment.

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

requires different operating strategies and management expertise.

are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are

controlled by, or are under common control with the Company.

Related parties also include principal owners of the Company, its management,

members of the immediate families of principal owners of the Company and its management and other parties with which the Company may

deal with if one party controls or can significantly influence the management or operating policies of the other to an extent that one

of the transacting parties might be prevented from fully pursuing its own separate interests.

The Company discloses all significant related

party transactions.

(*) Assumed the convertible note was converted into shares of common

stock of the Company at a conversion price of $ 6.5 per share.

(**) Assumed the Series A convertible preferred stock was converted

into shares of common stock of the Company at a conversion price of $ 10.0 per share.

Non-controlling Interest

As of December 31, 2022, Dr.

Yu Zhou, former director

and former Co-Chief Executive Officer of Genexosome, who owns 40 % of the equity interests of Genexosome, which is not under the Company’s

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

Segment Reporting

The Company uses “the management approach”

in determining reportable operating segments.

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

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

reportable segments.

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

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

During the years ended December 31, 2022 and 2021,

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

services segment.

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

as each requires different operating strategies and management expertise.

Due to the winding down of the medical related consulting services

segment in 2022, the Company decided to cease all operations of this segment and no longer has any material revenues or expenses in this

As a result, commencing from the first quarter of 2023, the Company’s chief operating decision maker no longer reviews

medical related consulting services operating results.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (continued)

Related Parties

Parties are considered to be related to the Company

if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with

Related parties also include principal owners of the Company, its management, members of the immediate families of principal

owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly

influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully

pursuing its own separate interests.

The Company discloses all significant related party transactions.

Reclassification

prior period amounts have been reclassified to conform to the current period presentation.

These reclassifications have no effect on

the previously reported financial position, results of operations and cash flows.

Certain prior period amounts have been reclassified

to conform to the current period presentation.

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

of operations and cash flows.

Fiscal Year End

Company has adopted a fiscal year end of December 31st.

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued )

Accounting Standards

June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (“Topic 326”).

Reverse Stock Split

The Company effected a one-for-ten

reverse stock split of its outstanding shares of common stock on January 5, 2023.

The reverse split did not change the number of authorized

shares of common stock or par value.

All references in these consolidated financial statements to shares, share prices, exercise prices,

and other per share information in all periods have been adjusted, on a retroactive basis, to reflect the reverse stock split.

Recent Accounting

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

1 unchanged sentence

and additional disclosures related to credit risk.

The CECL model utilizes a lifetime expected credit loss measurement objective for

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

ASU 2016-13 is effective for annual period

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

The Company expects that

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

December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes , as part of its Simplification Initiative

to reduce the cost and complexity in accounting for income taxes.

This standard removes certain exceptions related to the approach for

intra period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities

for outside basis differences.

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

The guidance is effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted.

of ASU 2019 – 12 did not have a material impact on the Company’s consolidated financial statements.

accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have

a material impact on the consolidated financial statements upon adoption.

The Company does not discuss recent pronouncements that are

not anticipated to have an impact on or are unrelated to its consolidated financial condition, results of operations, cash flows or disclosures.

4 – PREPAID EXPENSES AND OTHER CURRENT ASSETS

December 31, 2021 and 2020, prepaid expenses and other current assets consisted of the following:

Prepaid directors and officers

liability insurance premium

The CECL model utilizes a lifetime expected credit loss measurement objective for the

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

ASU 2016-13 is effective for annual period beginning

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

The Company expects that the adoption

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

Other accounting

standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material

impact on the consolidated financial statements upon adoption.

The Company does not discuss recent pronouncements that are not anticipated

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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – OTHER CURRENT AND

NON-CURRENT ASSETS

At December 31, 2022 and 2021, other current

and non-current assets consisted of the following:

Prepaid directors and officers liability insurance premium

Prepaid professional fees

Deferred financing costs, net

Recoverable VAT

Deferred leasing costs

Prepaid research and development fees

5 – PROPERTY AND EQUIPMENT

December 31, 2021 and 2020, property and equipment consisted of the following:

Security deposit

Equipment held for sale

Long-term straight-line rent receivable

Current portion

Non-current portion

NOTE 5 – PROPERTY AND EQUIPMENT

At December 31, 2022

and 2021, property and equipment consisted of the following:

Laboratory equipment

Office equipment and

Office equipment and furniture

accumulated depreciation

the years ended December 31, 2021 and 2020, depreciation expense of property and equipment amounted to $ 144,513 and $ 145,603 , respectively,

of which, $ 3,276 and $ 3,276 was included in real property operating expenses, $ 19,914 and $ 70,241 was included in other operating expenses,

and $ 121,323 and $ 72,086 was included in research and development expense, respectively.

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December

31, 2022 and 2021, depreciation expense of property and equipment amounted to $ 162,040 and $ 144,513 , respectively, of which, $ 2,987 and

$ 3,276 was included in real property operating expenses, $ 825 and $ 19,914 was included in other operating expenses, and $ 158,228 and $ 121,323

was included in research and development expense, respectively.

6 – INVESTMENT IN REAL ESTATE

December 31, 2021 and 2020, investment in real estate consisted of the following:

At December 31, 2022

and 2021, investment in real estate consisted of the following:

Commercial real property building

accumulated depreciation

the years ended December 31, 2021 and 2020, depreciation expense of this commercial real property amounted to $ 167,248 and $ 169,177 ,

which was included in real property operating expenses.

7 – EQUITY METHOD INVESTMENT

of December 31, 2021 and 2020, the equity method investment amounted to $ 515,632 and $ 521,758 , 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.

For the years ended December

31, 2022 and 2021, depreciation expense of this commercial real property amounted to $ 168,683 and $ 167,248 , which was included in real

property operating expenses.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – EQUITY

METHOD INVESTMENT

As of December

31, 2022 and 2021, the equity method investment amounted to $ 485,008 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,

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

2 unchanged sentences

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

Company treats the equity investment in the consolidated financial statements under the equity method.

treats the equity investment in the consolidated financial statements under the equity method.

Under the equity method, the investment

3 unchanged sentences

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

the years ended December 31, 2021 and 2020, the Company’s share of Epicon’s net loss was $ 60,463 and $ 51,673 , respectively,

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

the years ended December 31, 2021 and 2021, activity recorded for the Company’s equity method investment in Epicon is

summarized in the following table:

Equity investment carrying amount

at January 1, 2020

years ended December 31, 2022 and 2021, the Company’s share of Epicon’s net loss was $ 41,863 and $ 60,463 , respectively,

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

ended December 31, 2022 and 2021, activity recorded for the Company’s equity method investment in Epicon is summarized

in the following table:

Equity investment carrying amount at January 1, 2021

Payment made for equity method investment

Epicon’s net loss attributable to the

Epicon’s net loss attributable to the Company

Foreign currency fluctuation

1 unchanged sentence

Payment made for equity method investment

Epicon’s net loss attributable to the

Epicon’s net loss attributable to the Company

Foreign currency fluctuation

Equity investment carrying

amount at December 31, 2021

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

7 – EQUITY METHOD INVESTMENT (continued )

Equity investment carrying amount at December 31, 2022

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

2 unchanged sentences

Current liabilities

Noncurrent liabilities

For the Years Ended

Loss from operation

8 – ACCRUED LIABILITIES AND OTHER PAYABLES

December 31, 2021 and 2020, accrued liabilities and other payables consisted of the following:

Accrued tenants’ improvement

reimbursement

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – ACCRUED

LIABILITIES AND OTHER PAYABLES

At December 31, 2022

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

Accrued tenants’ improvement reimbursement

Tenants’ security deposit

Accrued business expense reimbursement

Accounts payable

Accrued utilities

Taxes payable

Deferred rental income

GLOBOCARE CORP.

Accrued real property cleaning service fee

Accrued equity offering costs

Taxes payable

NOTE 9 – CONVERTIBLE NOTE PAYABLE

On March 28, 2022, the

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

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

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

of 123,964 shares of common stock.

The 2022 Warrant is exercisable for five years at an exercise price of $ 12.5 .

financing closed with respect to:

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

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

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

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

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 88,984 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 21,986 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 6,661 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 6,333 shares of common stock dated May

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

TO CONSOLIDATED FINANCIAL STATEMENTS

9 – RELATED PARTY TRANSACTIONS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – 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 10).

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

model with the following assumptions:

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

and expected life of 10 years.

issued to the investor to purchase 123,964 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 573,645 shares of common stock

of the Company at a per share price of $ 6.5 (see Note 14 - 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.

year ended December 31, 2022, amortization of debt discount and interest expense related to the 2022 Convertible Note amounted to $ 3,281,078 and

$ 9,751 , which have been included in interest expense – amortization of debt discount and debt issuance cost and interest expense

– other, respectively, on the accompanying consolidated statements of operations and comprehensive loss.

NOTE 10 – DERIVATIVE LIABILITY

As stated in Note 9, 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

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

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.

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

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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – DERIVATIVE LIABILITY

Increases or decreases in fair

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

of operations and comprehensive loss.

The change to the derivative liability for the embedded conversion option resulted in a decrease

of $ 600,749 in the derivative liability and the corresponding increase in other income as a gain for the year ended December

There was no derivative liability in the year ended December 31, 2021.

NOTE 11 – 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 December 31, 2022,

the carrying balance of the 2022 Note Payable was $ 4,563,152 and the remaining unamortized debt issuance costs balance was $ 236,848 .

year ended December 31, 2022, amortization of debt issuance costs and interest expense related to the 2022 Note Payable amounted to $ 29,606

and $ 176,000 , which have been included in interest expense – amortization of debt discount and debt issuance cost and interest expense

– other, respectively, on the accompanying consolidated statements of operations and comprehensive loss.

NOTE 12 – RELATED PARTY TRANSACTIONS

Revenue from Related Party and Rent Receivable – Related Party

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

largest shareholder and chairman of the Board of Directors.

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

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

For the year ended December 31, 2021, the related party rental revenue amounted to $ 33,600 ,

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

December 31, 2021, the related party rent receivable totaled $ 33,600 and

no allowance for doubtful accounts was deemed to be required on rent receivable – related party at December 31, 2021.

Related Consulting Services Revenue from Related Parties

the years ended December 31, 2021 and 2020, medical related consulting services revenue from related parties was as follows:

The Company leases space of its commercial real

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 the years ended December 31, 2022 and 2021,

the related party rental revenue amounted to $ 50,400 and $ 33,600 , respectively, and has been included in real property rental on

the accompanying consolidated statements of operations and comprehensive loss.

The related party rent receivable totaled $ 74,100 and

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

at December 31, 2022 and 2021.

Medical Related Consulting

Services Revenue from Related Party

During the years ended December 31, 2022 and 2021,

medical related consulting services revenue from related party was as follows:

Years Ended December 31,

Medical related consulting services provided to:

Daopei and Shanghai Daopei are subsidiaries of an entity whose chairman is Wenzhao Lu, the

largest shareholder of the Company.

Services Provided by Related Party

Hebei Daopei *

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

Wenzhao Lu, the largest shareholder of the Company.

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 $ 216,169 and $ 282,582 for the years ended December 31, 2021 and 2020, respectively, which have been

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

Liabilities and Other Payables – Related Parties

recognized consulting expenses of $ 144,064 and $ 216,169 for the years ended December 31, 2022 and 2021, respectively, which

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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 – RELATED PARTY TRANSACTIONS

Accrued Liabilities and Other Payables –

Related Parties

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

As of December 31, 2021 and 2020, 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 consolidated balance sheets.

of December 31, 2021 and 2020, the accrued and unpaid interest related to borrowings from Wenzhao Lu, the Company’s largest shareholder

and chairman of the Board of Directors, amounted to $ 368,433 and $ 167,956 , respectively, and have been included in accrued liabilities

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

from Related Party

March 18, 2019, the Company issued Wenzhao Lu, the Company’s largest shareholder and Chairman of the Board of Directors, a Promissory

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

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

In March 2022, the Company and Wenzhao

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

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

of December 31, 2021 and 2020, the outstanding principal balance was $ 390,000 .

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

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

As of December 31, 2022 and 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 consolidated balance sheets.

As of December

31, 2022 and 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 consolidated balance sheets.

Borrowings from Related Party

Promissory Note

On March 18, 2019, the

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

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

The Promissory Note accrues

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

In March 2022, the Company and Wenzhao Lu entered into a Loan Extension

and Modification Agreement (the “Extension”) to extend the maturity date to March 19, 2024 .The Company repaid principal of

$ 410,000 , $ 200,000 and $ 390,000 in the third quarter of 2019, second quarter of 2020 and second quarter of 2022, respectively.

As of December

31, 2022 and 2021, the outstanding principal balance was $ 0 and $ 390,000 , respectively.

Line of Credit

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.

8 unchanged sentences

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.

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

9 – RELATED PARTY TRANSACTIONS (continued )

from Related Party (continued)

of Credit (continued)

the years ended December 31, 2021 and 2020, activity recorded for the Line of Credit is summarized in the following table:

Outstanding principal under the

Line of Credit at January 1, 2020

Draw down from Line

Outstanding principal under the Line of Credit

at December 31, 2020

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 years ended December 31, 2022 and 2021,

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

Outstanding principal under the Line of Credit at January 1, 2021

Draw down from Line of Credit

Settlement pursuant

to Debt Settlement Agreement and Release *

Settlement of Line of Credit in shares

( 3,000,000 )

Outstanding principal

under the Line of Credit at December 31, 2021

On December 21, 2021, the Company and Mr.

Lu entered into and closed a Debt Settlement Agreement and Release pursuant to which the $3.0

million debt was settled by issuance of the Company’s 2,400,000 shares of common stock (See Note 11 – Common Shares Issued

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

The 2.4 million shares issued had a fair value of $ 3 million.

the years ended December 31, 2021 and 2020, the interest expense related to above borrowings amounted to $ 200,477 and $ 168,762 , respectively,

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

of December 31, 2021 and 2020, the related accrued and unpaid interest for above borrowings was $ 368,433 and $ 167,956 , respectively,

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

Shares Sold to Related Party

April 1, 2020, the Company sold 645,161 shares of its common stock to WLM Limited (“WLM”), an entity owned by Wenzhao Lu,

Chairman of the Board of Directors of the Company, at a price per share of $ 1.55 , the fair market value on transaction date, for an aggregate

purchase price of $ 1,000,000 (See Note 11 – Common Shares Sold for Cash).

10 – INCOME TAXES

Company is governed by the Income Tax Law of the PRC and the U.S.

Outstanding principal under the Line of Credit at December 31, 2021

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 December 31, 2022

years ended December 31, 2022 and 2021, the interest expense related to above borrowings amounted to $ 79,898 and $ 200,477 , respectively,

and has been reflected as interest expense – related party on the accompanying consolidated statements of operations and comprehensive

As of December

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

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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 – RELATED PARTY TRANSACTIONS

Common Shares Sold

to Related Party for Cash

On August 5, 2022, the Company sold 44,872 shares

of its common stock at a purchase price of $ 7.8 per share, the fair market value on transaction date, to Wenzhao Lu pursuant to a subscription

The Company received proceeds of $ 350,000 (See Note 14 – Common Shares Sold for

Series A Convertible

Preferred Stock Sold to Related Party for Cash

On December 14, 2022,

the Company entered into a Securities Purchase Agreement with Wenzhao Lu, the Company’s Chairman of the Board, pursuant to which

the Company sold to Mr.

Lu 4,000 shares of its Series A Preferred Stock, stated value $ 1,000 , for the gross proceeds of $ 4,000,000 (See

Note 14 – Series A Convertible Preferred Stock Sold for Cash).

NOTE 13 – INCOME TAXES

is governed by the Income Tax Law of the PRC and the U.S.

Internal Revenue Code of 1986, as amended.

Under the Income Tax Laws

of PRC, Chinese companies are generally subject to an income tax at an effective rate of 25 % on income reported in the statutory financial

statements after appropriate tax adjustments.

The Company has a cumulative deficit from its foreign subsidiaries of $ 2,591,758 as of

December 31, 2021, which is included in the consolidated accumulated deficit.

Company’s loss before income taxes includes the following components:

United States loss before income

Under the Income Tax Laws of PRC,

Chinese companies are generally subject to an income tax at an effective rate of 25 % on income reported in the statutory financial statements

after appropriate tax adjustments.

The Company has a cumulative deficit from its foreign subsidiary of $ 2,356,797 as of December 31, 2022,

which is included in the consolidated accumulated deficit.

The Company’s

loss before income taxes includes the following components:

Years Ended December 31,

United States loss before income taxes

$ ( 11,567,154 )

$ ( 8,504,426 )

China loss before income

loss before income taxes

China loss before income taxes

Total loss before income taxes

$ ( 11,930,847 )

$ ( 9,090,499 )

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

10 – INCOME TAXES (continued )

of income taxes expense (benefit) consisted of the following:

Components of income taxes expense (benefit) consisted

of the following:

Years Ended December 31,

state and local

current income taxes expense

Total current income taxes expense

$ ( 1,729,700 )

1 unchanged sentence

state and local

deferred income taxes (benefit)

Total deferred income taxes (benefit)

$ ( 2,105,521 )

$ ( 2,575,183 )

in valuation allowance

income taxes expense

table below summarizes the differences between the U.S.

statutory rate and the Company’s effective tax rate for the years ended

December 31, 2021 and 2020:

Change in valuation allowance

Total income taxes expense

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 – INCOME TAXES (continued)

The table below summarizes the differences between

statutory rate and the Company’s effective tax rate for the years ended December 31, 2022 and 2021:

Years Ended December 31,

Permanent difference

Non-US rate differential

Prior year true-up

valuation allowance

Total provision for income

the years ended December 31, 2021 and 2020, the Company did not incur any income taxes expense since it did not generate any taxable

income in those periods.

The Company’s foreign entities did not pay any income taxes during the years ended December 31, 2021 and

The Company’s components of deferred taxes as of December 31, 2021 and 2020 were as follows:

Total provision for income taxes

For the years ended December 31, 2022 and 2021, the

Company did not incur any income taxes expense since it did not generate any taxable income in those periods.

The Company’s foreign

entities did not pay any income taxes during the years ended December 31, 2022 and 2021.

The Company’s components of deferred taxes

as of December 31, 2022 and 2021 were as follows:

December 31, 2022

December 31, 2021

Deferred tax assets

Disallowed business

interest deduction

Accrued directors’

Stock-based compensation

Disallowed business interest deduction

Accrued directors’ compensation

Accrued settlement

Lease liability

operating loss carryforward

Total deferred tax assets,

Net operating loss carryforward

Total deferred tax assets, gross

Valuation allowance

1 unchanged sentence

( 15,224,188 )

Total deferred tax assets,

Deferred tax liabilities

Fixed assets and intangible

assets book/tax basis difference

Total deferred tax assets, net

Deferred tax liabilities

Fixed assets and intangible assets book/tax basis difference

Right-of-use assets

Total deferred tax liabilities

$ ( 119,014 )

1 unchanged sentence

Net deferred tax assets

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

10 – INCOME TAXES (continued )

As of December 31, 2021 and 2020, the Company’s

both federal and state net operating loss carryforwards amounted to $ 38,420,422 and $ 30,557,167 , respectively.

As of December

the Company has $35,932,868 of U.S.

federal net operating loss carryovers that have no expiration date, and $2,487,554 of the federal

net operating loss and state net operating loss carry-forwards begin to expire in 2034.

of December 31, 2021, the Company had net operating loss carryforwards in China of $ 2,566,087 that begin to expire in 2022.

31, 2022 and 2021, the Company’s both federal and state net operating loss carryforwards amounted to $ 46,969,776 and $ 38,420,422 ,

respectively.

As of December 31, 2022, the Company has $44,482,221 of U.S.

federal net operating loss carryovers that have no

expiration date, and $2,487,555 of the federal net operating loss and state net operating loss carry-forwards begin to expire in 2034.

As of December

31, 2022, the Company had net operating loss carryforwards in China of $ 1,726,863 that begin to expire in 2023.

Additionally,

as of December 31, 2021, $ 61,847 of the future utilization of the net operating loss carryforward to offset future taxable income is

subject to special tax rules which may limit their usage under IRS Section 382 (Change of Ownership) and possibly the Separate Return

as of December 31, 2022, $ 61,847 of the future utilization of the net operating loss carryforward to offset future taxable income

is subject to special tax rules which may limit their usage under IRS Section 382 (Change of Ownership) and possibly the Separate Return

Limitation Year (“SRLY”) rules.

full valuation allowance has been provided against the Company’s deferred tax assets at December 31, 2021 as the Company believes

it is more likely than not that sufficient taxable income will not be generated to realize these temporary differences.

Company has been notified and assessed an IRS Section 6038 penalty of $ 10,000 for failure to file a foreign entity tax disclosure.

Company has appealed the penalty and awaits the Internal Revenue Service’s review of the appeal.

There is no assurance such appeal

will be successful.

Company has not been audited by any jurisdiction since its inception.

A full valuation

allowance has been provided against the Company’s deferred tax assets at December 31, 2022 as the Company believes it is more likely

than not that sufficient taxable income will not be generated to realize these temporary differences.

has been notified and assessed an IRS Section 6038 penalty of $ 10,000 for failure to file a foreign entity tax disclosure.

has appealed the penalty and awaits the Internal Revenue Service’s review of the appeal.

There is no assurance such appeal will

be successful.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 – INCOME TAXES (continued)

has not been audited by any jurisdiction since its inception.

The Company is open for audit by the U.S.

Internal Revenue Service

Internal Revenue Service and U.S.

state tax jurisdictions from 2019 to 2022, and open for audit by the Chinese Ministry of Finance from 2018 to 2022.

were no material uncertain tax positions as of December 31, 2021 and 2020.

no material uncertain tax positions as of December 31, 2022 and 2021.

The Company recognizes interest and penalties related to unrecognized

2 unchanged sentences

in a tax position.

Shares Sold for Cash

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

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

Jefferies, shares of its common stock.

During the year ended December 31, 2021, Jefferies sold an aggregate of 2,206,838 shares

of common stock at an average price of $ 1.30 per share to investors and the Company recorded net proceeds of $ 2,553,409 , net of

commission and other offering costs of $ 306,895 .

During the year ended December 31, 2020, Jefferies sold an aggregate of 3,913,413 shares

of common stock at an average price of $ 1.74 per share to investors and the Company recorded net proceeds of $ 6,405,475 , net of commission

and other offering costs of $ 398,624 .

April 1, 2020, the Company entered into a Subscription Agreement with WLM, an entity owned by Wenzhao Lu, Chairman of the Board of Directors

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

fair market value on transaction date, for an aggregate purchase price of $ 1,000,000 .

The closing occurred on April 1, 2020 (See Note

9 - Common Shares Sold to Related Party).

Shares Issued for Services

the year ended December 31, 2021, the Company issued a total of 1,405,679 shares of its common stock for services rendered

and to be rendered.

These shares were valued at $ 1,507,488 , the fair market values on the grant dates using the reported closing share

prices on the dates of grant, and the Company recorded stock-based compensation expense of $ 1,075,756 for the year ended December

31, 2021 and reduced accrued liabilities of $ 276,032 and recorded prepaid expense of $ 155,700 as of December 31, 2021 which

will be amortized over the rest of corresponding service periods.

the year ended December 31, 2020, the Company issued a total of 1,505,921 shares of its common stock for services rendered and to be

These shares were valued at $ 1,892,520 , the fair market values on the grant dates using the reported closing share prices on

the dates of grant and the Company recorded stock-based compensation expense of $ 1,670,166 for the year ended December 31, 2020 and reduced

accrued liabilities of $ 187,725 and recorded prepaid expense of $ 34,629 as of December 31, 2020 which will be amortized over the rest

of corresponding service periods.

GLOBOCARE CORP.

NOTE 14 – EQUITY

Series A Convertible

Preferred Stock

As described in Note

20 - Amended and Restated Membership Interest Purchase Agreement, in conjunction with the transaction, on November 3, 2022 the Company

filed a Certificate of Designation of Preferences, Rights and Limitations of the Series A Preferred Stock (the “Series A Certificate

of Designation”), which became effective immediately with the Secretary of State of the State of Delaware.

Pursuant to the Series

A Certificate of Designation, the Company designated up to 15,000 shares of the Company’s previously undesignated preferred stock

as Series A Preferred Stock.

Each share of Series A Preferred Stock shall have a par value of $ 0.0001 per share and a stated value equal

to $ 1,000 (the “Series A Stated Value”).

The shares of Series

A Preferred Stock have identical terms and include the terms as set forth below.

Series A Holders are entitled to receive, and the Company shall pay, dividends on shares of Series A Preferred Stock equal (on an as-if-converted-to-common-stock

basis, disregarding for such purpose any conversion limitations set forth in the Series A Certificate of Designations) to and in the same

form as dividends actually paid on shares of the Company’s common stock when, as and if such dividends are paid on shares of the

common stock.

No other dividends shall be paid on shares of Series A Preferred Stock.

The Company will not pay any dividends on its common

stock unless the Company simultaneously complies with the terms set forth in the Series A Certificate of Designation.

any dissolution, liquidation or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”), the Series

A Holders will be entitled to receive out of the assets available for distribution to the stockholders, (i) after and subject to the payment

in full of all amounts required to be distributed to the holders of another class or series of stock of the Company ranking on liquidation

prior and in preference to the Series A Preferred Stock, (ii) ratably with any class or series of stock ranking on liquidation on parity

with the Series A Preferred Stock and (iii) in preference and priority to the holders of the shares of the Company’s common stock,

an amount equal to 100% of the Series A Stated Value, and no more, in proportion to the full and preferential amount that all shares of

the Series A Preferred Stock are entitled to receive.

The Company shall mail written notice of any Liquidation not less than twenty (20)

days prior to the payment date stated therein, to each Series A Holder.

share of Series A Preferred Stock shall be convertible, at any time and from time to time from and after the later of (i) the date of

the stockholder approval as described above, in accordance with the Nasdaq Stock Market Listing Rules, and (ii) the nine (9) month anniversary

of the Closing (the “Initial Conversion Date”), at the option of the Series A Holder, into that number of shares of common

stock (subject to the limitations set forth in Series A Certificate of Designations, determined by dividing the Stated Value of such share

of Series A Preferred Stock by the Conversion Price (as defined below)).

The Series A Holders may effect conversions by providing the

Company with the form of conversion notice attached as Annex A to the Series A Certificate of Designation.

The Series A Holders may convert

such shares into shares of the Company’s common stock at a conversion price per share equal to the greater of (i) ten dollars ($ 10.0 )

and (ii) ninety percent ( 90 %) of the closing price of the Company’s common stock on Nasdaq on the day prior to receipt of a conversion

notice (collectively, the “Conversion Price”), subject to adjustment for stock splits and similar matters.

In addition, following

the Initial Conversion Date, each Series A Holder agrees that it shall not be entitled to in any calendar month, sell a number of Series

A Conversion Shares into the open market in an amount exceeding more than ten percent ( 10 %) of the number of Series A Conversion Shares

issuable upon conversion of the Series A Preferred Stock then held by such Series A Holder.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

11 – EQUITY (continued )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – EQUITY

Series A Convertible

Preferred Stock (continued)

Conversion Price Adjustment:

Stock Dividends and

Stock Splits.

If the Company, at any time while the Series A Preferred Stock is outstanding:

(i) pays a stock dividend or otherwise

makes a distribution or distributions payable in shares of common stock on shares of common stock or any other common stock equivalents

(which, for avoidance of doubt, shall not include any shares of common stock issued by the Company upon conversion of, or payment of a

dividend on, the Series A Preferred Stock), (ii) subdivides outstanding shares of common stock into a larger number of shares, (iii) combines

(including by way of a reverse stock split) outstanding shares of common stock into a smaller number of shares, or (iv) issues, in the

event of a reclassification of shares of the common stock, any shares of capital stock of the Company, then the conversion price of the

Series A Preferred Stock shall be multiplied by a fraction of which the numerator shall be the number of shares of common stock (excluding

any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares

of common stock outstanding immediately after such event.

Any of the foregoing adjustments shall become effective immediately after the

record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately

after the effective date in the case of a subdivision, combination or re-classification.

Fundamental Transaction.

If, at any time while the Series A Preferred Stock is outstanding, (i) the Company, directly or indirectly, in one or more related transactions

effects any merger or consolidation of the Company with or into another individual or corporation, partnership, trust, incorporated or

unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof)

or other entity of any kind (a “Person”), (ii) the Company (and all of its subsidiaries, taken as a whole), directly or indirectly,

effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one

or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company

or another Person) is completed pursuant to which holders of the Company’s common stock are permitted to sell, tender or exchange

their shares for other securities, cash or property and has been accepted by the holders of fifty percent ( 50 %) or more of the outstanding

common stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization

or recapitalization of the common stock or any compulsory share exchange pursuant to which the common stock is effectively converted into

or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates

a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization,

spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than fifty percent ( 50 %) of the outstanding

shares of common stock (not including any shares of common stock held by the other Person or other Persons making or party to, or associated

or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a

“Fundamental Transaction”), then, the Series A Holder shall have the right to receive, for each conversion share that would

have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation

set forth in the Series A Certificate of Designation on the conversion of the Series A Preferred Stock), the number of shares of common

stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and/or any additional consideration

(the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares

of common stock for which the Series A Preferred Stock is convertible immediately prior to such Fundamental Transaction (without regard

to the limitations set forth in the Series A Certificate of Designation on the conversion of the Series A Preferred Stock).

of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration

based on the amount of Alternate Consideration issuable in respect of one share of common stock in such Fundamental Transaction, and the

Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of

any different components of the Alternate Consideration.

If holders of common stock are given any choice as to the securities, cash or

property to be received in a Fundamental Transaction, then the Series A Holder shall be given the same choice as to the Alternate Consideration

it receives upon such Fundamental Transaction.

Voting Rights.

The Series A Holders will have no voting rights, except as otherwise required by the Delaware General Corporation Law.

Notwithstanding

the foregoing, as long as any shares of Series A Preferred Stock are outstanding, the Company shall not, without the affirmative vote

of the holders of a majority of the then outstanding shares of Series A Preferred Stock, voting as a separate class, (a) alter or change

adversely the powers, preferences or rights given to the Series A Preferred Stock in the Series A Certificate of Designation, (b) increase

the number of authorized shares of Series A Preferred Stock, (c) authorize or issue an additional class or series of capital stock that

ranks senior to the Series A Preferred Stock with respect to the distribution of assets on liquidation or (d) enter into any agreement

with respect to any of the foregoing.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – EQUITY

Series A Convertible

Preferred Stock (continued)

Fractional Shares.

No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Series A Preferred Stock.

any fraction of a share of Company common stock which a Series A Holder would otherwise be entitled to upon such conversion, the Company

will, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by

the Conversion Price or round up to the next whole share.

Notwithstanding the foregoing, nothing shall prevent any Series A Holder from

converting fractional shares of Series A Preferred Stock.

Series B Convertible

Preferred Stock

As described in Note

20 - Amended and Restated Membership Interest Purchase Agreement, in conjunction with the transaction, on February 9, 2023, the Company

filed a Certificate of Designation of Preferences, Rights and Limitations of the Series B Preferred Stock (the “Series B Certificate

of Designation”), which became effective immediately with the Secretary of State of the State of Delaware.

The Company designated

up to 15,000 shares of the Company’s previously undesignated preferred stock as Series B Preferred Stock.

Each share of Series B

Preferred Stock shall have a par value of $ 0.0001 per share and a stated value equal to $ 1,000 (the “Series B Stated Value”).

The shares of Series

B Preferred Stock have identical terms and include the terms as set forth below.

Series B Holders shall be entitled to receive, and the Company shall pay, dividends on shares of Series B Preferred Stock equal (on an

as-if-converted-to-common-stock basis, disregarding for such purpose any conversion limitations set forth in the Series B Certificate

of Designations) to and in the same form as dividends actually paid on shares of the Company’s common stock when, as and if such

dividends are paid on shares of the common stock.

No other dividends shall be paid on shares of Series B Preferred Stock.

will not pay any dividends on its common stock unless the Company simultaneously complies with the terms set forth in the Series B Certificate

of Designation.

B Preferred Stock will rank subordinate to the shares of the Company’s Series A Preferred Stock.

any Liquidation, the Series B Holders will be entitled to receive out of the assets available for distribution to stockholders, (i) after

and subject to the payment in full of all amounts required to be distributed to the holders of another class or series of stock of the

Company ranking on liquidation prior and in preference to the Series B Preferred Stock, including the Series A Preferred Stock, (ii) ratably

with any class or series of stock ranking on liquidation on parity with the Series B Preferred Stock and (iii) in preference and priority

to the holders of the shares of common stock, an amount equal to one hundred percent ( 100 %) of the Series B Stated Value and no more,

in proportion to the full and preferential amount that all shares of the Series B Preferred Stock are entitled to receive.

shall mail written notice of any such Liquidation not less than twenty (20) days prior to the payment date stated therein, to each Series

share of Series B Preferred Stock shall be convertible, at any time and from time to time from and after the later of (i) the date of

the stockholder approval and (ii) the one year anniversary of the Closing Date (the “Lock Up Period”), at the option of the

Series B Holder thereof, into that number of shares of common stock (subject to the limitations set forth in Series B Certificate of Designation

determined by dividing the Series B Stated Value of such share of Series B Preferred Stock by the conversion price of the Series B Preferred

Series B Holders may effect conversions by providing the Company with the form of conversion notice attached as Annex A to the

Series B Certificate of Designation.

The Series B Preferred Stock will be convertible into shares of the Company’s common stock

at a conversion price per share equal to $ 3.78 , subject to the adjustments set forth in the Series B Certificate of Designation.

Notwithstanding

the foregoing or the transactions contemplated by the Amended MIPA, until the consummation of the Lock Up Period, the Series B Holders

shall not, directly or indirectly, sell, transfer or otherwise dispose of any Series B Preferred Stock issued upon conversion of the Series

B Conversion Shares or pursuant to the Equity Earnout Payment (the “Restricted Securities”) without Company’s prior

written consent;

provided, however, the Series B Holders may sell, transfer or otherwise dispose of Restricted Securities to an Affiliate,

as defined in the Amended MIPA, of a Series B Holder without Company’s prior written consent;

provided, further, that such Series

B Holder provide prompt written notice to Company of such transfer, including the name and contact information of the Affiliate transferee,

and such Affiliate transferee agrees in writing to be bound by the terms of the transaction documents contemplated by the Amended MIPA

to which the Series B Holder is a party (which agreement shall also be provided to Company with such notice).

After the expiration of

the Lock Up Period, the Series B Holder agrees that it and any of its Affiliate transferees shall not be entitled to in any calendar month,

sell a number of shares of Company common stock into the open market in an amount exceeding more than ten percent ( 10 %) of the total number

of shares of Company common stock issuable upon conversion of the Company common stock then held by the Seller and its Affiliates.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – EQUITY

Series B Convertible

Preferred Stock (continued)

Conversion Price Adjustment:

Stock Dividends and

Stock Splits.

If the Company, at any time while the Series B Preferred Stock is outstanding:

(i) pays a stock dividend or otherwise

makes a distribution or distributions payable in shares of common stock on shares of common stock or any other common stock equivalents

(which, for avoidance of doubt, shall not include any shares of common stock issued by the Company upon conversion of, or payment of a

dividend on, the Series B Preferred Stock), (ii) subdivides outstanding shares of common stock into a larger number of shares, (iii) combines

(including by way of a reverse stock split) outstanding shares of common stock into a smaller number of shares, or (iv) issues, in the

event of a reclassification of shares of the common stock, any shares of capital stock of the Company, then the conversion price of the

Series B Preferred Stock shall be multiplied by a fraction of which the numerator shall be the number of shares of common stock (excluding

any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares

of common stock outstanding immediately after such event.

Any of the foregoing adjustments shall become effective immediately after the

record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately

after the effective date in the case of a subdivision, combination or re-classification.

Fundamental Transaction.

If, at any time while the Series B Preferred Stock is outstanding, (i) the Company, directly or indirectly, in one or more related transactions

effects any merger or consolidation of the Company with or into another Person, (ii) the Company (and all of its subsidiaries, taken as

a whole), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially

all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange

offer (whether by the Company or another Person) is completed pursuant to which holders of the Company’s common stock are permitted

to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of fifty percent

( 50 %) or more of the outstanding common stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any

reclassification, reorganization or recapitalization of the common stock or any compulsory share exchange pursuant to which the common

stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in

one or more related transactions consummates a Fundamental Transaction, then, at the closing of such Fundamental Transaction, without

any action on the part of the Series B Holder, the Series B Holder shall have the right to receive, for each conversion share that would

have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation

in the Series B Certificate of Designation on the conversion of the Series B Preferred Stock), the number of shares of common stock of

the successor or acquiring corporation or of the Company, if it is the surviving corporation, and/or any Alternate Consideration receivable

as a result of such Fundamental Transaction by a holder of the number of shares of common stock for which the Series B Preferred Stock

is convertible immediately prior to such Fundamental Transaction (without regard to the limitations set forth in the Series B Certificate

of Designation on the conversion of the Series B Preferred Stock).

For purposes of any such conversion, the determination of the conversion

price of the Series B Preferred Stock shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of

Alternate Consideration issuable in respect of one share of common stock in such Fundamental Transaction, and the Company shall apportion

the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components

of the Alternate Consideration.

If holders of common stock are given any choice as to the securities, cash or property to be received

in a Fundamental Transaction, then the Series B Holder shall be given the same choice as to the Alternate Consideration it receives upon

such Fundamental Transaction.

Voting Rights .

The Series B Holders will have no voting rights, except as otherwise required by the Delaware General Corporation Law.

Notwithstanding

the foregoing, in addition, as long as any shares of Series B Preferred Stock are outstanding, the Company shall not, without the affirmative

vote of the holders of a majority of the then outstanding shares of the Series B Preferred Stock, voting as a separate class, (a) alter

or change adversely the powers, preferences or rights given to the Series B Preferred Stock in the Series B Certificate of Designation,

(b) increase the number of authorized shares of Series B Preferred Stock, (c) except with respect to the Series A Preferred Stock, authorize

or issue an additional class or series of capital stock that ranks senior to the Series B Preferred Stock with respect to the distribution

of assets on liquidation or (d) enter into any agreement with respect to any of the foregoing.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – EQUITY

Series B Convertible

Preferred Stock (continued)

Fractional Shares.

No fractional shares

or scrip representing fractional shares shall be issued upon the conversion of the Series B Preferred Stock.

As to any fraction of a share

which a Series B Holder would otherwise be entitled to upon such conversion, the Company shall at its election, either pay a cash adjustment

in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole

Notwithstanding the foregoing, nothing shall prevent any Series B Holder from converting fractional shares of Series B Preferred

Series A Convertible

Preferred Stock Sold for Cash

During the year ended

December 31, 2022, the Company sold an aggregate of 9,000 shares of Series A Preferred stock and received proceeds of $ 9,000,000 .

share of Series A Preferred Stock shall be convertible, at any time and from time to time from and after the later of (i) the date of

the stockholder approval, in accordance with the Nasdaq Stock Market Listing Rules, and (ii) the nine (9) month anniversary of the Closing

(the “Initial Conversion Date”), at the option of the Series A Holder, into that number of shares of common stock (subject

to the limitations set forth in Series A Certificate of Designations, determined by dividing the Stated Value of such share of Series

A Preferred Stock by the Conversion Price).

The Series A Holders may convert such shares into shares of the Company’s common stock

at a conversion price per share equal to the greater of (i) ten dollars ($ 10.0 ) and (ii) ninety percent ( 90 %) of the closing price of

the Company’s common stock on Nasdaq on the day prior to receipt of a conversion notice (collectively, the “Conversion Price”),

subject to adjustment for stock splits and similar matters.

The Company evaluated the features of the Series A Convertible Preferred

Stock under ASC 480, and classified them as permanent equity because the Series A Convertible Preferred Stock is not mandatorily or contingently

redeemable at the stockholder’s option and the liquidation preference that exists does not fall within the guidance of SEC Accounting

Series Release No.

268 – Presentation in Financial Statements of “Redeemable Preferred Stocks” (“ASR

Common Shares Sold

On December 13, 2019, the Company entered into

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

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

During the year ended

December 31, 2022, Jefferies sold an aggregate of 17,064 shares of common stock at an average price of $ 7.9 per share to investors and

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

the year ended December 31, 2021, Jefferies sold an aggregate of 220,684 shares of common stock at an average price of $ 13.0 per

share to investors and the Company recorded net proceeds of $ 2,553,409 , net of commission and other offering costs of $ 306,895 .

On August 5, 2022, the Company sold 44,872 shares

of its common stock at a purchase price of $ 7.8 per share, the fair market value on transaction date, to Wenzhao Lu pursuant to a subscription

The Company received proceeds of $ 350,000 (see Note 12 - Common Shares Sold to Related Party for Cash).

On August 5, 2022, the Company sold 32,051 shares

of its common stock at a purchase price of $ 7.8 per share to an investor pursuant to a subscription agreement.

The Company received proceeds

of $ 250,000 .

Common Shares Issued

During the year ended December 31, 2022, the Company

issued a total of 40,896 shares of its common stock for services 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 $ 310,950 for the year ended December 31, 2022 and reduced accrued liabilities of $ 30,000 .

During the year ended December 31, 2021, the Company

issued a total of 140,568 shares of its common stock for services rendered and to be rendered.

These shares were valued at $ 1,507,488 ,

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

compensation expense of $ 1,075,756 for the year ended December 31, 2021 and reduced accrued liabilities of $ 276,032 and recorded

prepaid expense of $ 155,700 as of December 31, 2021 which will be amortized over the rest of corresponding service periods.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – EQUITY

Shares Issued for Settlement of Accrued Professional Fees

June 2021, the Company issued 167,355 shares of its common stock to settle accrued and unpaid professional fees of $ 202,500 .

The 167,355 shares issued had a fair value of $ 202,500 .

2021, the Company issued 16,736 shares of its common stock to settle accrued and unpaid professional fees of $ 202,500 .

The 16,736 shares

issued had a fair value of $ 202,500 .

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 573,645 shares of

common stock of the Company at a per share price of $ 6.5 (see Note 9).

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 444,399 shares of common

stock of the Company (see Note 12 - Borrowings from Related Party – 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 Mr.

relationship with the Company.

December 21, 2021, the Company and Mr.

2 unchanged sentences

– Borrowings from Related Party – Line of Credit ).

The 2.4 million shares issued had a fair value of $ 3 million.

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

Outstanding at

Contractual Life

Exercisable at

The 240,000 shares issued had a fair market value of $ 3 million.

The following table summarizes the shares of the

Company’s common stock issuable upon exercise of options outstanding at December 31, 2022:

Options Outstanding

Options Exercisable

Range of Exercise Price

Number Outstanding at December 31, 2022

Weighted Average Remaining Contractual Life (Years)

Weighted Average Exercise Price

Number Exercisable at December 31, 2022

Weighted Average Exercise Price

$ 4.25 – 8.20

option activities for the years ended December 31, 2021 and 2020 were as follows:

10.20 – 20.00

23.00 – 28.00

$ 4.25 – 47.60

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – EQUITY

Options (continued)

Stock option activities

for the years ended December 31, 2022 and 2021 were as follows:

Number of Options

Weighted Average Exercise Price

Outstanding at January 1, 2021

Outstanding at December 31, 2021

Forfeited / Expired

Outstanding at December 31, 2022

1 unchanged sentence

Options expected to vest

aggregate intrinsic value of both stock options outstanding and stock options exercisable at December 31, 2021 was $ 640,000 .

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

11 – EQUITY (continued )

fair values of options granted during the year ended December 31, 2021 were estimated at the date of grant using the Black-Scholes option-pricing

model with the following assumptions:

volatility of 119.21 % - 128.42 %, risk-free rate of 0.33 % - 1.20 %, annual dividend

yield of 0 %, and expected life of 3.00 - 5.00 years.

The aggregate fair value of the options granted during

the year ended December 31, 2021 was $726,952.

fair values of options granted during the year ended December 31, 2020 were estimated at the date of grant using the Black-Scholes option-pricing

The aggregate intrinsic value of stock options

outstanding and stock options exercisable at December 31, 2022 was $ 59,000 and $ 40,634 , respectively.

The fair values of options granted during the

year ended December 31, 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 % - 4.48 %, annual dividend yield of 0 %, and expected life of 3 .00 - 5 .00 years.

aggregate fair value of the options granted during the year ended December 31, 2022 was $ 421,428 .

values of options granted during the year ended December 31, 2021 were estimated at the date of grant using the Black-Scholes option-pricing

model with the following assumptions:

volatility of 131.16% - 139.58%, risk-free rate of 0.20% - 1.67%, annual dividend yield of 0%,

and expected life of 3.00 – 10.00 years.

The aggregate fair value of the options granted during the year ended December 31, 2020

was $2,878,773.

compensation expense associated with stock options granted amounted to $ 769,334 and $ 2,966,052 , of which, $ 544,785 and $ 2,669,729 was

recorded as compensation and related benefits, $ 157,207 and $ 240,354 was recorded as professional fees, and $ 67,342 and $ 55,969 was recorded

as research and development expenses, for the years ended December 31, 2021 and 2020, respectively.

summary of the status of the Company’s nonvested stock options granted as of December 31, 2021 and changes during the years ended

December 31, 2021 and 2020 is presented below:

volatility of 119.21 % - 128.42 %, risk-free rate of 0.33 % - 1.20 %, annual dividend yield of 0 %, and

expected life of 3.00 - 5.00 years.

The aggregate fair value of the options granted during the year ended December 31, 2021 was $ 726,952 .

For the years ended December 31, 2022 and 2021,

stock-based compensation expense associated with stock options granted amounted to $ 358,113 and $ 769,334 , of which, $ 234,856 and $ 544,785

was recorded as compensation and related benefits, $ 84,064 and $ 157,207 was recorded as professional fees, and $ 39,193 and $ 67,342 was

recorded as research and development expenses, respectively.

A summary of the status of the Company’s

nonvested stock options granted as of December 31, 2022 and changes during the years ended December 31, 2022 and 2021 is presented below:

Number of Options

Weighted Average Exercise Price

Nonvested at January 1, 2021

( 2,006,389 )

Nonvested at December 31, 2021

Nonvested at December 31, 2022

Incentive Stock Plan

Company held its annual meeting on August 4, 2020.

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

of common stock for issuance thereunder.

12 - STATUTORY RESERVE AND RESTRICTED NET ASSETS

Company’s PRC subsidiaries, Avalon Shanghai and Beijing Genexosome, are restricted

in their ability to transfer a portion of their net assets to the Company.

The payment of dividends by entities organized in China is

subject to limitations, procedures and 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.

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

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

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

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

Appropriations to the discretionary

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

The statutory reserve may be applied against prior year losses,

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

cash dividends.

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

Genexosome , from transferring a portion of their net assets, equivalent to their statutory reserves and their share capital, to

the Company’s shareholders in the form of loans, advances or cash dividends.

Only PRC entities’ accumulated profits may be

distributed as dividends to the Company’s shareholders without the consent of a third party.

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

31, 2021 and 2020 as they incurred net losses in these periods.

December 31, 2021 and 2020, the restricted amounts as determined pursuant to PRC statutory laws totaled $ 6,578 and $ 6,578 , respectively,

and total restricted net assets amounted to $ 783,984 and $ 683,984 , respectively.

GLOBOCARE CORP.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

13 – NONCONTROLLING INTEREST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – EQUITY

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 123,964 shares of

common stock.

The 2022 Warrant is exercisable for five years at an exercise price of $ 12.5 .

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 123,964 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.

There were no stock warrants issued, terminated/forfeited

and exercised during the year ended December 31, 2021.

Stock warrants activities during the year

ended December 31, 2022 were as follows:

Number of Warrants

Exercise Price

Outstanding at January 1, 2022

Expired/exercised

Outstanding and exercisable at December 31, 2022

The following table summarizes the shares of the

Company’s common stock issuable upon exercise of warrants outstanding at December 31, 2022:

Warrants Outstanding

Warrants Exercisable

Exercise Price

Outstanding at

Average Remaining

Contractual Life

Exercisable at

Exercise Price

The aggregate intrinsic value of both stock warrants

outstanding and stock warrants exercisable at December 31, 2022 was $ 0 .

NOTE 15 - 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.

did not make any appropriation to statutory reserve for Avalon Shanghai during the years ended December 31, 2022 and 2021 as it incurred

net loss in the periods.

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

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

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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 – NONCONTROLLING

December 31, 2022, Dr.

1 unchanged sentence

of Genexosome, which is not under the Company’s control.

the years ended December 31, 2021 and 2020, the Company did not allocate any net loss and foreign currency translation adjustment to

the noncontrolling interest holder due to its inability to satisfy these deficits.

14 – CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

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

shall be filed when the restricted net assets of consolidated subsidiary exceed 25 percent of consolidated net assets as of the end of

the most recently completed fiscal year.

For purposes of this test, restricted net assets of consolidated subsidiary shall mean that

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

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

cash dividends without the consent of a third party.

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

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

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

15 - CONCENTRATIONS

following table sets forth information as to each customer that accounted for 10 % or more of the Company’s revenues for the

years ended December 31, 2021 and 2020.

A (Shanghai Daopei, a related party)

B (Hebei Daopei, a related party)

years ended December 31, 2022 and 2021, the Company did not allocate any net loss and foreign currency translation adjustment to the noncontrolling

interest holder due to its inability to satisfy these deficits.

NOTE 17 – 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 18 - CONCENTRATIONS

The following

table sets forth information as to each customer that accounted for 10 % or more of the Company’s revenues for the years ended December

31, 2022 and 2021.

Years Ended December 31,

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 accounts receivable, accounts receivable – related party, rent receivable, and rent receivable – related

party at December 31, 2021, accounted for 80.6 % of the Company’s total outstanding accounts receivable, accounts receivable

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

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

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

total outstanding accounts receivable, accounts receivable – related party, and rent receivable at December 31, 2020.

supplier accounted for 10 % or more of the Company’s purchase during the years ended December 31, 2021 and 2020.

One supplier,

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

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

GLOBOCARE CORP.

total outstanding rent receivable and rent receivable – related party at December 31, 2022, accounted for 81.4 % of the Company’s

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

Two customers,

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

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

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

accounted for 10 % or more of the Company’s purchase during the years ended December 31, 2022 and 2021.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19 – SEGMENT INFORMATION

the year ended December 31, 2020, the Company operated in three reportable business segments - (1) the real property operating

segment, (2) the medical related consulting services segment, and (3) the performing development services for hospitals and other customers

and sales of developed products to hospitals and other customers segment.

to the winding down of the development services and sales of developed products segment in 2020, the Company no longer has any material

revenues or expenses in this segment.

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

decision maker no longer reviews development services and sales of developed products operating results.

the year ended December 31, 2021, the Company operated in two reportable business segments - (1) the real property operating

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

Company’s reportable segments are strategic business units that offer different services and products.

They are managed separately

based on the fundamental differences in their operations.

Information with respect to these reportable business segments for the years

ended December 31, 2021 and 2020 was as follows:

Real property

related consulting services

year ended December 31, 2022 and 2021, the Company operated in two reportable business segments - (1) the real property operating segment,

and (2) the medical related consulting services segment.

The Company’s reportable segments are strategic business units that offer

different services and products.

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

Due to the winding down of the medical related

consulting services segment in 2022, the Company decided to cease all operations of this segment and no longer has any material revenues

or expenses in this segment.

As a result, commencing from the first quarter of 2023, the Company’s chief operating decision maker

no longer reviews medical related consulting services operating results.

Information with respect to these reportable business

segments for the years ended December 31, 2022 and 2021 was as follows:

Years Ended December 31,

Real property operations

Medical related consulting services

Costs and expenses

Real property operations

Medical related consulting

Medical related consulting services

Real property operations

related consulting services

Medical related consulting services

Other operating expenses

Real property operations

Medical related consulting

Development services

and sales of developed products

Medical related consulting services

Corporate/Other

2 unchanged sentences

Corporate/Other

( 3,576,333 )

Other income (expense)

Real property operations

Medical related consulting

Development services

and sales of developed products

Medical related consulting services

Corporate/Other

Total other expense,

Total other expense, net

( 3,137,952 )

Real property operations

Medical related consulting

Development services

and sales of developed products

Medical related consulting services

Corporate/Other

GLOBOCARE CORP.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

16 – SEGMENT INFORMATION (continued )

Identifiable long-lived

tangible assets at December 31, 2021 and 2020

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19 – SEGMENT INFORMATION

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

Real property operations

Medical related consulting services

Development services and sales of developed

Corporate/Other

Identifiable long-lived

tangible assets at December 31, 2021 and 2020

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

United States

17 – COMMITMENTS AND CONTINCENGIES

time to time, the Company is subject to ordinary routine litigation incidental to its normal business operations.

The Company is not

currently a party to, and its property is not subject to, any material legal proceedings, except as set forth below.

October 25, 2017, Genexosome entered into and closed a Stock Purchase Agreement with Beijing Genexosome and Yu Zhou, MD, PhD, the sole

shareholder of Beijing Genexosome, pursuant to which Genexosome acquired all of the issued and outstanding securities of Beijing Genexosome

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

Further, on October 25, 2017, Genexosome

entered into and closed an Asset Purchase Agreement with Dr.

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

property and exosome separation systems, held by Dr.

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

technologies.

NOTE 20 – COMMITMENTS

AND CONTINCENGIES

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 $ 876,087 in cash, transferred 50,000 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 by Dr.

Zhou at the time of the acquisition and has decided to impair the intangible asset associated

with this acquisition to zero.

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

projections provided 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.

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

the Company and Genexosome including misappropriation of trade secrets in violation of the Defend Trade Secrets Act of 2016 and violation

of Ohio Uniform Trade Secrets Act.

Research Institute is seeking monetary damages, injunctive relief, exemplary damages, injunctive relief

and other equitable relief.

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

criminal proceedings against Dr.

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

The Company and Nationwide Children’s

Hospital have reached a verbal settlement agreement.

Both parties are in the process of drafting the related written agreements.

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

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

17 – COMMITMENTS AND CONTINCENGIES (continued )

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 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 parties provided a mutual release as well.

2022, the Company paid $ 450,000 to Research Institute.

As of December 31, 2022, the accrued litigation settlement amounted to $ 900,000 .

The Company’s management determine the likelihood of payment for pre-tax profit is remote.

Leases Commitment

Company is a party to leases for office space.

Rent expense under all operating leases amounted to approximately $ 143,000 and $ 157,000 for

the years ended December 31, 2021 and 2020, respectively.

is a party to leases for office space.

These lease agreements will expire through February 2025.

Rent expense under all operating leases

amounted to approximately $ 141,000 and $ 143,000 for the years ended December 31, 2022 and 2021, respectively.

cash flow information related to leases for the years ended December 31, 2022 and 2021 is as follows:

Years Ended December 31,

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

cash flows paid for operating lease

Right-of-use assets obtained in exchange for

lease obligation:

Operating cash flows paid for operating lease

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

Operating lease

following table summarizes the lease term and discount rate for the Company’s operating lease as of December 31, 2021:

Weighted average remaining lease

term (in years)

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 20 – COMMITMENTS

AND CONTINCENGIES (continued)

Leases Commitment (continued)

The following table summarizes the lease term

and discount rate for the Company’s operating lease as of December 31, 2022:

Operating Lease

Weighted average remaining lease term (in years)

Weighted average discount rate

The following

table summarizes the maturity of lease liabilities under operating lease as of December 31, 2021:

The following table summarizes the maturity of lease liabilities under

operating lease as of December 31, 2022:

For the Year Ending December 31:

Operating Lease

2024 and thereafter

Total lease payments

Amount of lease payments

representing interest

Total present value of

operating lease liabilities

Amount of lease payments representing interest

Total present value of operating lease liabilities

Current portion

Long-term portion

Investment Commitment

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

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

Equity Investment Commitment

On May 29, 2018, Avalon

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

(“Unicorn”), pursuant

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

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

Epicon is owned 60%

by Unicorn and 40% by Avalon Shanghai.

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

Epicon in an amount not less than RMB 8,000,000 (approximately $1.3 million) and the premises of the laboratories of Nanjing Hospital

of Chinese Medicine for exclusive use by Epicon, and Avalon Shanghai shall invest cash into Epicon in an amount not less than RMB 10,000,000

(approximately $1.6 million).

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

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

As of December 31, 2021, Avalon Shanghai

has contributed RMB 4,760,000 (approximately $0.7 million) that was included in equity method investment on the accompanying consolidated

balance sheets.

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

to fund the project cost.

Venture – AVAR BioTherapeutics (China) Co.

October 23, 2018, Avactis Biosciences, Inc.

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

(“Arbele”) agreed to the establishment of AVAR BioTherapeutics (China) Co.

(“AVAR”), a Sino-foreign equity

joint venture, pursuant to an Equity Joint Venture Agreement (the “AVAR Agreement”), which will be owned 60% by Avactis and

40% by Arbele.

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

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

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

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

subject to Avactis’ cash reserves.

Within 30 days, Arbele shall make a contribution of $6.66 million in the form of entering into

a License Agreement with AVAR granting AVAR with an exclusive right and license in China to its technology and intellectual property

pertaining to CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy technology and any additional technology developed in the future with

terms and conditions to be mutually agreed upon Avactis and AVAR and services.

GLOBOCARE CORP.

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 December 31, 2022, Avalon Shanghai has contributed

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

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

Joint Venture – Avactis Biosciences Inc.

On July 18, 2018, the

Company formed Avactis Biosciences Inc.

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

On October 23, 2018,

Avactis and Arbele Limited (“Arbele”) agreed to the establishment of AVAR BioTherapeutics (China) Co.

a Sino-foreign equity joint venture, pursuant to an Equity Joint Venture Agreement (the “AVAR Agreement”), which was to be

owned 60 % by Avactis and 40 % by Arbele.

On April 6, 2022, the

Company, Acactis, Arbele and Arbele Biotherapeutics Limited (“Arbele Biotherapeutics”), a wholly owned subsidiary of Arbele,

entered into an Amendment No.

1 to the Equity Joint Venture Agreement pursuant to which Arbele Biotherapeutics acquired 40 % of Avactis

for the purpose of the Company and Arbele establishing a joint venture in the United States and the parties agreed that they would no

longer pursue AVAR as a joint venture.

Further, all rights and obligations under the AVAR Agreement were assigned by Avactis to Avalon

and by Arbele to Arbele Biotherapeutics.

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

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

AVAR, as licensee (the “Arbele License Agreement”), was assigned to Avactis and Avalon and Arbele agreed to enter into a new

Arbele License Agreement with Avactis on the same/similar terms as the Arbele License Agreement.

Anthony Chan was appointed

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

Avactis purpose and business scope is to research,

research, develop, produce, sell, distribute and generally commercialize CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy globally.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

17 – COMMITMENTS AND CONTINCENGIES (continued )

Venture – AVAR BioTherapeutics (China) Co.

addition, Avactis is responsible for:

● Contributing registered capital of RMB 5,000,000 (approximately $0.8 million) for working capital purposes as required by local regulation, which is not required to be contributed immediately and will be contributed subject to Avactis’ discretion;

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

from Chinese government;

AVAR in recruiting, hiring and retaining personnel;

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

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

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

AVAR with advice pertaining to conducting clinicals in China;

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

Agreement, Arbele shall be responsible for the following:

into a License Agreement with AVAR;

AVAR with research and development expertise pertaining to clinical laboratory medicine when

hired by AVAR.

of both December 31, 2021 and 2020, Avactis paid the $ 900,000 to Arbele as research and development fee.

As of December 31, 2021, License

Agreement has not been finalized.

of Credit Agreement

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

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

and director of the Company.

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

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

The loans are unsecured and are not

convertible into equity of the Company.

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

loan will be payable three years from the date of issuance.

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

discretion of the related party Lender.

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 20 – COMMITMENTS

AND CONTINCENGIES (continued)

Joint Venture – Avactis Biosciences Inc.

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.

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;

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

assisting Avactis in recruiting, hiring and retaining personnel;

providing 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;

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

providing 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.

Under AVAR Agreement, as amended, Arbele Biotherapeutics

shall be responsible for the following:

Entering into a License Agreement with Avactis;

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

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

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

Line of Credit Agreement

On August 29, 2019, the Company entered into a

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

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

The Line of Credit

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

until the facility matures on December 31, 2024.

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

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

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

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

The Line of Credit Agreement includes customary events of default.

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

As of December 31, 2021, $ 2,750,262 was outstanding under the Line of Credit.

GLOBOCARE CORP.

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 December 31, 2022, $ 0 was outstanding under the

Line of Credit.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

18 – SUBSEQUENT EVENTS

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

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

required adjustment or disclosure in the financial statements.

Shares Sold for Cash

On December 13,

2019, the Company entered into an Open Market Sale Agreement SM with Jefferies LLC, as sales agent (“Jefferies”).

From January 1, 2022 to March 30, 2022, Jefferies sold an aggregate of 170,540 shares of common stock at an average price of

$ 0.79 per share to investors.

The Company received net cash proceeds of $ 131,427 , net of commission paid to sales agent of $ 4,065 .

March 18, 2019, the Company issued Wenzhao Lu, the Company’s largest shareholder and Chairman of the Board of Directors, a Promissory

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

Original Note had a maturity date of March 19, 2022.

In March 2022, the Company and Wenzhao Lu entered into a Loan Extension and Modification

Agreement (the “Extension”) to extend the maturity date to March 19, 2024.

Convertible Note

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

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

In addition to the 2022 Convertible

Note, the investor will also receive a Stock Purchase Warrant (the “2022 Warrant”) to acquire an aggregate of 1,333,333 shares

of common stock.

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

The financing will close on or about

April 15, 2022.

Convertible Note will bear 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.

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

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

issued and outstanding shares of common stock.

Further, 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 20 – COMMITMENTS

AND CONTINCENGIES (continued)

Amended and Restated Membership Interest

Purchase Agreement

On November 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 $5.75 or an aggregate of 2,608,696 shares of the Company’s common stock, which are subject to the Lock Up Period and the restrictions

on sale, 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”).

February 9, 2023 (the “Closing Date”), the Company entered into and closed an Amended and Restated Membership

Interest Purchase Agreement (the “Amended MIPA”), by and among Avalon Laboratory

Services, Inc., a wholly-owned subsidiary of the Company (the “Buyer”), SCBC Holdings LLC (the “Seller”), the

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

Laboratory Services MSO, LLC (“Laboratory Services MSO”).

The Amended MIPA amends and restates, in its entirety, that certain

Membership Interest Purchase Agreement, dated November 7, 2023 (the “Original MIPA”).

to the terms and conditions set forth in the Amended MIPA, Buyer acquired from the Seller, forty percent (40%) of all the issued and outstanding

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

The consideration paid by Buyer to Seller for the Purchased Interests consisted of $21,000,000, which comprised of (i) $9,000,000 in cash,

(ii) $11,000,000 pursuant to the issuance of 11,000 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”), and (iii) a $1,000,000 cash

payment on February 9, 2024 (the “Anniversary Payment”).

The Series B Preferred Stock will be convertible into shares of the

Company’s common stock at a conversion price per share equal to $3.78 or an aggregate of 2,910,053 shares of the Company’s

common stock and are subject to the Lock Up Period and the restrictions on sale .

The Seller is also eligible, under the terms

set forth in the Amended MIPA, to receive certain earnout payments upon achievement of certain operating results, which may be comprised

of up to $10,000,000 of which (x) up to $5,000,000 will be paid in cash and (y) up to $5,000,000 will be paid pursuant to the issuance

of the number of shares of Company common stock valued at $5,000,000, calculated using the closing price of the Company’s common

stock on December 31, 2023, rounded down to the nearest whole share (collectively, the “Earnout Payments”).

Amended 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 pursuant the indemnification provisions set forth in the Amended MIPA.

In addition, at any time

during the period beginning on the Closing Date and ending on the date nine (9) months after the Closing Date, the Buyer, or its designated

affiliates under the Amended MIPA, may purchase from the Seller twenty percent ( 20 %) of the total issued and outstanding equity interests

of Laboratory Services MSO for the purchase price of (i) $ 6,000,000 in cash and (ii) the issuance of an additional 4,000 shares of Series

B Preferred Stock valued at $ 4,000,000 , in accordance with the terms and conditions set forth in the Amended MIPA.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 21 – SUBSEQUENT EVENTS

The Company evaluated

subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued.

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

or disclosure in the financial statements.

Reverse Stock Split

The Company effected a one-for-ten

reverse stock split of its outstanding shares of common stock on January 5, 2023.

The reverse split did not change the number of authorized

shares of common stock or par value.

All references in these consolidated financial statements to shares, share prices, exercise prices,

and other per share information in all periods have been adjusted, on a retroactive basis, to reflect the reverse stock split.

Second Amended and

Restated Limited Liability Company Agreement

In connection with the

Closing of the Transaction, Laboratory Services MSO entered into a Second Amended and Restated Limited Liability Company Agreement, dated

February 9, 2023 (the “Amended Operating Agreement”), by and among the Seller, the Zoe Family Trust, the Owners, and the members

named therein.

The terms of the Amended Operating Agreement, include, but are not limited to:

(i) establishing Laboratory Services MSO

as a multi-member entity as of the Closing Date of the Transaction;

(ii) reaffirming the Buyer’s right to purchase an additional

twenty percent ( 20 %) of the issued and outstanding units of Laboratory Services MSO, as described above;

(iii) allocating the profits

and losses of Laboratory Services MSO among the parties to the agreement;

and (iv) providing for the management rights of the members.

Common Shares Issued

In March 2023, the Company issued a total of 202,731 shares

of its common stock for services rendered and to be rendered.

These shares were valued at $ 463,375 , the fair market values on the grant

dates using the reported closing share prices on the dates of grant.

Line of Credit

As disclosed elsewhere,

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 “Daniel” Lu (the “Lender”), a significant shareholder

and director of the Company.

Under the Line of Credit, the Company received a loan from the Lender of $ 750,000 in March 2023.

under the Line of Credit bear interest at an annual rate of 5 % and each individual loan will be payable three years from the date of issuance.

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.

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-K

Item 9A. Controls and Procedures