What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2024-04-15 compared with 2023-03-30 · 390 added, 472 removed, 213 unchanged (80% of the section changed)

We are a clinical-stage, vertically integrated,

leading CellTech bio-developer dedicated to advancing and empowering innovative and transformative immune effector cell therapy and laboratory

Through our membership interest in Lab Services MSO (“Lab Services”), we plan to focus on precision diagnostics

along with toxicology and wellness testing.

Through our subsidiary structure with unique integration of verticals from innovative R&D

to automated bioproduction and accelerated clinical development, we are establishing a leading role in the fields of cellular immunotherapy

(including CAR-T), and laboratory services.

Laboratory Services is focused on delivering

high quality services related to toxicology and wellness testing and provides a broad portfolio of diagnostic tests including drug testing,

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

Specific capabilities

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

The panels that we test for are thyroid panel, comprehensive metabolic panel, kidney profile, liver function tests, and other individual

Through Laboratory Services, we use fast, accurate, and efficient equipment to provide practitioners with the tools to quickly

determine if a patient is following their designated treatment plan.

In most instances, we are able to provide a practitioner with qualitative

drug class results the same day the sample is received.

We provide an extensive chemistry test menu that gives physicians the information

to better treat their patients and maintain their overall wellness and have developed a premier reputation for customer service and fast

turnaround times in the industry.

We are also focused on achieving and fostering

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

product commercialization.

Avalon’s upstream innovative research incl udes:

therapeutic and diagnostic targets development utilizing QTY-code protein design technology

with Massachusetts Institute of Technology (MIT) including using the QTY code protein design

technology for development of novel therapeutic and diagnostic targets.

● Co-development

of next generation, mRNA-based (Flash-CAR TM ) CAR-T, CAR-NK and other immune effector

cell therapeutic modalities with Arbele Limited.

Avalon’s midstream bio-processing and bio-production

facility is affiliated with the University of Pittsburgh Medical Center where our leading candidate AVA-011, as described below, is undergoing

process development to generate clinical grade CAR-T cells for upcoming clinical trial in the US.

Avalon’s downstream medical team and facility

consists of top-rated affiliated hospital network and experts specialized in hematology, oncology, cellular immunotherapy, hematopoietic

stem/progenitor cell transplant, as well as regenerative therapeutics.

Our major clinical programs include:

Avalon has initiated its first-in-human clinical trial of CD19 CAR-T candidate, AVA-001 in

August 2019 at the Hebei Yanda Lu Daopei Hospital and Beijing Lu Daopei Hospital in China

(the world’s single largest CAR-T treatment network for the indication of relapsed/refractory

B-cell acute lymphoblastic leukemia (B-ALL).

The AVA-001 candidate (co-developed with China

Immunotech Co.

Ltd) is characterized by the utilization of 4-1BB (CD137) co-stimulatory signaling

pathway, conferring a strong anti-cancer activity during pre-clinical study.

It also features

a shorter bio-manufacturing time which leads to the advantage of prompt treatment to patients

where timing is important related hematologic malignancies.

We have successfully completed

the first-in-human clinical trial of our AVA-001 anti-CD19 CAR-T cell therapy as a bridge

to allogeneic bone marrow transplantation for patients with relapsed/refractory B-ALL at

the Lu Daopei Hospital (registered clinical trial number NCT03952923) with excellent efficacy

(90% complete remission rate) and minimal adverse side effects.

We are currently expanding

the indication and plan to recuit patients in the USA for AVA-001 to include both relapsed/refractory

B-ALL and non-Hodgkin lymphoma patients.

and FLASH-CAR™:

Avalon advanced its next generation immune cell therapy using mRNA-based,

non-viral FLASH-CAR™ technology co-developed with our strategic partner Arbele Limited.

The adaptable FLASH-CAR™ platform can be used to create personalized cell therapy from

a patient’s own cells, as well as off-the-shelf cell therapy from a universal donor.

Our leading candidate, AVA-011, is currently at process development stage to generate clinical-grade

cell-therapy products for subsequent clinical studies.

In July 2021, we and the University

of Pittsburgh of the Commonwealth System of Higher Education (the “University”)

entered into a Corporate Research Agreement (the “University Agreement”).

to the University Agreement, for a term of two years the University agreed to use its reasonable

efforts to perform academic research funded by us in connection with the development of point-of-care

modular autonomous processing system to generate clinical-grade AVA-011, a RNA-based chimeric

antigen receptor (CAR) T-cell therapy candidate with the appointment of Dr.

Yen Michael S.

Hsu as Principal Investigator.

We are in the process of renegotiating this agreement

to extend the term through 2023 and complete some of the research contemplated in the original

Avalon’s AVA-Trap™ therapeutic program plans to enter animal model testing followed

by expedited clinical studies with the goal of providing an effective therapeutic option

to combat COVID-19 and other life-threatening conditions involving cytokine storms.

a sponsored research and co-development project with Massachusetts Institute of Technology

(MIT) led by Professor Shuguang Zhang as Principal Investigator in May 2019.

Using the unique

QTY code protein design platform, six water-soluble variant cytokine receptors have been

successfully designed and tested to show binding affinity to the respective cytokines.

can potentially generate novel therapeutic targets for cellular therapy, as well as

in the field of precision diagnostics.

We do not have a timeline for the next steps of this

For the year ended December 31, 2022, we generated

rental revenue from our commercial real property in New Jersey, where we are headquartered.

Starting in 2023, in addition to the

rental, we also plan to generate income through our membership interest in Lab Services MSO.

Corporate and Available

We are incorporated

We are dedicated

to developing and delivering innovative, transformative, precision diagnostics and clinical laboratory services.

Our main strategy is

to acquire ownership or license rights in precision diagnostic assets, genetic testing and clinical laboratory companies through joint

ventures, share ownership structures or distribution rights.

We plan to play a leading role in the innovation of diagnostic testing, utilizing

proprietary technology to deliver precise, genetics-driven results.

We have the following

areas of focus:

Laboratory Acquisitions

We have embarked on a laboratory

rollup strategy focused on forming joint ventures and acquiring laboratories that are accretive to our commercial strategy.

9, 2023, we entered into and closed an Amended and Restated Membership Interest Purchase Agreement (the “Amended MIPA”), by

and among Avalon Laboratory Services, Inc., our wholly owned subsidiary (“Avalon Laboratory Services”), SCBC Holdings LLC,

Laboratory Services MSO, LLC (“Lab Services MSO”), the Zoe Family Trust, Bryan Cox and Sarah Cox.

The Amended MIPA amended

and restated, in its entirety, that certain Membership Interest Purchase Agreement, dated November 7, 2022 (the “Original MIPA”).

Under the Amended MIPA, we acquired from SCBC Holdings LLC through our

subsidiary Avalon Laboratory Services, forty percent (40%) of all the issued and outstanding equity interests of Lab Services MSO, free

and clear of all liens (the “Laboratory Services MSO Acquisition”).

As part of the consideration for the Laboratory Services

MSO Acquisition, we issued shares of our newly designated Series B Convertible Preferred Stock, stated value $1,000 per share (“the

Series B Preferred Stock”).

Further, Avalon Laboratory Services paid SCBC Holdings LLC $20,666,667 for 40% of all the issued and

outstanding equity interests of Lab Services MSO, which comprised of (i) $9,000,000 in cash, (ii) $11,000,000 pursuant to the issuance

of the Series B Preferred Stock, and (iii) a $666,667 cash payment on February 29, 2024.

Services MSO is focused on delivering high quality services related to toxicology and wellness

testing and provides a broad portfolio of diagnostic tests, including drug testing, toxicology,

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

Specific capabilities include STAT blood testing, qualitative drug screening,

genetic testing, urinary testing, and sexually transmitted disease testing.

MSO tests for the thyroid panel, comprehensive metabolic panel, kidney profile, liver function

tests, and other individual tests.

Through Lab Services MSO, we use fast, accurate, and efficient

equipment to provide practitioners with the tools to quickly determine if a patient is following

their designated treatment plan.

In most instances, we are able to provide a practitioner

with qualitative drug class results the same day a sample is received.

Lab Services MSO provides

a menu of extensive chemistry tests that physicians can use to obtain information to better

treat their patients and maintain their overall wellness.

Lab Services MSO has developed

a premier reputation for customer service and fast turnaround times.

● Lab Services MSO is also focused on commercialization of genetic-based proprietary testing.

area of focus in this area is confirmatory genetic testing during toxicology screening and genetic testing to screen for addictive propensity.

Lab Services MSO plans to focus on diagnostic testing utilizing proprietary technology to deliver precise genetic driven results.

● In the third quarter of 2023, Lab Services MSO acquired Merlin Technologies, Inc., a retail medical equipment

Research and Development

We are focused on bringing

forward intellectual property through joint patent filings with the Massachusetts Institute of Technology (MIT).

We completed a sponsored

research and co-development project with MIT, led by Professor Shuguang Zhang as Principal Investigator.

Using the unique QTY code protein

design platform, six water-soluble variant cytokine receptors have been successfully designed and tested to show binding affinity to the

respective cytokines.

We currently are focused on bringing forward the intellectual property associated with this program through joint

patent submissions.

Commercialization

We have begun work on

the commercialization and development of a versatile breathalyzer system.

We were granted exclusive

distributorship rights for the KetoAir from Qi Diagnostics in Hong Kong for the following territories:

North America, South America,

the EU and the UK.

We had a pilot launch and exhibition of the KetoAir in this year’s KetoCon conference in Austin, Texas (April

21-23, 2023).

For our commercialization strategy, we intend to target the diabetes and obesity markets.

We are evaluating options for

commercialization, including identifying distribution partners or distributing the KetoAir ourselves.

The KetoAir breathalyzer

system (the “KetoAir”) is a handheld device that allows the user to detect acetone levels in exhaled breath.

The acetone level

is in concentration units (ppm, part-per-million) such that the user will know his/her real-time ketosis status:

inadequate ketosis (0-3.99

ppm), mild ketosis (4-9.99 ppm), optimal ketosis (10-40 ppm), or alarming level (> 40 ppm).

The breathalyzer is registered with the

United States Food and Drug Administration (“FDA”) as a Class I medical device.

The device is also paired with an “AI

Nutritionist” software program (via Bluetooth connection) which is downloadable from Google Play (for Android mobile phones, approved)

and iPhone (the app is currently being reviewed by Apple iOS AppStore).

It helps users monitor and manage their ketogenic diet and related

We believe the KetoAir can be an essential tool to help diabetic patients adhere to their therapeutic programs and optimize

their ketogenic dietary management.

order to preserve cash and focus on our core laboratory rollup strategy and product commercialization, we have currently suspended all

research and development efforts related to cellular therapy (except for our joint patent filing with MIT as noted above) in order to

redirect our funding efforts to our core business strategies outlined above.

Corporate and Available Information

We are incorporated in Delaware.

Our website is located at http://www.avalon-globocare.com.

On our website, investors can obtain, free of

charge, a copy of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, our Code of Conduct and

Business Ethics, including disclosure related to any amendments or waivers thereto, other reports and any amendments thereto filed or

furnished pursuant to Section 13(a) or 15(d) of the Exchange Act of 1934, as amended, as soon as reasonably practicable after we file

such material electronically with, or furnish it to, the Securities and Exchange Commission, or the SEC.

None of the information posted

on our website is incorporated by reference into this Annual Report.

The SEC also maintains a website at http://www.sec.gov that

contains reports, proxy and information statements and other information regarding us and other companies that file materials with the

SEC electronically.

On our website, investors can obtain, free of charge, a copy of our

Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, our Code of Conduct and Business Ethics, including

disclosure related to any amendments or waivers thereto, other reports and any amendments thereto filed or furnished pursuant to Section

13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as soon as reasonably practicable

after we file such material electronically with, or furnish it to, the Securities and Exchange Commission (the “SEC”).

of the information posted on our website is incorporated by reference into this Annual Report.

The SEC also maintains a website at http://www.sec.gov

that contains reports, proxy and information statements and other information regarding us and other companies that file materials with

the SEC electronically.

China Operations

Due to the winding down

of the medical related consulting services segment, in November 2022, we decided to cease all operations in the People’s Republic

of China (the “PRC”) with the exception of a small administrative office, in Shanghai.

Due to the winding down of

the medical related consulting services segment, in November 2022, we decided to cease all operations in the People’s Republic of

China (the “PRC”) with the exception of a small administrative office, in Beijing.

We, through our Nevada Subsidiary Avactis

Biosciences Inc., will continue to own Avactis Nanjing Biosciences Ltd., which only owns a patent and is not considered an operating entity.

In addition, we reconstituted our board in December 2022 at our annual meeting of stockholders and our directors who were citizens of

China did not stand for re-election at our annual meeting.

We do not expect nor do we plan that we will further operate in the PRC or

generate revenue from PRC operations for the foreseeable future.

The following diagram illustrates our corporate

Recent Developments

In the fourth quarter of 2022, we conducted a

private placement offering for shares of our newly designated Series A Convertible Preferred Stock, stated value $1,000 per share (the

“Series A Preferred Stock”).

We entered into a securities purchase agreement (the “Securities Purchase Agreement”),

with certain accredited investors named therein, including Wenzhao Lu, the chairman of our board of directors, pursuant to which we sold

an aggregate of 9,000 shares of our Series A Preferred Stock for the gross proceeds of $9,000,000, which funds were used to pay the cash

purchase price in connection with our acquisition of Lab Services.

On February 9, 2023, we entered into and closed

an Amended and Restated Membership Interest Purchase Agreement (the “Amended MIPA”), by and among Avalon Laboratory Services,

Inc., a wholly-owned subsidiary of us (“Avalon Laboratory Services”), SCBC Holdings LLC, Laboratory Services, the Zoe Family

Trust, Bryan Cox and Sarah Cox.

The Amended MIPA amended and restated, in its entirety, that certain Membership Interest Purchase Agreement,

dated November 7, 2022 (the “Original MIPA”).

Under the Amended MIPA, we acquired from SCBC

Holdings LLC through our subsidiary Avalon Laboratory Services, forty percent (40%) of all the issued and outstanding equity interests

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

As part of the consideration

for the Laboratory Services MSO Acquisition, we issued shares of our newly designated Series B Convertible Stock, stated value $1,000

per share (“the Series B Preferred Stock”).

Further, Avalon Laboratory Services paid SCBC Holdings LLC $21,000,000 for all

the issued and outstanding equity interests of Laboratory Services, which comprised of (i) $9,000,000 in cash, (ii) $11,000,000 pursuant

to the issuance of the Series B Preferred Stock, and (iii) a $1,000,000 cash payment on February 9, 2024.

In addition, at any time during the period beginning

on the closing date of the Laboratory Services MSO Acquisition and ending on the date nine (9) months after such closing date, Avalon

Laboratory Services, 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.

In addition, we reconstituted our Board of Directors (the “Board”) in December 2022 at our annual meeting of stockholders

and our directors who were citizens of China did not stand for re-election at our annual meeting.

We do not expect nor do we plan that

we will further operate in the PRC or generate revenue from PRC operations for the foreseeable future.

The accompanying consolidated financial statements

reflect the activities of the Company and each of the following entities:

Name of Subsidiary

Incorporation

Percentage of

Principal Activities

Avalon Healthcare System, Inc.

Delaware May 18, 2015

100% held by Company

Holding company for payroll and other expenses

Avalon RT 9 Properties, LLC (“Avalon RT 9”)

New Jersey February 7, 2017

100% held by Company

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

Avalon (Shanghai) Healthcare Technology Co., Ltd.

(“Avalon Shanghai”)

PRC April 29, 2016

100% held by AHS

Ceased operations and is not considered an operating entity

Genexosome Technologies Inc.

(“Genexosome”)

Nevada July 31, 2017

60% held by Company

No current activities to report, dormant

Avactis Biosciences Inc.

Nevada July 18, 2018

60% held by Company

Patent holding company

Avactis Nanjing Biosciences Ltd.

(“Avactis Nanjing”)

PRC May 8, 2020

100% held by Avactis

Owns a patent and is not considered an operating entity

Avalon Laboratory Services, Inc.

(“Avalon Lab”)

Delaware October 14, 2022

100% held by Company

Laboratory holding company with a 40% membership interest in Lab Services MSO

Sales and Marketing

We seek to develop new business through relationships

driven by our senior management, which have extensive contacts throughout the healthcare system.

Our senior management will be seeking

opportunities for joint ventures, strategic relationships and acquisitions in consulting, biomedical innovations, laboratory, and medical

device companies.

In addition, through our membership interest in Lab Services, we plan to generate revenue from toxicology and wellness

laboratory testing.

We also intend to seek opportunities to expand the operations of Lab Services, through acquisition of additional

lab companies and through the opening of new lab locations.

Consulting Services

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.

Laboratory Services

Through our membership interest in Laboratory

Services, we are focused on delivering high quality services related to toxicology and wellness testing.

We use fast, accurate, and efficient

equipment to provide practitioners with the tools to quickly determine if a patient is following their designated treatment plan.

most instances, we are able to provide a practitioner with qualitative drug class results the same day the sample is received.

an extensive chemistry test menu that gives physicians the information to better treat their patients and maintain their overall wellness.

The panels that we test for are thyroid panel, comprehensive metabolic panel, kidney profile, liver function tests, and other individual

Cellular Therapy

We focus on the following markets in developing

our cellular therapy business:

Immunotherapy in Oncology:

Regarded as the future of medicine, we believe cell-based technologies

and therapeutics will replace pharmaceuticals as a more effective and functional modality

in certain unmet medical areas.

We are actively engaging in this revolutionary trend and

positioning to take a leading role in immune effector cell therapies in the immuno-oncology

Protein Design:

Novel therapeutic and diagnostic targets development utilizing QTY-code protein

design technology with Massachusetts Institute of Technology (MIT) including using the QTY

code protein design technology for development of a hemofiltration device to treat Cytokine

Storm (aka Cytokine Release Syndrome).

QTY-code can be applied to generate water-soluble,

antibody-like molecular variants of native membrane-bound receptors, which may expand the

repertoire of therapeutic targets in CAR-T cell therapies.

Avalon RT 9 Properties, LLC

In May 2017, we acquired commercial property

located in Freehold, New Jersey.

This property is now our corporate headquarters and contains several commercial tenants that generate

revenue through rental income.

We seek to develop new business

through relationships driven by our senior management, which have extensive contacts throughout the healthcare system.

Our senior management

will be seeking opportunities for joint ventures, strategic relationships and acquisitions in consulting, biomedical innovations, laboratory,

and medical device companies.

In addition, through our membership interest in Lab Services MSO, we plan to generate revenue from toxicology

and wellness laboratory testing.

We also intend to seek opportunities to expand the operations of Lab Services MSO and our wholly owned

subsidiary, Avalon Laboratory Services, through the acquisition of additional lab companies and through the opening of new lab locations.

Breathalyzer System (KetoAir)

We are in the process of launching sales of the KetoAir in the US.

We have retained a marketing expert to assist us to bring this product to market through social media, influencer promotion and our website.

We will also be launching this product at the 2024 “KetoCon” convention taking place May 31, 2024 in Austin Texas, where we

plan to begin taking orders for this product.

Laboratory Services

On February 9, 2023,

we acquired membership interest in Lab Services.

We anticipate generating revenue through this membership interest in the areas of toxicology

and wellness testing.

Through our membership interest

in Lab Services MSO, we are focused on delivering high quality services related to toxicology and wellness testing.

We use fast, accurate,

and efficient equipment to provide practitioners with the tools to quickly determine if a patient is following their designated treatment

In most instances, we are able to provide a practitioner with qualitative drug class results the same day the sample is received.

We provide an extensive chemistry test menu that gives physicians the information to better treat their patients and maintain their overall

The panels that we test for are thyroid panel, comprehensive metabolic panel, kidney profile, liver function tests, and other

individual tests.

We are currently offering

our laboratory services in California, Texas and Arizona.

Breathalyzer System (KetoAir)

Our current area of focus

for the launch of the KetoAir is within the United States (“US”).

We are focused on the population within the US that is using

the Keto Diet approach to weight loss and diabetic management.

Avalon RT 9 Properties, LLC

In May 2017, we acquired commercial

property located in Freehold, New Jersey.

This property serves as our corporate headquarters and contains several commercial tenants that

generate revenue through rental income.

Strategic Development

Through our wholly owned subsidiary Lab Services,

we plan to embark in a rollup acquisition strategy of small to medium size laboratories accretive to our strategy and complimentary to

our membership interest in Lab Services.

We also intend to pursue the acquisition and development of healthcare related technologies

for cell related diagnostics and therapeutics through acquisition, licensing or joint ventures with major universities and biotech companies.

seeking laboratory or medical device acquisitions.

Through our wholly owned subsidiary

Avalon Laboratory Services and through our membership interest in Lab Services MSO, we plan to execute on a rollup acquisition strategy

of small to medium size laboratories accretive to our strategy and complimentary to our membership interest in Lab Services MSO.

intend to pursue the acquisition and development of healthcare related technologies for cell related diagnostics and therapeutics through

acquisition, licensing or joint ventures with major universities and biotech companies seeking laboratory or medical device acquisitions.

Intellectual Property

Our goal is to obtain, maintain and enforce patent

rights for our products, formulations, processes, methods of use and other proprietary technologies, preserve our trade secrets, and

operate without infringing on the proprietary rights of other parties, both in the United States and abroad.

Our policy is to actively

seek to obtain, where appropriate, the broadest intellectual property protection possible for our current product candidates and any

future product candidates, proprietary information and proprietary technology through a combination of contractual arrangements and patents,

both in the United States and abroad.

Even patent protection, however, may not always afford us with complete protection against competitors

who seek to circumvent our patents.

If we fail to adequately protect or enforce our intellectual property rights or secure rights to

patents of others, the value of our intellectual property rights would diminish.

To this end, we require all of our employees, consultants,

advisors and other contractors to enter into confidentiality agreements that prohibit the disclosure and use of confidential information

and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions relevant to our

technologies and important to our business.

Our goal is to obtain, maintain

and enforce patent rights for our products, formulations, processes, methods of use and other proprietary technologies, preserve our trade

secrets, and operate without infringing on the proprietary rights of other parties, both in the United States and abroad.

Our policy is

to actively seek to obtain, where appropriate, the broadest intellectual property protection possible for our current product candidates

and any future product candidates, proprietary information and proprietary technology through a combination of contractual arrangements

and patents, both in the United States and abroad.

Even patent protection, however, may not always afford us with complete protection

against competitors who seek to circumvent our patents.

If we fail to adequately protect or enforce our intellectual property rights or

secure rights to patents of others, the value of our intellectual property rights would diminish.

To this end, we require all of our employees,

consultants, advisors and other contractors to enter into confidentiality agreements that prohibit the disclosure and use of confidential

information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions relevant

to our technologies and important to our business.

Laboratory Services

While there has been consolidation in the diagnostic

information services industry in recent years, the laboratory testing industry is fragmented and highly competitive.

We primarily compete

with three types of clinical testing providers:

commercial clinical laboratories IDN-affiliated laboratories and physician-office laboratories.

Our largest commercial clinical laboratory competitors are Quest Diagnostic Laboratories and Laboratory Corporation of America.

we compete with many smaller regional and local commercial clinical laboratories, specialized advanced laboratories and providers of

consumer-initiated testing.

There also has been a trend among physician practices to establish their own histology laboratory capabilities

and/or bring pathologists into their practices, thereby reducing referrals from these practices and increasing the competitive position

of these practices.

In addition, we believe that consolidation in

the diagnostic information services industry will continue.

A significant portion of clinical testing is likely to continue to be performed

by independent delivery networks (including hospitals and hospital health systems) (“IDNs”), which generally have affiliations

with community clinicians and may have more, or more convenient, locations in a market.

As a result, we compete against these affiliated

laboratories primarily on the basis of service capability, quality and pricing.

In addition, market activity may increase the competitive

For example, IDN ownership of physician practices may enhance the ties of the clinicians to IDN-affiliated laboratories,

enhancing the competitive position of IDN-affiliated laboratories.

The diagnostic information services industry

is faced with changing technology, new product introductions and new service offerings.

Competitors may compete using advanced technology,

including technology that enables more convenient or cost-effective testing.

Digital pathology, still in an emerging state, is an example

While there has been consolidation

in the diagnostic information services industry in recent years, the laboratory testing industry is fragmented and highly competitive.

We primarily compete with three types of clinical testing providers:

commercial clinical laboratories IDN-affiliated laboratories and

physician-office laboratories.

Our largest commercial clinical laboratory competitors are Quest Diagnostic Laboratories and Laboratory

Corporation of America.

In addition, we compete with many smaller regional and local commercial clinical laboratories, specialized advanced

laboratories and providers of consumer-initiated testing.

There also has been a trend among physician practices to establish their own

histology laboratory capabilities and/or bring pathologists into their practices, thereby reducing referrals from these practices and

increasing the competitive position of these practices.

In addition, we believe that

consolidation in the diagnostic information services industry will continue.

A significant portion of clinical testing is likely to continue

to be performed by independent delivery networks (including hospitals and hospital health systems) (“IDNs”), which generally

have affiliations with community clinicians and may have more, or more convenient, locations in a particular market.

As a result, we compete

against these affiliated laboratories primarily on the basis of service capability, quality and pricing.

In addition, market activity

may increase the competitive environment.

For example, IDN ownership of physician practices may enhance the ties of the clinicians to

IDN-affiliated laboratories, enhancing the competitive position of IDN-affiliated laboratories.

The diagnostic information

services industry is faced with changing technology, new product introductions and new service offerings.

Competitors may compete using

advanced technology, including technology that enables more convenient or cost-effective testing.

Digital pathology, still in an emerging

state, is an example of this.

Competitors also may compete on the basis of new service offerings.

Competitors also may offer testing to be performed outside

of a commercial clinical laboratory, such as (1) point-of-care testing that can be performed by physicians in their offices;

that can be performed by IDNs in their own laboratories;

and (3) home testing that can be carried out without requiring the services

of outside providers.

The development and commercialization of new

drug products is highly competitive.

We expect that we will face significant competition from major pharmaceutical companies, specialty

pharmaceutical companies and biotechnology companies worldwide with respect to our product candidates that we may seek to develop or

commercialize in the future.

Specifically, due to the large unmet medical need, global demographics and relatively attractive reimbursement

dynamics, the markets in which we are seeking to develop products are fiercely competitive and there are a number of large pharmaceutical

and biotechnology companies that currently market and sell products or are pursuing the development of product candidates similar to

Our competitors may succeed in developing, acquiring or licensing technologies and drug products that are more effective, have

fewer or more tolerable side effects or are less costly than any product candidates that we are currently developing or that we may develop,

which could render our product candidates obsolete and noncompetitive.

Our commercial opportunity could be reduced or

eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects,

are more convenient or are less expensive than any products that we may develop.

Our competitors also may obtain FDA or other marketing

approval for their products before we are able to obtain approval for ours, which could result in our competitors establishing a strong

market position before we are able to enter the market.

Many of our existing and potential future competitors

have significantly greater financial resources and expertise in lab services and operations, research and development, manufacturing,

preclinical testing, conducting clinical studies, obtaining marketing approvals and marketing approved products than we do.

acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller

number of our competitors.

Smaller, or early stage, companies may also prove to be significant competitors, particularly through collaborative

arrangements with large and established companies.

These competitors also compete with us in recruiting and retaining qualified scientific

and management personnel and establishing clinical study sites and patient registration for clinical studies, as well as in acquiring

technologies complementary to, or necessary for, our programs.

We expect that our ability to compete effectively

will depend upon our ability to:

● successfully

operate and expand our lab services and locations;

● successfully

and rapidly complete adequate and well-controlled clinical studies that demonstrate statistically

significant safety and efficacy and to obtain all requisite regulatory approvals in a cost-effective

a proprietary position for our manufacturing processes and other technology;

our products in accordance with FDA and international regulatory guidelines;

and retain key personnel;

or access an adequate sales and marketing infrastructure for any approved products.

Competitors also may offer testing to

be performed outside of a commercial clinical laboratory, such as (1) point-of-care testing that can be performed by physicians in their

(2) testing that can be performed by IDNs in their own laboratories;

and (3) home testing that can be carried out without requiring

the services of outside providers.

The development and commercialization

of new drug products is highly competitive.

We expect that we will continue to face significant competition from major pharmaceutical

companies, specialty pharmaceutical companies and biotechnology companies worldwide with respect to our product candidates that we may

seek to develop or commercialize in the future.

Specifically, due to the large unmet medical need, global demographics and relatively

attractive reimbursement dynamics, the markets in which we are seeking to develop products are fiercely competitive and there are a number

of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of product

candidates similar to ours.

Our competitors may succeed in developing, acquiring or licensing technologies and drug products that are

more effective, have fewer or more tolerable side effects or are less costly than any product candidates that we are currently developing

or that we may develop, which could render our product candidates obsolete and noncompetitive.

Our commercial opportunity

could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective, have fewer or less

severe side effects, are more convenient or are less expensive than any products that we may develop.

Our competitors also may obtain

FDA or other marketing approval for their products before we are able to obtain approval for ours, which could result in our competitors

establishing a strong market position before we are able to enter the market.

Many of our existing and potential

future competitors have significantly greater financial resources and expertise in lab services and operations, research and development,

manufacturing, preclinical testing, conducting clinical studies, obtaining marketing approvals and marketing approved products than we

Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among

a smaller number of our competitors.

Smaller, or early stage, companies may also prove to be significant competitors, particularly through

collaborative arrangements with large and established companies.

These competitors also compete with us in recruiting and retaining qualified

scientific and management personnel and establishing clinical study sites and patient registration for clinical studies, as well as in

acquiring technologies complementary to, or necessary for, our programs.

We expect that our ability

to compete effectively will depend upon our ability to:

successfully operate and expand our lab services and locations;

successfully and rapidly complete adequate and well-controlled clinical studies that demonstrate statistically significant safety and efficacy and to obtain all requisite regulatory approvals in a cost-effective manner;

maintain a proprietary position for our manufacturing processes and other technology;

produce our products in accordance with FDA and international regulatory guidelines;

attract and retain key personnel;

build or access an adequate sales and marketing infrastructure for any approved products.

Failure to do one or more of these activities

1 unchanged sentence

Avalon RT 9 Properties, LLC

Our executive commercial building in Freehold,

New Jersey is located on a major highway and is one of the largest buildings in the surrounding areas.

It is centrally located and maintains

high occupancy.

Our executive commercial building

in Freehold, New Jersey is located on a major highway and is one of the largest buildings in the surrounding areas.

It is centrally located

and maintains high occupancy.

There are other commercial properties in the vicinity that offer similar amenities.

However, premier executive offices

are limited and as such we expect to continue to maintain high occupancy in the near term.

As of March 30, 2023, we employed six employees,

five of which are full time employees.

However, premier executive

offices are limited and as such we expect to continue to maintain high occupancy in the near term.

As of March 29, 2024, we employed

five employees, four of which are full time employees.

None of our employees are represented by a collective bargaining arrangement.

19 unchanged sentences

On December 16, 2021, the PCAOB issued a Determination

Report which reported that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered

Report which reported that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in:

(1) mainland China of the People’s Republic of China, because of a position taken by one or more authorities in mainland China;

8 unchanged sentences

firms registered in mainland China or Hong Kong that are subject to PCAOB’s determination on December 16, 2021.

Although the audit reports of Avalon are prepared

auditors that are subject to inspection by the PCAOB, the PCAOB is currently unable to conduct inspections over the audit work

of Avalon’s independent registered public accounting firms with respect to Avalon’s operations in mainland China without

the approval of certain Chinese authorities.

Also, there is no guarantee that future audit reports will be prepared by auditors that

are completely inspected by the PCAOB and, as such, future investors may be deprived of such inspections, which could result in limitations

or restrictions to Avalon’s access of the U.S.

capital markets.

Inspections of certain other firms that the PCAOB

has conducted outside of China have identified deficiencies in those firms’ audit procedures and quality control procedures, which

may be addressed as part of the inspection process to improve future audit quality.

However, the PCAOB is currently unable to inspect

an auditor’s audit work related to a company’s operations in China where such documentation of the audit work is located

As a result, Avalon’s investors may be deprived of the benefits of the PCAOB’s oversight of auditors that are located

in China through such inspections.

On March 24, 2021, the SEC adopted interim final

rules relating to the implementation of certain disclosure and documentation requirements of the HFCA Act.

Avalon will be required to

comply with these rules if the SEC identifies us as having a “non-inspection” year under a process to be subsequently established

The SEC is assessing how to implement other requirements of the HFCA Act, including the listing and trading prohibition requirements

described above.

On June 22, 2021, the U.S.

Senate passed a bill

which, if passed by the U.S.

House of Representatives and signed into law, would reduce the number of consecutive non-inspection years

required for triggering the prohibitions under the HFCA Act from three years to two, which would shorten the timeframe before Avalon’s

share may be delisted and before the trading in Avalon’s shares is prohibited.

On November 5, 2021, the SEC approved Rule 6100

adopted by the PCAOB to determine its inability to inspect or investigate registered firms completely under the HFCA Act.

This rule establishes

the framework for the PCAOB to make these required determinations.

The trading in Avalon’s securities may be prohibited under the

HFCA Act if the PCAOB subsequently determines Avalon’s audit work is performed by auditors that the PCAOB is unable to inspect

or investigate completely pursuant to Rule 6100, and as a result, U.S.

national securities exchanges, such as Nasdaq, may determine to

delist Avalon’s securities.

Such a delisting would likely cause the value of such securities to significantly decline or become

The SEC may propose additional regulatory or

legislative requirements or guidance that could impact us if our auditor is not subject to PCAOB inspection.

For example, on August 6,

2020, the President’s Working Group on Financial Markets, or the PWG, issued the Report on Protecting United States Investors from

Significant Risks from Chinese Companies to the then President of the United States.

This report recommended the SEC implement five recommendations

to address companies from jurisdictions that do not provide the PCAOB with sufficient access to fulfil its statutory mandate.

the concepts of these recommendations were implemented with the enactment of the HFCA Act.

However, some of the recommendations were

more stringent than the HFCA Act.

For example, if a company was not subject to PCAOB inspection, the report recommended that the transition

period before a company would be delisted would end on January 1, 2022.

The SEC has announced that the SEC staff is preparing

a consolidated proposal for the rules regarding the implementation of the HFCA Act and to address the recommendations in the PWG report.

It is unclear when the SEC will complete its rulemaking and when such rules will become effective and what, if any, of the PWG recommendations

will be adopted.

The implications of this possible regulation in addition to the requirements of the HFCA Act are uncertain.

Avalon is currently not subject to the HFCA Act, any uncertainty of its applicability to Avalon, for example if Avalon switched to using

a PRC-based auditing firm, could cause the market price of Avalon’s securities to be materially and adversely affected and could

cause Avalon’s securities to be delisted or prohibited from being traded “over-the-counter”.

If Avalon’s securities

are unable to be listed on another securities exchange, such a delisting would substantially impair your ability to sell or purchase

Avalon’s securities when you wish to do so, and the risk and uncertainty associated with a potential delisting would have a negative

impact on the price of Avalon’s securities.

See “ Risk Factors— Trading in Avalon’s securities may be restricted

under the Holding Foreign Companies Accountable Act if the PCAOB determines that it cannot inspect or fully investigate Avalon’s

auditors, and as a result, U.S.

national securities exchanges, such as Nasdaq, may determine to delist Avalon’s securities.

Drug Approval Process

5 unchanged sentences

Failure to comply with the applicable U.S.

may subject us to administrative or judicial sanctions, such as the FDA’s refusal to approve a pending new drug application, or

NDA, or a pending biologics license application, or BLA, warning letters, product recalls, product seizures, total or partial suspension

of production or distribution, injunctions and/or criminal prosecution.

Pharmaceutical products such as ours may not

be commercially marketed without prior approval from the FDA and comparable regulatory agencies in other countries.

requirements may

subject us to administrative or judicial sanctions, such as the FDA’s refusal to approve a pending new drug application, or NDA,

or a pending biologics license application, or BLA, warning letters, product recalls, product seizures, total or partial suspension of

production or distribution, injunctions and/or criminal prosecution.

Pharmaceutical products such as ours may not be

commercially marketed without prior approval from the FDA and comparable regulatory agencies in other countries.

In the United States,

the process to receiving such approval is long, expensive and risky, and includes the following steps:

● pre-clinical

laboratory tests, animal studies, and formulation studies;

to the FDA of an IND for human clinical testing, which must become effective before human

clinical trials may begin;

and well-controlled human clinical trials to establish the safety and efficacy of the drug

for each indication;

to the FDA of an NDA or BLA;

● satisfactory

completion of an FDA inspection of the manufacturing facility or facilities at which the

drug is produced to assess compliance with current good manufacturing practices, or cGMPs;

potential FDA audit of the preclinical and clinical trial sites that generated the data in

support of the NDA or BLA;

ability to obtain clearance or approval of companion diagnostic tests, if required, on a

timely basis, or at all;

review and approval of the NDA or BLA.

pre-clinical laboratory tests, animal studies, and formulation studies;

submission to the FDA of an IND for human clinical testing, which must become effective before human clinical trials may begin;

adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug for each indication;

submission to the FDA of an NDA or BLA;

satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the drug is produced to assess compliance with current good manufacturing practices, or cGMPs;

a potential FDA audit of the preclinical and clinical trial sites that generated the data in support of the NDA or BLA;

the ability to obtain clearance or approval of companion diagnostic tests, if required, on a timely basis, or at all;

FDA review and approval of the NDA or BLA.

Regulation by U.S.

2 unchanged sentences

our ongoing research and development activities.

The commercialization of drug products requires regulatory approval by governmental

agencies prior to commercialization.

Various laws and regulations govern or influence the research and development, non-clinical and

clinical testing, manufacturing, processing, packing, validation, safety, labeling, storage, record keeping, registration, listing, distribution,

advertising, sale, marketing and post-marketing commitments of our products.

The lengthy process of seeking these approvals, and the

subsequent compliance with applicable laws and regulations, require expending substantial resources.

The commercialization of drug products requires regulatory approval by governmental agencies

prior to commercialization.

Various laws and regulations govern or influence the research and development, non-clinical and clinical testing,

manufacturing, processing, packing, validation, safety, labeling, storage, record keeping, registration, listing, distribution, advertising,

sale, marketing and post-marketing commitments of our products.

The lengthy process of seeking these approvals, and the subsequent compliance

with applicable laws and regulations, require expending substantial resources.

The results of pre-clinical testing, which include

laboratory evaluation of product chemistry and formulation, animal studies to assess the potential safety and efficacy of the product

and its formulations, details concerning the drug manufacturing process and its controls, and a proposed clinical trial protocol and

other information must be submitted to the FDA as part of an IND that must be reviewed and become effective before clinical testing can

and its formulations, details concerning the drug manufacturing process and its controls, and a proposed clinical trial protocol and other

information must be submitted to the FDA as part of an IND that must be reviewed and become effective before clinical testing can begin.

The study protocol and informed consent information for patients in clinical trials must also be submitted to an independent Institutional

15 unchanged sentences

however, the phases may overlap or be combined:

I clinical trials typically are conducted in a small number of volunteers or patients to

assess the early tolerability and safety profile, and the pattern of drug absorption, distribution

and metabolism;

II clinical trials typically are conducted in a limited patient population with a specific

disease in order to assess appropriate dosages and dose regimens, expand evidence of the

safety profile and evaluate preliminary efficacy;

III clinical trials typically are larger scale, multicenter, well-controlled trials conducted

on patients with a specific disease to generate enough data to statistically evaluate the

efficacy and safety of the product, to establish the overall benefit-risk relationship of

the drug and to provide adequate information for the registration of the drug.

Phase I clinical trials typically are conducted in a small number of volunteers or patients to assess the early tolerability and safety profile, and the pattern of drug absorption, distribution and metabolism;

Phase II clinical trials typically are conducted in a limited patient population with a specific disease in order to assess appropriate dosages and dose regimens, expand evidence of the safety profile and evaluate preliminary efficacy;

Phase III clinical trials typically are larger scale, multicenter, well-controlled trials conducted on patients with a specific disease to generate enough data to statistically evaluate the efficacy and safety of the product, to establish the overall benefit-risk relationship of the drug and to provide adequate information for the registration of the drug.

A therapeutic product candidate being studied

5 unchanged sentences

individual patient access to such investigational product.

The results of the pre-clinical and clinical

testing, chemistry, manufacturing and control information, proposed labeling and other information are then submitted to the FDA in the

form of either an NDA or BLA for review and potential approval to begin commercial sales.

In responding to an NDA or BLA, the FDA may

grant marketing approval, request additional information in a Complete Response Letter, or CRL, or deny the approval if it determines

that the NDA or BLA does not provide an adequate basis for approval.

A CRL generally contains a statement of specific conditions that

must be met in order to secure final approval of an NDA or BLA and may require additional testing.

If and when those conditions have

been met to the FDA’s satisfaction, the FDA will typically issue an approval letter, which authorizes commercial marketing of the

product with specific prescribing information for specific indications, and sometimes with specified post-marketing commitments and/or

distribution and use restrictions imposed under a Risk Evaluation and Mitigation Strategy program.

Any approval required from the FDA

might not be obtained on a timely basis, if at all.

The results of the pre-clinical and clinical testing,

chemistry, manufacturing and control information, proposed labeling and other information are then submitted to the FDA in the form of

either an NDA or BLA for review and potential approval to begin commercial sales.

In responding to an NDA or BLA, the FDA may grant marketing

approval, request additional information in a Complete Response Letter, or CRL, or deny the approval if it determines that the NDA or

BLA does not provide an adequate basis for approval.

A CRL generally contains a statement of specific conditions that must be met in order

to secure final approval of an NDA or BLA and may require additional testing.

If and when those conditions have been met to the FDA’s

satisfaction, the FDA will typically issue an approval letter, which authorizes commercial marketing of the product with specific prescribing

information for specific indications, and sometimes with specified post-marketing commitments and/or distribution and use restrictions

imposed under a Risk Evaluation and Mitigation Strategy program.

Any approval required from the FDA might not be obtained on a timely

basis, if at all.

Among the conditions for an NDA or BLA approval

is the requirement that the manufacturing operations conform on an ongoing basis with cGMPs.

In complying with cGMPs, we must expend

time, money and effort in the areas of training, production and quality control within our own organization and at our contract manufacturing

In complying with cGMPs, we must expend time,

money and effort in the areas of training, production and quality control within our own organization and at our contract manufacturing

A successful inspection of the manufacturing facility by the FDA is usually a prerequisite for final approval of a pharmaceutical

18 unchanged sentences

and demonstrate the potential to address unmet medical needs for the condition.

Fast Track designation applies to the combination of

the product and the specific indication for which it is being studied.

Fast Track designation applies to the combination of the

product and the specific indication for which it is being studied.

The sponsor of a new drug or biologic may request the FDA to designate

8 unchanged sentences

Under the Breakthrough Therapy program, products intended to treat a serious or life-threatening

disease or condition may be eligible for the benefits of the Fast Track program when preliminary clinical evidence demonstrates that

such product may have substantial improvement on one or more clinically significant endpoints over existing therapies.

disease or condition may be eligible for the benefits of the Fast Track program when preliminary clinical evidence demonstrates that such

product may have substantial improvement on one or more clinically significant endpoints over existing therapies.

Additionally, FDA will

seek to ensure the sponsor of a breakthrough therapy product receives timely advice and interactive communications to help the sponsor

design and conduct a development program as efficiently as possible.

Any product is eligible for priority review if it has the potential

to provide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the treatment,

diagnosis or prevention of a disease compared to marketed products.

The FDA will attempt to direct additional resources to the evaluation

of an application for a new drug or biological product designated for priority review in an effort to facilitate the review.

Additionally,

FDA will seek to ensure the sponsor of a breakthrough therapy product receives timely advice and interactive communications to help the

sponsor design and conduct a development program as efficiently as possible.

Any product is eligible for priority review if it has the

potential to provide safe and effective therapy where no satisfactory alternative therapy exists or a significant improvement in the

treatment, diagnosis or prevention of a disease compared to marketed products.

The FDA will attempt to direct additional resources to

the evaluation of an application for a new drug or biological product designated for priority review in an effort to facilitate the review.

Additionally, a product may be eligible for accelerated approval.

Drug or biological products studied for their safety and effectiveness

in treating serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive

accelerated approval, which means that they may be approved on the basis of adequate and well-controlled clinical studies establishing

that the product has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an

effect on a clinical endpoint other than survival or irreversible morbidity.

As a condition of approval, the FDA may require that a sponsor

of a drug or biological product receiving accelerated approval perform adequate and well-controlled post-marketing clinical studies.

In addition, the FDA currently requires as a condition for accelerated approval the pre-approval of promotional materials, which could

adversely impact the timing of the commercial launch of the product.

Fast Track designation, Breakthrough Therapy designation, priority

review and accelerated approval do not change the standards for approval but may expedite the development or approval process.

a product may be eligible for accelerated approval.

Drug or biological products studied for their safety and effectiveness in treating

serious or life-threatening illnesses and that provide meaningful therapeutic benefit over existing treatments may receive accelerated

approval, which means that they may be approved on the basis of adequate and well-controlled clinical studies establishing that the product

has an effect on a surrogate endpoint that is reasonably likely to predict a clinical benefit, or on the basis of an effect on a clinical

endpoint other than survival or irreversible morbidity.

As a condition of approval, the FDA may require that a sponsor of a drug or biological

product receiving accelerated approval perform adequate and well-controlled post-marketing clinical studies.

In addition, the FDA currently

requires as a condition for accelerated approval the pre-approval of promotional materials, which could adversely impact the timing of

the commercial launch of the product.

Fast Track designation, Breakthrough Therapy designation, priority review and accelerated approval

do not change the standards for approval but may expedite the development or approval process.

Regenerative Medicine Advanced Therapies

7 unchanged sentences

product, human cell and tissue product, or any combination product using such therapies or products, with limited exceptions;

is intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition;

intended to treat, modify, reverse, or cure a serious or life-threatening disease or condition;

and (3) preliminary clinical evidence

32 unchanged sentences

within the DOJ, and state and local governments.

For example, sales, marketing and scientific/educational grant programs may have to

comply with the anti-fraud and abuse provisions of the Social Security Act, the false claims laws, the privacy and security provisions

of the Health Insurance Portability and Accountability Act, or HIPAA, and similar state laws, each as amended, as applicable.

The federal Anti-Kickback Statute prohibits,

among other things, any person or entity from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly

or indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or arranging for the

purchase, lease or order of any item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcare

For example, sales, marketing and scientific/educational grant programs may have to comply

with the anti-fraud and abuse provisions of the Social Security Act, the false claims laws, the privacy and security provisions of the

Health Insurance Portability and Accountability Act, or HIPAA, and similar state laws, each as amended, as applicable.

The federal Anti-Kickback Statute prohibits, among

other things, any person or entity from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or

indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or arranging for the purchase,

lease or order of any item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcare programs.

The term remuneration has been interpreted broadly to include anything of value.

The Anti-Kickback Statute has been interpreted

to apply to arrangements between therapeutic product manufacturers on one hand and prescribers, purchasers, and formulary managers on

The Anti-Kickback Statute has been interpreted to apply

to arrangements between therapeutic product manufacturers on one hand and prescribers, purchasers, and formulary managers on the other.

There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution.

The exceptions and safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be intended to induce

prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor.

meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se

illegal under the Anti-Kickback Statute.

Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on

a cumulative review of all of its facts and circumstances.

Additionally, the intent standard under the Anti-Kickback Statute was amended

by the ACA to a stricter standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent

to violate it in order to have committed a violation.

In addition, the ACA codified case law that a claim including items or services

resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False

Claims Act, or FCA.

The exceptions

and safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be intended to induce prescribing,

purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor.

Failure to meet all of the

requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the

Anti-Kickback Statute.

Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review

of all of its facts and circumstances.

Additionally, the intent standard under the Anti-Kickback Statute was amended by the ACA to a stricter

standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order

to have committed a violation.

In addition, the ACA codified case law that a claim including items or services resulting from a violation

of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act, or FCA.

The federal false claims and civil monetary penalty

11 unchanged sentences

HIPAA created additional federal criminal statutes

that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by

means of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody

of, any healthcare benefit program, including private third-party payors, willfully obstructing a criminal investigation of a healthcare

offense, and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any

materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or

Like the Anti-Kickback Statute, the ACA amended the intent standard for certain healthcare fraud statutes under HIPAA such

that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed

Many states have similar, and typically more

prohibitive, fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs,

or, in several states, apply regardless of the payor.

Additionally, to the extent that our product candidates may in the future be sold

in a foreign country, we may be subject to similar foreign laws.

that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means

of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any

healthcare benefit program, including private third-party payors, willfully obstructing a criminal investigation of a healthcare offense,

and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially

false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services.

the Anti-Kickback Statute, the ACA amended the intent standard for certain healthcare fraud statutes under HIPAA such that a person or

entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.

Many states have similar, and typically more prohibitive,

fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several

states, apply regardless of the payor.

Additionally, to the extent that our product candidates may in the future be sold in a foreign

country, we may be subject to similar foreign laws.

We may be subject to data privacy and security

11 unchanged sentences

In addition, many state laws govern the privacy and security

of health information in specified circumstances, many of which differ from each other in significant ways, are often not pre-empted

by HIPAA, and may have a more prohibitive effect than HIPAA, thus complicating compliance efforts.

of health information in specified circumstances, many of which differ from each other in significant ways, are often not pre-empted by

HIPAA, and may have a more prohibitive effect than HIPAA, thus complicating compliance efforts.

We expect our product, after approval, may be

13 unchanged sentences

Penalties may apply in some cases when such metrics are not submitted accurately and timely.

Additionally, the federal Physician Payments

Sunshine Act, or the Sunshine Act, within the ACA, and its implementing regulations, require that certain manufacturers of drugs, devices,

biological and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program

(with certain exceptions) report annually to CMS information related to certain payments or other transfers of value made or distributed

to physicians and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and

teaching hospitals and to report annually certain ownership and investment interests held by physicians and their immediate family members.

Failure to report accurately could result in penalties.

In addition, many states also govern the reporting of payments or other transfers

of value, many of which differ from each other in significant ways, are often not pre-empted, and may have a more prohibitive effect

than the Sunshine Act, thus further complicating compliance efforts.

Additionally, the federal Physician Payments Sunshine

Act, or the Sunshine Act, within the ACA, and its implementing regulations, require that certain manufacturers of drugs, devices, biological

and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain

exceptions) report annually to CMS information related to certain payments or other transfers of value made or distributed to physicians

and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals

and to report annually certain ownership and investment interests held by physicians and their immediate family members.

Failure to report

accurately could result in penalties.

In addition, many states also govern the reporting of payments or other transfers of value, many

of which differ from each other in significant ways, are often not pre-empted, and may have a more prohibitive effect than the Sunshine

Act, thus further complicating compliance efforts.

New Legislation and Regulations

8 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business