What changed in this filing

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Item 1. Financial Statements

2023-11-14 compared with 2023-08-14 · 1136 added, 861 removed, 562 unchanged (78% of the section changed)

Financial Statements.

AVALON GLOBOCARE CORP.

GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS

September 30,

CURRENT ASSETS:

Rent receivable

Prepaid expense and other current assets

Total Current Assets

expense and other current assets

Current Assets

NON-CURRENT ASSETS:

Operating lease right-of-use assets, net

Property and equipment, net

Investment in real estate, net

Equity method investments, net

Advances for equity interest purchase

Other non-current assets

Total Non-current Assets

Operating lease right-of-use

Property and equipment,

Investment in real estate,

Equity method investments,

Advances for equity

interest purchase

non-current assets

Non-current Assets

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Accrued professional fees

Accrued research and development fees

Accrued payroll liability and compensation

Accrued professional

Accrued research and

development fees

Accrued payroll liability

and compensation

Accrued litigation settlement

Accrued liabilities and other payables

Accrued liabilities and other payables - related parties

Accrued liabilities

and other payables

Accrued liabilities

and other payables - related parties

Operating lease obligation

Equity method investment payable

Equity method investment

Derivative liability

Convertible note payable, net

Total Current Liabilities

note payable, net

Current Liabilities

NON-CURRENT LIABILITIES:

Operating lease obligation - noncurrent portion

Accrued litigation settlement - noncurrent portion

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 15)

payable - related party

Non-current Liabilities

Commitments and Contingencies

Preferred stock, $ 0.0001 par value;

10,000,000 shares authorized;

Series A Convertible Preferred Stock, 9,000 shares issued and outstanding at June 30, 2023 and December 31, 2022.

Liquidation preference $ 9 million at June 30, 2023 and December 31, 2022

Series B Convertible Preferred Stock, 11,000 and 0 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively.

Liquidation preference $ 11 million at June 30, 2023

Series A Convertible Preferred Stock, 9,000 shares issued and outstanding at September 30, 2023 and December 31, 2022.

Liquidation preference $ 9 million at September 30, 2023

Series B Convertible Preferred Stock, 11,000 and 0 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively.

Liquidation preference $ 11 million at September 30, 2023

Common stock, $ 0.0001 par value;

490,000,000 shares authorized;

10,499,907 shares issued and 10,447,907 shares outstanding at June 30, 2023;

10,981,534 shares issued and 10,929,534 shares outstanding at September 30, 2023;

10,013,576 shares issued and 9,961,576 shares outstanding at December 31, 2022

1 unchanged sentence

common stock held in treasury, at cost;

52,000 shares at June 30, 2023 and December 31, 2022

52,000 shares at September 30, 2023 and December 31, 2022

Accumulated deficit

2 unchanged sentences

Statutory reserve

Accumulated other comprehensive loss

Total Avalon GloboCare Corp.

other comprehensive loss

Total Avalon GloboCare

stockholders' equity

Non-controlling interest

Total Liabilities and Equity

Non-controlling

Liabilities and Equity

accompanying notes to the condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

For the Three Months

Ended June 30,

For the Six Months

Ended June 30,

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

RENTAL REVENUE

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Interest expense - amortization of debt discount and debt issuance cost

( 3,248,597 )

( 3,303,282 )

Interest expense - other

Interest expense - related party

Conversion inducement expense

Loss from equity method investment - Epicon

1 unchanged sentence

Impairment of equity method investment - Epicon

Other (expense) income

Total Other (Expense) Income, net

Total Other Expense, net

( 3,825,055 )

( 1,189,045 )

( 2,953,554 )

LOSS BEFORE INCOME TAXES

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Basic and diluted

See accompanying notes to the condensed consolidated

financial statements.

AVALON GLOBOCARE CORP.

accompanying notes to the condensed consolidated financial statements.

GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

For the Three and Six Months Ended June 30, 2023

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

the Three and Nine Months Ended September 30, 2023

GloboCare Corp.

Stockholders' Equity

Preferred Stock

preferred Stock

Comprehensive

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( 68,729,522 )

of common stock, net

of common stock as convertible note payable commitment fee

currency translation adjustment

loss for the three months ended September 30, 2023

( 1,485,075 )

See accompanying notes to the condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

September 30, 2023

$ ( 522,500 )

$ ( 70,214,597 )

$ ( 229,163 )

accompanying notes to the condensed consolidated financial statements.

GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

For the Three and Six Months Ended June 30, 2022

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

the Three and Nine Months Ended September 30, 2022

GloboCare Corp.

1 unchanged sentence

Comprehensive

Non-controlling

January 1, 2022

17 unchanged sentences

( 55,230,886 )

of convertible note payable and accrued interest into common stock

Reclassification

of derivative liability to equity

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

of common stock - related party

of common stock

currency translation adjustment

loss for the three months ended September 30, 2022

( 5,414,154 )

See accompanying notes to the condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

September 30, 2022

$ ( 522,500 )

$ ( 60,645,040 )

$ ( 243,781 )

accompanying notes to the condensed consolidated financial statements.

GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF

For the Six Months Ended

CONSOLIDATED STATEMENTS OF CASH FLOWS

the Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

1 unchanged sentence

$ ( 9,513,166 )

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

Change in straight-line rent receivable

Amortization of operating lease right-of-use asset

Stock-based compensation and service expense

(Income) loss from equity method investments

Impairment of equity method investment

Amortization of debt issuance costs and debt discount

Change in fair market value of derivative liability

Changes in operating assets and liabilities:

Adjustments to reconcile

net loss to net cash used in operating activities:

Bad debt provision

Change in straight-line

rent receivable

Amortization of operating

lease right-of-use asset

Stock-based compensation

and service expense

(Income) loss from equity

method investments

Impairment of equity

method investment

Amortization of debt

issuance costs and debt discount

Conversion inducement

Change in fair market

value of derivative liability

Changes in operating

assets and liabilities:

Rent receivable

Security deposit

Deferred leasing costs

Prepaid expense and other assets

Prepaid expense and other

Accounts payable

Accrued liabilities and other payables

Accrued liabilities and other payables - related parties

Accrued liabilities and

other payables

Accrued liabilities and

other payables - related parties

Operating lease obligation

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CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

Additional investment in equity method investment

Purchase of property

and equipment

Additional investment

in equity method investment

NET CASH USED IN INVESTING ACTIVITIES

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

Payments of convertible debt issuance costs

Proceeds from issuance of balloon promissory note

Payments of balloon promissory note issuance costs

Proceeds from equity offering

Disbursements for equity offering costs

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

Payments of convertible

debt issuance costs

Proceeds from issuance

of balloon promissory note

Payments of balloon

promissory note issuance costs

Proceeds from equity

Disbursements for equity

offering costs

NET CASH PROVIDED BY FINANCING ACTIVITIES

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NON-CASH INVESTING AND FINANCING ACTIVITIES:

Common stock issued for future services

Common stock issued for accrued liabilities

Reclassification of advances for equity interest purchase to equity method investment

Series B Convertible Preferred Stock issued related to equity method investment

Accrued purchase price related to equity method investment

Warrants issued as convertible note payable finder’s fee

Warrants issued with convertible note payable recorded as debt discount

Bifurcated embedded conversion feature recorded as derivative liability and debt discount

Common stock issued as convertible note payable commitment fee

Deferred financing costs in accrued liabilities

See accompanying notes to

the condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

Common stock issued

for future services

Common stock issued

for accrued liabilities

Reclassification of

advances for equity interest purchase to equity method investment

Series B Convertible

Preferred Stock issued related to equity method investment

Accrued purchase price

related to equity method investment

Warrants issued as convertible

note payable finder's fee

Warrants issued with

convertible note payable recorded as debt discount

Bifurcated embedded

conversion feature recorded as derivative liability and debt discount

Common stock issued

as convertible note payable commitment fee

Deferred financing costs

in accrued liabilities

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

accompanying notes to the condensed consolidated financial statements.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 — ORGANIZATION AND NATURE OF OPERATIONS

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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

Shareholders”), pursuant to which the Company 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”).

Avalon Shanghai

was incorporated on April 29, 2016, had limited assets and was engaged in medical related consulting services for customers.

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.

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 was the legal acquirer.

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.

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, had limited assets 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.

As a result, Avalon Shanghai is no longer an operating entity.

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

June 30, 2023, the occupancy rate of the building is 86.3 %.

September 30, 2023, the occupancy rate of the building is 89.4 %.

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 as well as cellular immunotherapy including CAR-T,

which focuses on accelerating commercial activities related to cellular therapies as well as cellular immunotherapy including CAR-T,

CAR-NK, TCR-T and others.

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

advance the use of cellular therapies to treat certain cancers.

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

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

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”),

Avactis is designed to integrate and optimize the Company’s global scientific and clinical resources

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

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

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

Avactis owns 100 % of

the capital stock of Avactis Nanjing Biosciences Ltd., a company incorporated in the PRC on May 8, 2020 (“Avactis Nanjing”),

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

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(“Avalon Lab”), a Delaware

On February 9, 2023, Avalon Lab purchased forty percent ( 40 %) of all the issued and outstanding equity interests of Laboratory

Services MSO, LLC, a private limited company formed under the laws of the State of Delaware on September 6, 2019 (“Lab Services

MSO”) and its subsidiaries.

Lab Services MSO, through its two subsidiaries, Laboratory Services, LLC (“Lab Services LLC”)

and Laboratory Services DME, LLC (“Lab Services DME”), is engaged in providing laboratory testing services.

AVALON GLOBOCARE CORP.

On February 9, 2023, Avalon Lab purchased forty percent ( 40 %) of the issued and outstanding equity interests of Laboratory Services

MSO, LLC, a private limited company formed under the laws of the State of Delaware on September 6, 2019 (“Lab Services MSO”),

and its subsidiaries.

Lab Services MSO, through its two subsidiaries, Laboratory Services, LLC (“Lab Services LLC”) and Laboratory

Services DME, LLC (“Lab Services DME”), is engaged in providing laboratory testing services.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 — ORGANIZATION AND NATURE OF OPERATIONS (continued)

accompanying condensed consolidated financial statements reflect the activities of ALBT and each of the following entities:

accompanying condensed consolidated financial statements reflect the activities of the Company and each of the following entities:

of Subsidiary

Incorporation

and Date of Incorporation

Healthcare System, Inc.

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December 31, 2022 filed with the Securities and Exchange Commission on March 30, 2023.

AVALON GLOBOCARE CORP.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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reflected in the accompanying condensed consolidated financial statements, the Company had a working capital deficit of approximately

$ 4,542,000 at June 30, 2023 and had incurred recurring net losses and generated negative cash flow from operating activities of

approximately $ 5,327,000 and $ 4,360,000 for the six months ended June 30, 2023, respectively.

$ 5,828,000 at September 30, 2023 and had incurred recurring net losses and generated negative cash flow from operating activities

of approximately $ 7,152,000 and $ 5,708,000 for the nine months ended September 30, 2023, respectively.

Company has a limited operating history and its continued growth is dependent upon the continuation of generating rental revenue from

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10-K filed with the SEC that have had a material impact on the Company’s financial condition, and operating results.

preparation of the condensed consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and

assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date

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

Changes in these estimates

and assumptions may have a material impact on the condensed 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.

estimates during the three and six months ended June 30, 2023 and 2022 include the valuation of deferred tax assets and the associated

preparation of condensed consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions

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

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

Changes in these estimates and assumptions

may have a material impact on the condensed 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.

estimates during the three and nine months ended September 30, 2023 and 2022 include the valuation of deferred tax assets and the associated

valuation allowances, the valuation of stock-based compensation, the assumptions used to determine fair value of warrants and embedded

conversion features of convertible note payable, and the fair value of the consideration given in the purchase of 40 % of Lab Services

AVALON GLOBOCARE CORP.

conversion features of convertible note payable, and the fair value of the consideration given and assets acquired in the purchase of 40 %

of Lab Services MSO.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Value of Financial Instruments and Fair Value Measurements

of Financial Instruments and Fair Value Measurements

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

1 unchanged sentence

used in measuring fair value as follows:

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

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

available at the measurement date.

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

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

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

by observable market data.

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

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

on the best available information.

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

2 unchanged sentences

and liabilities measured at fair value on a recurring basis.

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

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

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 table below reflects the activity

of derivative liability measured at fair value for the six months ended June 30, 2023:

Derivative liability is

carried at fair value and measured on an ongoing basis.

The table below reflects the activity of derivative liability measured at fair

value for the nine months ended September 30, 2023:

Balance of derivative liability as of January 1, 2023

Initial fair value of derivative liability attributable to warrants issuance with fund raise

Gain from change in the fair value of derivative liability

Balance of derivative liability as of June 30, 2023

Initial fair value of derivative

liability attributable to warrants issuance with fund raise

Gain from change in the fair value of derivative

Balance of derivative liability as of September 30, 2023

and liabilities measured at fair value on a nonrecurring basis.

assets and liabilities are measured at fair value on a nonrecurring basis.

These assets and liabilities are not measured at fair value

on an ongoing basis, but are subject to fair value adjustments in certain circumstances.

These assets and liabilities can include equity

method investment that are written down to fair value when they are impaired.

method investment in Epicon Biotech Co., Ltd.

factors used to determine fair value are subject to management’s judgment and expertise and include, but are not limited to, the

investee’s series of operating losses and the joint venture partner unable to obtain funds to commence operations.

These assumptions

represent Level 3 inputs.

Impairment of equity method investment in Epicon Biotech Co., Ltd.

for the nine months ended September 30,

2023 was $ 464,406 .

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

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

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

and Cash Equivalents

June 30, 2023 and December 31, 2022, the Company’s cash balances by geographic area were as follows:

June 30, 2023

December 31, 2022

September 30, 2023 and December 31, 2022, the Company’s cash balances by geographic area were as follows:

United States

1 unchanged sentence

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

The Company had no cash equivalents at June

The Company had no cash equivalents at September

30, 2023 and December 31, 2022.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED 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 $69,000) per bank.

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

At June 30, 2023, cash balances held in the PRC are RMB 731,059 (approximately $ 101,000 ), of which, RMB 97,666 (approximately

$ 13,000 ) 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.

Balances at state-owned banks within the

PRC are covered by insurance up to RMB 500,000 (approximately $ 69,000 ) per bank.

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

At September 30, 2023, cash balances held in the PRC are RMB 144,963 (approximately $ 20,000 ), which was covered

by such limited insurance.

Company maintains a portion of its cash on deposits with bank and financial institution within the U.S.

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

At June 30, 2023, the Company’s

cash balances in United States bank accounts had approximately $ 54,000 in excess of the federally-insured limits.

At September 30, 2023, the

Company’s cash balances in United States bank accounts had approximately $ 25,000 in excess of the federally-insured limits.

Company’s concentrations of credit risk with respect to its rent receivable is limited due to short-term payment terms.

8 unchanged sentences

Impairment of equity method investment

amounted to $ 464,406 for the six months ended June 30, 2023.

amounted to $ 464,406 for the nine months ended September 30, 2023.

See Note 5 for discussion of equity method investments.

Property Rental Revenue

Company has determined that the ASC 606 does not apply to rental contracts, which are within the scope of other revenue recognition accounting

Company has determined that 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.

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

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

and Contingencies

6 unchanged sentences

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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Share Data (continued)

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.

net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common

2 unchanged sentences

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

For the three and six months

ended June 30, 2023 and 2022, potentially dilutive common shares consist of the common shares issuable upon the conversion of convertible

preferred stock and convertible note (using the if-converted method) and exercise of common stock options and warrants (using the treasury

stock method).

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

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

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

The following table summarizes the securities that were excluded from the

diluted per share calculation because the effect of including these potential shares was antidilutive:

Three Months Ended June 30,

Six Months Ended June 30,

For the three and nine

months ended September 30, 2023 and 2022, potentially dilutive common shares consist of the common shares issuable upon the conversion

of convertible preferred stock and convertible note (using the if-converted method) and exercise of common stock options and warrants

(using the treasury stock method).

Common stock equivalents are not included in the calculation of diluted net loss per share if their

effect would be anti-dilutive.

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

the computation of diluted shares outstanding as they would have had an anti-dilutive impact.

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

potential shares was antidilutive:

September 30,

Options to purchase common stock

4 unchanged sentences

Potentially dilutive securities

the Series A convertible preferred stock was converted into shares of common stock of the Company at a conversion price of $ 10.0 per

the Series B convertible preferred stock was converted into shares of common stock of the Company at a conversion price of $ 3.78 per

(***) Assumed

the convertible note was converted into shares of common stock of the Company at a conversion price of $ 4.50 and $ 0.75 per share for

the 2023 and 2022 periods, respectively.

(*) 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 .

(**) Assumed the Series B convertible preferred stock was converted into shares of common stock of the Company at a conversion price of $ 3.78 per share.

(***) Assumed the convertible note was converted into shares of common stock of the Company at a conversion price of $ 4.50 and $ 0.65 per share for the 2023 and 2022 periods, respectively.

Company uses “the management approach” in determining reportable operating segments.

5 unchanged sentences

allocating resources and assessing performance for the entire Company.

the three and six months ended June 30, 2022, 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.

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.

February 9, 2023, the Company purchased 40 % of Lab Services MSO.

Commencing from the purchase date, February 9, 2023, the Company is

active in the management of Lab Services MSO.

During the three and six months ended June 30, 2023, the Company operated in two reportable

business segments:

(1) the real property operating segment, and (2) laboratory testing services segment (which commenced with the purchase

date, February 9, 2023) since Lab Services MSO’s operating results are regularly reviewed by the Company’s chief operating

decision maker to determine the resources to be allocated to the segment and assess its performance.

The Company regularly reviews the

operating results and performance of Lab Services MSO, for which the Company accounts for under the equity method.

AVALON GLOBOCARE CORP.

the three and nine months ended September 30, 2022, 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 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.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Reporting (continued)

February 9, 2023, the Company purchased 40 % of Lab Services MSO.

Commencing from the purchase date, February 9, 2023, the Company

is active in the management of Lab Services MSO.

During the three and nine months ended September 30, 2023, the Company operated in two

reportable business segments:

(1) the real property operating segment, and (2) laboratory testing services segment (which commenced with

the purchase date, February 9, 2023) since Lab Services MSO’s operating results are regularly reviewed by the Company’s chief

operating decision maker to determine the resources to be allocated to the segment and assess its performance.

The Company regularly

reviews the operating results and performance of Lab Services MSO, for which the Company accounts for under the equity method.

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.

Company effected a one-for-ten reverse stock split of its outstanding shares of common stock on January 5, 2023.

21 unchanged sentences

ASU 2021-08 is effective for fiscal years beginning after December

15, 2022, including interim periods within those fiscal years, and should be applied prospectively to businesses combinations occurring

15, 2022, including interim periods within those fiscal years, and should be applied prospectively to business combinations occurring

on or after the effective date of the amendment.

7 unchanged sentences

4 — PREPAID EXPENSE AND OTHER CURRENT ASSETS

June 30, 2023 and December 31, 2022, prepaid expense and other current assets consisted of the following:

September 30, 2023 and December 31, 2022, prepaid expense and other current assets consisted of the following:

September 30,

Prepaid professional fees

Prepaid directors and officers liability insurance premium

Prepaid directors and officers liability insurance

Prepaid NASDAQ listing fee

Deferred financing costs

Deferred offering costs

Deferred leasing costs

Security deposit

AVALON GLOBOCARE CORP.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5 — EQUITY METHOD INVESTMENTS

in Epicon Biotech Co., Ltd.

of June 30, 2023 and December 31, 2022, the equity method investment in Epicon Biotech Co., Ltd.

(“Epicon”) amounted to $ 0 and

$ 485,008 , respectively.

The investment represents the Company’s subsidiary, Avalon Shanghai’s interest in Epicon.

was incorporated on August 14, 2018 in PRC.

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

(“Unicorn”), accounted for 40 % and 60 % of the total ownership, respectively.

Epicon is focused on cell preparation,

third party testing, biological sample repository for commercial and scientific research purposes and the clinical transformation of

scientific achievements.

of September 30, 2023 and December 31, 2022, the equity method investment in Epicon Biotech Co., Ltd.

(“Epicon”) amounted

to $ 0 and $ 485,008 , respectively.

The investment represents the Company’s subsidiary, Avalon Shanghai’s interest in

Epicon was incorporated on August 14, 2018 in PRC.

Avalon Shanghai and an unrelated company, Jiangsu Unicorn Biological Technology

(“Unicorn”), have an ownership interest in Epicon of 40 % and 60 %, respectively.

Epicon is focused on

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

of scientific achievements.

The Company is not involved in the management of Epicon.

Therefore, it is a passive investment.

Company treats the equity investment in the condensed consolidated financial statements under the equity method.

Under the equity method,

the investment is initially recorded at cost, adjusted for any excess of the Company’s share of the incorporated-date fair values

of the investee’s identifiable net assets over the cost of the investment (if any).

Thereafter, the investment is adjusted for

the post incorporation change in the Company’s share of the investee’s net assets and any impairment loss relating to the

the three months ended June 30, 2023 and 2022, the Company’s share of Epicon’s net loss was $ 9,110 and $ 11,882 , respectively,

which was included in other (expense) income – loss from equity method investment – Epicon in the accompanying condensed

consolidated statements of operations and comprehensive loss.

For the six months ended June 30, 2023 and 2022, the Company’s share

of Epicon’s net loss was $ 18,564 and $ 24,798 , respectively, which was included in other (expense) income – loss from equity

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

the six months ended June 30, 2023, activity recorded for the Company’s equity method investment in Epicon is summarized

in the following table:

Equity investment carrying amount at January 1, 2023

Epicon’s net loss attributable to the Company

Impairment of investment in Epicon

Foreign currency fluctuation

Equity investment carrying amount at June 30, 2023

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

Current assets

Noncurrent assets

Current liabilities

For the Three Months Ended

For the Six Months Ended

Loss from operation

In June 2023, the Company

assessed its equity method investment in Epicon for any impairment and concluded that there were indicators of impairment as of June

The impairment is due to the Company’s conclusion that it will be unable to recover the carrying amount of the investment

due to the investee’s series of operating losses and the joint venture partner unable to obtain fund to commence operations.

Company calculated that the estimated undiscounted cash flows were less than the carrying amount related to the equity method investment.

The Company has recognized an impairment loss of $ 464,406 related to the equity method investment for the three and six months ended

June 30, 2023, which reduced the investment value to zero.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5 – EQUITY METHOD INVESTMENTS (continued)

in Epicon Biotech Co., Ltd.

June 2023, the Company assessed its equity method investment in Epicon for any impairment and concluded that there were indicators of

impairment as of June 30, 2023.

The impairment is due to the Company’s conclusion that it will be unable to recover the carrying

amount of the investment due to the investee’s series of operating losses and the inability of Avalon Shanghai’s joint venture

partner (Unicorn) to obtain adequate funding to commence operations.

The Company calculated that the estimated undiscounted cash flows

were less than the carrying amount related to the equity method investment.

The Company has recognized an impairment loss of $ 464,406 related

to the equity method investment for the three and nine months ended September 30, 2023, which reduced the investment value to zero.

the equity method, if there is a commitment for the Company to fund the losses of its equity method investees, the Company would continue

6 unchanged sentences

fund the losses of its equity method investees, the carrying value of its equity method investments will not be reduced below zero.

Company had no commitment to fund additional losses of its equity method investments during the three months ended June 30, 2023.

Company had no commitment to fund additional losses of its equity method investments during the three months ended September 30, 2023.

in Laboratory Services MSO, LLC

3 unchanged sentences

an “Owner” and collectively, the “Owners”), and Laboratory Services MSO, LLC

to the terms and conditions set forth in the Amended MIPA, Buyer acquired from the Seller, forty percent ( 40 %) of all the issued and

to the terms and conditions set forth in the Amended MIPA, the Buyer acquired from the Seller, forty percent ( 40 %) of the issued and

outstanding equity interests of Lab Services MSO (the “Purchased Interests”).

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 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 Series B Preferred Stock

will be convertible into shares of Avalon’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 (See Note 10 – Series

B Convertible Preferred Stock Issued for Equity Method Investment).

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 the Company’s 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”).

At both February 9, 2023 and June

30, 2023, the estimated earnout liability amounted to $0 since the minimum thresholds as defined in the agreement are currently

unlikely to be met.

The estimated earnout is a level 3 valuation which will be measured at the end of reporting period.

for the Purchased Interests consisted of $21,000,000, which was comprised of (i) $9,000,000 in cash, (ii) $11,000,000 pursuant to the

issuance of 11,000 shares of the Company’s 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 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, which are

subject to a lock-up period and restrictions on sale (See Note 10 — Series B Convertible Preferred Stock Issued for Equity Method

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, up to $10,000,000, which may be comprised of(x) up to $5,000,000 paid in cash and (y) up to $5,000,000

paid pursuant to the issuance of the number of shares of the Company’s 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

At both February 9, 2023 and September 30, 2023, the estimated earnout liability amounted to $0 since the minimum

thresholds set forth in the Amended MIPA are currently unlikely to be met.

The estimated earnout is a level 3 valuation which will be

measured at the end of the applicable reporting period.

Services MSO, through its two subsidiaries, Lab Services LLC and Lab Services DME, is engaged in providing laboratory testing services.

Avalon Lab and the other unrelated company, accounted for 40 % and 60 % of the total ownership, respectively.

As of June 30,

Avalon Lab and an unrelated company, have an ownership interest in Lab Services MSO of 40 % and 60 %, respectively.

As of September

30, 2023, the equity method investment in Lab Services MSO amounted to $ 21,370,060 .

1 unchanged sentence

a controlling financial interest over the legal entity.

However, it determined it does have significant influence as a result of its

board representation.

Therefore, the Company treats the equity investment in the condensed consolidated financial statements under the

equity method.

However, the Company determined that it does have significant influence as a

result of its board representation.

Therefore, the Company treats the equity investment in the condensed consolidated financial statements

under the equity method.

Under the equity method, the investment is initially recorded at cost, adjusted for any excess of the Company’s

share of the purchased-date fair values of the investee’s identifiable net assets over the cost of the investment (if any).

February 9, 2023 (date of investment), the excess of the Company’s share of the fair values of the investee’s identifiable

net assets over the cost of the investment was approximately $ 19,901,000 which was attributable to intangible assets and goodwill.

the investment is adjusted for the post purchase change in the Company’s share of the investee’s net assets and any impairment

loss relating to the investment.

the three months ended June 30, 2023 and the period from February 9, 2023 (date on investment) through June 30, 2023, the Company’s

share of Lab Services MSO’s net income was $ 308,395 and $ 355,134 , respectively, which was included in income from equity method

investment – Lab Services MSO in the accompanying condensed consolidated statements of operations and comprehensive loss.

the six months ended June 30, 2023, activity recorded for the Company’s equity method investment in Lab Services MSO

is summarized in the following table:

AVALON GLOBOCARE CORP.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5 — EQUITY METHOD INVESTMENTS (continued)

in Laboratory Services MSO, LLC (continued)

the three months ended September 30, 2023 and the period from February 9, 2023 (date of investment) through September 30, 2023, the Company’s

share of Lab Services MSO’s net income was $ 354,500 and $ 370,060 , respectively, which was included in income from equity method

investment — Lab Services MSO in the accompanying condensed consolidated statements of operations and comprehensive loss.

the nine months ended September 30, 2023, activity recorded for the Company’s equity method investment in Lab Services

MSO is summarized in the following table:

Equity investment carrying amount at January 1, 2023

Payment for equity method investment:

The Company’s interest in the net assets of Lab Services MSO’s carrying amount at February 9, 2023 which approximates fair value

The Company’s interest in the net excess of Lab Services MSO’s fair value over carrying value which was attributable to identifiable intangible assets at February 9, 2023

The Company’s interest in the net excess of Lab Services MSO’s fair value over carrying value which was attributable to goodwill at February 9, 2023

Lab Services MSO’s net income attributable to the Company

Equity investment carrying amount at June 30, 2023

Intangible assets amortization amount

Equity investment carrying amount at September 30, 2023

As of September 30, 2023,

the Company’s carrying value of the identified intangible assets and goodwill which are included in the equity investment carrying

amount was $ 5,426,866 and $ 13,930,429 , respectively.

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

September 30,

Current assets

3 unchanged sentences

Three Months Ended

September 30,

Income from operation

February 9, 2023, the Company entered into 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, SCBC Holdings LLC, the Zoe Family Trust,

Bryan Cox and Sarah Cox as individuals, and Laboratory Services MSO.

According to the Amended MIPA, at any time during the period beginning

on February 9, 2023 and ending on the date nine (9) months after February 9, 2023, Avalon Laboratory Services, Inc., or its designated

affiliates under the Amended MIPA, may purchase from SCBC Holdings LLC 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.

the Amended MIPA, at any time during the period beginning on February 9, 2023 and ending on the date nine (9) months after February 9,

2023, 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.

As of the date of this report, the Amended MIPA has expired.

Currently, both parties are negotiating the

purchase of additional eleven percent ( 11 %) of the total issued and outstanding equity interests of Laboratory Services MSO.

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6 — CONVERTIBLE NOTE PAYABLE

May 23, 2023, the Company entered into securities purchase agreements (the “Securities Purchase Agreements”) with Mast Hill

(“Mast Hill”) for the issuance of 13.0 % senior secured promissory notes in the aggregate principal amount of $ 1,500,000

(collectively the “May 2023 Convertible Note”) convertible into shares of common stock, par value $ 0.0001 per share, of the

Company, as well as the issuance of 75,000 shares of common stock as a commitment fee and warrants for the purchase of 230,500 shares

of common stock of the Company.

The Company and its subsidiaries have entered into that certain security agreement (the “Security

Agreement”), creating a security interest in certain property of the Company and its subsidiaries to secure the prompt payment,

performance and discharge in full of all of the Company’s obligations under the May 2023 Convertible Note.

The transaction closed

on May 23, 2023 (the “Closing Date”).

2023 Convertible Note

May 23, 2023, the Company entered into securities purchase agreements with Mast Hill Fund, L.P.

(“Mast Hill”) for the issuance

of 13.0 % senior secured promissory notes in the aggregate principal amount of $ 1,500,000 (collectively, the “May 2023

Convertible Note”) convertible into shares of common stock, par value $ 0.0001 per share, of the Company, as well as the issuance

of 75,000 shares of common stock as a commitment fee and warrants for the purchase of 230,500 shares of common stock

of the Company.

The Company and its subsidiaries have also entered into a security agreement, creating a security interest in certain

property of the Company and its subsidiaries to secure the prompt payment, performance and discharge in full of all of the Company’s

obligations under the May 2023 Convertible Note.

Principal amount and interest under the May 2023 Convertible Note are convertible into

shares of common stock of the company at a conversion price of $ 4.50 per share unless the Company fails to make an amortization payment

(the “amortization payment”) when due, in which case the conversion price shall be the lower of $ 4.50 or the trading price

of the shares, subject to a floor of $ 1.50 .

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6 – CONVERTIBLE NOTE PAYABLE (continued)

Hill acquired the May 2023 Convertible Note with principal amount of $ 1,500,000 and paid the purchase price of $ 1,425,000 after an original

issue discount of $ 75,000 .

On the same Closing Date, the Company issued (i) a warrant to purchase 125,000 shares of common stock with

an exercise price of $4.50 exercisable until the five-year anniversary of the Closing Date, (ii) a warrant to purchase 105,500 shares

of common stock with an exercise price of $3.20 exercisable until the five-year anniversary of the Closing Date, which warrant shall

be cancelled and extinguished against payment of the May 2023 Convertible Note, and (iii) 75,000 shares of common stock as a commitment

fee for the purchase of the May 2023 Convertible Note, which were earned in full as of the Closing Date.

On the Closing Date, the Company

delivered such duly executed May 2023 Convertible Note, warrants and common stock to Mast Hill against delivery of such purchase price.

Company shall make the following amortization payments in cash to Mast Hill towards the repayment of the May 2023 Convertible Note, as

provided in the following table:

shares of common stock of the Company at a conversion price of $ 4.50 per share unless the Company fails to make an amortization

payment when due, in which case the conversion price shall be the lower of $ 4.50 or the trading price of the shares, subject to

a floor of $ 1.50 .

Hill acquired the May 2023 Convertible Note with principal amount of $ 1,500,000 and paid the purchase price of $ 1,425,000 after

an original issue discount of $ 75,000 .

On May 23, 2023, the Company issued (i) a warrant to purchase 125,000 shares of common stock

with an exercise price of $ 4.50 exercisable until the five-year anniversary of May 23, 2023, (ii) a warrant to purchase 105,500 shares

of common stock with an exercise price of $ 3.20 exercisable until the five-year anniversary of May 23, 2023, which warrant shall be cancelled

and extinguished against payment of the May 2023 Convertible Note, and (iii) 75,000 shares of common stock as a commitment fee for the

purchase of the May 2023 Convertible Note, which were earned in full as of May 23, 2023.

On May 23, 2023, the Company delivered

such duly executed May 2023 Convertible Note, warrants and common stock to Mast Hill against delivery of such purchase price.

Company is obligated to make amortization payments in cash to Mast Hill towards the repayment of the May 2023 Convertible Note, as provided

in the following table :

November 23, 2023

$150,000 plus accrued interest through November 23, 2023

December 23, 2023

$150,000 plus accrued interest through December 23, 2023

January 23, 2024

$200,000 plus accrued interest through January 23, 2024

February 23, 2024

$250,000 plus accrued interest through February 23, 2024

March 23, 2024

$250,000 plus accrued interest through March 23, 2024

April 23, 2024

$300,000 plus accrued interest through April 23, 2024

The entire remaining outstanding balance of the May 2023 Convertible Note

connection with the issuance of May 2023 Convertible Note, the Company incurred debt issuance costs of $ 175,162 (including the issuance

of 10,000 warrants as a finder’s fee) which is capitalized and will be amortized into interest expense over the term of the May

2023 Convertible Note.

connection with the issuance of the May 2023 Convertible Note, the Company incurred debt issuance costs of $ 175,162 (including the

issuance of 10,000 warrants as a finder’s fee) which is capitalized and will be amortized into interest expense over

the term of the May 2023 Convertible Note.

upon the Company’s analysis of the criteria contained in ASC 815, the Company determined that all the warrants issued to Mast Hill

and a third party as a finder’s fee meet the definition of derivative liability, as the Company cannot avoid a net cash settlement

and a third party as a finder’s fee met the definition of a derivative liability, as the Company cannot avoid a net cash settlement

under certain circumstances.

Management determined the probability of fail to make an amortization payment when due to be remote and

as such the fair value of the 105,500 warrants with an exercise price of $ 3.20 exercisable until the five-year anniversary of the Closing

Date, which warrant shall be cancelled and extinguished against payment of the May 2023 Convertible Note, has been estimated to be zero.

Accordingly, the fair value of the 135,000 warrants with an exercise price of $ 4.50 exercisable until the five-year anniversary of the

Closing Date was classified as derivative liability on the Closing Date, May 23, 2023.

The fair values of the 135,000 warrants with an

exercise price of $ 4.50 exercisable until the five-year anniversary of the Closing Date issued on May 23, 2023 were computed using the

Black-Scholes option-pricing model with the following assumptions:

stock price of $ 1.96 , volatility of 88.80 %, risk-free rate of 3.76 %,

annual dividend yield of 0 % and expected life of 5 years.

Management determined the probability of failing to make an amortization payment when due to be remote and

as such the fair value of the 105,500 warrants with an exercise price of $ 3.20 exercisable until the five-year anniversary

of May 23, 2023, which warrant shall be cancelled and extinguished against payment of the May 2023 Convertible Note, has been estimated

Accordingly, the fair value of the 135,000 warrants with an exercise price of $ 4.50 exercisable until the

five-year anniversary of May 23, 2023 was classified as derivative liability on May 23, 2023.

The fair values of the 135,000 warrants

with an exercise price of $ 4.50 exercisable until the five-year anniversary of May 23, 2023 issued on May 23, 2023 were computed

using the Black-Scholes option-pricing model with the following assumptions:

stock price of $ 1.96 , volatility of 88.80 %, risk-free

rate of 3.76 %, annual dividend yield of 0 % and expected life of 5 years.

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

6 unchanged sentences

of the convertible debt (see Note 7).

However, management determined the probability of fail to make an amortization payment when due

to be remote and as such the fair value of the embedded conversion feature has been estimated to be zero.

Company recorded a total debt discount of $ 349,654 related to the original issue discount, common shares issued and warrants issued to

Mast Hill, which will be amortized over the term of the May 2023 Convertible Note.

both the three and six months ended June 30, 2023, amortization of debt discount and debt issuance costs and interest expense related

to the May 2023 Convertible Note amounted to $ 44,715 and $ 20,836 , respectively, which have been included in interest expense –

However, management determined the probability of failing to make an amortization payment when

due to be remote and as such the fair value of the embedded conversion feature has been estimated to be zero.

Company recorded a total debt discount of $ 349,654 related to the original issue discount, common shares issued and warrants issued

to Mast Hill, which will be amortized over the term of the May 2023 Convertible Note.

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6 — CONVERTIBLE NOTE PAYABLE (continued)

May 2023 Convertible Note (continued)

the three months ended September 30, 2023, amortization of debt discount and debt issuance costs and interest expense related to the

May 2023 Convertible Note amounted to $ 131,204 and $ 49,151 , respectively, which have been included in interest expense — amortization

of debt discount and debt issuance cost and interest expense — other on the accompanying condensed consolidated statements of operations

and comprehensive loss.

the nine months ended September 30, 2023, amortization of debt discount and debt issuance costs and interest expense related to the May

2023 Convertible Note amounted to $ 175,919 and $ 69,987 , respectively, which have been included in interest expense — amortization

of debt discount and debt issuance cost and interest expense — other on the accompanying condensed consolidated statements of operations

and comprehensive loss.

2023 Convertible Note

July 6, 2023, the Company entered into securities purchase agreements with Firstfire Global Opportunities Fund, LLC (“Firstfire”)

for the issuance of 13.0 % senior secured promissory notes in the aggregate principal amount of $ 500,000 (collectively, the “July

2023 Convertible Note”) convertible into shares of common stock, par value $ 0.0001 per share, of the Company, as well as the issuance

of 25,000 shares of common stock as a commitment fee and warrants for the purchase of 76,830 shares of common stock of the Company.

Company and its subsidiaries have also entered into a security agreement, creating a security interest in certain property of the Company

and its subsidiaries to secure the prompt payment, performance and discharge in full of all of the Company’s obligations under

the July 2023 Convertible Note.

Principal amount and interest under the July 2023 Convertible Note are convertible into shares of common

stock of the Company at a conversion price of $ 4.50 per share unless the Company fails to make an amortization payment when due, in which

case the conversion price shall be the lower of $ 4.50 or the trading price of the shares, subject to a floor of $ 1.50 .

Firstfire acquired

the July 2023 Convertible Note with principal amount of $ 500,000 and paid the purchase price of $ 475,000 after an original issue discount

of $ 25,000 .

On July 6, 2023, the Company issued (i) a warrant to purchase 41,665 shares of common stock with an exercise price of $ 4.50

exercisable until the five-year anniversary of July 6, 2023, (ii) a warrant to purchase 35,165 shares of common stock with an exercise

price of $ 3.20 exercisable until the five-year anniversary of July 6, 2023, which warrant shall be cancelled and extinguished against

payment of the July 2023 Convertible Note, and (iii) 25,000 shares of common stock as a commitment fee for the purchase of the July 2023

Convertible Note, which were earned in full as of July 6, 2023.

On July 6, 2023, the Company delivered such duly executed July 2023 Convertible

Note, warrants and common stock to Firstfire against delivery of such purchase price.

Company is obligated to make amortization payments in cash to Firstfire towards the repayment of the July 2023 Convertible Note, as provided

in the following table :

January 6, 2024

$50,000 plus accrued interest through January 6, 2024

February 6, 2024

$50,000 plus accrued interest through February 6, 2024

March 6, 2024

$66,000 plus accrued interest through March 6, 2024

April 6, 2024

$83,000 plus accrued interest through April 6, 2024

$83,000 plus accrued interest through May 6, 2024

$100,000 plus accrued interest through June 6, 2024

The entire remaining outstanding balance of the July 2023 Convertible Note

connection with the issuance of the July 2023 Convertible Note, the Company incurred debt issuance costs of $ 74,204 (including the

issuance of 3,333 warrants as a finder’s fee), which is capitalized and will be amortized into interest expense over

the term of the July 2023 Convertible Note.

upon the Company’s analysis of the criteria contained in ASC 815, the Company determined that all the warrants issued to Firstfire

and a third party as a finder’s fee meet the definition of a derivative liability, as the Company cannot avoid a net cash settlement

under certain circumstances.

Management determined the probability of failing to make an amortization payment when due to be remote and

as such the fair value of the 35,165 warrants with an exercise price of $ 3.20 exercisable until the five-year anniversary

of July 6, 2023, which warrant shall be cancelled and extinguished against payment of the July 2023 Convertible Note, has been estimated

Accordingly, the fair value of the 44,998 warrants with an exercise price of $ 4.50 exercisable until the five-year

anniversary of July 6, 2023 was classified as a derivative liability on July 6, 2023.

The fair values of the 44,998 warrants

with an exercise price of $ 4.50 exercisable until the five-year anniversary of July 6, 2023 issued on July 6, 2023 were computed

using the Black-Scholes option-pricing model with the following assumptions:

stock price of $ 1.42 , volatility of 88.52 %, risk-free

rate of 4.37 %, annual dividend yield of 0 % and expected life of 5 years.

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 allocated to the warrants are accounted for as derivative liability.

The remainder of the proceeds are allocated

to the debt instrument portion of the transaction.

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6 — CONVERTIBLE NOTE PAYABLE (continued)

2023 Convertible Note (continued)

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 liability in accordance with the provisions

of the convertible debt (see Note 7).

However, management determined the probability of failing to make an amortization payment when

due to be remote and as such the fair value of the embedded conversion feature has been estimated to be zero.

Company recorded a total debt discount of $ 89,191 related to the original issue discount, common shares issued and warrants issued

to Firstfire, which will be amortized over the term of the July 2023 Convertible Note.

both the three and nine months ended September 30, 2023, amortization of debt discount and debt issuance costs and interest expense related

to the July 2023 Convertible Note amounted to $ 38,125 and $ 15,493 , respectively, which have been included in interest expense —

amortization of debt discount and debt issuance cost and interest expense — other on the accompanying condensed consolidated statements

of operations and comprehensive loss.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – DERIVATIVE LIABILITY

As stated in Note 6, May 2023 Convertible Note,

the Company determined that the convertible note payable contains an embedded derivative feature in the form of a conversion provision

which is adjustable based on future prices of the Company’s common stock.

In accordance with ASC 815-10-25, each derivative feature

is initially recorded at its fair value using the Black-Scholes option valuation method and then re-value at each reporting date, with

changes in the fair value reported in the statements of operations.

However, on May 23, 2023 and June 30, 2023, management determined

the probability of fail to make an amortization payment when due to be remote and as such the fair value of the embedded conversion feature

has been estimated to be zero.

7 — DERIVATIVE LIABILITY

stated in Note 6, May 2023 Convertible Note and July 2023 Convertible Note, the Company determined that the convertible note payable

contains an embedded derivative feature in the form of a conversion provision which is adjustable based on future prices of the Company’s

common stock.

In accordance with ASC 815-10-25, each derivative feature is 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.

However, on May 23, 2023, July 6, 2023, and September 30, 2023, management determined the probability of failing to make an amortization

payment when due to be remote and as such the fair value of the embedded conversion feature has been estimated to be zero.

May 23, 2023, the Company issued 240,500 warrants to Mast Hill and a third party as a finder’s fee (see Note 6).

Upon evaluation,

the warrants meet the definition of derivative liability under FASB ASC 815, as the Company cannot avoid a net cash settlement under

certain circumstances.

Management determined the probability of fail to make an amortization payment when due to be remote and

as such the fair value of the 105,500 warrants with an exercise price of $ 3.20 exercisable until the five-year anniversary of the Closing

Date, which warrant shall be cancelled and extinguished against payment of the May 2023 Convertible Note, has been estimated to be zero.

Accordingly, the fair value of the 135,000 warrants with an exercise price of $ 4.50 exercisable until the five-year anniversary of the

Closing Date was classified as derivative liability on the Closing Date, May 23, 2023.

May 23, 2023, the estimated fair values of the 135,000 warrants with an exercise price of $ 4.50 exercisable until the five-year

anniversary of the Closing Date issued were computed using the Black-Scholes option-pricing model with the following assumptions:

price of $ 1.96 , volatility of 88.80 %, risk-free rate of 3.76 %, annual dividend yield of 0 % and expected life of 5 years.

June 30, 2023, the estimated fair value of the 135,000 warrants with an exercise price of $ 4.50 exercisable until the five-year anniversary

of the Closing Date as derivative liability was $ 108,969 .

The estimated fair value of the warrants was computed as of June

evaluation, the warrants meet the definition of a derivative liability under FASB ASC 815, as the Company cannot avoid a net cash settlement

under certain circumstances.

Management determined the probability of failing to make an amortization payment when due to be remote

and as such the fair value of the 105,500 warrants with an exercise price of $ 3.20 exercisable until the five-year anniversary

of May 23, 2023, which warrant shall be cancelled and extinguished against payment of the May 2023 Convertible Note, has been estimated

Accordingly, the fair value of the 135,000 warrants with an exercise price of $ 4.50 exercisable until the

five-year anniversary of May 23, 2023 was classified as a derivative liability on May 23, 2023.

May 23, 2023, the estimated fair value of the 135,000 warrants with an exercise price of $ 4.50 exercisable until

the five-year anniversary of May 23, 2023 issued were computed using the Black-Scholes option-pricing model with the following assumptions:

stock price of $ 1.96 , volatility of 88.80 %, risk-free rate of 3.76 %, annual dividend yield of 0 % and expected life of 5 years.

September 30, 2023, the estimated fair value of the 135,000 warrants with an exercise price of $ 4.50 exercisable until

the five-year anniversary of May 23, 2023 as derivative liability was $ 39,688 .

The estimated fair value of the warrants was computed

as of September 30, 2023 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 0.80 , volatility

of 86.97 %, risk-free rate of 4.60 %, annual dividend yield of 0 % and expected life of 4.6 years.

July 6, 2023, the Company issued 80,163 warrants to Firstfire and a third party as a finder’s fee (see Note 6).

evaluation, the warrants meet the definition of a derivative liability under FASB ASC 815, as the Company cannot avoid a net cash settlement

under certain circumstances.

Management determined the probability of failing to make an amortization payment when due to be remote

and as such the fair value of the 35,165 warrants with an exercise price of $ 3.20 exercisable until the five-year anniversary

of July 6, 2023, which warrant shall be cancelled and extinguished against payment of the July 2023 Convertible Note, has been estimated

Accordingly, the fair value of the 44,998 warrants with an exercise price of $ 4.50 exercisable until the five-year

anniversary of July 6, 2023 was classified as a derivative liability on July 6, 2023.

July 6, 2023, the estimated fair values of the 44,998 warrants with an exercise price of $ 4.50 exercisable until

the five-year anniversary of July 6, 2023 issued were computed using the Black-Scholes option-pricing model with the following assumptions:

stock price of $ 1.42 , volatility of 88.52 %, risk-free rate of 4.37 %, annual dividend yield of 0 % and expected life of 5 years.

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7 — DERIVATIVE LIABILITY (continued)

September 30, 2023, the estimated fair value of the 44,998 warrants with an exercise price of $ 4.50 exercisable until the five-year

anniversary of July 6, 2023 as derivative liability was $ 14,982 .

The estimated fair value of the warrants was computed as of September

30, 2023 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 1.54 , volatility of 89.16 %, risk-free

rate of 4.13 %, annual dividend yield of 0 % and expected life of 4.9 years.

Increases or decreases in fair value of the derivative

liability is included as a component of total other (expenses) income in the accompanying condensed consolidated statements of operations

and comprehensive loss for the respective period.

The changes to the derivative liability resulted in a decrease of $ 41,721 in the derivative

liability and the corresponding increase in other income as a gain for the three and six months ended June 30, 2023.

NOTE 8 – NOTE PAYABLE, NET

On September 1, 2022, the Company issued a balloon

promissory note in the form of a mortgage on its headquarters to a third party company in the principal amount of $ 4,800,000 which

carries interest of 11.0 % per annum.

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 principal of $ 4,800,000

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

The Company may not prepay the principal of

$ 4,800,00 for a period of 12 months.

The principal of $ 4,800,000 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

stock price of $ 0.80 , volatility of 91.44 %,

risk-free rate of 4.60 %, annual dividend yield of 0 % and expected life of 4.8 years.

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

condensed consolidated statements of operations and comprehensive loss for the respective period.

The changes to the derivative liability

resulted in a decrease of $ 87,173 and $ 128,894 in the derivative liability and the corresponding increase in other income as a gain

for the three and nine months ended September 30, 2023, respectively.

8 — NOTE PAYABLE, NET

September 1, 2022, the Company issued a balloon promissory note in the form of a mortgage on its headquarters to a third party company

in the principal amount of $ 4,800,000 , which carries interest of 11.0 % per annum.

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

The principal of $ 4,800,000 can be extended for an additional 36 months, provided that the Company has not defaulted.

may not prepay the principal of $ 4,800,00 for a period of 12 months.

The principal of $ 4,800,000 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.

May 2023, the Company borrowed $ 1,000,000 from the same lender.

The principal of $ 1,000,000 shall accrue interest at the annual rate

of 13.0 % and be paid in monthly installments of interest-only in the amount of $10,833 commencing in June 2023 and continuing through

October 2025 (at which point any unpaid balance of principal, interest and other charges shall be due and payable), and be secured by

a second-lien mortgage on certain real property and improvements located at 4400 Route 9, Freehold, Monmouth County.

payable as of June 30, 2023 and December 31, 2022 is as follows:

The principal of $ 1,000,000 accrues interest at an annual rate

of 13.0 % and is payable in monthly installments of interest-only in the amount of $10,833 , commencing in June 2023 and

continuing through October 2025 (at which point any unpaid balance of principal, interest and other charges are due and payable).

loan is secured by a second-lien mortgage on certain real property and improvements located at 4400 Route 9, Freehold, Monmouth County,

note payable as of September 30, 2023 and December 31, 2022 is as follows:

September 30,

Principal amount

1 unchanged sentence

Note payable, net

For the three months ended June 30, 2023, amortization

of debt issuance costs and interest expense related to note payable amounted to $ 24,738 and $ 145,722 , respectively, which have been

included in interest expense on the accompanying condensed consolidated statements of operations and comprehensive loss.

months ended June 30, 2023, amortization of debt issuance costs and interest expense related to note payable amounted to $ 46,943 and

$ 277,722 , respectively, which have been included in interest expense on the accompanying condensed consolidated statements of operations

and comprehensive loss.

AVALON GLOBOCARE CORP.

the three months ended September 30, 2023 and 2022, amortization of debt issuance costs related to note payable amounted to $ 29,807 and

$ 22,204 , respectively, which have been included in interest expense — amortization of debt discount and debt issuance cost on the

accompanying condensed consolidated statements of operations and comprehensive loss.

For the three months ended September 30, 2023 and

2022, interest expense related to note payable amounted to $ 164,500 and $ 44,000 , respectively, which have been included in interest expense

- other on the accompanying condensed consolidated statements of operations and comprehensive loss.

the nine months ended September 30, 2023 and 2022, amortization of debt issuance costs related to note payable amounted to $ 76,750 and

$ 22,204 , respectively, which have been included in interest expense — amortization of debt discount and debt issuance cost on the

accompanying condensed consolidated statements of operations and comprehensive loss.

For the nine months ended September 30, 2023 and

2022, interest expense related to note payable amounted to $ 442,222 and $ 44,000 , respectively, which have been included in interest expense

- other on the accompanying condensed consolidated statements of operations and comprehensive loss.

9 — 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, 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.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – RELATED PARTY TRANSACTIONS

Rental Revenue from Related Party and Rent

Receivable – Related Party

The Company leases space of its commercial

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

Capital Investments LLC, which is controlled by Wenzhao Lu, the Company’s

largest shareholder and chairman of the Board of Directors.

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

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

For both the three months ended June 30, 2023

and 2022, the related party rental revenue amounted to $ 12,600 and has been included in real property rental on the accompanying

condensed consolidated statements of operations and comprehensive loss.

For both the six months ended June 30, 2023 and 2022, the related

party rental revenue amounted to $ 25,200 and has been included in real property rental on the accompanying condensed consolidated

statements of operations and comprehensive loss.

At June 30, 2023 and December 31, 2022, the related

party rent receivable totaled $ 49,300 and $ 74,100 , respectively, which has been included in rent receivable on the accompanying

condensed consolidated balance sheets, and no allowance for doubtful accounts was deemed to be required on the receivable.

Services Provided by Related Parties

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9 — RELATED PARTY TRANSACTIONS (continued)

Revenue from Related Party and Rent Receivable — Related Party (continued)

both the three months ended September 30, 2023 and 2022, the related

party rental revenue amounted to $ 12,600 and has been included in rental revenue on the accompanying condensed consolidated statements

of operations and comprehensive loss.

For both the nine months ended September 30, 2023 and 2022, the related party rental revenue amounted

to $ 37,800 and has been included in rental revenue on the accompanying condensed consolidated statements of operations and comprehensive

September 30, 2023 and December 31, 2022, the related party rent receivable totaled $ 36,900 and $ 74,100 , respectively, which has

been included in rent receivable on the accompanying condensed consolidated balance sheets, and no allowance for doubtful accounts was

deemed to be required on the receivable.

Provided by Related Parties

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

1 unchanged sentence

for professional services provided, the Company recognized consulting expenses of $ 20,049 and $ 29,121 for the three months

ended June 30, 2023 and 2022, respectively, which have been included in professional fees on the accompanying condensed consolidated

ended September 30, 2023 and 2022, respectively, which have been included in professional fees on the accompanying condensed consolidated

statements of operations and comprehensive loss.

As compensation for professional services provided, the Company recognized consulting

expenses of $ 48,642 and $ 87,598 for the six months ended June 30, 2023 and 2022, respectively, which have been included in

professional fees on the accompanying condensed consolidated statements of operations and comprehensive loss.

Accrued Liabilities and Other Payables –

Related Parties

In 2017, the Company acquired Beijing Genexosome

for a cash payment of $ 450,000 .

As of June 30, 2023 and December 31, 2022, the unpaid acquisition consideration of $ 100,000 , was payable

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

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

June 2023, Lab Services MSO paid shared expense on behalf of the Company.

As of June 30, 2023, the balance due to Lab Services

MSO amounted to $ 5,413 , which has been included in accrued liabilities and other payables – related parties on the

accompanying condensed consolidated balance sheets.

As of June 30, 2023 and December 31, 2022, $ 12,288 and

$ 0 of accrued and unpaid interest related to borrowings from Wenzhao Lu, the Company’s largest shareholder and chairman of

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

condensed consolidated balance sheets.

Borrowings from Related Party

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.

AVALON GLOBOCARE CORP.

expenses of $ 68,691 and $ 116,719 for the nine months ended September 30, 2023 and 2022, respectively, which have been included

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

Liabilities and Other Payables — Related Parties

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

As of September 30, 2023 and December 31, 2022, the

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

Yu Zhou, former director and former co-chief executive officer and 40 %

owner of Genexosome, and has been included in accrued liabilities and other payables — related parties on the accompanying condensed

consolidated balance sheets.

the period from June 2023 through September 2023, Lab Services MSO paid shared expense on behalf of the Company.

As of September

30, 2023, the balance due to Lab Services MSO amounted to $ 36,481 , which has been included in accrued liabilities and other payables

— related parties on the accompanying condensed consolidated balance sheets.

of September 30, 2023 and December 31, 2022, $ 23,000 and $ 0 of accrued and unpaid interest related to borrowings from Wenzhao

Lu, the Company’s largest shareholder and chairman of the Board of Directors, respectively, have been included in accrued liabilities

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

from Related Party

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

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

and Chairman of the Board of Directors of the Company.

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

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

are unsecured and are not convertible into equity of the Company.

Loans drawn under the Line of Credit bear interest at an annual rate

of 5 % and each individual loan is 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.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – RELATED PARTY TRANSACTIONS (continued)

Line of Credit (continued)

In the six months ended June 30, 2023, activity

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

Outstanding principal under the Line of Credit at January 1, 2023

Draw down from Line of Credit

Outstanding principal under the Line of Credit at June 30, 2023

For the three months ended June 30, 2023 and

2022, the interest expense related to related party borrowings amounted to $ 10,267 and $ 31,854 , respectively, and has been reflected

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

For the six months ended June 30, 2023 and 2022, the interest expense related to related party borrowings amounted to $ 12,288 and

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

— RELATED PARTY TRANSACTIONS (continued)

the nine months ended September 30, 2023, activity recorded for the Line of Credit is summarized in the following table:

Outstanding principal under the Line of Credit

at January 1, 2023

from Line of Credit

Outstanding principal

under the Line of Credit at September 30, 2023

the three months ended September 30, 2023 and 2022, the interest expense related to related party borrowings amounted to $ 10,712 and

$ 8,358 , respectively, and has been reflected as interest expense — related party on the accompanying condensed consolidated statements

of operations and comprehensive loss.

As of June 30, 2023 and December 31, 2022, the

related accrued and unpaid interest for Line of Credit was $ 12,288 and $ 0 , respectively, and has been included in accrued liabilities

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

As of June 30, 2023,

the Company used approximately $ 6.8 million of the credit facility and has approximately $ 13.2 million remaining available under the

Line of Credit.

NOTE 10 – EQUITY

Series A Convertible Preferred Stock

The Company designated up to 15,000 shares

of its previously undesignated preferred stock as Series A Preferred Stock.

Each share of Series A Preferred Stock has a par value of

$ 0.0001 per share and a stated value equal to $ 1,000 .

As of June 30, 2023, 9,000 shares of

Series A Preferred Stock were issued and outstanding.

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

common stock at a conversion price per share equal to the greater of (i) ten dollars ($ 10.00 ), and (ii) ninety percent ( 90 %) of the closing

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

notice from the Series A Preferred stock-holder, subject to adjustment for stock splits and similar matters.

Conversion of the Series

A Preferred Stock is subject to restriction pursuant to the Nasdaq Stock Market Listing Rules.

Series B Convertible

Preferred Stock Issued for Equity Method Investment

The Company designated up to 15,000 shares

of its previously undesignated preferred stock as Series B Preferred Stock.

Each share of Series B Preferred Stock has a par value of

$ 0.0001 per share and a stated value equal to $ 1,000 .

On February 9, 2023, the Company issued 11,000 shares

of its Series B Convertible Preferred Stock as a part of consideration for the purchase of 40 % of equity interest of Lab Services

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 (See Note – 5 - Investment in Laboratory Services MSO, LLC).

Common Shares Issued

During the six months ended June 30, 2023, the

Company issued a total of 361,331 shares of its common stock for services rendered and to be rendered.

These shares were valued

at $ 999,656 , 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 $ 657,035 for the six months ended June 30, 2023 and reduced accrued liabilities of

$ 164,871 and recorded prepaid expense of $ 177,750 as of June 30, 2023 which will be amortized over the rest of corresponding

service periods.

AVALON GLOBOCARE CORP.

For the nine months ended September 30, 2023 and 2022, the interest expense related to related

party borrowings amounted to $ 23,000 and $ 79,898 , respectively, and has been reflected as interest expense — related party

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

of September 30, 2023 and December 31, 2022, the related accrued and unpaid interest for Line of Credit was $ 23,000 and $ 0 , respectively,

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

of September 30, 2023, the Company used approximately $ 6.8 million of the credit facility and has approximately $ 13.2 million

remaining available under the Line of Credit.

A Convertible Preferred Stock

Company designated up to 15,000 shares of its previously undesignated preferred stock as Series A Preferred Stock.

of Series A Preferred Stock has a par value of $ 0.0001 per share and a stated value equal to $ 1,000 .

of September 30, 2023, 9,000 shares of Series A Preferred Stock were issued and outstanding.

The Series A Preferred Stock

is convertible into shares of the Company’s common stock at a conversion price per share equal to the greater of (i) ten dollars

($ 10.00 ), and (ii) ninety percent ( 90 %) of the closing price of the Company’s common stock on the Nasdaq Stock Market (“Nasdaq”)

on the day prior to receipt of the conversion notice from the Series A Preferred stock-holder, subject to adjustment for stock splits

and similar matters.

Conversion of the Series A Preferred Stock is subject to restriction pursuant to the Nasdaq Stock Market Listing

B Convertible Preferred Stock Issued for Equity Method Investment

Company designated up to 15,000 shares of its previously undesignated preferred stock as Series B Preferred Stock.

of Series B Preferred Stock has a par value of $ 0.0001 per share and a stated value equal to $ 1,000 .

February 9, 2023, the Company issued 11,000 shares of its Series B Convertible Preferred Stock as a part of consideration for

the purchase of 40 % of equity interest of Lab Services MSO.

The Series B Preferred Stock is 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 a lock-up period and restrictions on sale (See Note — 5 - Investment in Laboratory Services

Shares Sold for Cash

In June 2023, the Company entered into a sales agreement (the “Sales Agreement”) with Roth Capital

Partners, LLC (“Roth”) under which the Company may offer and sell from time to time shares of its common stock having an aggregate

offering price of up to $ 3.5 million.

During the nine months ended September 30, 2023, Roth sold an aggregate of 456,627 shares of common

stock at an average price of $ 1.39 per share to investors and the Company recorded net proceeds of $ 414,396 , net of commission and other

offering costs of $ 220,995 .

Shares Issued for Services

the nine months ended September 30, 2023, the Company issued a total of 361,331 shares of its common stock for services rendered

and to be rendered.

These shares were valued at $ 999,656 , 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 $ 776,285 for the nine months ended September

30, 2023 and reduced accrued liabilities of $ 164,871 and recorded prepaid expense of $ 58,500 as of September 30, 2023 which

will be amortized over the rest of corresponding service periods.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – EQUITY

Common Shares Issued

as Convertible Note Payable Commitment Fee

On May 23, 2023, the Company issued 75,000 shares

of its common stock to Mast Hill as a commitment fee for the purchase of the May 2023 Convertible Note.

These shares were valued at $ 147,000 ,

the fair market value on the grant date using the reported closing share price on the date of grant, and the Company recorded it as debt

The following table summarizes the shares of

the Company’s common stock issuable upon exercise of options outstanding at June 30, 202 3:

Options Outstanding

Options Exercisable

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10 — EQUITY (continued)

Shares Issued as Convertible Note Payable Commitment Fee

May 23, 2023, the Company issued 75,000 shares of its common stock to Mast Hill as a commitment fee for the purchase of the

May 2023 Convertible Note.

These shares were valued at $ 147,000 , the fair market value on the grant date using the reported closing share

price on the date of grant, and the Company recorded it as debt discount.

July 6, 2023, the Company issued 25,000 shares of its common stock to FirstFire as a commitment fee for the purchase of the

July 2023 Convertible Note.

These shares were valued at $ 35,500 , the fair market value on the grant date using the reported closing share

price on the date of grant, and the Company recorded it as debt discount.

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

Exercise Price

Outstanding at

June 30, 2023

September 30,

Contractual Life

Exercise Price

Exercisable at

June 30, 2023

September 30,

Average Exercise

$ 1.86 — 2.08

10.20 — 20.00

Stock option activities

for the six months ended June 30, 2023 were as follows :

$ 1.86 — 27.50

option activity for the nine months ended September 30, 2023 was as follows:

Outstanding at January 1, 2023

Outstanding at June 30, 2023

Options exercisable at June 30, 2023

Outstanding at September 30, 2023

Options exercisable at September 30, 2023

Options expected to vest

The aggregate intrinsic value of both stock options

outstanding and stock options exercisable at June 30, 2023 was $ 0 .

The fair values of options granted during the

six months ended June 30, 2023 were estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

volatility of 79.76 % - 96.37 %, risk-free rate of 3.58 % - 3.96 %, annual dividend yield of 0 %, and expected life

of 3.00 - 5.00 years.

The aggregate fair value of the options granted during the six months ended June 30, 2023 was $ 313,144 .

The fair values of options granted during the

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

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

of 3.00 - 5.00 years.

The aggregate fair value of the options granted during the six months ended June 30, 2022

was $ 373,982 .

For the three months

ended June 30, 2023 and 2022, stock-based compensation expense associated with stock options granted amounted to $ 112,015 and $ 126,301 ,

of which, $ 38,191 and $ 93,171 was recorded as compensation and related benefits, $ 73,824 and $ 21,460 was recorded

as professional fees, and $ 0 and $ 11,670 was recorded as research and development expenses, respectively.

For the six months ended

June 30, 2023 and 2022, stock-based compensation expense associated with stock options granted amounted to $ 180,277 and $ 278,624 ,

of which, $ 89,527 and $ 198,084 was recorded as compensation and related benefits, $ 85,281 and $ 57,598 was recorded as

professional fees, and $ 5,469 and $ 22,942 was recorded as research and development expenses, respectively.

AVALON GLOBOCARE CORP.

aggregate intrinsic value of both stock options outstanding and stock options exercisable at September 30, 2023 was $ 0 .

fair values of options granted during the nine months ended September 30, 2023 were estimated at the date of grant using the Black-Scholes

option-pricing model with the following assumptions:

volatility of 79.76 % - 96.37 %, risk-free rate of 3.58 % - 3.96 %,

annual dividend yield of 0 %, and expected life of 3.00 - 5.00 years.

The aggregate fair value of the options

granted during the nine months ended September 30, 2023 was $ 313,144 .

fair values of options granted during the nine months ended September 30, 2022 were estimated at the date of grant using the Black-Scholes

option-pricing model with the following assumptions:

volatility of 74.8 % - 117.46 %, risk-free rate of 1.37 % - 3.56 %,

annual dividend yield of 0 %, and expected life of 3.00 - 5.00 years.

The aggregate fair value of the options

granted during the nine months ended September 30, 2022 was $ 373,982 .

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – EQUITY

Options (continued)

A summary of the status

of the Company’s nonvested stock options granted as of June 30, 2023 and changes during the six months ended June 30, 2023 is presented

Number of Options

Weighted Average Exercise Price

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10 — EQUITY (continued)

the three months ended September 30, 2023 and 2022, stock-based compensation expense associated with stock options granted amounted to

$ 54,654 and $ 110,442 , of which, $ 42,906 and $ 87,300 was recorded as compensation and related benefits, $ 11,748 and

$ 14,121 was recorded as professional fees, and $ 0 and $ 9,021 was recorded as research and development expenses, respectively.

the nine months ended September 30, 2023 and 2022, stock-based compensation expense associated with stock options granted amounted to

$ 234,931 and $ 389,066 , of which, $ 132,433 and $ 285,384 was recorded as compensation and related benefits, $ 97,029 and

$ 71,719 was recorded as professional fees, and $ 5,469 and $ 31,963 was recorded as research and development expenses, respectively.

summary of the status of the Company’s nonvested stock options granted as of September 30, 2023 and changes during the nine months

ended September 30, 2023 is presented below:

Nonvested at January 1, 2023

Nonvested at June 30, 2023

The following table summarizes the shares of

the Company’s common stock issuable upon exercise of warrants outstanding at June 30, 2023:

Warrants Outstanding

Warrants Exercisable

Exercise Price

Nonvested at September 30, 2023

following table summarizes the shares of the Company’s common stock issuable upon exercise of warrants outstanding at September

Outstanding at

June 30, 2023

September 30,

Contractual Life

Stock warrant activities

for the six months ended June 30, 2023 were as follows:

Average Exercise

Exercisable at

September 30,

$ 3.20 — 12.50

warrant activities for the nine months ended September 30, 2023 were as follows:

Outstanding at January 1, 2023

Outstanding at June 30, 2023

Warrants exercisable at June 30, 2023

Outstanding at September 30, 2023

Warrants exercisable at September 30, 2023

Warrants expected to vest

The aggregate intrinsic value of both stock warrants

outstanding and stock warrants exercisable at June 30, 2023 was $ 0 .

connection with the issuance of May 2023 Convertible Note (See Note 6), the Company issued (i) a warrant to purchase 125,000 shares

of common stock with an exercise price of $4.50 exercisable until the five-year anniversary of the Closing Date, and (ii) a warrant to

purchase 105,500 shares of common stock with an exercise price of $3.20 exercisable until the five-year anniversary of the Closing Date ,

aggregate intrinsic value of both stock warrants outstanding and stock warrants exercisable at September 30, 2023 was $ 0 .

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10 — EQUITY (continued)

Issued in May 2023

connection with the issuance of May 2023 Convertible Note (See Note 6), the Company issued (i) a warrant to purchase 125,000

shares of common stock with an exercise price of $4.50 exercisable until the five-year anniversary of May 23, 2023, and (ii) a warrant

to purchase 105,500 shares of common stock with an exercise price of $3.20 exercisable until the five-year anniversary of May 23, 2023,

which warrant shall be cancelled and extinguished against payment of the May 2023 Convertible Note, to Mast Hill;

and issued a warrant

to purchase 10,000 shares of common stock with an exercise price of $ 4.50 exercisable until the five-year anniversary of the Closing

Date to a third party as a finder’s fee.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – EQUITY

Warrants (continued)

to purchase 10,000 shares of common stock with an exercise price of $4.50 exercisable until the five-year anniversary

of May 23, 2023 to a third party as a finder’s fee.

upon the Company’s analysis of the criteria contained in ASC 815, the Company determined that all the warrants issued to Mast

1 unchanged sentence

under certain circumstances.

Management determined the probability of fail to make an amortization payment when due to be remote and

as such the fair value of the 105,500 warrants with an exercise price of $ 3.20 exercisable until the five-year anniversary of the Closing

Date, which warrant shall be cancelled and extinguished against payment of the May 2023 Convertible Note, has been estimated to be zero.

Accordingly, the fair value of the 135,000 warrants with an exercise price of $ 4.50 exercisable until the five-year anniversary of the

Closing Date was classified as derivative liability on the Closing Date, May 23, 2023.

The fair values of the 135,000 warrants with an

exercise price of $ 4.50 exercisable until the five-year anniversary of the Closing Date issued on May 23, 2023 were computed using the

Black-Scholes option-pricing model with the following assumptions:

stock price of $ 1.96 , volatility of 88.80 %, risk-free rate of 3.76 %,

annual dividend yield of 0 % and expected life of 5 years.

warrants with an exercise price of $ 4.50 exercisable until the five-year anniversary of the Closing Date issued to Mast Hill to

purchase 125,000 shares of the Company’s common stock were treated as a discount on the convertible note payable and were valued

at $ 127,654 and will be amortized over the term of the May 2023 Convertible Note.

warrants with an exercise price of $ 4.50 exercisable until the five-year anniversary of the Closing Date issued to a third party

as a finder’s fee to purchase 10,000 shares of the Company’s common stock were treated as convertible debt issuance costs

and were valued at $ 11,162 and will be amortized over the term of the May 2023 Convertible Note.

summary of the status of the Company’s nonvested stock warrants issued as of June 30, 2023 and changes during the six months

ended June 30, 2023 is presented below:

Nonvested at January 1, 2023

Nonvested at June 30, 2023

NOTE 11 - STATUTORY

RESERVE AND RESTRICTED NET ASSETS

The Company’s PRC subsidiary, Avalon Shanghai,

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

The payment of dividends by entities organized in

China is subject to limitations, procedures and formalities.

Regulations in the PRC currently permit payment of dividends only out of

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

The Company is required to make appropriations

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

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

Appropriations to the statutory

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

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

Appropriations to the discretionary surplus reserve are made at the discretion

of the Board of Directors.

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

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

The Company did not make any

appropriation to statutory reserve for Avalon Shanghai during the six months ended June 30, 2023 and 2022 as it incurred net loss in

As of June 30, 2023 and December 31, 2022, the restricted amount as determined pursuant to PRC statutory laws totaled $ 6,578 .

Relevant PRC laws and regulations restrict the

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

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

Only PRC entity’s

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

30, 2023 and December 31, 2022, total restricted net assets amounted to $ 1,106,578 and $ 1,006,578 , respectively.

AVALON GLOBOCARE CORP.

Management determined the probability of failing to make an amortization payment when due to be remote and

as such the fair value of the 105,500 warrants with an exercise price of $ 3.20 exercisable until the five-year anniversary

of May 23, 2023, which warrant shall be cancelled and extinguished against payment of the May 2023 Convertible Note, has been estimated

Accordingly, the fair value of the 135,000 warrants with an exercise price of $ 4.50 exercisable until the

five-year anniversary of May 23, 2023 was classified as derivative liability on May 23, 2023.

The fair values of the 135,000 warrants

with an exercise price of $ 4.50 exercisable until the five-year anniversary of May 23, 2023 issued on May 23, 2023 were computed

using the Black-Scholes option-pricing model with the following assumptions:

stock price of $ 1.96 , volatility of 88.80 %, risk-free

rate of 3.76 %, annual dividend yield of 0 % and expected life of 5 years.

warrants with an exercise price of $ 4.50 exercisable until the five-year anniversary of May 23, 2023 issued to Mast Hill to

purchase 125,000 shares of the Company’s common stock were treated as a discount on the convertible note payable and

were valued at $ 127,654 and will be amortized over the term of the May 2023 Convertible Note.

warrants with an exercise price of $ 4.50 exercisable until the five-year anniversary of May 23, 2023 issued to a third party

as a finder’s fee to purchase 10,000 shares of the Company’s common stock were treated as convertible debt issuance

costs and were valued at $ 11,162 and will be amortized over the term of the May 2023 Convertible Note.

Issued in July 2023

connection with the issuance of July 2023 Convertible Note (See Note 6), the Company issued (i) a warrant to purchase 41,665

shares of common stock with an exercise price of $4.50 exercisable until the five-year anniversary of July 6, 2023, and (ii) a warrant

to purchase 35,165 shares of common stock with an exercise price of $3.20 exercisable until the five-year anniversary of July 6, 2023,

which warrant shall be cancelled and extinguished against payment of the July 2023 Convertible Note, to Firstfire;

and issued a warrant

to purchase 3,333 shares of common stock with an exercise price of $4.50 exercisable until the five-year anniversary of

July 6, 2023 to a third party as a finder’s fee.

upon the Company’s analysis of the criteria contained in ASC 815, the Company determined that all the warrants issued to Firstfire

and a third party as a finder’s fee meet the definition of derivative liability, as the Company cannot avoid a net cash settlement

under certain circumstances.

Management determined the probability of failing to make an amortization payment when due to be remote and

as such the fair value of the 35,165 warrants with an exercise price of $ 3.20 exercisable until the five-year anniversary

of July 6, 2023, which warrant shall be cancelled and extinguished against payment of the July 2023 Convertible Note, has been estimated

Accordingly, the fair value of the 44,998 warrants with an exercise price of $ 4.50 exercisable until the five-year

anniversary of July 6, 2023 was classified as derivative liability on July 6, 2023.

The fair values of the 44,998 warrants

with an exercise price of $ 4.50 exercisable until the five-year anniversary of July 6, 2023 issued on July 6, 2023 were computed

using the Black-Scholes option-pricing model with the following assumptions:

stock price of $ 1.42 , volatility of 88.52 %, risk-free

rate of 4.37 %, annual dividend yield of 0 % and expected life of 5 years.

warrants with an exercise price of $ 4.50 exercisable until the five-year anniversary of July 6, 2023 issued to Firstfire to

purchase 41,665 shares of the Company’s common stock were treated as a discount on the convertible note payable and were

valued at $28,691 and will be amortized over the term of the July 2023 Convertible Note.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10 — EQUITY (continued)

warrants with an exercise price of $ 4.50 exercisable until the five-year anniversary of July 6, 2023 issued to a third party

as a finder’s fee to purchase 3,333 shares of the Company’s common stock were treated as convertible debt issuance

costs and were valued at $ 2,435 and will be amortized over the term of the July 2023 Convertible Note.

summary of the status of the Company’s nonvested stock warrants

issued as of September 30, 2023 and changes during the nine months ended September 30, 2023 is presented below:

Average Exercise Price

Nonvested at January 1, 2023

Nonvested at September 30, 2023

11 - STATUTORY RESERVE AND RESTRICTED NET ASSETS

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

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

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

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

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

Appropriations to the discretionary

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

The statutory reserve may be applied against prior year losses,

if any, and may be used for general business expansion and production

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

The Company did not make any appropriation to statutory

reserve for Avalon Shanghai during the nine months ended September 30, 2023 and 2022 as it incurred net loss in the periods.

As of September

30, 2023 and December 31, 2022, the restricted amount as determined pursuant to PRC statutory laws totaled $ 6,578 .

PRC laws and regulations restrict the Company’s PRC subsidiary, Avalon Shanghai, from transferring a portion of its net assets,

equivalent to their statutory reserves and their share capital, to the Company’s shareholders in the form of loans, advances or

cash dividends.

Only PRC entity’s accumulated profit may be distributed as dividend to the Company’s shareholders without

the consent of a third party.

As of September 30, 2023 and December 31, 2022, total restricted net assets amounted to $ 1,106,578 and

$ 1,006,578 , respectively.

12 — CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

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

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

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

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

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

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

of a third party.

The Company performed a test on the restricted

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

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

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

NOTE 13 - CONCENTRATIONS

following table sets forth information as to each customer that accounted for 10 % or more of the Company’s revenues

for the three and six months ended June 30, 2023 and 2022.

Ended June 30,

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 at June 30, 2023, accounted for 77.8 % of the Company’s total outstanding rent receivable at June 30, 2023.

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 at December 31, 2022, accounted for 81.4 % of the Company’s total outstanding rent receivable at December 31,

No supplier accounted for 10 % or more of

the Company’s purchase during the three and six months ended June 30, 2023 and 2022.

NOTE 14 – SEGMENT

For the three and six months ended June 30, 2022,

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.

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.

On February 9, 2023, the Company purchased 40 %

of Lab Services MSO.

Commencing from the purchase date, February 9, 2023, the Company is active in the management of Lab Services MSO.

During the three and six months ended June 30, 2023, the Company operated in two reportable business segments:

(1) the real property

operating segment, and (2) laboratory testing services segment (which commenced with the purchase date, February 9, 2023) since Lab Services

MSO’s operating results are regularly reviewed by the Company’s chief operating decision maker to make decisions about resources

to be allocated to the segment and assess its performance.

The Company regularly reviews the operating results and performance of Lab

Services MSO, which is the Company’s an equity method investee.

AVALON GLOBOCARE CORP.

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 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.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – SEGMENT

INFORMATION (continued)

Information with respect

to these reportable business segments for the three and six months ended June 30, 2023 and 2022 was as follows:

Three Months Ended June 30, 2023

Lab Services MSO

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13 - CONCENTRATIONS

following table sets forth information as to each customer that accounted for 10 % or more of the Company’s revenues for

the three and nine months ended September 30, 2023 and 2022 .

September 30,

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 at September 30, 2023, accounted for 70.8 % of the Company’s total

outstanding rent receivable at September 30, 2023.

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 at December 31, 2022, accounted for 81.4 % of the Company’s total

outstanding rent receivable at December 31, 2022.

supplier accounted for 10 % or more of the Company’s purchase during the three and nine months ended September 30, 2023 and

14 — SEGMENT INFORMATION

the three and nine months ended September 30, 2022, 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.

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.

February 9, 2023, the Company purchased 40 % of Lab Services MSO.

Commencing from the purchase date, February 9, 2023, the Company

is active in the management of Lab Services MSO.

During the three and nine months ended September 30, 2023, the Company operated in two

reportable business segments:

(1) the real property operating segment, and (2) laboratory testing services segment (which commenced with

the purchase date, February 9, 2023) since Lab Services MSO’s operating results are regularly reviewed by the Company’s chief

operating decision maker to make decisions about resources to be allocated to the segment and assess its performance.

The Company regularly

reviews the operating results and performance of Lab Services MSO, which is the Company’s an equity method investee.

with respect to these reportable business segments for the three and nine months ended September 30, 2023 and 2022 was as follows:

Months Ended September 30, 2023

Property Operations

Real property rental revenue

1 unchanged sentence

Real property operating income

Income from equity method investment – Lab Services MSO

Income from equity method investment - Lab

Other operating expenses

3 unchanged sentences

Interest expense

Other income (expense)

Net (loss) income

1 unchanged sentence

$ ( 1,485,075 )

Three Months Ended June 30, 2022

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14 — SEGMENT INFORMATION (continued)

Months Ended September 30, 2022

Property Operations

Related Consulting Services

Real property rental revenue

6 unchanged sentences

Interest expense

Net (loss) income

( 3,303,502 )

Six Months Ended June 30, 2023

Lab Services MSO

Other income (expense)

$ ( 105,169 )

$ ( 5,302,928 )

$ ( 5,414,154 )

Months Ended September 30, 2023

Property Operations

Real property rental revenue

1 unchanged sentence

Real property operating income

Income from equity method investment – Lab Services MSO

Income from equity method investment - Lab

Other operating expenses

7 unchanged sentences

$ ( 7,407,943 )

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – SEGMENT

INFORMATION (continued)

Six Months Ended June 30, 2022

$ ( 7,151,876 )

Months Ended September 30, 2022

Property Operations

Related Consulting Services

Real property rental revenue

6 unchanged sentences

Interest expense

Net (loss) income

( 3,436,931 )

Identifiable long-lived tangible assets at June 30, 2023 and December 31, 2022

$ ( 9,410,529 )

$ ( 9,513,166 )

long-lived tangible assets at September 30, 2023 and December 31, 2022

September 30,

Real property operations

1 unchanged sentence

Corporate/Other

Identifiable long-lived tangible assets at June 30, 2023 and December 31, 2022

long-lived tangible assets at September 30, 2023 and December 31, 2022

September 30,

United States

NOTE 15 – COMMITMENTS

AND CONTINGENCIES

Operating Leases Commitment

The Company is a party to leases for office

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

— COMMITMENTS AND CONTINGENCIES

Leases Commitment

The Company 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 $ 66,000 and

$ 72,000 for the six months ended June 30, 2023 and 2022, respectively.

Supplemental cash flow information related to leases for

the six months ended June 30, 2023 and 2022 is as follows:

Six Months Ended June 30,

Rent expense under all operating leases amounted

to approximately $ 97,000 and $ 107,000 for the nine months ended September 30, 2023 and 2022, respectively.

cash flow information related to leases for the nine months ended September 30, 2023 and 2022 is as follows:

September 30,

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

Operating cash flows paid for operating lease

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

Operating lease

The following table summarizes the lease term

and discount rate for the Company’s operating lease as of June 30, 2023:

Operating cash flows paid for operating

Right-of-use assets obtained in exchange for

lease obligation:

Operating lease

Weighted average remaining lease term (in years)

The following

table summarizes the lease term and discount rate for the Company’s operating lease as of September 30, 2023:

Weighted average remaining lease

term (in years)

Weighted average discount rate

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – COMMITMENTS AND CONTINGENCIES (continued)

Operating Leases Commitment (continued)

The following table summarizes the maturity of lease liabilities under

operating lease as of June 30, 2023:

For the Twelve-month Period Ending June 30:

Operating Lease

2026 and thereafter

The following

table summarizes the maturity of lease liabilities under operating lease as of September 30, 2023:

For the Twelve-month

Period Ending September 30:

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

Joint Venture – Avactis Biosciences

On July 18, 2018, the Company formed Avactis

Biosciences Inc.

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

On October 23, 2018, Avactis and Arbele

Limited (“Arbele”) agreed to the establishment of AVAR BioTherapeutics (China) Co.

(“AVAR”), a Sino-foreign

equity joint venture, pursuant to an Equity Joint Venture Agreement (the “AVAR Agreement”), which was to be owned 60 %

by Avactis and 40 % by Arbele.

On April 6, 2022, the Company, Acactis, Arbele

and Arbele Biotherapeutics Limited (“Arbele Biotherapeutics”), a wholly owned subsidiary of Arbele, entered into an Amendment

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.

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.

The Company is required to contribute $ 10 million

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

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

Within 30 days, Arbele Biotherapeutics shall make contribution

of $ 6.66 million in the form of entering into a License Agreement with Avactis granting Avactis with an exclusive right and license

in China to its technology and intellectual property pertaining to CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy technology and

any additional technology developed in the future with terms and conditions to be mutually agreed upon the Company and Avactis and services.

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

In addition, the Company is responsible for contributing

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

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

As of the date

hereof, this company has been limited to a patent holding company and there no activity or planned contributions in 2023.

AVALON GLOBOCARE CORP.

Venture — Avactis Biosciences Inc.

July 18, 2018, the Company formed a wholly owned subsidiary, Avactis Biosciences Inc.

(“Avactis”), a Nevada corporation,

which focuses on accelerating commercial activities related to cellular therapies as well as cellular immunotherapy including CAR-T,

CAR-NK, TCR-T and others.

When formed, Avactis was designed to integrate and optimize the Company’s global scientific and clinical

resources to further advance the use of cellular therapies to treat certain cancers, however the Company is no longer pursuing any commercial

activities with respect to cellular immunotherapy and CAR-T, in particular.

As of 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 PRC on May 8, 2020 (“Avactis Nanjing”), which only owns a

patent and is not considered an operating entity.

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.

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

granting Avactis 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 by the parties.

addition, the Company is responsible for contributing registered capital of RMB 5,000,000 (approximately $ 0.7 million)

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

subject to the Company’s discretion.

As of the date hereof, Avactis’ activities have been limited to that of a patent holding

company and there is no other activity or planned contributions in 2023.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – COMMITMENTS AND CONTINGENCIES (continued)

Line of Credit Agreement

On August 29, 2019, the Company entered into

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

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

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

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

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

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

years from the date of issuance.

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

party Lender.

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

maturity, without premium or penalty.

15 — COMMITMENTS AND CONTINGENCIES (continued)

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.

The Line of Credit Agreement includes customary events of default.

If any such event of default

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

As of June 30, 2023,

$ 850,000 was outstanding under the Line of Credit.

Amended and Restated Membership Interest

Purchase Agreement

On February 9, 2023, the Company entered

into 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, SCBC Holdings LLC, the Zoe Family Trust, Bryan Cox and Sarah Cox as individuals,

and Laboratory Services MSO.

According to the Amended MIPA, at any time during the period beginning on February 9, 2023 and ending on

the date nine (9) months after February 9, 2023, Avalon Laboratory Services, Inc., or its designated affiliates under the Amended MIPA,

may purchase from SCBC Holdings LLC 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 (See Note – 5 - Investment

in Laboratory Services MSO, LLC) .

As of June 30, 2023, the Company did not purchase any additional equity interest from SCBC Holdings

NOTE 16 – SUBSEQUENT

The Company evaluated

subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued.

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

or disclosure in the financial statements.

July 2023 Convertible

Note Financing

In July 2023, the Company

entered into a securities purchase agreement with certain lenders (the “July 2023 Lenders”) and closed on the issuance of

a 13.0 % senior secured convertible promissory note in the aggregate principal amount of $ 500,000 (the “July 2023 Note”),

as well as the issuance of 25,000 shares of common stock as a commitment fee and warrants for the purchase of up to 76,830 shares of

the Company’s common stock.

The Company and its subsidiaries have also entered into a security agreement, creating a security interest

in certain property of the Company and its subsidiaries to secure the prompt payment, performance and discharge in full of all of the

Company’s obligations under the July 2023 Note.

The July 2023 Lenders acquired the July 2023 Note for $ 475,000 after an original

issue discount of $ 25,000 .

The July 2023 Note matures on July 6, 2024 and accrues interest at a rate of 13.0 % per annum.

The July 2023

Note contains certain negative covenants.

If the July 2023 Note is accelerated following the occurrence of an event of default as described

in such note, the Company is required to pay 120 % of the principal and interest outstanding under the July 2023 Note.

The principal amount

and interest under the July 2023 Note is convertible into shares of Company common stock at a conversion price of $4.50 per share, unless

the Company fails to make an amortization payment when due which commences in January 2024 in accordance with the terms of the July 2023

Note, in which case the conversion price shall be the lower of (i) $4.50 or (ii) 85% of the lowest VWAP of the Company’s common

stock on any trading day during the five (5) trading days prior to the respective conversion date, subject to a floor of $1.50 per share.

The warrants are comprised of (i) a warrant to purchase 41,665 shares of the Company’s common stock at an exercise price of $4.50

and exercisable until July 6, 2028 and (ii) a warrant to purchase 35,165 shares of Company common stock at an exercise price of $3.20

and exercisable until July 6, 2028 and which warrant shall be cancelled and extinguished upon the payment of the July 2023 Notes.

conversion price of the July 2023 Note and the exercise price of the warrants issued thereunder contain certain price protection anti-dilution

adjustments if an event of default occurs under the July 2023 Notes.

AVALON GLOBOCARE CORP.

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

As of September 30, 2023, $ 850,000 was outstanding under the Line of Credit.

16 — RESTATEMENTS OF PREVIOUSLY ISSSUED FINANCIAL STATEMENTS

months ended March 31, 2023

the three months ended March 31, 2023, the Company misstated the equity method investment and income from equity method investments.

The impact of these errors was an overstatement of total assets and total equity by approximately $ 136,000 and an overstatement of income

from equity method investments of approximately $ 136,000 for the three months ended March 31, 2023.

These errors did not have any impact

on consolidated cash flow.

The Company’s March 31, 2023 financial statements have been restated for the impact of these adjustments

Condensed Consolidated Balance Sheet As of March 31, 2023

Equity method investments

$ ( 135,830 )

Accumulated deficit

$ ( 65,846,635 )

$ ( 135,830 )

$ ( 65,982,465 )

$ ( 135,830 )

Total liabilities and equity

$ ( 135,830 )

Condensed Consolidated

Statement of Operations and Comprehensive Loss for the Three Months Ended March 31, 2023

Income from equity method investments

$ ( 135,830 )

Total other expense, net

$ ( 119,678 )

$ ( 135,830 )

$ ( 255,508 )

Loss before income taxes

$ ( 2,783,914 )

$ ( 135,830 )

$ ( 2,919,744 )

$ ( 2,783,914 )

$ ( 135,830 )

$ ( 2,919,744 )

Net loss attributable to Avalon Globocare Corp.

common shareholders

$ ( 2,783,914 )

$ ( 135,830 )

$ ( 2,919,744 )

Comprehensive loss

$ ( 2,780,244 )

$ ( 135,830 )

$ ( 2,916,074 )

Comprehensive loss attributable to Avalon Globocare

common shareholders

$ ( 2,780,244 )

$ ( 135,830 )

$ ( 2,916,074 )

Net loss per common share attributable to Avalon Globocare Corp.

common shareholders:

months ended June 30, 2023

the six months ended June 30, 2023, the Company misstated the equity method investment and income from equity method investments.

impact of these errors was an overstatement of total assets and total equity by approximately $ 340,000 and an overstatement of income

from equity method investment — Lab Services MSO of approximately $ 204,000 and $ 340,000 for the three and six months ended June

30, 2023, respectively.

These errors did not have any impact on consolidated cash flow.

The Company’s June 30, 2023 financial statements

have been restated for the impact of these adjustments as follows:

Condensed Consolidated Balance Sheet As of June 30, 2023

Equity method investments, net

$ ( 339,574 )

Accumulated deficit

$ ( 68,389,948 )

$ ( 339,574 )

$ ( 68,729,522 )

$ ( 339,574 )

Total liabilities and equity

$ ( 339,574 )

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 – SUBSEQUENT

EVENTS (continued)

In June 2023, the Company

entered into a sales agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (“Roth) under which the Company

may offer and sell from time to time shares of its common stock having an aggregate offering price of up to $ 3.5 million.

2023 to August 10, 2023, Roth sold an aggregate of 343,380 shares of common stock at an average price of $ 1.45 per share to investors.

The Company received net cash proceeds of $ 483,235 , net of commission paid for sales agent and other fees of $ 14,975 .

16 — RESTATEMENTS OF PREVIOUSLY ISSSUED FINANCIAL STATEMENTS (continued)

months ended June 30, 2023 (continued)

Condensed Consolidated

Statement of Operations and Comprehensive Loss for the Three Months Ended June 30, 2023

from equity method investment - Lab Services MSO

$ ( 203,744 )

from operations

$ ( 1,864,624 )

$ ( 203,744 )

$ ( 2,068,368 )

before income taxes

$ ( 2,543,313 )

$ ( 203,744 )

$ ( 2,747,057 )

$ ( 2,543,313 )

$ ( 203,744 )

$ ( 2,747,057 )

loss attributable to Avalon Globocare Corp.

common shareholders

$ ( 2,543,313 )

$ ( 203,744 )

$ ( 2,747,057 )

Comprehensive

$ ( 2,554,324 )

$ ( 203,744 )

$ ( 2,758,068 )

Comprehensive

loss attributable to Avalon Globocare Corp.

common shareholders

$ ( 2,554,324 )

$ ( 203,744 )

$ ( 2,758,068 )

Net loss per common share attributable to Avalon Globocare Corp.

common shareholders:

Condensed Consolidated

Statement of Operations and Comprehensive Loss for the Six Months Ended June 30, 2023

from equity method investment - Lab Services MSO

$ ( 339,574 )

from operations

$ ( 4,482,121 )

$ ( 339,574 )

$ ( 4,821,695 )

before income taxes

$ ( 5,327,227 )

$ ( 339,574 )

$ ( 5,666,801 )

$ ( 5,327,227 )

$ ( 339,574 )

$ ( 5,666,801 )

loss attributable to Avalon Globocare Corp.

common shareholders

$ ( 5,327,227 )

$ ( 339,574 )

$ ( 5,666,801 )

Comprehensive

$ ( 5,334,568 )

$ ( 339,574 )

$ ( 5,674,142 )

Comprehensive

loss attributable to Avalon Globocare Corp.

common shareholders

$ ( 5,334,568 )

$ ( 339,574 )

$ ( 5,674,142 )

Net loss per common share attributable to Avalon Globocare Corp.

common shareholders:

17 — 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.

2023 Convertible Note Financing

October 2023, the Company entered into securities purchase agreements with certain lenders (the “October 2023 Lenders”) and

closed on the issuance of 13.0 % senior secured convertible promissory notes in the aggregate principal amount of $ 700,000 (the “October

2023 Note”), as well as the issuance of 70,000 shares of common stock as a commitment fee and warrants for the purchase of up to

105,000 shares of the Company’s common stock.

The Company and its subsidiaries have also entered into security agreements, creating

a security interest in certain property of the Company and its subsidiaries to secure the prompt payment, performance and discharge in

full of all of the Company’s obligations under the October 2023 Note.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements