What changed in this filing

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Item 9A. Controls and Procedures

2024-04-15 compared with 2023-03-30 · 2540 added, 2029 removed, 1132 unchanged (80% of the section changed)

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Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures

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

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

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

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

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

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

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

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

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

controls and procedures.

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

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

We maintain disclosure controls

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

Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and to ensure

that such information is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and

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

We carried out an

evaluation, under the supervision and with the participation of our management, including the principal executive officer and the principal

financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e)

under the Exchange Act, as of the end of the period covered by this report.

Our management recognizes that any controls and procedures,

no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily

applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

During evaluation of disclosure

controls and procedures as of December 31, 2023, conducted as part of our annual audit and preparation of our annual financial statements,

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

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

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over Financial Reporting

Management is responsible for the preparation

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

The financial statements have been prepared in conformity

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

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

Management is also responsible for establishing

and maintaining adequate internal control over financial reporting.

Our internal control over financial reporting includes those policies

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

Management recognizes that there are

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

the circumvention or overriding of internal control.

Accordingly, even effective internal control over financial reporting can provide

only reasonable assurance with respect to financial statement presentation.

Further, because of changes in conditions, the effectiveness

of internal control over financial reporting may vary over time.

Management regularly assesses controls and did

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

This assessment was based on criteria for effective internal control

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

of the Treadway Commission.

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

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

effectiveness of the controls.

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

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

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

In light of the material weaknesses described above, we performed

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

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

Accordingly, management believes that despite

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

in accordance with US GAAP.

Management is responsible

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

The financial statements have been prepared

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

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

Management is also responsible

for establishing and maintaining adequate internal control over financial reporting.

Our internal control over financial reporting includes

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

Management recognizes

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

human error and the circumvention or overriding of internal control.

Accordingly, even effective internal control over financial reporting

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

Further, because of changes in conditions, the

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

Management regularly assesses our internal

control over financial reporting and did so most recently for our financial reporting as of December 31, 2023.

This assessment was

based on criteria for effective internal control over financial reporting described in the Internal Control Integrated Framework

issued by the Committee of Sponsoring Organizations (COSO) of the Treadway Commission.

Based on this assessment, management has

concluded that our internal control over financial reporting was not effective as of December 31, 2023, due to the lack of

segregation of duties resulting from our small size and inability to perform an effective test of the operating effectiveness of the

controls, including the oversight of our financial statement close process.

As a result of our Lab Services MSO transaction in

February 2023, we retained additional accounting staff and hired a Controller that works part-time for Lab Services MSO and

part-time for the Company.

We hope to be able to utilize the Controller going forward to enhance the segregation of duties.

addition, the Company has transitioned all email servers to the United States to enhance this aspect of internal controls.

In light of the material weaknesses

described above, we performed additional analyses and procedures in order to conclude that our consolidated financial statements for the

year ended December 31, 2023 included in this Annual Report on Form 10-K were fairly stated in accordance with US GAAP.

Accordingly, management

believes that despite the material weakness identified in our internal control over financial reporting, our consolidated financial statements

for the year ended December 31, 2023 are fairly stated, in all material respects, in accordance with US GAAP.

Changes in Internal Control over Financial

There were no changes in our internal control

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

Other than those described above, there were no changes in our internal

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

31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting

Attestation Report of the Registered Public Accounting Firm

This Annual Report on Form 10-K does not include

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

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

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

This Annual Report on Form

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

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

public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report.

OTHER INFORMATION

(a) We issued 105,000 shares of our common stock as a commitment fee

and warrants for the purchase of up to 252,404 shares of our common stock in connection with the issuance of the March 2024 Note to the

March 2024 Lender.

(b) During the quarter ended December 31, 2023,

none of our directors or executive officers adopted or terminated a Rule 10b5-1 trading plan or a non-Rule 10b5-1

trading arrangement (as defined in Item 408(c) of Regulation S-K).

DISCLOSURE REGARDING FOREIGN JURISDICTIONS

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Directors and Executive Officers

Below are the names of and certain information

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

Below are the names of and

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

Chairman of the Board of Directors

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Lourdes Felix

Officers are elected annually by the Board of

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

Officers are elected annually

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

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

The principal occupation and business experience

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

The principal occupation and

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

Wenzhao Lu, Chairman of the Board of Directors

Wenzhao Lu has served

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

He is a seasoned healthcare entrepreneur with extensive operational knowledge and

experience in US & Asia.

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

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

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

DPMG was founded by Professor

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

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

at Ogilvy & Mather Advertising Company.

Prior to joining DPMG, Mr.

Lu served as Chief Operating Officer for BioTime Asia Limited,

which is a subsidiary of BioTime, Inc.

Wenzhao Lu has served as our Chairman of the Board since October 10, 2016.

He is a seasoned healthcare entrepreneur with extensive operational

knowledge and experience in the US & Asia.

He has served as Chairman of the board of directors of the Daopei Medical Group, or DPMG,

since 2010 to December, 2021.

Under his leadership, DPMG operates three top-ranked private hospitals (located in Beijing and Hebei), specialty

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

was founded by Professor Daopei Lu, a renowned hematologist pioneering in hematopoietic stem cell transplant and a member of the Academy

of Engineering in China.

Lu received a Bachelor of Arts from Temple University Tyler School of Arts in 1988 and subsequently worked

as senior Art Director at Ogilvy & Mather Advertising Company.

Prior to joining DPMG, in 2009, Mr.

Lu served as Chief Operating Officer

of BioTime Asia Limited, a subsidiary of BioTime, Inc.

(NYSE American:

BTX) in 2009.

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

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

Lu is qualified to serve as a director because of his

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

David Jin, Chief Executive Officer, President

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

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

From 2009 to 2017, Dr.

Jin has served as

the Chief Medical Officer of BioTime, Inc.

David Jin, MD, PhD, has served as our Chief Executive Officer, President and as a member of our Board since September 14, 2016.

Jin served as the Chief Medical Officer of BioTime, Inc.

(NYSE American:

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

stem cell technology.

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

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

Prior to his current endeavors, Dr.

Jin was Chief Consultant/Advisor

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

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

scientific abstracts, articles, reviews, and book chapters.

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

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

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

Jin was honored

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

Jin is qualified

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

in, the healthcare industry.

BTX), a clinical stage regenerative medicine company

with a focus on pluripotent stem cell technology.

Jin also acts as a senior translational clinician-scientist at the Howard Hughes

Medical Institute and the Ansary Stem Cell Center at Weill Cornell Medical College of Cornell University.

Prior to his current endeavors,

Jin was Chief Consultant/Advisor for various biotech/pharmaceutical companies regarding hematology, oncology, immunotherapy and stem

cell-based technology development.

Jin has been Principle Investigator in more than 15 pre-clinical and clinical trials, as well as

an author/co-author of over 80 peer-reviewed scientific abstracts, articles, reviews, and book chapters.

Jin studied medicine at SUNY

Downstate College of Medicine in Brooklyn, New York.

He received his clinical training and subsequent faculty tenure at the New York-Presbyterian

Hospital (the teaching hospital for both Cornell and Columbia Universities) in the areas of internal medicine, hematology, and clinical

Jin was honored as Top Chief Medical Officer by ExecRank in 2012, as well as recognized by Leading Physicians of the World

Jin is qualified to serve as a director because of his role with us, and his extensive operational knowledge of, and executive

level management experience in, the healthcare industry.

Meng Li, Chief Operating Officer and Secretary

Meng Li has served as our Chief Operating

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

from April 5, 2019 through December 30, 2022.

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

and media investment consultancy.

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

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

Meng Li has served as our Chief Operating Officer, Secretary since October 10, 2016 and served as a member of the Board from October 10,

2016 to July 9, 2018 and from April 5, 2019 through December 30, 2022.

Li has over 15 years of executive experience in international

marketing, branding, communications, and media investment consultancy.

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

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

Prior to joining Maxus/Group M, Ms.

Li worked for Zenith Media (a Publicis

Group company) from 2000 to 2006 as Senior Manager.

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

University in China.

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

Li received a Bachelor of Arts in International

Economic Law from Dalian Maritime University in China.

Luisa Ingargiola, Chief Financial Officer

Luisa Ingargiola has served as our Chief Financial

Officer since February 21, 2017.

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

NASDAQ and NYSE companies.

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

Dragonfly Energy (DFLI) andVision Marine (VMAR).

From 2007 through 2016, Ms.

Ingargiola served as the Chief Financial Officer and then

Director at MagneGas Corporation (Nasdaq:

Ingargiola has served as our Chief Financial Officer since February 21, 2017.

Ingargiola has significant experience serving as Chief

Financial Officer or Audit Chair for multiple Nasdaq and New York Stock Exchange companies.

She currently serves as Director and Audit

Chair for several public companies including ElectraMeccanica (NASDAQ:SOLO), Dragonfly Energy (DFLI) and Vision Marine (VMAR).

through 2016, Ms.

Ingargiola served as the Chief Financial Officer and then a member of the board of directors at MagneGas Corporation

Prior to 2007, Ms.

Ingargiola held various roles as Budget Director and Investment Analyst

in several private companies.

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

and a concentration in Finance.

Ingargiola held various roles as Budget Director and Investment Analyst in several private companies.

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

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

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

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

Ingargiola is qualified to

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

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

Sanders, Director

Sanders has served as a member of the

Board of Directors since July 30, 2018.

Sanders has served as a member of the Board since July 30, 2018.

Since January 2017, Mr.

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

Sanders has been Of Counsel to the law firm

of Ortoli Rosenstadt LLP.

From July 2007 until January 2017, Mr.

Sanders was a Senior Partner of Ortoli Rosenstadt LLP.

From January 1, 2004 until June 30, 2007,

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

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

firm of Spitzer & Feldman PC.

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

Sanders was a Senior Partner at Ortoli Rosenstadt LLP.

From January 1,

2004 until June 30, 2007, he was Of Counsel to the law firm of Rubin, Bailin, Ortoli, LLP.

From January 1, 2001 to December 31, 2003,

he was Counsel at the law firm of Spitzer & Feldman PC.

Sanders also serves as a member of the boards of directors of Helijet

International, Inc.

and Electrameccanica Vehicles Corp.

(NASDAQ:SOLO).

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

of the Bay Street Theater since February 2015.

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

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

working with companies in the life sciences industry.

Additionally, since October 2013, he has been a member of the board

of directors at the American Academy of Dramatic Arts, and, since February 2015, has been a member of the board of directors of the Bay

Street Theater.

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

Sanders is qualified

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

life sciences industry.

Lourdes Felix, Director

Felix has served as a member of the Board

of the Directors since January 9, 2023.

Lourdes Felix has served as

a member of the Board since January 9, 2023.

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

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

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

She has been with BioCorRx since

October 2012.

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

and a member of the board of directors of BioCorRx Inc, a company focused on addiction treatment solutions and related disorders.

has been with BioCorRx since October 2012.

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

owned subsidiary of BioCorRx Inc.

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

She has expertise in finance, accounting,

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

She has thorough knowledge

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

She also has extensive experience in

developing and managing financial operations.

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

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

Felix is qualified

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

has expertise in finance, accounting, company-wide operations, budgeting, and internal control principles including GAAP, SEC, and SOX

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

She also has extensive experience in developing and managing financial operations.

Felix holds a Bachelor of Science degree in Accounting

from the University of Phoenix.

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

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

Tauzin II, Director

Tauzin II has served as a member of

the Board of Directors since November 1, 2017.

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

Counsel to Alston & Bird LLP.

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

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

Tauzin II has served as a member of the Board since November 1, 2017.

From December 2010 until March 1, 2014, Congressman Tauzin served

as a Special Legislative Counsel at Alston & Bird LLP.

From December 2004 to June 2010, Congressman Tauzin was President and Chief

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

top lobbying groups.

He served 12.5 terms in the U.S.

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

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

He also served as a senior

member of the House Resources Committee and Deputy Majority Whip.

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

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

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

and retains the role of Lead Independent Emeritus today.

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

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

He received a Bachelor

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

Congressman Tauzin is qualified

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

and privately-held companies.

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

served as a senior member of the House Resources Committee and Deputy Majority Whip.

Prior to serving as a member of Congress, Congressman

Tauzin was a member of the Louisiana State Legislature, where he served as Chairman of the House Natural Resources Committee and Chief

Administration Floor Leader.

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

from 2005 to 2021 and retains the role of Lead Independent Emeritus today.

The Congressman also served on the board of directors of Entergy,

a Fortune 500 company.

In addition, the Congressman chartered a Louisiana State Savings and Loan Association and Chaired its first board

of directors.

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

Congressman Tauzin is qualified to serve as a director because of his extensive knowledge of the pharmaceutical industry and his experience

as a director of several publicly traded and privately held companies.

Stilley, III, Director

Stilley has served as a member of the

Board of Directors since July 5, 2018.

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

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

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

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

business development and strategic projects at Clinical Data, Inc.

In September 2021, Mr.

Stilley was appointed to serve

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

From February 2002, Mr.

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

Stilley has served as a member of the Board since July 5,

Stilley has been the Chief Executive Officer of Adovate, LLC since January 2023.

Previously, he was Chief Executive Officer

of Purnovate, Inc., a subsidiary of Adial Pharmaceuticals, Inc.

(Adial) from January 2021 until May 2023, and was Chief Executive Officer

of Adial from December 2010 until August 2022, and was a member of Adial’s board of directors from December 2010 until September

From August 2008 until December 2010, he was the Vice President, Business Development and Strategic Projects at Clinical Data, Inc.

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

in August 2008.

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

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

Before entering the business community, Mr.

Stilley served as Captain

March 2018, the audit chair for public companies, and the COO and CFO of a number of private companies.

Before entering the business community,

Stilley served as Captain in the U.S.

Marine Corps.

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

in Commerce/Marketing from

the McIntire School of Commerce at the University of Virginia.

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

biotechnology organization.

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

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

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

He currently serves on the Advisory Board of

Virginia BIO, the statewide biotechnology organization and has guest lectures as the University School of Engineering.

qualified to serve as a director because of his extensive knowledge of the biotechnology industry, significant executive leadership and

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

Tevi Troy, Director

Tevi Troy has served as a member of the Board

of Directors since June 4, 2018.

Troy has served as a member of the Board since June 4, 2018.

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

Department of Health and Human Services.

a Senior Fellow at the Bipartisan Policy Center in Washington.

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

Institute and a Senior Fellow at Hudson Institute.

Department of Health and

Human Services.

Troy is a Senior Fellow at the Bipartisan Policy Center in Washington.

He was the founder and CEO of the American

Health Policy Institute and a Senior Fellow at Hudson Institute.

On August 3, 2007, Dr.

Troy was unanimously confirmed by the U.S.

Senate as the Deputy

Secretary of HHS.

as the Deputy Secretary of HHS.

As Deputy Secretary, Dr.

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

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

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

positions over a five-year period, culminating in his service as Deputy Assistant and then Acting Assistant to the President for Domestic

Troy was the chief operating officer of the largest civilian department in the

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

Troy has extensive White House experience, having served

in several high-level positions over a five-year period, culminating in his service as Deputy Assistant and then Acting Assistant to the

President for Domestic Policy.

Troy has held high-level positions on Capitol Hill as well.

From 1998 to 2000, Dr.

Troy served as the Policy Director for

Senator John Ashcroft.

Troy served as the

Policy Director for Senator John Ashcroft.

From 1996 to 1998, Dr.

Troy was Senior Domestic Policy Adviser and later Domestic Policy Director for the House

Policy Committee, chaired by Christopher Cox.

In addition to his senior level government work and health care expertise, Dr.

a best-selling presidential historian and the author of five books, including, most recently, “Fight House:

Rivalries in the White

House from Truman to Trump,” which the Wall Street Journal listed as one of the top political books of 2020.

other affiliations include:

Troy was Senior Domestic Policy Adviser and later Domestic Policy Director

for the House Policy Committee, chaired by Christopher Cox.

In addition to his senior level government work and health care expertise,

Troy is also a best-selling presidential historian and the author of five books, including, most recently, “Fight House:

in the White House from Truman to Trump,” which the Wall Street Journal listed as one of the top political books of 2020.

many other affiliations include:

contributing editor for Washingtonian magazine;

member of the publication committee of National Affairs;

of the Board of Fellows of the Jewish Policy Center;

member of the Board of Fellows of the Jewish Policy Center;

a Senior Fellow at the Potomac Institute;

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Board Composition

Our business and affairs are organized under the

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

The primary responsibility of our board of directors is

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

Our board of directors meets on a regular

Our Board is currently composed

of seven directors.

Our directors hold office until their successors have been elected and qualified or until the earlier of their resignation

We are subject to Nasdaq Board diversity rules and ensure our compliance with such rules.

In addition, our priority

in selection of board members is identification of members who will further the interests of our stockholders through his or her established

record of professional accomplishment, the ability to contribute positively to the collaborative culture among board members, knowledge

of our business and understanding of the competitive landscape.

A majority of the authorized

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

However, any action required or permitted to be

taken by the Board may be taken without a meeting if all members of the Board individually or collectively consent in writing to the action.

Board Leadership Structure and Role in Risk

The positions of our Chairman

of the Board and Chief Executive Officer are separated.

Separating these positions allows our Chief Executive Officer to focus on our

day-to-day business, while allowing the Chairman of the Board to lead our Board in its fundamental role of providing advice to and independent

oversight of management.

Our Board recognizes the time, effort and energy that the Chief Executive Officer must devote to his position

in the current business environment, as well as the commitment required to serve as our Chairman, particularly as our Board’s oversight

responsibilities continue to grow.

Our Board also believes that this structure ensures a greater role for the independent directors in

the oversight of our Company and active participation of the independent directors in setting agendas and establishing priorities and

procedures for the work of our Board.

Our Board believes its administration of its risk oversight function has not affected its leadership

Although our bylaws do not

require our Chairman and Chief Executive Officer positions to be separate, our Board believes that having separate positions is the appropriate

leadership structure for us at this time and demonstrates our commitment to good corporate governance.

Risk is inherent with every

business, and how well a business manages risk can ultimately determine its success.

We face a number of risks, including those described

under the section entitled “ Risk Factors ” of this report.

Our Board is actively involved in oversight of risks that

could affect us.

This oversight is conducted primarily by our full Board, which has responsibility for general oversight of risks.

Our Board satisfies this responsibility

through full reports by each committee chair regarding the committee’s considerations and actions, as well as through regular reports

directly from officers responsible for oversight of particular risks within our Company.

Our Board believes that full and open communication

between management and the Board is essential for effective risk management and oversight.

Board of Director Meetings

The primary responsibility

of the Board is to provide oversight, strategic guidance, counseling, and direction to our management team.

Our Board meets on a regular

basis and additionally as required.

A majority of the authorized number of directors

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

The directors must be present at the meeting to constitute

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

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

Our Board met three times in 2023.

Each of the directors attended at least 75% of the aggregate of

(i) the total number of meetings of our Board (held during the period for which such directors served on the Board) and (ii) the total

number of meetings of all committees of our Board on which the director served (during the periods for which the director served on such

committee or committees).

We do not have a formal policy requiring members of the Board to attend our annual meetings.

Our last annual

meeting of stockholders was held on October 12, 2023.

One of our directors serving at the time attended last year’s annual meeting.

Director Independence

Our board of directors currently consists of seven

Our board of directors has determined that William B.

Stilley, III, Steven A.

Sanders, Tevi Troy, and Lourdes Felix, qualify

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

As required under Nasdaq rules and regulations,

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

Our common stock is listed

on The Nasdaq Capital Market.

Under the rules of The Nasdaq Capital Market, independent directors must comprise a majority of our Board.

In addition, the rules of The Nasdaq Capital Market require that all the members of such committees be independent.

Members of our Audit

Committee, as defined below, must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act.

committee members must also satisfy the independence criteria established by The Nasdaq Capital Market in accordance with Rule 10C-1 under

the Exchange Act.

Under the rules of The Nasdaq Capital Market, a director will only qualify as an “independent director”

if, among other qualifications, in the opinion of that company’s board of directors, that person does not have a relationship that

would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

The Board has reviewed its

composition, the composition of its committees and the independence of each director.

Based upon information requested from and provided

by each director concerning his or her background, employment and affiliations, including family relationships, the Board has determined

that Steven A.

Sanders, Lourdes Felix, William B.

Stilley, III and Tevi Troy do not, respectively, have a relationship that would interfere

with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent”

as that term is defined under the Rules of The Nasdaq Capital Market and the SEC.

In making this determination,

our Board considered the relationships that each non-employee director has with our Company and all other facts and circumstances our

Board deemed relevant in determining their independence.

We intend to comply with the other independence requirements for committees within

the time periods specified above.

Family Relationships

There are no family relationships among our directors

or executive officers.

Board Leadership Structure and Role in Risk

Our Board of Directors, or the Board, is primarily

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

The Board receives and reviews periodic reports from

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

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

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

While the Board oversees our company’s

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

We believe this division of responsibilities is the

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

There are no family relationships

among our directors or executive officers.

Board Committees

Establishment of Board Committees and Adoption of Charters

In November 2018, the Company established a Nominating

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

and adopted charters to govern each of the Committees.

In connection with the establishment of the Nominating

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

members to each such committee.

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

set forth in each applicable charter.

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

and Corporate

Governance Committee

Steven Sanders (Chairman)

Lourdes Felix (Chairwoman)

William Stilley (Chairman)

Steven Sanders

William Stilley

Steve Sanders

Nominating and Corporate Governance Committee

Our board of directors has determined that each

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

as defined by Nasdaq.

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

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

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

The Governance

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

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

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

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

The Governance Committee’s principal functions include:

● developing and maintaining our corporate governance

policy guidelines;

● developing and maintaining our codes of conduct

● overseeing the interpretation and enforcement

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

● evaluating the performance of our board of directors,

its committees, and committee chairmen and our directors;

● selecting and recommending a slate of director

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

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

During 2022, the Nominating and Corporate Governance

Committee did not meet.

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

A copy of the Governance

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

of the website.

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

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

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

The final candidate

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

In general, in considering

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

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

These criteria include the candidate’s

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

act in the interests of our stockholders.

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

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

The Governance Committee does not assign specific weights to particular

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

We believe that the backgrounds and qualifications

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

of directors to fulfill its responsibilities.

Stockholders may recommend individuals to the Governance Committee for consideration as

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

our Governance Committee.

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

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

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

The Board has established

an audit committee, a compensation committee and a nominating and corporate governance committee.

Our Board may establish other committees

to facilitate the management of our business.

The composition and functions of each committee named above are defined and described below.

Members serve on these committees until their resignation or until otherwise determined by our Board.

Audit Committee .

We have a separately-designated standing Audit

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

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

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

In addition, Mr.

Stilley is an “audit committee financial

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

rules of The NASDAQ Stock Market, Inc.

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

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

and performance of our internal and external auditors.

The Audit Committee’s principal functions include:

● reviewing our annual audited financial statements

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

reporting that could significantly affect our financial statements;

● reviewing our quarterly financial statements

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

auditors’ reviews of the quarterly financial statements;

● recommending to the board of directors the appointment

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

● approving the fees to be paid to our independent

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

● reviewing periodic reports from our independent

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

● reviewing the adequacy of our overall control

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

● reviewing with our management and legal counsel

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

received from regulators or governmental agencies.

During the year ended December 31, 2022, the audit

committee met four times.

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

in the “Investors” section of the website.

Meetings may be held from time to time to consider

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

We have a separately

designated standing audit committee of the Board (the “Audit Committee”), established in accordance with Section 3(a)(58)(A)

of the Exchange Act.

The Audit Committee consists of William Stilley, Steven Sanders and Tevi Troy, with Mr.

Stilley serving as the Chair

of the Audit Committee.

The Board has determined that each director currently serving on our Audit Committee is an “independent

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

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

sophistication” as defined by Nasdaq Rules.

The Audit Committee is appointed by the Board to assist with monitoring (i) the integrity

of our financial statements, (ii) our compliance with legal and regulatory requirements, and (iii) the independence and performance of

our internal and external auditors.

The principal functions and responsibilities of

the Audit Committee include:

● reviewing our annual audited

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

and practices and financial reporting that could significantly affect our financial statements;

● reviewing our quarterly financial

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

of the independent auditors’ reviews of the quarterly financial statements;

● recommending to the Board the

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

● approving and conducting a

review of all related party transactions for potential conflict of interest situations on an ongoing basis;

● approving the fees to be paid

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

for such services;

● reviewing periodic reports

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

● reviewing the adequacy of our

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

● reviewing with our management

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

reports or inquiries received from regulators or governmental agencies.

During the fiscal year ended December 31, 2023,

the Audit Committee met four times.

The Audit Committee is governed by a written charter, as adopted by the Board.

A copy of the Audit

Committee Charter is posted under the “Investors” tab under “Corporate Governance” on our website, which is located

at www.avalon-globocare.com .

Compensation Committee .

Our compensation committee consists of Lourdes

Felix, Steven Sanders and Tevi Troy.

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

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

The Compensation Committee is responsible for establishing

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

as well as director compensation.

The Compensation Committee also administers our equity incentive plans.

During the year ended December

31, 2022, the Compensation Committee did not meet.

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

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

the “Investors” section of the website.

The Compensation Committee works with the Chairman of the Board and Chief Executive

Officer and reviews and approves compensation decisions regarding senior management including compensation levels and equity incentive

The Compensation Committee also approves employment and compensation agreements with our key personnel and directors.

The compensation

Committee has the power and authority to conduct or authorize studies, retain independent consultants, accountants or others, and obtain

unrestricted access to management, our internal auditors, human resources and accounting employees and all information relevant to its

responsibilities.

The responsibilities of the Compensation Committee,

as stated in its charter, include the following:

● review and approve the Company’s compensation

guidelines and structure;

● review and approve on an annual basis the corporate

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

● review and approve on an annual basis the evaluation

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

● periodically review and make recommendations

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

The Compensation Committee is responsible for

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

policies and compensation programs for the executive team.

committee of the Board (the “Compensation Committee”) consists of Lourdes Felix, Steven Sanders and Tevi Troy, with Ms.

serving as the Chair of the Compensation Committee.

The Board has determined that each member of the Compensation Committee is considered

(i) an “independent director” as defined by Nasdaq Rules applicable to members of a compensation committee;

(ii) a “non-employee

director” as defined in Rule 16b-3 promulgated under the Exchange Act;

and (iii) an “outside director” as that term

is defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

The Compensation Committee is

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

executive officer benefits as well as director compensation.

The Compensation Committee also administers our equity incentive plans.

Compensation Committee works with the Chairman of the Board and our Chief Executive Officer and reviews and approves compensation decisions

regarding senior management, including compensation levels and equity incentive awards.

The Compensation Committee also approves employment

and compensation agreements with our key personnel and directors.

The Compensation Committee has the power and authority to conduct or

authorize studies, retain independent consultants, accountants or others, and obtain unrestricted access to management, our internal auditors,

human resources and accounting employees and all information relevant to its responsibilities.

The principal functions and responsibilities of

the Compensation Committee include:

● reviewing and approving the

Company’s compensation guidelines and structure;

● reviewing and approving, on

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

● reviewing and approving, on

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

and equity compensation;

● periodically reviewing and

making recommendations to the Board regarding the compensation of non-management directors;

● developing the executive compensation

philosophy and reviewing and recommending to the Board for approval all compensation policies and compensation programs for the executive

During the fiscal year ended

December 31, 2023, the Compensation Committee did not meet.

The Compensation Committee is governed by a written charter, as adopted by

A copy of the Compensation Committee Charter is posted under the “Investors” tab under “Corporate Governance”

on our website, which is located at www.avalon-globocare.com .

Nominating and Corporate Governance Committee .

Our Nominating and Corporate Governance Committee consists of Steven Sanders, William Stilley and Tevi Troy, with Mr.

Sanders serving

as the Chair of our Nominating and Corporate Governance Committee.

Our Board has determined that each member of the Nominating and Governance

Committee is an “independent director” as defined by Nasdaq Rules.

The Nominating and Corporate Governance Committee is generally

responsible for recommending to our full Board certain policies, procedures, and practices designed to ensure that our corporate governance

policies, procedures, and practices continue to assist the Board and our management in effectively and efficiently promoting the best

interests of our stockholders.

The Nominating and Corporate Governance Committee is also responsible for selecting and recommending for

approval by our Board and our stockholders a slate of director nominees for election at each of our annual meetings of stockholders, and

otherwise for determining the board committee members and chairpersons, subject to ratification by our Board, as well as recommending

to the Board director nominees to fill vacancies or new positions on the Board or its committees that may occur or be created from time

to time, all in accordance with our bylaws and applicable law.

In identifying independent

candidates, with significant senior-level professional experience, to be nominated as potential members of our Board, the Nominating and

Corporate Governance Committee solicits candidates from the Board, senior management and others, and may engage a search firm in the process.

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

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

In general, in considering

whether to recommend any particular candidate for inclusion in our Board’s slate of recommended director nominees, the Nominating

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

These criteria include the

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

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

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

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

The Nominating and Corporate Governance Committee does not assign

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

We believe that the

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

that will allow our Board to fulfill its responsibilities.

Stockholders may recommend individuals to the Nominating and Corporate Governance

Committee for consideration as potential director candidates by submitting the names, together with appropriate biographical information

and background materials to our Nominating and Corporate Governance Committee.

The Nominating and Corporate Governance Committee considers

recommendations from stockholders if submitted in a timely manner in accordance with the procedures set forth in our bylaws and will apply

the same criteria to all persons being considered.

The principal functions and responsibilities of

the Nominating and Corporate Governance Committee include:

● developing and maintaining

our corporate governance policy guidelines;

● developing and maintaining

our Code of Business Conduct and Ethics;

● overseeing the interpretation

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

● evaluating the performance

of our Board, its committees, and committee chairpersons and our directors;

● selecting and recommending

a slate of director nominees for election at each of our annual meetings of the stockholders and recommending to the Board director nominees

to fill vacancies or new positions on the Board or its committees that may occur from time to time.

During the fiscal year ended

December 31, 2023, the Nominating and Corporate Governance Committee met one time.

The Nominating and Corporate Governance Committee is

governed by a written charter approved by our Board.

A copy of the Nominating and Corporate Governance Committee Charter is posted under

the “Investors” tab under “Corporate Governance” on our website, which is located at www.avalon-globocare.com .

Stockholder nominations for directorships

Stockholders may recommend

individuals to the Nominating and Corporate Governance Committee for consideration as potential director candidates by submitting their

names and background to the Secretary of the Company at the address set forth below under “Stockholder Communications” in

accordance with the provisions set forth in our bylaws.

All such recommendations will be forwarded to the Nominating and Corporate Governance

Committee, which will review and only consider such recommendations if appropriate biographical and other information is provided, including,

but not limited to, the items listed below, on a timely basis.

All security holder recommendations for director candidates must be received

by the Company in the timeframe(s) set forth under the heading “Stockholder Proposals” below.

● the name and address of record

of the security holder;

● a representation that the security

holder is a record holder of the Company’s securities, or if the security holder is not a record holder, evidence of ownership

in accordance with Rule 14a-8(b)(2) of the Exchange Act;

● the name, age, business and

residential address, educational background, current principal occupation or employment, and principal occupation or employment for the

preceding five (5) full fiscal years of the proposed director candidate;

● a description of the qualifications

and background of the proposed director candidate and a representation that the proposed director candidate meets applicable independence

requirements;

● a description of any arrangements

or understandings between the security holder and the proposed director candidate;

● the consent of the proposed

director candidate to be named in the proxy statement relating to the Company’s annual meeting of stockholders and to serve as

a director if elected at such annual meeting.

Assuming that appropriate

information is provided for candidates recommended by stockholders, the Nominating and Corporate Governance Committee will evaluate those

candidates by following substantially the same process, and applying substantially the same criteria, as for candidates submitted by members

of the Board or other persons, as described above and as set forth in its written charter.

Compensation Committee Interlocks and Insider

Participation

None of our executive officers currently serves,

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

officers on our board of directors or compensation committee.

None of our executive officers

currently serves, or in the past year has served, as a member of the board of directors or compensation committee of any entity that has

one or more executive officers on our board of directors or compensation committee.

Code of Ethics

We have a code of ethics that applies to all of

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

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

website at www.avalon-globocare.com.

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

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

The reference to

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

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

Indemnification of Directors and Officers

Our directors and executive officers are indemnified

as provided by the Delaware law and our Bylaws.

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

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

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

The indemnification of costs can include an amount paid to settle

an action or satisfy a judgment.

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

and Exchange Commission’s policy regarding indemnification.

Insofar as indemnification for liabilities arising

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

or otherwise.

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

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

We have adopted a written

Code of Business Conduct and Ethics that applies to our employees, officers and directors.

A copy of the Code of Business Conduct and

Ethics is posted under the “Investors” tab under “Corporate Governance” in our website, which is located at www.avalon-globocare.com.

We intend to disclose future amendments to certain provisions of our Code of Business Conduct and Ethics, or waivers of such provisions

applicable to any principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing

similar functions, and our directors, on our website identified above or in filings with the SEC.

Anti-Hedging Policy

Under the terms of our insider

trading policy, we prohibit each officer, director and employee, and each of their family members and controlled entities, from engaging

in certain forms of hedging or monetization transactions.

Such transactions include those, such as zero-cost collars and forward sale

contracts, that would allow them to lock in much of the value of their stock holdings, often in exchange for all or part of the potential

for upside appreciation in the stock, and to continue to own the covered securities but without the full risks and rewards of ownership.

Limitation of Directors Liability and Indemnification

The Delaware General Corporation

Law authorizes corporations to limit or eliminate, subject to certain conditions, the personal liability of directors to corporations

and their stockholders for monetary damages for breach of their fiduciary duties.

Our Amended and Restated Certificate of Incorporation

(the “Certificate of Incorporation”) limits the liability of our directors to the fullest extent permitted by Delaware law.

In addition, we have entered into indemnification agreements with each of our directors and officers whereby we have agreed to indemnify

those directors and officers to the fullest extent permitted by law, including indemnification against expenses and liabilities incurred

in legal proceedings to which the director or officer was, or is threatened to be made, a party by reason of the fact that such director

or officer is or was a director, officer, employee or agent of the Company, provided that such director or officer acted in good faith

and in a manner that the director or officer reasonably believed to be in, or not opposed to, the best interests of the Company.

We have director and officer

liability insurance to cover liabilities our directors and officers may incur in connection with their services to us, including matters

arising under the Securities Act.

Our Certificate of Incorporation and bylaws also provide that we will indemnify our directors and officers

who, by reason of the fact that he or she is one of our officers or directors, is involved in any action, suit or proceeding, whether

civil, criminal, administrative or investigative related to their board role with us.

There is no pending litigation

or proceeding involving any of our directors, officers, employees or agents in which indemnification will be required or permitted.

are not aware of any threatened litigation or proceeding that may result in a claim for such indemnification.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires

the Company’s executive officers, directors, and persons who beneficially own more than ten percent of a registered class of the

Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of the Company’s

common stock.

Such officers, directors, and persons are required by SEC regulation to furnish the Company with copies of all Section 16(a)

forms that they file with the SEC.

To our knowledge, based solely on review of the

copies of such reports and amendments to such reports with respect to the year ended December 31, 2022 filed with the SEC, all required

Section 16 reports under the Exchange Act for our directors, executive officers, principal accounting officer and beneficial owners

of greater than 10% of our common stock were filed on a timely basis during the year ended December 31, 2022.

16(a) of the Exchange Act requires our directors and executive, officers, and persons who are beneficial owners of more than

10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the SEC.

These persons

are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.

solely upon our review of copies of Forms 3, 4 and 5 furnished to us, we believe that all of our directors, executive officers

and any other applicable stockholders timely filed all reports required by Section 16(a) of the Exchange Act during the fiscal

year ended December 31, 2023, except for the following:

(i) we filed a Form 3 for Lourdes Felix on March 7, 2023, covering a transaction

that required a Form 4 filing due on January 11, 2023;

(ii) we filed a Form 4 for Tevi Troy on March 8, 2023, covering a transaction that

required a Form 4 filing due on January 5, 2021;

(iii) we filed a Form 4 for William Stilley on March 8, 2023, covering a transaction

that required a Form 4 filing due on January 5, 2021;

(iv) we filed a Form 4 for William B.

Stilley, III on March 8, 2023, covering a

transaction that required a Form 4 filing due on January 5, 2021;

(v) we filed a Form 4 for Steven A.

Sanders on March 9, 2023, covering

a transaction that required a Form 4 filing due on January 5, 2021;

and (vi) we filed a Form 4 for Wilbert J.

Tauzin II on March 9, 2023,

covering a transaction that required a Form 4 filing due on January 5, 2021.

EXECUTIVE COMPENSATION

Executive Officers’ Compensation

The following table sets forth information concerning

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

Officer during the last two (2) years.

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

December 31, 2022.

Summary Annual Compensation Table

We are currently a “smaller

reporting company” and as such, we have opted to comply with the scaled down disclosure rules applicable to a “smaller reporting

company,” as such term is defined in the rules promulgated under the Securities Act, which require compensation disclosure

for (i) our principal executive officer, (ii) our two most highly compensated executive officers, other than the principal executive officer,

whose total compensation for 2023 exceeded $100,000 and who were serving as executive officers as of December 31, 2023, and (iii) up to

two additional individuals for whom disclosure would have been provided pursuant to the foregoing clause (ii) but for the fact that the

individual was not serving as an executive officer as of December 31, 2023.

We refer to these individuals as “named executive officers.”

Our named executive officers for the year ended December 31, 2023 were:

Summary Compensation Table

Name and principal position

incentive plan

Pension Value

Luisa Ingargiola

Employment Agreements

On December 1, 2016, the Company entered into

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

Pursuant to the agreement, Mr.

Jin was employed

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

terminated pursuant to the terms of the agreement.

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

to which the term of Dr.

December 1, 2016, the Company entered into an Executive Employment Agreement with David Jin, the Company’s CEO and President.

to the agreement, Mr.

Jin was employed as President and Chief Executive Officer of the Company, which agreement had a term initially through

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

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

Agreement with Dr.

Jin pursuant to which the term of Dr.

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

During the term of the agreement, Mr.

Jin is entitled

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

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

On January 3, 2019, the Company

entered into a Letter Agreement with Dr.

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

to $360,000 effective January 1, 2019.

During the term of the agreement, Dr.

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

awards and to participate in employee benefits plans as the Company may institute from time to time at the discretion of the Board.

On January 3, 2019, the Company entered into a

Letter Agreement with Dr.

Jin, pursuant to which his annual base salary set forth in his employment agreement was increased to $360,000,

effective January 1, 2019.

Pursuant to the agreement, Mr.

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

Jin may resign for “good reason” as defined.

Jin may resign

for “good reason” as defined.

In the event Mr.

Jin is terminated without cause or resigns for good reason,

the Company will be required to pay Mr.

Jin is terminated without cause or resigns for good reason, the Company will

be required to pay Mr.

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

salary for one year.

Jin’s salary for one

In the event Mr.

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

be required to pay Mr.

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

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

Under the agreement Mr.

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

On January 11, 2017, Avalon Shanghai entered into

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

Pursuant to the agreement, Ms.

Li was employed

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

the terms of the agreement.

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

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

Li dated January 11, 2017 was extended

an additional three years.

During the term of the agreement, Ms.

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

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

Jin is subject to confidentiality,

non-compete and non-solicitation restrictions.

This agreement has not been extended, however Dr.

Jin is continuing his employment with

the Company at will and otherwise under the same terms and conditions, except that Dr.

Jin agreed to a salary reduction as set forth in

the table above for the year ended December 31, 2023 as part of the Company’s cost reduction measures.

Luisa Ingargiola

February 21, 2017, Ms.

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

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

On January 3, 2019, the Company

entered into a Letter Agreement with Ms.

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

to $340,000 effective January 1, 2019.

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

increased to $350,000 effective January 1, 2019.

employment of Ms.

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

Pursuant to the terms of Executive

Retention Agreement with Ms.

Ingargiola, the Company has agreed to provide specified severance and bonus amounts and to accelerate the

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

the event of a termination upon a change of control, Ms.

Ingargiola is entitled to receive an amount equal to 12 months of her base salary

and the target bonus then in effect for the executive officer for the year in which such termination occurs, such bonus payment to be

pro-rated to reflect the full number of months the executive remained in the Company’s employ.

In addition, the vesting on any stock

option held by the executive officer will be accelerated in full.

At the election of the executive officer, the Company will also continue

to provide health related employee insurance coverage for twelve months, at the Company’s expense.

the event of an involuntary termination, Ms.

Ingargiola is entitled to receive an amount equal to six months of her base salary and the

target bonus then in effect for the executive officer for the six months in which such termination occurs, such bonus payment to be pro-rated

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

Such payment will be increased to 12 months

upon the one-year anniversary of the retention agreement.

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

be accelerated in full.

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

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

January 11, 2017, Avalon Shanghai entered into an Executive Employment Agreement with Meng Li, the Company’s COO and Secretary.

Pursuant to the agreement, Ms.

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

Li was employed as Chief Operating Officer and President of Avalon Shanghai initially through November

30, 2019, unless earlier terminated pursuant to the terms of the agreement.

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

with Meng Li pursuant to which the term of Ms.

Li’s Executive Employment Agreement entered between the Company’s subsidiary

Li dated January 11, 2017 was extended an additional three years.

During the term of the agreement, Ms.

Li is entitled

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

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

On January 3, 2019, the Company entered

into a Letter Agreement with Ms.

Li, pursuant to which her annual base salary set forth in her employment agreement was increased to $340,000

effective January 1, 2019, except that Ms.

Li agreed to a salary reduction as set forth in the table above for the year ended December

31, 2023 as part of the Company’s cost reduction measures.

Pursuant to the agreement, Ms.

Li may be terminated for “cause”

as defined and Ms.

Li may resign for “good reason” as defined.

In the event Ms.

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

Shanghai will be required to pay Ms.

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

for one year.

Li is terminated without cause or resigns

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

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

Li’s salary for one year.

In the event Ms.

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

required to pay Ms.

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

Avalon Shanghai will be required to pay Ms.

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

Under the agreement Ms.

Li is subject

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

Luisa Ingargiola

On February 21, 2017, Ms.

Ingargiola and the Company

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

Ingargiola agreed to serve as Chief Financial

Officer in consideration of an annual salary.

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

Ingargiola, pursuant

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

The employment of Ms.

Ingargiola is at will and

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

Pursuant to the terms of executive retention agreement with Ms.

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

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

In the event of a termination upon a change of

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

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

months the executive remained in the Company’s employ.

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

will be accelerated in full.

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

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

In the event of an involuntary termination, Ms.

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

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

executive remained in the Company’s employ.

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

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

At the election of

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

Company’s expense.

Under the agreement

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

Option Exercises and Stock Vested

There were no options exercised by our executive

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

Outstanding Equity Awards

There were no options exercised

by our executive officers or stock vested to our executive officers during the year ended December 31, 2023.

Outstanding Equity Awards at Fiscal Year End

The following table sets forth information with

1 unchanged sentence

who served as an executive officer of the Company as of December 31, 2023:

Equity Awards

and principal position

Outstanding Equity Awards

Option Awards

Name and principal position

Unexercisable

Luisa Ingargiola, CFO

David Jin, CEO

Luisa Ingargiola,

No Pension Benefits

The Company does not maintain any plan that provides

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

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

The Company does not maintain

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

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

No Nonqualified Deferred Compensation

The Company does not maintain any defined contribution

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

The Company does not maintain

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

Director Compensation

The following table sets forth

information concerning the compensation earned or paid to certain of our non-employee directors during the fiscal year ended December

Earned or Paid in

1 unchanged sentence

Pension Value

Yue (Charles) Li (1)

Yancen Lu (2)

Wilbert Tauzin (1)

Lourdes Felix (2)

Steven Sanders (3)

1 unchanged sentence

William Stilley (5)

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

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

Li resigned as a director on December 30, 2022.

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

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

Lu resigned as a director on December 30, 2022.

Tauzin’s 2022 compensation consisted of 200,000 options

vested and valued at $94,890.

Li resigned as a director on December 30, 2022.

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

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

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

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

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

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

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL

OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Beneficial ownership is determined in accordance

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

In accordance with SEC rules,

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

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

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

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

Subject to community property laws, where applicable, the

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

as beneficially owned by them.

The following table sets forth certain information,

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

Tauzin’s 2023 compensation consisted of 20,000 options vested and valued at $38,052.

Felix’s 2023 compensation consisted of cash of $68,488 and 7,803 stock options vested and valued at $23,268.

Sanders’s 2023 compensation consisted of cash of $70,000 and 8,000 options vested and valued at $33,665.

Troy’s 2023 compensation consisted of cash of $60,000 and 8,000 options vested and valued at $33,665.

Stilley’s 2023 compensation consisted of cash of $70,000 and 8,000 options vested and valued at $33,665.

SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

Amended and Restated 2020 Stock Incentive Plan

On August 29, 2023, the Board

adopted the Avalon GloboCare Corp.

Amended and Restated 2020 Stock Incentive Plan (the “Amended and Restated 2020 Plan”),

subject to stockholder approval, which was received on December 19, 2023.

The Amended and Restated 2020 Plan provides for the grant of

incentive stock options that are intended to qualify under Section 422 of the Code (“ISOs”), nonstatutory stock options, stock

appreciation rights, restricted stock awards, restricted stock unit awards, performance-based stock awards and performance-based cash

ISOs may be granted only to employees.

All other awards may be granted to employees, including officers, and to the Company’s

non-employee directors, consultants and other advisors.

A total of 2,000,000 shares of our common

stock were initially available under the Amended and Restated 2020 Plan.

In addition, the number of shares of our common stock

reserved for issuance under the Amended and Restated 2020 Plan automatically increases on January 1 of each year, beginning on

January 1, 2024, by 1% of the total number of shares of our common stock outstanding on December 31 of the preceding

calendar year, or a lesser number of shares determined by our Board.

On January 1, 2024, the number of shares of our common stock

reserved for issuance under the Amended and Restated 2020 Plan was increased by an aggregate of 109,995 shares.

March 29, 2024, a total of 2,109,995 shares of our common stock are available for issuance under the Amended and Restated 2020

Plan, including shares that are the subject of outstanding awards as of such date.

Clawback/Recoupment.

granted under the Amended and Restated 2020 Plan will be subject to the requirement that the awards be forfeited or amounts repaid

to the Company after they have been distributed to the participant (i) to the extent set forth in an award agreement or (ii) to the

extent covered by any clawback or recapture policy adopted by the Company from time to time (including the Clawback Policy adopted

by the Board on November 16, 2023), or any applicable laws that impose mandatory forfeiture or recoupment, under circumstances set

forth in such applicable laws.

Amendment, Termination .

Board may at any time amend, suspend or terminate the Amended and Restated 2020 Plan for the purpose of satisfying the requirements

of the Code, or other applicable law or regulation or for any other legal purpose, provided that, without the consent of our

stockholders, the Board may not (i) increase the number of shares of our common stock available under the Amended and Restated 2020

Plan, (ii) change the group of individuals eligible to receive awards, or (iii) extend the term of the Amended and Restated 2020

2020 Incentive Stock Plan

On June 12, 2020, the Board

adopted the Avalon GloboCare Corp.

2020 Incentive Stock Plan (the “2020 Plan”), subject to stockholder approval, which was

received on August 4, 2020.

The general purpose of the

2020 Plan is to provide a means whereby eligible directors, officers, employees or consultants to the Company develop a sense of proprietorship

and personal involvement in our development and financial success, and to encourage them to devote their best efforts to our business,

thereby advancing our interests and the interests of our stockholders.

We believe that the 2020 Plan advances the Company’s interests

by enhancing our ability to (i) attract, retain and reward employees, officers, directors and consultants who are in a position to make

significant contributions to our success;

(ii) encourage our employees, officers, directors and consultants to take into account our long-term

interests through ownership of our shares of our common stock;

and (iii) to provide incentives for such persons to exert maximum efforts

for our success.

The Board has reserved 500,000 shares of our

common stock for issuance under the 2020 Plan, subject to customary adjustments for stock splits, stock dividends or similar

transactions.

Under the 2020 Plan, awards may be made in the form of options to purchase shares of our common stock, as well as

restricted shares of our common stock and restricted stock units payable in shares of our common stock.

Options may be granted which

are intended to qualify as ISOs under Section 422 of the Code or which are not intended to qualify as ISOs thereunder.

However, ISOs

may only be granted to employees.

If any option granted under the 2020 Plan terminates without having been exercised in full or if

any award is forfeited, or if shares otherwise issuable are withheld to satisfy tax withholding obligations, the number of shares of

our common stock as to which such option or award was forfeited or withheld will be available for future grants under the 2020

The 2020 Plan is not a qualified

deferred compensation plan under Section 401(a) of the Code and is not subject to the provisions of the Employee Retirement Income Security

2019 Incentive Stock Plan

On June 7, 2019, the Board adopted the

Avalon GloboCare Corp.

2019 Incentive Stock Plan (the “2019 Plan”), subject to stockholder approval, which was received

on August 6, 2019.

There are 500,000 shares of our common stock reserved for issuance under the 2019 Plan, subject to customary

adjustments for stock splits, stock dividends or similar transactions.

As of March 29, 2024, 93,200 shares remained available for

issuance under the 2019 Plan.

The following table provides

information with respect to our 2019 Plan, 2020 Plan, and Amended and Restated 2020 Plan under which equity compensation was authorized

as of December 31, 2023:

Plan category

available for

Equity compensation plan approved by security holders

Amended and Restated 2020 Plan (4)

Equity compensation plans not approved by security holders

Includes 324,803 shares of our common stock issuable upon exercise of

outstanding options and 47,600 shares of our common stock issuable pursuant to outstanding restricted stock units.

The weighted average exercise price does not take into account the shares issuable pursuant to outstanding restricted stock units, which have no exercise price.

Includes 402,000 shares of our common stock

issuable upon exercise of outstanding options and 4,800 shares of our common stock issuable pursuant to outstanding restricted stock

No issuances have been made as of December

31, 2023 under the Amended and Restated 2020 Plan.

Ownership of Certain Beneficial Owners and Management

Beneficial ownership is determined

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

In accordance with

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

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

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

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

Subject to community property laws, where

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

common stock indicated as beneficially owned by them.

The following table sets forth

certain information, as of March 29, 2024 with respect to the beneficial ownership of the outstanding common stock by (i) any holder of

more than five (5%) percent;

(ii) each of our executive officers and directors;

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

The numbers below

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

Except as otherwise indicated, each of the stockholders listed below

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

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

Except as otherwise indicated, each of the stockholders

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

of Beneficial Owner (1)

Beneficially Owned

Common Stock (2)

Wenzhao Lu* (3)

8 unchanged sentences

FSUNSHINE TRADING PTE LTD (12)

Officer and/or director of our company.

* Officer and/or director of our

** Less than 1.0%.

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

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

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

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

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

David Jin holds (i) 1,545,000 shares of common stock and (ii) 55,000 vested options to acquire 55,000 shares of common stock of our company.

Meng Li holds (i) 515,000 shares of common stock and (ii) 45,000 vested options to acquire 45,000 shares of common stock of our company.

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

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

Represents stock option to acquire 65,000 shares of common stock of our company, which included 1,000 shares to be vested within 60 days.

Represents stock option to acquire33,000 shares of common stock of our company, which included 2,000 shares to be vested within 60 days.

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

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

(1) Except as otherwise indicated, the address of each beneficial

owner is c/o Avalon GloboCare Corp., 4400 Route 9 South, Suite 3100, Freehold, New Jersey 07728.

(2) Applicable percentage ownership is based on 11,104,534 shares of our common stock outstanding as of

March 29, 2024, together with securities exercisable or convertible into shares of our common stock within 60 days of March 29, 2024

for each stockholder.

Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or

investment power with respect to securities.

Shares of common stock that are currently exercisable or exercisable within 60 days of

March 29, 2024 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage

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

(3) Wenzhao Lu holds 3,583,788 shares of our common stock.

(4) David Jin holds (i) 1,545,000 shares of our common stock and (ii) 40,000 vested options to acquire

40,000 shares of our common stock.

(5) Meng Li holds (i) 515,000 shares of our common stock and (ii) 30,000 vested options to acquire

30,000 shares of our common stock.

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

Represents stock option to acquire 34,000 shares of our common stock, 32,000 of which have been vested and 2,000 of which will be vested within 60 days.

Represents stock option to acquire 65,000 shares of our common stock, 64,000 of which have been vested and 1,000 of which will be vested within 60 days.

Represents stock option to acquire 34,000 shares of our common stock, 32,000 of which have been vested and 2,000 of which will be vested within 60 days.

Represents stock option to acquire 9,803 shares of our common stock, 7,803 of which have been vested and 2,000 of which will be vested within 60 days.

FSUNSHINE TRADING PTE LTD holds (i) 573,646 shares of our common stock and (ii) 123,964 vested options to acquire 123,964 shares of our common stock.

CERTAIN RELATIONSHIPS AND RELATED

TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Other than compensation arrangements

for our named executive officers and directors, we describe below each transaction or series of similar transactions, since January 1,

2022 to which we were a party or will be a party, in which:

● the amounts involved exceeded

or will exceed the lesser of (i) $120,000 or (ii) 1% of the average total assets of the Company at year end for the last two completed

fiscal years;

● any of our directors, executive

officers, promoters or holders of more than 5% of our capital stock, or any member of the immediate family of the foregoing persons,

had or will have a direct or indirect material interest.

Compensation arrangements

for our named executive officers and directors are described in the section entitled “Executive Compensation.”

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 the years ended December 31, 2022 and 2021,

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

the accompanying consolidated statements of operations and comprehensive loss.

The related party rent receivable totaled $74,100 and

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

at December 31, 2022 and 2021.

Medical Related Consulting

Services Revenue from Related Party

During the years ended December 31, 2022 and 2021,

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

Years Ended December 31,

Medical related consulting services provided to:

Hebei Daopei *

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

Wenzhao Lu, the largest shareholder of the Company.

The Company leases part of its commercial

real property located in New Jersey to D.P.

Capital Investments LLC, a company controlled by Wenzhao Lu, the Company’s largest shareholder

and chairman of the Board.

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

the years ended December 31, 2023 and 2022, the related party rental revenue amounted to $50,400 and has been included in rental

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

31, 2023 and 2022, the related party rent receivable totaled $124,500 and $74,100, respectively, which has been included in rent

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

Provided by Related Party

2 unchanged sentences

As compensation for professional services provided, the Company

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

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

recognized consulting expenses of $86,528 and $144,064 for the years ended December 31, 2023 and 2022, respectively, which have

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

Accrued Liabilities and Other Payables –

Related Parties

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

As of December 31, 2022 and 2021, the unpaid acquisition consideration

of $100,000, was payable to Dr.

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

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

As of December

31, 2022 and 2021, $0 and $368,433 of accrued and unpaid interest related to borrowings from Wenzhao Lu, the Company’s

largest shareholder and chairman of the Board of Directors, respectively, have been included in accrued liabilities and other payables

– related parties on the accompanying consolidated balance sheets.

In 2017, the Company acquired Beijing Genexosome

for a cash payment of $450,000.

As of December 31, 2023 and 2022, the unpaid acquisition consideration of $100,000, was payable to Dr.

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

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

During the period from June 2023 through December

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

As of December 31, 2023, the balance due to Lab Services MSO

amounted to $72,746, which has been included in accrued liabilities and other payables — related parties on the accompanying consolidated

balance sheets.

As of December 31, 2023 and 2022, $33,712 and

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

the Board, respectively, have been included in accrued liabilities and other payables — related parties on the accompanying consolidated

balance sheets.

Borrowings from Related Party

Promissory Note

On March 18, 2019, the

Company issued Wenzhao Lu, the Company’s largest shareholder and Chairman of the Board of Directors, a Promissory Note in the principal

amount of $1,000,000 (“Promissory Note”) in consideration of cash in the amount of $1,000,000.

The Promissory Note accrues

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

In March 2022, the Company and Wenzhao Lu entered into a Loan Extension

and Modification Agreement (the “Extension”) to extend the maturity date to March 19, 2024.The Company repaid principal of

$410,000, $200,000 and $390,000 in the third quarter of 2019, second quarter of 2020 and second quarter of 2022, respectively.

As of December

31, 2022 and 2021, the outstanding principal balance was $0 and $390,000, respectively.

Line of Credit

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

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

and Chairman of the Board of Directors of the Company.

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

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

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

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

of 5% and each individual loan will be payable three years from the date of issuance.

The Company has a right to draw down on the

line of credit and not at the discretion of the related party Lender.

The Company may, at its option, prepay any borrowings under the

Line of Credit, in whole or in part at any time prior to maturity, without premium or penalty.

The Line of Credit Agreement includes customary

events of default.

If any such event of default occurs, the Lender may declare all outstanding loans under the Line of Credit to be due

and payable immediately.

On 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 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 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 such right is not at the discretion of the related party

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

without premium or penalty.

The Line of Credit Agreement includes customary events of default.

If any such event of default occurs, the

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

In the years ended December 31, 2023 and 2022,

2 unchanged sentences

Draw down from Line of Credit

Repayment of Line of Credit

Settlement of Line of Credit in shares

1 unchanged sentence

Draw down from Line of Credit

Repayment of Line of Credit

Settlement of Line of Credit in shares

Outstanding principal under the Line of Credit at December 31, 2023

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

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

As of December

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

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

Common Shares Sold

to Related Party for Cash

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

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

The Company received proceeds of $350,000 .

Series A Convertible

Preferred Stock Sold to Related Party for Cash

On December 14, 2022,

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

the Company sold to Mr.

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

PRINCIPAL ACCOUNTING FEES AND SERVICES

Marcum LLP served as our independent auditors

For the years ended December 31, 2023 and 2022,

Aggregate fees billed to the Company for professional

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

Ended December 31,

the interest expense related to related party borrowings amounted to $33,712 and $79,898, respectively, and has been reflected as

interest expense — related party on the accompanying consolidated statements of operations and comprehensive loss.

As of December 31, 2023 and 2022, the related

accrued and unpaid interest for the Line of Credit was $33,712 and $0, respectively, and has been included in accrued liabilities

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

As of December

31, 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.

Stock Sold to Related Party for Cash

5, 2022, the Company sold 44,872 shares of its common stock at a purchase price of $7.8 per share, the fair market value

on the transaction date, to Wenzhao Lu, the Chairman of the Board, pursuant to a subscription agreement.

The Company received proceeds

of $350,000 (See Note 14 – Common Shares Sold for Cash).

A Preferred Stock Sold to Related Party for Cash

14, 2022, the Company entered into a Securities Purchase Agreement with Wenzhao Lu, the Company’s Chairman of the Board, pursuant

to which the Company sold to Mr.

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

$4,000,000 (See Note 14 – Series A Preferred Stock Sold for Cash).

Membership Interest

Purchase Agreement

On November 17, 2023,

the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Wenzhao Lu (the “Purchaser”),

the largest shareholder and Chairman of the Board, pursuant to which (i) the Purchaser will acquire from the Company 30% of the total

outstanding membership interests of Avalon RT 9, a wholly owned subsidiary of the Company for a cash purchase price of $3,000,000 (the

“Acquisition”), and (ii) for a period of twelve months following the closing of the Acquisition, the Purchaser shall have

the option to purchase from the Company up to an additional 70% of the outstanding membership interests of Avalon RT 9 for a purchase

price of up to $7,000,000 (the “Option”), subject to the terms and conditions of a membership interest purchase agreement

to be negotiated and entered into between the Purchaser and the Company at such time that the Purchaser desires to exercise the Option.

The Acquisition was not closed as of December 31, 2023.

The Company received $485,714 from Wenzhao Lu as of December 31, 2023, which was

recorded as advance from sale of noncontrolling interest – related party on the accompanying consolidated balance sheets.

Policies and Procedures for Related Party

Our Board has adopted a policy

that our executive officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of our common

stock, any members of the immediate family of any of the foregoing persons and any firms, corporations or other entities in which any

of the foregoing persons is employed or is a partner or principal or in a similar position or in which such person has a 5% or greater

beneficial ownership interest, are not permitted to enter into a transaction with us without the prior consent of our Board acting through

the Audit Committee or, in certain circumstances, the Chairman of the Audit Committee.

Any request for us to enter into a transaction

with a related party, in which the amount involved exceeds $100,000 and such related party would have a direct or indirect interest must

first be presented to our Audit Committee, or in certain circumstances the Chairman of our Audit Committee, for review, consideration

and approval.

In approving or rejecting any such proposal, our Audit Committee, or the Chairman of our Audit Committee, is to consider

the material facts of the transaction, including, but not limited to, whether the transaction is on terms no less favorable than terms

generally available to an unaffiliated third party under the same or similar circumstances, the extent of the benefits to us, the availability

of other sources of comparable products or services and the extent of the related party’s interest in the transaction.

ACCOUNTING FEES AND SERVICES

Marcum LLP served as

our independent auditors for the years ended December 31, 2023 and 2022.

Aggregate fees billed

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

Audit-Related Fees

All Other Fees

Consists of fees billed for professional

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

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

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

Consists of fees billed for

professional services rendered for the audit of our annual consolidated financial statements, review of our Annual Report on Form 10-K,

and review of the interim consolidated financial statements included in our Quarterly Reports on Form 10-Q, and services that are normally

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

Audit-Related Fees

Consists of fees billed for assurance and related services that are

reasonably related to the performance of the audit and or review of our consolidated financial statements and are not reported under “Audit

Fees”, such as audits and reviews in connection with the acquisition of Lab Services MSO.

Consists of fees billed for

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

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

Consists of fees billed for professional

services for tax compliance, tax advice and tax planning.

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

All Other Fees

2 unchanged sentences

There were no management consulting services provided in 2023 or 2022.

POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT

AND PERMISSIBLE NON-AUDIT SERVICES OF INDEPENDENT AUDITORS

The current policy of the directors, acting as

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

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

10-Q filings.

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

The Audit Committee is responsible for the pre-approval

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

The Audit Committee will, on an

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

Thereafter, the Audit

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

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

The Audit Committee has delegated

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

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

Pre-Approval Policy and Procedures

The current policy of the

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

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

included in Quarterly Reports on Form 10-Q.

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

Audit Committee Chairman.

The Audit Committee is responsible

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

The Audit Committee

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

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

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

The Audit Committee

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

by the auditor.

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

December 31, 2023.

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

8 unchanged sentences

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

Certificate of Designation of Preferences, Rights and Limitations of the Series B Convertible Preferred Stock (incorporated by reference to Exhibit 3.2 of the Registrant’s Current Report on Form 8-K filed on February 13, 2023)

Form of Subscription Agreement by and between Avalon GloboCare Corp.

5 unchanged sentences

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

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

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

Warranty Agreement by and between Lu Wenzhao and Beijing DOING Biomedical Technology Co., Ltd., dated February 27, 2017 (incorporated by reference to Exhibit 4.3 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 7, 2017)

Form of Subscription Agreement between Avalon GloboCare Corp.

12 unchanged sentences

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

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

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

December 23, 2016)

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

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

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

Retention Agreement by and between Avalon GloboCare Corp.

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

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

Executive Retention Agreement by and between Avalon GloboCare Corp.

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

Indemnification Agreement by and between Avalon GloboCare Corp.

108 unchanged sentences

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

Director Agreement by and Between Avalon GloboCare Corp.

and Lourdes Felix dated January 9, 2023 (incorporated by reference to Exhibit 10.1 of the Registrants Current Report on Form 8-K filed with the SEC on January 11, 2023)

Second Amended and Restated Limited Company Agreement, dated February 9, 2023, by and among Laboratory Services MSO, LLC, SCBC Holdings LLC, the Zoe Family Trust, Bryan Cox, Sarah Cox and the members named therein (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on February 13, 2023)

Securities Purchase Agreement, dated May 23, 2023, between Avalon GloboCare Corp.

and Mast Hill Fund, L.P (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on May 26, 2023)

Security Agreement, dated May 23, 2023, by and among Avalon GloboCare Corp., Avalon Healthcare System Inc., Avalon Laboratory Services, Inc., Avalon RT 9 Properties, LLC, Avactis Biosciences, Inc., Laboratory Services MSO, LLC, Genexosome Technologies Inc., International Exosome Association LLC and Mast Hill Fund, L.P.

(incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed with the SEC on May 26, 2023)

Senior Secured Promissory Note, dated May 23, 2023, between Avalon Globocare Corp.

and Mast Hill Fund, L.P.

(incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K filed with the SEC on May 26, 2023)

First Warrant, dated May 23, 2023, by and between Avalon GloboCare Corp.

and Mast Hill Fund, L.P.

(incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K filed with the SEC on May 26, 2023)

Second Warrant, dated May 23, 2023, by and between Avalon GloboCare Corp.

and Mast Hill Fund, L.P.

(incorporated by reference to Exhibit 10.5 of the Registrant’s Current Report on Form 8-K filed with the SEC on May 26, 2023)

Form of Balloon Mortgage Note (incorporated by reference to Exhibit 10.6 of the Registrant’s Current Report on Form 8-K filed with the SEC on May 26, 2023)

Form of Second Mortgage and Security Agreement (incorporated by reference to Exhibit 10.7 of the Registrant’s Current Report on Form 8-K filed with the SEC on May 26, 2023)

Form of Guaranty (incorporated by reference to Exhibit 10.8 of the Registrant’s Current Report on Form 8-K filed with the SEC on May 26, 2023)

Form of Hazardous Material Guaranty and Indemnification Agreement (incorporated by reference to Exhibit 10.9 of the Registrant’s Current Report on Form 8-K filed with the SEC on May 26, 2023)

Sales Agreement, dated June 16, 2023, by and between Avalon GloboCare Corp.

and Roth Capital Partners, LLC.

(incorporated by reference to Exhibit 1.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on June 16, 2023)

Securities Purchase Agreement, dated July 6, 2023, by and between Avalon Globocare Corp.

and Firstfire Global Opportunities, LLC.

(incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on July 10, 2023)

Security Agreement, dated July 6, 2023, by and among Avalon GloboCare Corp., Avalon Healthcare System Inc., Avalon Laboratory Services, Inc., Avalon RT 9 Properties, LLC, Avactis Biosciences, Inc., Laboratory Services MSO, LLC, Genexosome Technologies Inc., International Exosome Association LLC and Firstfire Global Opportunities, LLC.

(incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed with the SEC on July 10, 2023)

Senior Secured Promissory Note, dated July 6, 2023, by and between Avalon GloboCare Corp.

and Firstfire Global Opportunities, LLC.

(incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K filed with the SEC on July 10, 2023)

First Warrant dated July 6, 2023, by and between Avalon GloboCare Corp.

and Firstfire Global Opportunities, LLC.

(incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K filed with the SEC on July 10, 2023)

Second Warrant, dated July 6, 2023, by and between Avalon Globocare Corp.

and Firstfire Global Opportunities, LLC.

(incorporated by reference to Exhibit 10.5 of the Registrant’s Current Report on Form 8-K filed with the SEC on July 10, 2023)

Securities Purchase Agreement, dated October 9, 2023, between Avalon Globocare Corp.

and Mast Hill Fund, L.P.

(incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 13, 2023)

(incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 13, 2023)

Senior Secured Promissory Note, dated October 9, 2023, between Avalon Globocare Corp.

and Mast Hill Fund, L.P.

(incorporated by reference to Exhibit 10.3 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 13, 2023)

First Warrant, dated October 9, 2023, between Avalon Globocare Corp.

and Mast Hill Fund, L.P.

(incorporated by reference to Exhibit 10.4 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 13, 2023)

Second Warrant, dated October 9, 2023, between Avalon Globocare Corp.

and Mast Hill Fund, L.P.

(incorporated by reference to Exhibit 10.5 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 13, 2023)

Securities Purchase Agreement, dated October 9, 2023, between Avalon Globocare Corp.

and Firstfire Global Opportunities Fund, LLC (incorporated by reference to Exhibit 10.6 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 13, 2023)

Security Agreement, dated October 9, 2023, among Avalon Globocare Corp., Avalon Healthcare System Inc., Avalon Laboratory Services, Inc., Avalon RT 9 Properties, LLC, Avactis Biosciences, Inc., Laboratory Services MSO, LLC, Genexosome Technologies Inc., International Exosome Association LLC and Firstfire Global Opportunities Fund, LLC (incorporated by reference to Exhibit 10.7 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 13, 2023)

Senior Secured Promissory Note, dated October 9, 2023, between Avalon Globocare Corp.

and Firstfire Global Opportunities Fund, LLC (incorporated by reference to Exhibit 10.8 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 13, 2023)

First Warrant, dated October 9, 2023, between Avalon Globocare Corp.

and Firstfire Global Opportunities Fund, LLC (incorporated by reference to Exhibit 10.9 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 13, 2023)

Second Warrant, dated October 9, 2023, between Avalon Globocare Corp.

and Firstfire Global Opportunities Fund, LLC (incorporated by reference to Exhibit 10.10 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 13, 2023)

Mortgage and Security Agreement, dated October 9, 2023, between Avalon Globocare Corp., Mast Hill Fund, L.P and Firstfire Global Opportunities Fund, LLC (incorporated by reference to Exhibit 10.11 of the Registrant’s Current Report on Form 8-K filed with the SEC on October 13, 2023)

Membership Interest Purchase Agreement, dated November 17, 2023, between Avalon Globocare Corp.

and Wenzhao Lu (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on November 22, 2023)

Mortgage and Security Agreement, dated March 27, 2024, between Avalon Globocare Corp.

and Mast Hill Fund, L.P.

(incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC on March 27, 2024)

Mortgage and Security Agreement, dated March 27, 2024, between Avalon Globocare Corp.

and Firstfire Global Opportunities Fund, LLC (incorporated by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 8-K filed with the SEC on March 27, 2024)

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

Consent of Independent Registered Accounting Firm

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

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

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

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

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

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

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

Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

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

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

Avalon GloboCare Corp.

Compensation Recovery Policy.

Inline XBRL Instance Document.

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Cover Page Interactive Data File (formatted as Inline

XBRL and contained in Exhibit 101).

** This certification will not be deemed “filed”

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

of that section.

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

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

contract or compensatory plan or arrangement.

Inline XBRL Taxonomy Extension Presentation Linkbase Document.

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

Filed herewith

This certification will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liability of that section.

Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent specifically incorporated by reference into such filing.

Management contract or compensatory plan or arrangement.

FORM 10-K SUMMARY.

3 unchanged sentences

AVALON GLOBOCARE CORP.

March 30, 2023

April 15, 2024

Chief Executive Officer, President and Director

(Principal Executive Officer)

March 30, 2023

April 15, 2024

/s/ Luisa Ingargiola

Luisa Ingargiola

2 unchanged sentences

In accordance with the Exchange Act, this report

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

has been signed below by the following persons on April 15, 2024, on behalf of the registrant and in the capacities indicated.

Chief Executive Officer, President and Director

(Principal Executive Officer)

/s/ Luisa Ingargiola

Chief Financial Officer

Luisa Ingargolia

(Principal Financial and Accounting

Luisa Ingargiola

(Principal Financial and Accounting Officer)

/s/ Wenzhao Lu

Chairman of the Board of Directors

Chief Operating Officer and Secretary

/s/ Steven A.

/s/ Lourdes Felix

Lourdes Felix

/s/ Wilbert J.

/s/ William B.

/s/ Tevi Troy

16 unchanged sentences

We have audited the accompanying consolidated balance

sheet of Avalon GloboCare Corp.

sheets of Avalon GloboCare Corp.

(the “Company”) as of December 31, 2023 and 2022, and the related consolidated statements

1 unchanged sentence

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

In our opinion, the financial statements

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

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

generally accepted in the United States of America.

In our opinion, the financial statements present

fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations

and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally

accepted in the United States of America.

Explanatory Paragraph – Going Concern

The accompanying consolidated

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

As more fully described in Note 2

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

its obligations and sustain its operations.

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

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

The consolidated financial statements do not include

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

The accompanying financial statements

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

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

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

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

Management's plans in

regard to these matters are also described in Note 2.

The financial statements do not include any adjustments that might result from the

outcome of this uncertainty.

Basis for Opinion

23 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the

current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective,

or complex judgments.

We determined that there are no critical audit matters.

Critical Audit Matter

The critical audit matter communicated below are matters

arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,

subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements,

taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit

matter or on the accounts or disclosures to which it relates.

Critical Audit Matter Description

On February 9, 2023 (the “Acquisition Date”),

the Company acquired 40% of the issued and outstanding equity interests of Laboratory Services MSO, LLC (the “Labs”) for a

total consideration of approximately $21 million.

The investment was recorded on the Acquisition Date at cost with the investment being

accounted for under the equity method as the Company has significant influence over the Labs.

As disclosed in Note 7 of the accompanying

financial statements, the Company identified equity method goodwill and intangible assets, which included tradename and customer relationships,

of approximately $9.5 million and $10 million, respectively, on the Acquisition Date.

As of December 31, 2023 (the “Reporting Date”),

the Company concluded that approximately $9.2 million of the equity method goodwill was impaired.

We identified the initial allocation of purchase consideration

and the subsequent impairment assessment on such goodwill as a critical audit matter because of the significant estimates and assumptions

made by management, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair

value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related

to the selection of the valuation techniques and assumptions utilized, growth rates, and the future operating margins.

Under the income approach, the Company utilizes the

discounted cash flow method to estimate the fair value of the Labs.

Some of the significant assumptions inherent in estimating the fair

values include the estimated future annual net cash flows for the Labs (including net sales, operating income margin, and working capital)

and a discount rate that appropriately reflects the risks inherent in each future cash flow stream.

The Company selects assumptions used

in the financial forecasts using historical data, supplemented by current and anticipated market conditions, estimated growth rates, management’s

plans, and guideline companies.

Under the market approach, fair value is derived from

metrics of publicly traded companies or historically completed transactions of comparable businesses.

The selection of comparable businesses

is based on the markets in which the reporting units operate giving consideration to risk profiles, size, geography, and diversity of

products and services.

The estimates of fair value of the reporting units

as of the Acquisition Date and Reporting Date are computed using a combination of both the income approach and market approach noted above.

How the Critical Audit Matter was Addressed in

Our audit procedures included the following:

assessed the reasonableness of the forecasted revenue growth rates and operating margins over the cash flow forecast period by comparing

them to the Labs’ actual revenues and operating margins during the recent historical periods;

(2) We evaluated the reasonableness

of the (a) valuation methodologies;

(b) revenue growth rate by comparing it to industry rates;

the mathematical accuracy of the rates used and comparing them to industry rates;

and (d) discount rates, which included testing the source

information underlying the determination of the discount rates, testing the mathematical accuracy of the calculations, and developing

a range of independent estimates and comparing those to the discount rates selected by management;

evaluated the guideline companies used and operated in a similar industry as the subject reporting unit;

(4) We sensitized the

projections and compared them to the valuation reports for reasonableness;

(5) We evaluated the disclosures

in the Company's financial statements for proper reporting.

For the Company’s impairment assessment as of

the Reporting Date, in additions to the aforementioned audit procedures, we assessed the reasonableness of t he

Company’s use of the appropriate modified capital asset pricing model and a weighted average cost of capital.

/s/ Marcum llp

We have served as the Company’s auditor since 2019.

New York , NY

March 30, 2023

April 15, 2024

AVALON GLOBOCARE CORP.

3 unchanged sentences

Rent receivable

Rent receivable - related party

Other current assets

Prepaid expense and other current assets

Total Current Assets

3 unchanged sentences

Investment in real estate, net

Equity method investment

Equity method investments, net

Advances for equity interest purchase

5 unchanged sentences

Accrued research and development fees

Accrued payroll liability and directors’ compensation

Accrued payroll liability and compensation

Accrued litigation settlement

2 unchanged sentences

Operating lease obligation

Note payable - related party

Advance from sale of noncontrolling interest - related party

Equity method investment payable

Derivative liability

Convertible note payable, net

Total Current Liabilities

9 unchanged sentences

10,000,000 shares authorized;

Series A Convertible Preferred Stock, $ 0.0001 par value;

9,000 and 0 shares issued and outstanding at December 31, 2022 and 2021, respectively.

Liquidation preference $ 9 million at December 31, 2022

Series B Convertible Preferred Stock, $ 0.0001 par value;

0 shares issued and outstanding at December 31, 2022 and 2021

Series A Convertible Preferred Stock, 9,000 shares issued and outstanding at December 31, 2023 and 2022 Liquidation preference $ 9 million at December 31, 2023

Series B Convertible Preferred Stock, 11,000 and 0 shares issued and outstanding at December 31, 2023 and 2022, respectively Liquidation preference $ 11 million at December 31, 2023

Common stock, $ 0.0001 par value;

9 unchanged sentences

Statutory reserve

Accumulated other comprehensive loss - foreign currency translation adjustment

Accumulated other comprehensive loss

Total Avalon GloboCare Corp.

stockholders’ equity

Non-controlling interest

Noncontrolling interest

Total Liabilities and Equity

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For the Years Ended

Real property rental

Medical related consulting services - related party

Total Revenues

COSTS AND EXPENSES

Real property operating expenses

Medical related consulting services - related party

Total Costs and Expenses

Real property operating income

Gross profit from medical related consulting services

Total Gross Profit

RENTAL REVENUE

OPERATING EXPENSES

OPERATING INCOME

LOSS FROM EQUITY METHOD INVESTMENT - LAB SERVICES MSO

( 8,571,647 )

OTHER OPERATING EXPENSES:

Advertising and marketing

Advertising and marketing expenses

Professional fees

2 unchanged sentences

Litigation settlement

Other general and administrative

Other general and administrative expenses

Total Other Operating Expenses

8 unchanged sentences

Conversion inducement expense

Loss from equity method investment

Loss from equity method investment - Epicon

Change in fair value of derivative liability

Impairment of equity method investment - Epicon

Gain on debts extinguishment

Other (expense) income

Total Other Expense, net

5 unchanged sentences

$ ( 11,930,847 )

NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST

NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

NET LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

2 unchanged sentences

$ ( 11,930,847 )

COMPREHENSIVE LOSS:

NET LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

NET LOSS PER COMMON SHARE ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

COMMON SHAREHOLDERS:

Basic and diluted

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic and diluted

COMPREHENSIVE LOSS:

$ ( 16,707,010 )

$ ( 11,930,847 )

OTHER COMPREHENSIVE (LOSS) INCOME

Unrealized foreign currency translation (loss) gain

OTHER COMPREHENSIVE LOSS

Unrealized foreign currency translation loss

COMPREHENSIVE LOSS

1 unchanged sentence

( 11,978,718 )

COMPREHENSIVE LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST

COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

COMPREHENSIVE LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

2 unchanged sentences

$ ( 11,978,718 )

NET LOSS PER COMMON SHARE ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

COMMON SHAREHOLDERS:

Basic and diluted

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic and diluted

See accompanying notes to the consolidated financial statements.

3 unchanged sentences

For the Years Ended December 31, 2023 and 2022

GloboCare Corp.

Avalon GloboCare Corp.

Stockholders’ Equity

A Preferred Stock

Preferred Stock

Treasury Stock

Comprehensive

Noncontrolling

Balance, January 1, 2022

3 unchanged sentences

Sale of common stock, net

Issuance of common stock for settlement of accrued

professional fees

Issuance of common stock for settlement of loan payable

- related party

Issuance of common stock for services

Warrants issued with convertible

debt offering

Conversion of convertible

note payable and accrued interest into common stock

Reclassification of derivative

liability to equity

Issuance of common stock

for settlement of loan payable and accrued interest - related party

Sale of common stock - related

Sale of Series A Convertible

Preferred Stock

Issuance of common stock

Stock-based compensation

Foreign currency translation adjustment

Shares issued for adjustments

for 1:10 reverse split

Foreign currency translation

Net loss for the year

3 unchanged sentences

( 63,062,721 )

To correct shares issued

for adjustments for 1:10 reverse split

Issuance of Series B Convertible

Preferred Stock for equity method investment

Issuance of common stock

as convertible note payable commitment fee

Sale of common stock, net

Warrants issued with convertible debt offering

Conversion of convertible note payable and accrued

interest into common stock

Reclassification of derivative liability to equity

Issuance of common stock for settlement of loan payable

and accrued interest - related party

Sale of common stock - related party

Sale of Series A Convertible Preferred Stock

Issuance of common stock for services

Issuance of common stock

Stock-based compensation

Shares issued for adjustments for 1:10 reverse split

Foreign currency translation adjustment

Net loss for the year

Foreign currency translation

loss for the year

( 16,707,010 )

12 unchanged sentences

$ ( 11,930,847 )

Adjustments to reconcile net loss to

net cash used in operating activities:

Bad debt provision

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

Credit loss provision

Change in straight-line rent receivable

Amortization of right-of-use asset

Amortization of operating lease right-of-use asset

Stock-based compensation and service expense

Loss on equity method investment

Loss on impairment of equipment held for sale

Amortization of debt discount

Amortization of debt issuance costs

Loss from equity method investments

Impairment of equipment held for sale

Impairment of equity method investment - Epicon

Amortization of debt issuance costs and debt discount

Conversion inducement expense

Change in fair market value of derivative liability

Gain on debts extinguishment

Changes in operating assets and liabilities:

Rent receivable

Rent receivable - related party

Security deposit

Deferred leasing costs

Prepaid expense and other assets

Accrued liabilities and other payables

6 unchanged sentences

Purchase of property and equipment

Improvement of commercial real estate

Additional investment in equity method investment

8 unchanged sentences

Proceeds from issuance of convertible debt and warrants

Payments of convertible debt issuance costs

Repayments of convertible debt

Proceeds from issuance of balloon promissory note

Payments of debt issuance costs

Payments of balloon promissory note issuance costs

Proceeds from equity offering

Disbursements for equity offering costs

Advance from sale of noncontrolling interest in subsidiary

Proceeds from issuance of convertible preferred stock

1 unchanged sentence

EFFECT OF EXCHANGE RATE ON CASH

NET INCREASE IN CASH

NET (DECREASE) INCREASE IN CASH

( 1,705,510 )

CASH - beginning of year

3 unchanged sentences

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Common stock issued for future services

Common stock issued for accrued liabilities

Deferred financing costs in accrued liabilities

Accrued professional fees relieved for shares issued

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

1 unchanged sentence

Related party loan and accrued interest settled in shares

See accompanying notes to the consolidated financial

See accompanying notes to the consolidated financial statements.

AVALON GLOBOCARE CORP.

3 unchanged sentences

Avalon GloboCare Corp.

(the “Company”

or “ALBT”) is a Delaware corporation.

The Company was incorporated under the laws of the State of Delaware on July 28, 2014.

On October 19, 2016, the Company entered into and closed a Share Exchange Agreement with the shareholders of Avalon Healthcare System,

Inc., a Delaware corporation (“AHS”), each of which were accredited investors (“AHS Shareholders”) pursuant to

which we acquired 100 % of the outstanding securities of AHS in exchange for 50,000,000 shares of the Company’s common stock (the

“AHS Acquisition”).

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

“Company” or “ALBT”) is a Delaware corporation.

The Company was incorporated under the laws of the State of

Delaware on July 28, 2014.

On October 19, 2016, the Company entered into and closed a Share Exchange Agreement with the shareholders

of Avalon Healthcare System, Inc., a Delaware corporation (“AHS”), each of which were accredited investors (“AHS

Shareholders”), pursuant to which the Company acquired 100 % of the outstanding securities of AHS in exchange for

5,000,000 shares of the Company’s common stock (the “AHS Acquisition”).

AHS was incorporated on May 18, 2015

under the laws of the State of Delaware.

For accounting purposes, AHS was the surviving

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

and continuing entity although the Company is the legal acquirer.

The Company did not recognize goodwill or any intangible assets in connection

with this transaction.

Accordingly, the Company’s historical financial statements are those of AHS and its wholly-owned subsidiary,

Avalon (Shanghai) Healthcare Technology Co., Ltd.

(“Avalon Shanghai”) immediately following the consummation of this reverse

merger transaction.

AHS owns 100 % of the capital stock of Avalon Shanghai, which is a wholly foreign-owned enterprise organized under

the laws of the People’s Republic of China (“PRC”).

Avalon Shanghai was incorporated on April 29, 2016 and was engaged

in medical related consulting services for customers.

Due to the winding down of the medical related consulting services in 2022, the

Company decided to cease all operations of Avalon Shanghai and no longer has any material revenues or expenses in Avalon Shanghai.

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

The Company is a clinical-stage biotechnology

company dedicated to developing and delivering innovative, transformative cellular therapeutics, precision diagnostics, and clinical laboratory

The Company also provides strategic advisory and outsourcing services to facilitate and enhance its clients’ growth and

development, as well as competitiveness in healthcare and CellTech industry markets.

Through its subsidiary structure with unique integration

of verticals from innovative research and development to automated bioproduction and accelerated clinical development, the Company is

establishing a leading role in the fields of cellular immunotherapy (including CAR-T/NK), exosome technology (ACTEX™), and regenerative

therapeutics.

On January 23, 2017, the Company incorporated

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

There was no activity for the subsidiary since its incorporation through December

Avalon (BVI) Ltd.

is dormant and is in process of being dissolved.

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.

The Company did not recognize goodwill or any intangible

assets in connection with this transaction.

Accordingly, the Company’s historical financial statements are those of AHS and its

wholly owned subsidiary, Avalon (Shanghai) Healthcare Technology Co., Ltd.

(“Avalon Shanghai”) immediately following the consummation

of this reverse merger transaction.

AHS owns 100 % of the capital stock of Avalon Shanghai, which is a wholly foreign-owned enterprise

organized under the laws of the People’s Republic of China (“PRC”).

Avalon Shanghai was incorporated on April 29, 2016

and was engaged in medical related consulting services for customers.

Due to the winding down of the medical related consulting services

in 2022, the Company decided to cease all operations of Avalon Shanghai and no longer has any material revenues or expenses in Avalon

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

The Company is a commercial stage company dedicated

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

The Company is establishing

a leading role in the innovation of diagnostic testing, utilizing proprietary technology to deliver precise, genetics-driven results.

The Company also provides laboratory services, offering 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.

On February 7, 2017, the Company formed Avalon

11 unchanged sentences

owned subsidiary, Avactis Biosciences Inc.

(“Avactis”), a Nevada corporation, which will focus on accelerating commercial

activities related to cellular therapies, including regenerative medicine with stem/progenitor cells as well as cellular immunotherapy

including CAR-T, CAR-NK, TCR-T and others.

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

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

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

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

Avactis owns 100 % of the capital stock

of Avactis Nanjing Biosciences Ltd., a company incorporated in the People’s Republic of China on May 8, 2020 (“Avactis Nanjing”),

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

order to purchase a membership interest, on October 14, 2022, the Company formed a wholly owned subsidiary, Avalon Laboratory Services,

Inc., a Delaware company.

(“Avactis”), a Nevada corporation, which is a patent holding company.

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

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.

On October 14, 2022, the Company formed a wholly

owned subsidiary, Avalon Laboratory Services, Inc.

(“Avalon Lab”), a Delaware company.

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 subsidiaries, is engaged in providing laboratory testing services.

AVALON GLOBOCARE CORP.

11 unchanged sentences

100% held by ALBT

Developing Avalon Cell and Avalon Rehab in United States of America (“USA”)

Avalon (BVI) Ltd.

(“Avalon BVI”)

British Virgin Island

January 23, 2017

100% held by ALBT

is in process of being dissolved

Holding company for payroll and other expenses

Avalon RT 9 Properties LLC

7 unchanged sentences

100% held by AHS

Ceased operations and is not considered an operating entity

Is not considered an operating entity

Genexosome Technologies Inc.

2 unchanged sentences

60% held by ALBT

No current activities to report, dormant

Avactis Biosciences Inc.

1 unchanged sentence

60% held by ALBT

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

Patent holding company

Avactis Nanjing Biosciences Ltd.

2 unchanged sentences

Owns a patent and is not considered an operating entity

International Exosome Association LLC

June 13, 2019

100% held by ALBT

Promotes standardization related to exosome industry

Avalon Laboratory Services, Inc.

(“Avalon Lab”)

October 14, 2022

100% held by ALBT

Purchases a membership interest

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

2 – BASIS OF PRESENTATION AND GOING CONCERN CONDITION

13 unchanged sentences

Going Concern

The Company is a clinical-stage biotechnology

company dedicated to developing and delivering innovative, transformative cellular therapeutics, precision diagnostics, and clinical laboratory

The Company also provides strategic advisory and outsourcing services to facilitate and enhance its clients’ growth and

development, as well as competitiveness in healthcare and CellTech industry markets.

Through its subsidiary structure with unique integration

of verticals from innovative research and development to automated bioproduction and accelerated clinical development, the Company is

establishing a leading role in the fields of cellular immunotherapy (including CAR-T/NK), exosome technology (ACTEX™), and regenerative

therapeutics.

In addition, the Company owns commercial real

estate that houses its headquarters in Freehold, New Jersey.

These consolidated financial statements have been prepared assuming that

the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of

liabilities in the normal course of business.

As reflected in the accompanying consolidated financial statements,

the Company had working capital deficit of $ 1,206,279 at December 31, 2022 and had incurred recurring net losses and generated negative

cash flow from operating activities of $ 11,930,847 and $ 7,037,224 for the year ended December 31, 2022, respectively.

The Company has

a limited operating history and its continued growth is dependent upon generating rental revenue from its income-producing real estate

property in New Jersey and obtaining additional financing to fund future obligations and pay liabilities arising from normal business

In addition, the current cash balance cannot be projected to cover the operating expenses for the next twelve months from

the release date of this report.

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

The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital, implement

its business plan, and generate significant revenues.

There are no assurances that the Company will be successful in its efforts to generate

significant revenues, maintain sufficient cash balance or report profitable operations or to continue as a going concern.

plans on raising capital through the sale of equity to implement its business plan.

However, there is no assurance these plans will be

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

The occurrence of an uncontrollable event such

as the COVID-19 pandemic had negatively impact on the Company’s operations.

Our general development operations have continued during

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

However, we are uncertain if the COVID-19 pandemic will impact future

operations at our laboratory, or our ability to collaborate with other laboratories and universities.

In addition, we are unsure if the

COVID-19 pandemic will impact future clinical trials.

Given the dynamic nature of these circumstances, the duration of business disruption

and reduced traffic, the related financial effect cannot be reasonably estimated at this time.

The accompanying

consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts

or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

The Company is a commercial stage company dedicated

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

The Company is establishing

a leading role in the innovation of diagnostic testing, utilizing proprietary technology to deliver precise, genetics-driven results.

The Company also provides laboratory services through its 40 % equity investment in Lab Services MSO, offering 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

In addition, the Company owns commercial real estate that houses its headquarters in Freehold, New Jersey.

These consolidated

financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things,

the realization of assets and the satisfaction of liabilities in the normal course of business.

As reflected in the accompanying consolidated

financial statements, the Company had a working capital deficit of approximately $ 5,912,000 at December 31, 2023 and had incurred

recurring net losses and generated negative cash flow from operating activities of approximately $ 16,707,000 and $ 6,505,000 for

the year ended December 31, 2023, respectively.

The Company has a limited operating history and

its continued growth is dependent upon the continuation of generating rental revenue from its income-producing real estate property in

New Jersey and income from equity method investment through its forty percent ( 40 %) interest in Lab Services MSO and obtaining additional

financing to fund future obligations and pay liabilities arising from normal business operations.

In addition, the current cash balance

cannot be projected to cover the operating expenses for the next twelve months from the release date of this report.

These matters raise

substantial doubt about the Company’s ability to continue as a going concern.

The ability of the Company to continue as a going

concern is dependent on the Company’s ability to raise additional capital, implement its business plan, and generate significant

There are no assurances that the Company will be successful in its efforts to generate significant revenues, maintain sufficient

cash balance or report profitable operations or to continue as a going concern.

The Company plans on raising capital through the sale

of equity to implement its business plan.

However, there is no assurance these plans will be realized and that any additional financings

will be available to the Company on satisfactory terms and conditions, if any.

The accompanying consolidated financial statements

do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification

of liabilities that may result should the Company be unable to continue as a going concern.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

Use of Estimates

The preparation of the consolidated financial statements in conformity

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure

of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during

the reporting period.

Changes in these estimates and assumptions may have a material impact on the consolidated financial statements and

accompanying notes.

The preparation

of 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 consolidated financial statements and accompanying notes.

Making estimates requires management to exercise significant judgment.

It is at least reasonably possible that the

estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management

considered in formulating its estimate, could change in the near term due to one or more future confirming events.

Accordingly, the actual

results could differ significantly from those estimates.

Significant estimates during the years ended December 31, 2022 and 2021 include

the useful life of property and equipment and investment in real estate, assumptions used in assessing impairment of long-term assets,

valuation of deferred tax assets and the associated valuation allowances, valuation of stock-based compensation, and assumptions used

to determine fair value of warrants and embedded conversion features of convertible note payable.

It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the

date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or

more future confirming events.

Accordingly, the actual results could differ significantly from those estimates.

Significant estimates during the

years ended December 31, 2023 and 2022 include the useful life of property and equipment, investment in real estate, and intangible assets,

the assumptions used in assessing impairment of long-term assets, 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 and assets acquired in the purchase of 40 % of Lab Services

AVALON GLOBOCARE CORP.

15 unchanged sentences

3-Inputs are unobservable inputs which reflect the

reporting entity’s own assumptions on what assumptions the market participants would

use in pricing the asset or liability based on the best available information.

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

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

to their short-term nature.

reporting entity’s own assumptions on what assumptions the mark et

participants would use in pricing the asset or liability based on the best available information.

The fair value of the Company’s assets and

liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying

amounts represented in the accompanying consolidated financial statements, primarily due to their short-term nature .

and liabilities measured at fair value on a recurring basis.

Certain assets and liabilities are measured at fair value

on a recurring basis.

Certain assets and liabilities are measured at

fair value on a recurring basis.

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

These assets and liabilities include

derivative liability.

These assets and liabilities

include derivative liability .

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

The Company did not have any derivative

liability during the year ended December 31, 2021.

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

for the year ended December 31, 2022:

The table below reflects the

activity of derivative liability measured at fair value for the years ended December 31, 2023 and 2022:

Unobservable Inputs

Balance of derivative liability as of January 1, 2022

4 unchanged sentences

Balance of derivative liability as of December 31, 2022

ASC 825-10 “Financial Instruments”,

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

value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs.

If the fair value

option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent

reporting date.

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

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 December 31, 2023

and liabilities measured at fair value on a nonrecurring basis.

Certain 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 equipment held for sale and equity method investment that

are written down to fair value when they are impaired.

held for sale.

The Company conducted an impairment assessment on the equipment held for sale based on the guidelines established in

Financial Accounting Standards Board (“FASB”) ASC Topic 360 to determine the estimated fair market value of the equipment

as of December 31, 2022.

Upon completion of its 2022 impairment analysis, the Company determined that the carrying value exceeded the

fair market value on equipment which was held for sale.

The fair market value of equipment held for sale is a level 3 valuation.

recorded an impairment charge of $ 22,285 for the years ended December 31, 2022.

method investment in Epicon Biotech Co., Ltd.

The 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

for the year ended December 31, 2023 was $ 454,679 .

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (continued)

Fair Value of Financial

Instruments and Fair Value Measurements (continued)

method investment in Laboratory Services MSO, LLC The factors used to determine

fair value are subject to management’s judgment and expertise.

These assumptions represent Level 3 inputs.

Impairment of equity

method investment in Laboratory Services MSO, LLC for the year ended December 31, 2023 was $ 9,196,682 .

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

at fair value (fair value option).

The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless

a new election date occurs.

If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should

be reported in earnings at each subsequent reporting date.

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

Cash and Cash Equivalents

4 unchanged sentences

United States

of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less

when purchased and money market accounts to be cash equivalents.

For purposes of the consolidated statements of

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

accounts to be cash equivalents.

The Company had no cash equivalents at December 31, 2023 and 2022.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (continued)

Advances for Equity Interest Purchase

In the fourth quarter of 2022, the Company sold

9,000 shares of its Series A Preferred Stock, stated value $ 1,000 , for the gross proceeds of $ 9,000,000 (the “Private Placement”),

which funds were recorded as advances for equity interest purchase at December 31, 2022 and were used to pay the cash purchase price for

the purchased interests of Laboratory Services MSO, LLC in February 2023.

As of December 31, 2022 and 2021, advances for equity interest

purchase amounted to $ 8,999,722 and $0 , respectively.

Credit Risk and Uncertainties

2 unchanged sentences

covered by insurance up to RMB 500,000 (approximately $ 71,000 ) per bank.

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

December 31, 2022, cash balances held in the PRC are RMB 1,274,920 (approximately $ 185,000 ), of which, RMB 722,573 (approximately

$ 105,000 ) was not covered by such limited insurance.

The Company has not experienced any losses in such accounts and believes it is not

exposed to any risks on its cash in bank accounts.

maintains a portion of its cash in bank and financial institution deposits within U.S.

that at times may exceed federally-insured limits

of $ 250,000 .

The Company manages this credit risk by concentrating its cash balances in high quality financial institutions and by periodically

evaluating the credit quality of the primary financial institutions holding such deposits.

The Company has not experienced any losses

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

At December 31, 2022, the Company’s

cash and restricted cash balances in United States bank accounts had approximately $ 4,952,000 in excess of the federally-insured

instruments which potentially subject the Company to concentrations of credit risk consist principally of trade accounts receivable.

portion of the Company’s sales are credit sales which is to the customer whose ability to pay is dependent upon the industry economics

prevailing in these areas;

however, concentrations of credit risk with respect to trade accounts receivable is limited due to short-term

payment terms.

The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk.

Rent Receivable and Allowance for Doubtful

Rent receivable

is presented net of an allowance for doubtful accounts.

Rent receivable balance consists of base rents, tenant reimbursements and receivables

arising from straight-lining of rents represent amounts accrued and unpaid from tenants in accordance with the terms of the respective

leases, subject to the Company’s revenue recognition policy.

An allowance for the uncollectible portion of rent receivable is determined

based upon an analysis of the tenant’s payment history, the financial condition of the tenant, business conditions in the industry

in which the tenant operates and economic conditions in Freehold, New Jersey in which the property is located.

believes that the rent receivable is fully collectable.

Therefore, no material allowance for doubtful accounts is deemed to be required

on its rent receivable at December 31, 2022 and 2021.

Deferred financing costs

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

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

As of December 31, 2022 and 2021,

deferred financing costs amounted to $ 174,107 and $ 213,279 , of which $ 34,821 and $ 138 ,631were included in other current assets and $ 139,286

and $ 74,648 were included in other non-current assets, respectively.

Debt Issuance Costs

Debt issuance costs are

those costs that have been incurred in connection with the issuance of balloon promissory note payable in 2022 and are offset against

note payable in the consolidated balance sheets.

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

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

of December 31, 2022, debt issuance costs amounted to $ 236,848 .

Any balance over RMB 500,000 per bank in

PRC will not be covered.

At December 31, 2023, cash balances held in the PRC are RMB 36,827 (approximately $ 5,000 ), which

was covered by such insurance.

The Company has not experienced any losses in such accounts and believes it is not exposed to any risks

on its cash in bank accounts.

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

that at times may exceed federally-insured

limits of $ 250,000 .

The Company manages this credit risk by concentrating its cash balances in high quality financial institutions and

by periodically evaluating the credit quality of the primary financial institutions holding such deposits.

The Company has not experienced

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

At December 31, 2023, there

were no balances in excess of the federally-insured limits.

The Company’s

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

The Company also performs

ongoing credit evaluations of its tenants to help further reduce credit risk.

Rent Receivable and Reserve for Credit

Rent receivable is presented net

of reserve for credit losses.

Rent receivable balance consists of base rents, tenant reimbursements and receivables arising from straight-lining

of rents represent amounts accrued and unpaid from tenants in accordance with the terms of the respective leases, subject to the Company’s

revenue recognition policy.

A reverse for the uncollectible portion of rent receivable is determined based upon an analysis of the tenant’s

payment history, the financial condition of the tenant, business conditions in the industry in which the tenant operates and economic

conditions in Freehold, New Jersey in which the property is located.

Management believes that the rent

receivable is fully collectable.

Therefore, no material reverse for credit losses is deemed to be required on its rent receivable at December

31, 2023 and 2022.

AVALON GLOBOCARE CORP.

3 unchanged sentences

POLICIES (continued)

Deferred Offering Costs

Deferred offering costs consist of legal, accounting and other costs that

are directly related to the Company’s open market sale equity financing and will be charged to stockholders’ equity upon the

completion of the equity offering.

As of December 31, 2023 and 2022, deferred offering costs amounted to $ 175,136 and $ 174,107 , of

which $ 175,136 and $ 34,821 were included in prepaid expense and other current assets and $ 0 and $ 139,286 were included in other

non-current assets, respectively.

Deferred Leasing Costs

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Property and Equipment

Property and equipment are carried at cost and

are depreciated on a straight-line basis over the estimated useful lives of the assets.

Property and equipment are carried at cost less accumulated depreciation,

and are depreciated on a straight-line basis over the estimated useful lives of the assets.

The cost of repairs and maintenance is expensed

7 unchanged sentences

Estate and Depreciation

Investment in real estate is carried at cost less

accumulated depreciation and consists of building and improvement.

The Company depreciates real estate building and improvement on a straight-line

basis over estimated useful life.

Investment in real estate is carried at cost less accumulated depreciation,

and consists of building and improvement.

The Company depreciates real estate building and improvement on a straight-line basis over estimated

Expenditures for ordinary repair and maintenance costs are charged to expense as incurred.

for improvements, renovations, and replacements of real estate asset is capitalized and depreciated over its estimated useful life if

the expenditure qualifies as betterment.

Expenditure for improvements,

renovations, and replacements of real estate asset is capitalized and depreciated over its estimated useful life if the expenditure qualifies

as betterment.

Impairment of Long-lived Assets

6 unchanged sentences

estimated fair value and its book value.

The Company did not record any impairment charge for the years ended December 31, 2022 and 2021.

For the year ended December 31, 2022,

the Company incurred impairment charges in operations of $ 22,285 on the laboratory equipment.

The valuations of the laboratory equipment,

and the amounts of the impairment charge, were based on impairment assessments conducted on the equipment held for sale at December 31,

Investment in Unconsolidated

Company – Epicon Biosciences Co., Ltd.

The Company uses the equity method of accounting for its investment in, and earning or loss of, company that it does not control but over

which it does exert significant influence.

The Company considers whether the fair value of its equity method investment has declined below

its carrying value whenever adverse events or changes in circumstances indicate that recorded value may not be recoverable.

If the Company

considers any decline to be other than temporary (based on various factors, including historical financial results and the overall health

of the investee), then a write-down would be recorded to estimated fair value.

See Note 7 for discussion of equity method investment.

Deferred Rental Income

rental income represents rental income collected but not earned as of the reporting date.

The Company defers the revenue related to lease

payments received from tenants in advance of their due dates.

As of December 31, 2022 and 2021, deferred rental income totaled $ 27,685 and

$ 8,638 , respectively, which were included in accrued liabilities and other payables on the accompanying consolidated balance sheets .

The Company uses the equity method of accounting

for its investments in, and earning or loss of, companies that it does not control but over which it does exert significant influence.

The Company considers whether the fair values of its equity method investments have declined below their carrying values whenever adverse

events or changes in circumstances indicate that recorded values may not be recoverable.

If the Company considers any decline to be other

than temporary (based on various factors, including historical financial results and the overall health of the investee), then a write-down

would be recorded to estimated fair value.

Impairment of equity method investment amounted to $ 9,651,361 and $0 for the years ended

December 31, 2023 and 2022, respectively.

See Note 7 for discussion of equity method investments.

AVALON GLOBOCARE CORP.

3 unchanged sentences

POLICIES (continued)

Revenue Recognition

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

The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised

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

those goods or services.

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

Identify the contract with the customer

Identify the performance obligations in the contract

Determine the transaction price

Allocate the transaction price to the performance obligations in the contract

Recognize revenue when the company satisfies a performance obligation

to identify the performance obligations in a contract with a customer, a company must assess the promised goods or services in the contract

and identify each promised goods or service that is distinct.

A performance obligation meets ASC 606’s defi nition

of a “distinct” goods or service (or bundle of goods or services) if both of the following criteria are met:

customer can benefit from the goods or service either on its own or together with other resources

that are readily available to the customer (i.e., the goods or service is capable of being

entity’s promise to transfer the goods or service to the customer is separately identifiable

from other promises in the contract (i.e., the promise to transfer the goods or service is

distinct within the context of the contract).

a goods or service is not distinct, the goods or service is combined with other promised goods or services until a bundle of goods or

services is identified that is distinct.

The transaction

price is the amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services

to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes).

The consideration promised in a

contract with a customer may include fixed amounts, variable amounts, or both.

Variable consideration is included in the transaction price

only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when

the uncertainty associated with the variable consideration is subsequently resolved.

The transaction

price is allocated to each performance obligation on a relative standalone selling price basis.

The transaction price allocated to each

performance obligation is recognized when that performance obligation is satisfied, at a point in time or over time as appropriate.

The Company’s

revenues are derived from providing medial related consulting services for its’ related parties.

Revenues related to its service

offerings are recognized at a point in time when service is rendered.

Any payments received in advance of the performance of services

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

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

Deferred Rental Income

Deferred rental income represents rental income

collected but not earned as of the reporting date.

The Company defers the revenue related to lease payments received from tenants in advance

of their due dates.

As of December 31, 2023 and 2022, deferred rental income totaled $ 11,429 and $ 27,685 , respectively, which were

included in accrued liabilities and other payables on the accompanying consolidated balance sheets.

Real Property Rental Revenue

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

Rental income

3 unchanged sentences

The cumulative difference between lease revenue recognized under the straight-line

method and contractual lease payments are included in rent receivable on the consolidated balance sheets.

method and contractual lease payments are included in account receivable on the consolidated balance sheets.

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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (continued)

When a lease contains “rent holidays”,

6 unchanged sentences

to the Company’s rental properties.

Related Consulting Services Costs

medical related consulting services include the cost of labor and related benefits, travel expenses related to consulting services, and

other overhead costs.

Research and Development

for research and product development costs are expensed as incurred.

The Company incurred research and development expense of $ 731,328

and $ 1,025,009 in the years ended December 31, 2022 and 2021, respectively .

The Company incurred research and development expense of $ 109,618 and

$ 731,328 in the years ended December 31, 2023 and 2022, respectively.

Advertising and Marketing Costs

related to advertising and marketing are expensed as incurred.

For the years ended December 31, 2022 and 2021, advertising and marketing

costs amounted to $ 1,325,313 and $ 328,565 , respectively .

All costs related to advertising and marketing

are expensed as incurred.

For the years ended December 31, 2023 and 2022, advertising and marketing costs amounted to $ 1,666,721 and

$ 1,325,313 , respectively.

Stock-based Compensation

10 unchanged sentences

earn the equity instruments is reached or (ii) the date at which the counterparty’s performance is complete.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (continued)

is governed by the income tax laws of China and the United States.

17 unchanged sentences

no such interest and penalties were recorded as of December 31, 2023 and 2022.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (continued)

Foreign Currency Translation

1 unchanged sentence

currency of the Company is the U.S.

The functional currency of the parent company, AHS, Avalon RT 9, Genexosome, Avactis, and

Exosome, is the U.S.

The functional currency of the parent company, AHS, Avalon RT 9, and Avalon Lab is the U.S.

dollar and the functional currency of Avalon Shanghai is the Chinese Renminbi (“RMB”).

For the subsidiaries

whose functional currency is the RMB, result of operations and cash flows are translated at average exchange rates during the period,

assets and liabilities are translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange

As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with

the changes in the corresponding balances on the balance sheets.

Translation adjustments resulting from the process of translating the

local currency financial statements into U.S.

For Avalon Shanghai whose functional

currency is the RMB, result of operations and cash flows are translated at average exchange rates during the period, assets and liabilities

are translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange rates.

amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with the changes in the

corresponding balances on the balance sheets.

Translation adjustments resulting from the process of translating the local currency financial

statements into U.S.

dollars are included in determining comprehensive income/loss.

Transactions denominated

in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates.

liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance

sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency

other than the functional currency are included in the results of operations as incurred.

All of the Company’s revenue transactions

are transacted in the functional currency of the operating subsidiaries.

The Company does not enter into any material transaction in foreign

Transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of

Transactions denominated in foreign currencies are

translated into the functional currency at the exchange rates prevailing on the transaction dates.

Assets and liabilities denominated

in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance sheet date with any

transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional

currency are included in the results of operations as incurred.

All of the Company’s revenue transactions are transacted in the

functional currency of the operating subsidiaries.

The Company does not enter into any material transaction in foreign currencies.

gains or losses have not had, and are not expected to have, a material effect on the results of operations of the Company.

liability accounts at December 31, 2023 and 2022 were translated at 7.0786 RMB and 6.8979 RMB to $ 1.00 , respectively, which were the exchange

9 unchanged sentences

For the Company, comprehensive loss for the years ended December 31, 2023 and 2022 consisted of net loss and unrealized

(loss) gain from foreign currency translation adjustment.

loss from foreign currency translation adjustment.

and Contingencies

In the normal

course of business, the Company is subject to contingencies, such as legal proceedings and claims arising out of its business, that cover

a wide range of matters.

Liabilities for such contingencies are recorded when it is probable that a liability has been incurred and the

amount of the assessment can be reasonably estimated.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (continued)

Per Share Data

260 “Earnings per Share,” requires presentation of both basic and diluted earnings per share (“EPS”) with a reconciliation

of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation.

excludes dilution.

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock

were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.

ASC Topic 260 “Earnings per Share,”

requires presentation of both basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator and denominator

of the basic EPS computation to the numerator and denominator of the diluted EPS computation.

Basic EPS excludes dilution.

reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into

common stock or resulted in the issuance of common stock that then shared in the earnings of the entity.

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

3 unchanged sentences

For the years ended December

31, 2022 and 2021, potentially dilutive common shares consist of the common shares issuable upon the conversion of Series A convertible

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

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

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

as they would have had an anti-dilutive impact.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (continued)

Per Share Data (continued)

31, 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

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

3 unchanged sentences

Warrants to purchase common stock

Convertible note (*)

Series A convertible preferred stock (*)

Series B convertible preferred stock (**)

Convertible notes (***)

Potentially dilutive securities

(*) Assumed the convertible note was converted into shares of common

stock of the Company at a conversion price of $ 6.5 per share.

(*) Assumed the Series A convertible preferred stock was converted

into shares of common stock of the Company at a conversion price of $ 10.00 per share .

Non-controlling Interest

(**) 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

notes were converted into shares of common stock of the Company at a conversion price of $ 4.50 and $ 1.50 per share for the year ended

December 31, 2023.

Assumed the convertible note was converted into shares of common stock of the Company at a conversion price of $ 6.50

per share for the year ended December 31, 2022.

Noncontrolling Interest

As of December 31, 2023, Dr.

2 unchanged sentences

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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (continued)

Segment Reporting

The Company uses “the management approach”

in determining reportable operating segments.

The management approach considers the internal organization and reporting used by the Company’s

chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s

reportable segments.

The Company’s chief operating decision maker is the Chief Executive Officer (“CEO”) and president

of the Company, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company.

During the years ended December 31, 2022 and 2021,

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

services segment.

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

The management approach considers the internal

organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance

as the source for determining the Company’s reportable segments.

The Company’s chief operating decision maker is the Chief

Executive Officer (“CEO”) and president of the Company, who reviews operating results to make decisions about allocating resources

and assessing performance for the entire Company.

During the year ended December 31, 2022, the Company

operated in two reportable business segments - (1) the real property operating segment, and (2) the medical related consulting services

These reportable segments offer different services and products, have different types of revenue, and are managed separately

4 unchanged sentences

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 year ended December 31, 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

Certain prior period amounts

have been reclassified to conform to the current period presentation.

These reclassifications have no effect on the previously reported

financial position, results of operations and cash flows.

Fiscal Year End

Company has adopted a fiscal year end of December 31st.

Reverse Stock Split

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

The reverse split did not change

the number of authorized shares of common stock or par value.

All references in these consolidated financial statements to shares, share

prices, exercise prices, and other per share information in all periods have been adjusted, on a retroactive basis, to reflect the reverse

AVALON GLOBOCARE CORP.

3 unchanged sentences

POLICIES (continued)

Related Parties

Parties are considered to be related to the Company

if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with

Related parties also include principal owners of the Company, its management, members of the immediate families of principal

owners of the Company and its management and other parties with which the Company may deal with if one party controls or can significantly

influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully

pursuing its own separate interests.

The Company discloses all significant related party transactions.

Reclassification

Certain prior period amounts have been reclassified

to conform to the current period presentation.

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

of operations and cash flows.

Fiscal Year End

Company has adopted a fiscal year end of December 31st.

Reverse Stock Split

The Company effected a one-for-ten

reverse stock split of its outstanding shares of common stock on January 5, 2023.

The reverse split did not change the number of authorized

shares of common stock or par value.

All references in these consolidated financial statements to shares, share prices, exercise prices,

and other per share information in all periods have been adjusted, on a retroactive basis, to reflect the reverse stock split.

Recent Accounting

In August 2020, the Financial Accounting Standards

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

Other Options (Subtopic 470-20 ) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40):

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

for certain financial instruments with characteristics of liabilities and equity.

This ASU (1) simplifies the accounting for convertible

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

Debt with Conversion and

Other Options , that requires entities to account for beneficial conversion features and cash conversion features in equity, separately

from the host convertible debt or preferred stock;

(2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding

financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’

equity, by removing certain criteria required for equity classification;

and (3) revises the guidance in ASC 260, Earnings Per

Share , to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method.

In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash

ASU 2020-06 is effective for public business entities for fiscal years beginning after December 15, 2021 (or December 15, 2023

for companies who meet the SEC definition of Smaller Reporting Companies), and interim periods within those fiscal years.

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

However, early adoption is permitted

as early as fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020.

The Company adopted the new

standard on January 1, 2022, which adoption required the Company to bifurcate the embedded conversion feature from the convertible note

it issued during the second quarter of 2022.

2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (“Topic 326”).

The ASU introduces

a new accounting model, the Current Expected Credit Losses model (“CECL”), which requires earlier recognition of credit losses

and additional disclosures related to credit risk.

The CECL model utilizes a lifetime expected credit loss measurement objective for the

recognition of credit losses at the time the financial asset is originated or acquired.

ASU 2016-13 is effective for annual period beginning

after December 15, 2022, including interim reporting periods within those annual reporting periods.

The Company expects that the adoption

will not have a material impact on the Company’s consolidated financial statements.

2016, the Financial Accounting Standards

Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (“Topic 326”).

The ASU introduces a new accounting

model, the Current Expected Credit Losses model (“CECL”), which requires earlier recognition of credit losses and additional

disclosures related to credit risk.

The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition

of credit losses at the time the financial asset is originated or acquired.

ASU 2016-13 is effective for annual period beginning after

December 15, 2022, including interim reporting periods within those annual reporting periods.

The adoption of this new guidance did not

have any material impact on the Company’s consolidated financial statements.

2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts

with Customers, which amends the accounting related to contract assets and liabilities acquired in business combinations.

requires that entities recognize and measure contract assets and contract liabilities acquired in a business combination in accordance

with ASC Topic 606, Revenue from Contracts with Customers.

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 business combinations occurring on or after

the effective date of the amendment.

Early adoption is permitted, including adoption in an interim period.

The adoption of this new guidance

did not have any material impact on the Company’s consolidated financial statements.

2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

This guidance is intended to enhance

the transparency and decision-usefulness of income tax disclosures.

The amendments in ASU 2023-09 address investor requests for enhanced

income tax information primarily through changes to disclosure regarding rate reconciliation and income taxes paid both in the U.S.

in foreign jurisdictions.

ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 on a prospective basis, with the

option to apply the standard retrospectively.

Early adoption is permitted.

The company is currently evaluating this guidance to determine

the impact it may have on its consolidated financial statements disclosures.

Other accounting

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to have an impact on or are unrelated to its consolidated financial condition, results of operations, cash flows or disclosures.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – OTHER CURRENT AND

NON-CURRENT ASSETS

At December 31, 2022 and 2021, other current

and non-current assets consisted of the following:

Prepaid directors and officers liability insurance premium

NOTE 4 – PREPAID EXPENSE

AND OTHER CURRENT ASSETS

At December 31, 2023 and 2022, prepaid expense

and other current assets consisted of the following:

Prepaid professional fees

Deferred financing costs, net

Recoverable VAT

Prepaid directors and officers liability insurance premium

Deferred offering costs

Deferred leasing costs

Security deposit

Equipment held for sale

Long-term straight-line rent receivable

Current portion

Non-current portion

Due from broker

NOTE 5 – PROPERTY AND EQUIPMENT

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$ 158,228 was included in research and development expense, respectively.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6 – INVESTMENT IN REAL ESTATE

3 unchanged sentences

accumulated depreciation

For the years ended December

31, 2022 and 2021, depreciation expense of this commercial real property amounted to $ 168,683 and $ 167,248 , which was included in real

property operating expenses.

For both the years ended

December 31, 2023 and 2022, depreciation expense of this commercial real property amounted to $ 168,683 , which was included in real property

operating expenses.

NOTE 7 – EQUITY

METHOD INVESTMENTS

Investment in Epicon

Biotech Co., Ltd.

As of December 31, 2023

and 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.

Epicon was incorporated on August

14, 2018 in PRC.

Avalon Shanghai and an unrelated company, Jiangsu Unicorn Biological Technology Co., Ltd.

(“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.

is not involved in the management of Epicon.

Therefore, it is a passive investment.

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 30,

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 $ 454,679 related to the equity method

investment for the year ended December 31, 2023, which reduced the investment value to zero.

Under the equity method,

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

of losses resulting in a negative equity method investment, which would be presented as a liability on the consolidated balance sheets.

Commitments may be explicit and may include formal guarantees, legal obligations, or arrangements by contract.

Implicit commitments may

arise from reputational expectations, intercompany relationships, statements by the Company of its intention to provide support, a history

of providing financial support or other facts and circumstances.

When the Company has no commitment to fund the losses of its equity method

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

The Company has no commitment to fund additional

losses of its equity method investments.

Investment in Laboratory

Services MSO, LLC

On February 9, 2023 (the

“Closing Date”), the Company entered into and closed an Amended and Restated Membership Interest Purchase Agreement (the “Amended

MIPA”), by and among Avalon Laboratory Services, Inc., a wholly owned subsidiary of the Company (the “Buyer”), SCBC

Holdings LLC (the “Seller”), the Zoe Family Trust, Bryan Cox and Sarah Cox as individuals (each an “Owner” and

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

Pursuant 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 $ 20,666,667 , 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”), which approximated the fair value, and (iii) a $666,667 cash payment on February 9, 2024.

Series B Preferred Stock is convertible into shares of the Company’s common stock at a conversion price per share equal to $3.78,

which approximated the market price at the date of closing, 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 14 — Series B Convertible Preferred Stock Issued for Equity Method

AVALON GLOBOCARE CORP.

2 unchanged sentences

NOTE 7 – EQUITY

METHOD INVESTMENT

As of December

31, 2022 and 2021, the equity method investment amounted to $ 485,008 and $ 515,632 , respectively.

The investment represents the Company’s

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

Epicon was incorporated on August 14,

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

accounted for 40 % and 60 % of the total ownership, respectively.

Epicon is focused on cell preparation, third party testing,

biological sample repository for commercial and scientific research purposes and the clinical transformation of scientific achievements.

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

Under the equity method, the investment

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

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

Thereafter, the investment is adjusted for the post incorporation change

in the Company’s share of the investee’s net assets and any impairment loss relating to the investment.

years ended December 31, 2022 and 2021, the Company’s share of Epicon’s net loss was $ 41,863 and $ 60,463 , respectively,

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

ended December 31, 2022 and 2021, activity recorded for the Company’s equity method investment in Epicon is summarized

in the following table:

METHOD INVESTMENTS (continued)

Investment in Laboratory

Services MSO, LLC (continued)

Lab Services MSO, through

its subsidiaries, is engaged in providing laboratory testing services.

Avalon Lab and an unrelated company, have an ownership interest

in Lab Services MSO of 40 % and 60 %, respectively.

In accordance with ASC

810, the Company determined that Lab Services MSO does not qualify as a Variable Interest Entity, nor does it have a controlling financial

interest over the legal entity.

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 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).

At 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 $ 19,460,000 which was attributable to intangible assets and goodwill.

Thereafter, 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.

Intangible assets consist

of the valuation of identifiable intangible assets acquired, representing trade names and customers relationships, which are being amortized

on a straight-line method over the estimated useful life of 15 years.

The straight-line method of amortization represents the Company’s

best estimate of the distribution of the economic value of the identifiable intangible assets.

Goodwill represents the excess of the purchase price paid over the

fair value of net assets acquired in the business acquisition of Lab Services MSO incurred on February 9, 2023.

Goodwill is not amortized,

but is tested for impairment at December 31, 2023.

In December 2023, the

Company assessed its equity method investment in Laboratory Services MSO, LLC for any impairment and concluded that there were indicators

of impairment as of December 31, 2023.

The Company calculated that the estimated undiscounted cash flows of goodwill were less than the

carrying amount of goodwill related to the equity method investment.

The Company has recognized an impairment loss of $ 9,196,682 related

to the equity method investment for the year ended December 31, 2023.

For the period from February

9, 2023 (date of investment) through December 31, 2023, the Company’s share of Lab Services MSO’s net income was $ 625,035 ,

which was included in income from equity method investment — Lab Services MSO in the accompanying consolidated statements of operations

and comprehensive loss.

In the year ended December

31, 2023, activity recorded for the Company’s equity method investment in Lab Services MSO is summarized in the following

Equity investment carrying amount at January 1, 2023

Payment made for equity method investment

Epicon’s net loss attributable to the Company

Foreign currency fluctuation

Equity investment carrying amount at December 31, 2021

Payment made for equity method investment

Epicon’s net loss attributable to the Company

Foreign currency fluctuation

Payment for equity method investment:

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

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

Loss from equity method investment – Lab Services MSO:

Lab Services MSO’s net income attributable to the Company

Intangible assets amortization amount

Impairment of goodwill

( 9,196,682 )

( 8,571,647 )

Equity investment carrying amount at December 31, 2023

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

As of December 31, 2023, the Company’s carrying

value of the identified intangible assets and goodwill which are included in the equity investment carrying amount was $ 9,392,644 and

$ 259,579 , respectively.

The tables below present the summarized financial

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

Current assets

1 unchanged sentence

Current liabilities

For the Years Ended

Loss from operation

Noncurrent liabilities

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – EQUITY

METHOD INVESTMENTS (continued)

Investment in Laboratory

Services MSO, LLC (continued)

For the Period from

(Date of Investment) through

December 31, 2023

Income from operation

NOTE 8 – ACCRUED

8 unchanged sentences

Accrued real property cleaning service fee

Accrued equity offering costs

Interest payable

Taxes payable

NOTE 9 – CONVERTIBLE NOTE PAYABLE

2022 Convertible Note

On March 28, 2022, the

9 unchanged sentences

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

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

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

Warrant to acquire 88,984 shares of common stock dated April 15, 2022, a 2022 Convertible Note in the principal amount of $ 659,581 and

a 2022 Warrant to acquire 21,986 shares of common stock dated April 29, 2022, a 2022 Convertible Note in the principal amount

of $ 659,581 and a 2022 Warrant to acquire 21,986 shares of common stock dated April 29, 2022, a 2022 Convertible Note in

the principal amount of $ 199,840 and a 2022 Warrant to acquire 6,661 shares of common stock dated May 18, 2022, and a 2022

Convertible Note in the principal amount of $ 190,000 and a 2022 Warrant to acquire 6,333 shares of common stock dated May

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

The investor may

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

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

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

of $ 199,840 and a 2022 Warrant to acquire 6,661 shares of common stock dated May 18, 2022, and a 2022 Convertible Note

in the principal amount of $ 190,000 and a 2022 Warrant to acquire 6,333 shares of common stock dated May 25, 2022.

accrued on the principal amount at 1.0 % per annum.

The investor may elect to convert all or part of the 2022 Convertible Note, plus accrued

interest, at any time into shares of common stock of the Company at a conversion price equal to 95 % of the average of the highest

three trading prices for the common stock during the 20-trading day period ending one trading day prior to the conversion date but in

no event will the conversion price be lower than $ 0.75 per share.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – CONVERTIBLE NOTE PAYABLE

2022 Convertible Note

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

7 unchanged sentences

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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – CONVERTIBLE NOTE PAYABLE

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

Own Equity”, the Company determined that all the warrants issued to the investor with this private placement are classified as equity

in additional paid in-capital.

Own Equity”, the Company determined that all the warrants issued to the investor with this private placement were classified as

equity in additional paid in-capital.

In accordance

10 unchanged sentences

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

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

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

debt (see Note 10).

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

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

model with the following assumptions:

9 unchanged sentences

note payable.

On July 25, 2022, the Company and the investor

entered into a Conversion Agreement (“Conversion Agreement”) pursuant to which the investor converted all of its Convertible

Notes in the principal amount of $ 3,718,943 and unpaid interest of $ 9,751 into 573,645 shares of common stock

of the Company at a per share price of $ 6.5 (see Note 14 - Common Shares Issued for Debt Conversion).

The Company recorded a conversion

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

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

25, 2022, the Company and the investor entered into a Conversion Agreement (“Conversion Agreement”) pursuant to which the

investor converted all of its Convertible Notes in the principal amount of $ 3,718,943 and unpaid interest of $ 9,751 into 573,645 shares

of common stock of the Company at a per share price of $ 6.5 (see Note 14 - Common Shares Issued for Debt Conversion).

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

issued upon conversion in excess of the common stock issuable under the original terms of the 2022 Convertible Note.

year ended December 31, 2022, amortization of debt discount and interest expense related to the 2022 Convertible Note amounted to $ 3,281,078 and

1 unchanged sentence

– other, respectively, on the accompanying consolidated statements of operations and comprehensive loss.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – CONVERTIBLE NOTE PAYABLE

May 2023 Convertible

On 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.

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 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 .

Mast 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

The 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

Payment Date:

Payment Amount:

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

In 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.

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 met 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 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.

In accordance

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

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

The portion of the proceeds 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.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – CONVERTIBLE NOTE PAYABLE

May 2023 Convertible

Note (continued)

In accordance

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

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

debt (see Note 10).

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.

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.

For the year ended December

31, 2023, amortization of debt discount and debt issuance costs and interest expense related to the May 2023 Convertible Note amounted

to $307,123 and $ 115,450 , respectively, which have been included in interest expense — amortization of debt discount and debt

issuance cost and interest expense — other on the accompanying consolidated statements of operations and comprehensive loss.

July 2023 Convertible

On 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.

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

The 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

Payment Date:

Payment Amount:

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

In 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.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – CONVERTIBLE NOTE PAYABLE

July 2023 Convertible

Note (continued)

Based 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.

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 to be zero.

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.

In accordance with ASC 470-20-25-2, proceeds from

the sale of a debt instrument with stock purchase warrants are allocated to the two elements based on the relative fair values of

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

The portion of the proceeds 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.

In accordance

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

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

debt (see Note 10).

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.

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.

year ended December 31, 2023, amortization of debt discount and debt issuance costs and interest expense related to the July 2023 Convertible

Note amounted to $ 78,974 and $ 31,164 , respectively, which have been included in interest expense — amortization of debt discount

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

Convertible Note

On October 9, 2023, the

Company entered into securities purchase agreements with Mast Hill and Firstfire for the issuance of 13.0 % senior secured promissory notes

in the aggregate principal amount of $ 700,000 (collectively, the “October 2023 Convertible Note”) convertible into shares

of common stock, par value $ 0.0001 per share, of the Company, as well as the issuance of 70,000 shares of common stock as a commitment

fee and warrants for the purchase of 192,500 shares of common stock of the Company.

The Company and its subsidiaries have entered into

that certain 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 Convertible Note.

amount and interest under the October 2023 Convertible Note are convertible into shares of common stock of the Company at a conversion

price of $ 1.50 per share unless the Company fails to make an amortization payment when due, in which case the conversion price shall

be the lower of $ 1.50 or the market price (as defined in the October 2023 Convertible Note) of the shares.

Mast Hill acquired the October 2023 Convertible Note with principal

amount of $ 350,000 and paid the purchase price of $ 332,500 after an original issue discount of $ 17,500 .

On October 9, 2023, the Company

issued (i) a warrant to purchase 52,500 shares of common stock with an exercise price of $ 2.50 exercisable until the five-year anniversary

of October 9, 2023, (ii) a warrant to purchase 43,750 shares of common stock with an exercise price of $ 1.80 exercisable until the five-year

anniversary of October 9, 2023, which warrant shall be cancelled and extinguished against payment of the October 2023 Convertible Note,

and (iii) 35,000 shares of common stock as a commitment fee for the purchase of the October 2023 Convertible Note, which were earned in

full as of October 9, 2023.

On October 9, 2023, the Company delivered such duly executed October 2023 Convertible Note, warrants and common

stock to Mast Hill against delivery of such purchase price.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – CONVERTIBLE NOTE PAYABLE

Convertible Note (continued)

The Company is obligated

to make amortization payments in cash to Mast Hill towards the repayment of the October 2023 Convertible Note, as provided in the following

Payment Date:

Payment Amount:

April 9, 2024

$35,000 plus accrued interest through April 9, 2024

$35,000 plus accrued interest through May 9, 2024

$46,667 plus accrued interest through June 9, 2024

$58,333 plus accrued interest through July 9, 2024

August 9, 2024

$58,333 plus accrued interest through August 9, 2024

September 9, 2024

$70,000 plus accrued interest through September 9, 2024

October 9, 2024

The entire remaining outstanding balance of the October 2023 Convertible Note

Firstfire acquired

the October 2023 Convertible Note with principal amount of $ 350,000 and paid the purchase price of $ 332,500 after an original issue discount

of $ 17,500 .

On October 9, 2023, the Company issued (i) a warrant to purchase 52,500 shares of common stock with an exercise price of $ 2.50

exercisable until the five-year anniversary of October 9, 2023, (ii) a warrant to purchase 43,750 shares of common stock with an exercise

price of $ 1.80 exercisable until the five-year anniversary of October 9, 2023, which warrant shall be cancelled and extinguished against

payment of the October 2023 Convertible Note, and (iii) 35,000 shares of common stock as a commitment fee for the purchase of the October

2023 Convertible Note, which were earned in full as of October 9, 2023.

On October 9, 2023, the Company delivered such duly executed October

2023 Convertible Note, warrants and common stock to Firstfire against delivery of such purchase price.

The Company is obligated

to make amortization payments in cash to Firstfire towards the repayment of the October 2023 Convertible Note, as provided in the following

Payment Date:

Payment Amount:

April 9, 2024

$35,000 plus accrued interest through April 9, 2024

$35,000 plus accrued interest through May 9, 2024

$46,667 plus accrued interest through June 9, 2024

$58,333 plus accrued interest through July 9, 2024

August 9, 2024

$58,333 plus accrued interest through August 9, 2024

September 9, 2024

$70,000 plus accrued interest through September 9, 2024

October 9, 2024

The entire remaining outstanding balance of the October 2023 Convertible Note

In connection with the issuance of the October

2023 Convertible Note, the Company incurred debt issuance costs of $ 95,349 (including the issuance of 8,400 warrants as

a finder’s fee), which is capitalized and will be amortized into interest expense over the term of the October 2023 Convertible

Based upon the Company’s analysis of the

criteria contained in ASC 815, the Company determined that all the warrants issued to Mast Hill and 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.

determined the probability of failing to make an amortization payment when due to be remote and as such the fair value of the 87,500 warrants

with an exercise price of $ 1.80 exercisable until the five-year anniversary of October 9, 2023, which warrant shall be cancelled

and extinguished against payment of the October 2023 Convertible Note, has been estimated to be zero.

Accordingly, the fair value of the 113,400 warrants

with an exercise price of $ 2.50 exercisable until the five-year anniversary of October 9, 2023 was classified as a derivative liability

on October 9, 2023.

The fair values of the 113,400 warrants with an exercise price of $ 2.50 exercisable until the five-year

anniversary of October 9, 2023 issued on October 9, 2023 were computed using the Black-Scholes option-pricing model with the following

stock price of $ 0.77 , volatility of 89.70 %, risk-free rate of 4.75 %, annual dividend yield of 0 % and expected

life of 5 years.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – CONVERTIBLE NOTE PAYABLE

Convertible Note (continued)

In accordance with ASC 470-20-25-2, proceeds from

the sale of a debt instrument with stock purchase warrants are allocated to the two elements based on the relative fair values of

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

The portion of the proceeds 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.

In accordance

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

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

debt (see Note 10).

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.

recorded a total debt discount of $ 128,748 related to the original issue discount, common shares issued and warrants issued to Mast

Hill and Firstfire, which will be amortized over the term of the October 2023 Convertible Note.

year ended December 31, 2023, amortization of debt discount and debt issuance costs and interest expense related to the October 2023 Convertible

Note amounted to $51,356 and $20,444, respectively, which have been included in interest expense — amortization of debt discount

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

NOTE 10 – DERIVATIVE LIABILITY

As stated in Note 9, 2022 Convertible

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

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

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

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

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

in Note 9, 2022 Convertible Note, the Company determined that the convertible note payable contained an embedded derivative feature in

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

In accordance with

ASC 815-10-25, each derivative feature was initially recorded at its fair value using the Black-Scholes option valuation method and then

re-valued at each reporting date, with changes in the fair value reported in the statements of operations.

The estimated

3 unchanged sentences

to which the investor converted all of its Convertible Notes into shares of common stock of the Company.

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

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

The estimated fair

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

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

Increases or decreases in fair value of the derivative

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

The change to the derivative liability for the embedded conversion option resulted in a decrease of $ 600,749 in the derivative

liability and the corresponding increase in other income as a gain for the year ended December 31, 2022.

As stated in Note 9,

May 2023 Convertible Note, July 2023 Convertible Note, and October 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, July 6, 2023, October 9, 2023, and December 31, 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.

On May 23, 2023, the

Company issued 240,500 warrants to Mast Hill and a third party as a finder’s fee (see Note 9).

Upon 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.

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 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 May 23, 2023 was classified as a derivative liability

on May 23, 2023.

AVALON GLOBOCARE CORP.

2 unchanged sentences

NOTE 10 – DERIVATIVE LIABILITY

Increases or decreases in fair

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

of operations and comprehensive loss.

The change to the derivative liability for the embedded conversion option resulted in a decrease

of $ 600,749 in the derivative liability and the corresponding increase in other income as a gain for the year ended December

There was no derivative liability in the year ended December 31, 2021.

On 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.

On December 31, 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 $ 14,805 .

The estimated fair value of the warrants was computed as of December 31, 2023

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

stock price of $ 0.48 , volatility of 83.96 %, risk-free

rate of 3.84 %, annual dividend yield of 0 % and expected life of 4.4 years.

On July 6, 2023, the

Company issued 80,163 warrants to Firstfire and a third party as a finder’s fee (see Note 9).

Upon 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.

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 to be zero.

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.

On 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.

31, 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 $ 5,098 .

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

31, 2023 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 0.48 , volatility of 83.66 %,

risk-free rate of 3.84 %, annual dividend yield of 0 % and expected life of 4.5 years.

On October 9, 2023, the

Company issued 200,900 warrants to Mast Hill and Firstfire and a third party as a finder’s fee (see Note 9).

Upon 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 87,500 warrants with an exercise price of $ 1.80 exercisable until the five-year anniversary

of October 9, 2023, which warrant shall be cancelled and extinguished against payment of the October 2023 Convertible Note, has been estimated

Accordingly, the fair value of the 113,400 warrants with an exercise price of $ 2.50 exercisable until the five-year

anniversary of October 9, 2023 was classified as a derivative liability on October 9, 2023.

On October 9, 2023, the

estimated fair values of the 113,400 warrants with an exercise price of $ 2.50 exercisable until the five-year anniversary

of October 9, 2023 issued were computed using the Black-Scholes option-pricing model with the following assumptions:

stock price of $ 0.77 ,

volatility of 89.70 %, risk-free rate of 4.75 %, annual dividend yield of 0 % and expected life of 5 years.

31, 2023, the estimated fair value of the 113,400 warrants with an exercise price of $ 2.50 exercisable until the five-year

anniversary of October 9, 2023 as derivative liability was $ 20,920 .

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

31, 2023 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 0.48 , volatility of 86.33 %,

risk-free rate of 3.84 %, 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

consolidated statements of operations and comprehensive loss.

The changes to the derivative liability resulted in a decrease of $ 188,374 in

the derivative liability and the corresponding increase in other income as a gain for the year ended December 31, 2023.

NOTE 11 – NOTE PAYABLE, NET

On September 1, 2022,

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

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

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

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

The 2022 Note Payable can

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

The Company may not prepay the 2022 Note Payable

for a period of 12 months.

The 2022 Note Payable is secured by a first mortgage on the Company’s real property located in Township

of Freehold, County of Monmouth, State of New Jersey, having a street address of 4400 Route 9 South, Freehold, NJ 07728.

As of December 31, 2022,

the carrying balance of the 2022 Note Payable was $ 4,563,152 and the remaining unamortized debt issuance costs balance was $ 236,848 .

year ended December 31, 2022, amortization of debt issuance costs and interest expense related to the 2022 Note Payable amounted to $ 29,606

and $ 176,000 , which have been included in interest expense – amortization of debt discount and debt issuance cost and interest expense

– other, respectively, on the accompanying consolidated statements of operations and comprehensive loss.

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.

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.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – NOTE PAYABLE, NET

In May 2023, the Company

borrowed $ 1,000,000 from the same lender.

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).

The loan is secured by a second-lien

mortgage on certain real property and improvements located at 4400 Route 9, Freehold, Monmouth County, New Jersey.

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

Principal amount

unamortized debt issuance costs

Note payable, net

For the year ended December

31, 2023 and 2022, amortization of debt issuance costs related to note payable amounted to $ 106,557 and $ 29,606 , respectively, which

have been included in interest expense — amortization of debt discount and debt issuance cost on the accompanying consolidated statements

of operations and comprehensive loss.

For the year ended December 31, 2023 and 2022, interest expense related to note payable amounted

to $606,722 and $ 176,000 , respectively, which have been included in interest expense - other on the accompanying consolidated statements

of operations and comprehensive loss.

NOTE 12 – RELATED PARTY TRANSACTIONS

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 the years ended December 31, 2022 and 2021,

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

the accompanying consolidated statements of operations and comprehensive loss.

The related party rent receivable totaled $ 74,100 and

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

at December 31, 2022 and 2021.

Medical Related Consulting

Services Revenue from Related Party

During the years ended December 31, 2022 and 2021,

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

Years Ended December 31,

Medical related consulting services provided to:

Hebei Daopei *

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

Wenzhao Lu, the largest shareholder of the Company.

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.

the years ended December 31, 2023 and 2022, the related party rental revenue amounted to $ 50,400 and has been included in rental

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

31, 2023 and 2022, the related party rent receivable totaled $ 124,500 and $ 74,100 , respectively, which has been included in rent

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

Provided by Related Party

2 unchanged sentences

As compensation for professional services provided, the Company

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

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

recognized consulting expenses of $ 86,528 and $ 144,064 for the years ended December 31, 2023 and 2022, respectively, which have

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

Accrued Liabilities and Other Payables –

Related Parties

In 2017, the Company acquired Beijing Genexosome

for a cash payment of $ 450,000 .

As of December 31, 2023 and 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 consolidated balance sheets.

During the period from June 2023 through December

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

As of December 31, 2023, the balance due to Lab Services MSO

amounted to $ 72,746 , which has been included in accrued liabilities and other payables — related parties on the accompanying consolidated

balance sheets.

As of December 31, 2023 and 2022, $ 33,712 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

consolidated balance sheets.

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 – RELATED PARTY TRANSACTIONS

Accrued Liabilities and Other Payables –

Related Parties

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

As of December 31, 2022 and 2021, the unpaid acquisition consideration

of $ 100,000 , was payable to Dr.

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

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

As of December

31, 2022 and 2021, $ 0 and $ 368,433 of accrued and unpaid interest related to borrowings from Wenzhao Lu, the Company’s

largest shareholder and chairman of the Board of Directors, respectively, have been included in accrued liabilities and other payables

– related parties on the accompanying consolidated balance sheets.

NOTE 12 – RELATED PARTY

TRANSACTIONS (continued)

Borrowings from Related Party

Promissory Note

On March 18, 2019, the

Company issued Wenzhao Lu, the Company’s largest shareholder and Chairman of the Board of Directors, a Promissory Note in the principal

amount of $ 1,000,000 (“Promissory Note”) in consideration of cash in the amount of $ 1,000,000 .

The Promissory Note accrues

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

In March 2022, the Company and Wenzhao Lu entered into a Loan Extension

and Modification Agreement (the “Extension”) to extend the maturity date to March 19, 2024 .The Company repaid principal of

$ 410,000 , $ 200,000 and $ 390,000 in the third quarter of 2019, second quarter of 2020 and second quarter of 2022, respectively.

As of December

31, 2022 and 2021, the outstanding principal balance was $ 0 and $ 390,000 , respectively.

Line of Credit

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

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

and Chairman of the Board of Directors of the Company.

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

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

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

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

of 5 % and each individual loan will be payable three years from the date of issuance.

The Company has a right to draw down on the

line of credit and not at the discretion of the related party Lender.

The Company may, at its option, prepay any borrowings under the

Line of Credit, in whole or in part at any time prior to maturity, without premium or penalty.

The Line of Credit Agreement includes customary

events of default.

If any such event of default occurs, the Lender may declare all outstanding loans under the Line of Credit to be due

and payable immediately.

On 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 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.

In the years ended December 31, 2023 and 2022,

2 unchanged sentences

Draw down from Line of Credit

Repayment of Line of Credit

Settlement of Line of Credit in shares

2 unchanged sentences

Draw down from Line of Credit

Repayment of Line of Credit

Settlement of Line of Credit in shares

( 2,440,262 )

Outstanding principal under the Line of Credit at December 31, 2023

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

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

As of December

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

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

For the years ended December 31, 2023 and 2022,

the interest expense related to related party borrowings amounted to $ 33,712 and $ 79,898 , respectively, and has been reflected as

interest expense — related party on the accompanying consolidated statements of operations and comprehensive loss.

As of December 31, 2023 and 2022, the related

accrued and unpaid interest for Line of Credit was $ 33,712 and $ 0 , respectively, and has been included in accrued liabilities and

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

As of December 31, 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.

Common Shares Sold to Related Party for Cash

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

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

a subscription agreement.

The Company received proceeds of $ 350,000 (See Note 14 – Common Shares Sold for Cash).

Series A Convertible Preferred Stock Sold

to Related Party for Cash

On December 14, 2022, the Company entered into

a Securities Purchase Agreement with Wenzhao Lu, the Company’s Chairman of the Board, pursuant to which the Company sold to Mr.

Lu 4,000 shares of its Series A Preferred Stock, stated value $ 1,000 , for the gross proceeds of $ 4,000,000 (See Note 14

– Series A Convertible Preferred Stock Sold for Cash).

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 – RELATED PARTY TRANSACTIONS

Common Shares Sold

to Related Party for Cash

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

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

The Company received proceeds of $ 350,000 (See Note 14 – Common Shares Sold for

Series A Convertible

Preferred Stock Sold to Related Party for Cash

On December 14, 2022,

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

the Company sold to Mr.

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

Note 14 – Series A Convertible Preferred Stock Sold for Cash).

NOTE 13 – INCOME TAXES

NOTE 12 – RELATED PARTY

TRANSACTIONS (continued)

Membership Interest

Purchase Agreement

On November 17, 2023,

the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Wenzhao Lu (the “Purchaser”),

the largest shareholder and Chairman of the Board of Directors of the Company, pursuant to which (i) the Purchaser will acquire from the

Company 30 % of the total outstanding membership interests of Avalon RT 9, a wholly owned subsidiary of the Company for a cash purchase

price of $ 3,000,000 (the “Acquisition”), and (ii) for a period of twelve months following the closing of the Acquisition,

the Purchaser shall have the option to purchase from the Company up to an additional 70 % of the outstanding membership interests of Avalon

RT 9 for a purchase price of up to $ 7,000,000 (the “Option”), subject to the terms and conditions of a membership interest

purchase agreement to be negotiated and entered into between the Purchaser and the Company at such time that the Purchaser desires to

exercise the Option The Acquisition was not closed as of December 31, 2023.

The Company received $ 485,714 from Wenzhao Lu as of December

31, 2023 which was recorded as advance from sale of noncontrolling interest – related party on the accompanying consolidated balance

NOTE 13 – INCOME

is governed by the Income Tax Law of the PRC and the U.S.

1 unchanged sentence

Under the Income Tax Laws of PRC,

Chinese companies are generally subject to an income tax at an effective rate of 25 % on income reported in the statutory financial statements

after appropriate tax adjustments.

The Company has a cumulative deficit from its foreign subsidiary of $ 2,356,797 as of December 31, 2022,

which is included in the consolidated accumulated deficit.

Chinese companies are generally subject to an income tax at an effective rate of 25 % on income reported in the statutory financial

statements after appropriate tax adjustments.

The Company has a cumulative deficit from its foreign subsidiary of $ 3,135,027 as of

December 31, 2023, which is included in the consolidated accumulated deficit.

The Company’s

16 unchanged sentences

state and local

( 1,102,392 )

Total deferred income taxes (benefit)

14 unchanged sentences

Total provision for income taxes

For the years ended December 31, 2022 and 2021, the

Company did not incur any income taxes expense since it did not generate any taxable income in those periods.

The Company’s foreign

entities did not pay any income taxes during the years ended December 31, 2022 and 2021.

The Company’s components of deferred taxes

as of December 31, 2022 and 2021 were as follows:

December 31, 2022

December 31, 2021

For the years ended December 31, 2023 and 2022,

the Company did not incur any income taxes expense since it did not generate any taxable income in those periods.

The Company’s

foreign entity did not pay any income taxes during the years ended December 31, 2023 and 2022.

The Company’s components of deferred

taxes as of December 31, 2023 and 2022 were as follows:

Deferred tax assets

1 unchanged sentence

Disallowed business interest deduction

Research and development expense

Accrued directors’ compensation

Accrued settlement

Partnership Investment

Lease liability

Capital Loss Limitation

Net operating loss carryforward

26 unchanged sentences

than not that sufficient taxable income will not be generated to realize these temporary differences.

has been notified and assessed an IRS Section 6038 penalty of $ 10,000 for failure to file a foreign entity tax disclosure.

has appealed the penalty and awaits the Internal Revenue Service’s review of the appeal.

There is no assurance such appeal will

be successful.

AVALON GLOBOCARE CORP.

2 unchanged sentences

NOTE 13 – INCOME TAXES (continued)

has not been audited by any jurisdiction since its inception.

has been notified and assessed an IRS Section 6038 penalty of $10,000 for failure to file a foreign entity tax disclosure.

has appealed the penalty and awaits the Internal Revenue Service’s review of the appeal.

There is no assurance such appeal will

be successful.

Company has not been audited by any jurisdiction since its inception.

The Company is open for audit by the U.S.

Internal Revenue Service and U.S.

Internal Revenue Service

state tax jurisdictions from 2020 to 2023, and open for audit by the Chinese Ministry of Finance from 2019 to 2023.

5 unchanged sentences

NOTE 14 – EQUITY

Series A Convertible

Preferred Stock

As described in Note

20 - Amended and Restated Membership Interest Purchase Agreement, in conjunction with the transaction, on November 3, 2022 the Company

filed a Certificate of Designation of Preferences, Rights and Limitations of the Series A Preferred Stock (the “Series A Certificate

of Designation”), which became effective immediately with the Secretary of State of the State of Delaware.

Pursuant to the Series

A Certificate of Designation, the Company designated up to 15,000 shares of the Company’s previously undesignated preferred stock

as Series A Preferred Stock.

Each share of Series A Preferred Stock shall have a par value of $ 0.0001 per share and a stated value equal

to $ 1,000 (the “Series A Stated Value”).

The shares of Series

A Preferred Stock have identical terms and include the terms as set forth below.

Series A Holders are entitled to receive, and the Company shall pay, dividends on shares of Series A Preferred Stock equal (on an as-if-converted-to-common-stock

basis, disregarding for such purpose any conversion limitations set forth in the Series A Certificate of Designations) to and in the same

form as dividends actually paid on shares of the Company’s common stock when, as and if such dividends are paid on shares of the

common stock.

No other dividends shall be paid on shares of Series A Preferred Stock.

The Company will not pay any dividends on its common

stock unless the Company simultaneously complies with the terms set forth in the Series A Certificate of Designation.

any dissolution, liquidation or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”), the Series

A Holders will be entitled to receive out of the assets available for distribution to the stockholders, (i) after and subject to the payment

in full of all amounts required to be distributed to the holders of another class or series of stock of the Company ranking on liquidation

prior and in preference to the Series A Preferred Stock, (ii) ratably with any class or series of stock ranking on liquidation on parity

with the Series A Preferred Stock and (iii) in preference and priority to the holders of the shares of the Company’s common stock,

an amount equal to 100% of the Series A Stated Value, and no more, in proportion to the full and preferential amount that all shares of

the Series A Preferred Stock are entitled to receive.

The Company shall mail written notice of any Liquidation not less than twenty (20)

days prior to the payment date stated therein, to each Series A Holder.

share of Series A Preferred Stock shall be convertible, at any time and from time to time from and after the later of (i) the date of

the stockholder approval as described above, in accordance with the Nasdaq Stock Market Listing Rules, and (ii) the nine (9) month anniversary

of the Closing (the “Initial Conversion Date”), at the option of the Series A Holder, into that number of shares of common

stock (subject to the limitations set forth in Series A Certificate of Designations, determined by dividing the Stated Value of such share

of Series A Preferred Stock by the Conversion Price (as defined below)).

The Series A Holders may effect conversions by providing the

Company with the form of conversion notice attached as Annex A to the Series A Certificate of Designation.

The Series A Holders may convert

such shares into shares of the Company’s common stock at a conversion price per share equal to the greater of (i) ten dollars ($ 10.0 )

and (ii) ninety percent ( 90 %) of the closing price of the Company’s common stock on Nasdaq on the day prior to receipt of a conversion

notice (collectively, the “Conversion Price”), subject to adjustment for stock splits and similar matters.

In addition, following

the Initial Conversion Date, each Series A Holder agrees that it shall not be entitled to in any calendar month, sell a number of Series

A Conversion Shares into the open market in an amount exceeding more than ten percent ( 10 %) of the number of Series A Conversion Shares

issuable upon conversion of the Series A Preferred Stock then held by such Series A Holder.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – EQUITY

Series A Convertible

Preferred Stock (continued)

Conversion Price Adjustment:

Stock Dividends and

Stock Splits.

If the Company, at any time while the Series A Preferred Stock is outstanding:

(i) pays a stock dividend or otherwise

makes a distribution or distributions payable in shares of common stock on shares of common stock or any other common stock equivalents

(which, for avoidance of doubt, shall not include any shares of common stock issued by the Company upon conversion of, or payment of a

dividend on, the Series A Preferred Stock), (ii) subdivides outstanding shares of common stock into a larger number of shares, (iii) combines

(including by way of a reverse stock split) outstanding shares of common stock into a smaller number of shares, or (iv) issues, in the

event of a reclassification of shares of the common stock, any shares of capital stock of the Company, then the conversion price of the

Series A Preferred Stock shall be multiplied by a fraction of which the numerator shall be the number of shares of common stock (excluding

any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares

of common stock outstanding immediately after such event.

Any of the foregoing adjustments shall become effective immediately after the

record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately

after the effective date in the case of a subdivision, combination or re-classification.

Fundamental Transaction.

If, at any time while the Series A Preferred Stock is outstanding, (i) the Company, directly or indirectly, in one or more related transactions

effects any merger or consolidation of the Company with or into another individual or corporation, partnership, trust, incorporated or

unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof)

or other entity of any kind (a “Person”), (ii) the Company (and all of its subsidiaries, taken as a whole), directly or indirectly,

effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one

or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company

or another Person) is completed pursuant to which holders of the Company’s common stock are permitted to sell, tender or exchange

their shares for other securities, cash or property and has been accepted by the holders of fifty percent ( 50 %) or more of the outstanding

common stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization

or recapitalization of the common stock or any compulsory share exchange pursuant to which the common stock is effectively converted into

or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates

a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization,

spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than fifty percent ( 50 %) of the outstanding

shares of common stock (not including any shares of common stock held by the other Person or other Persons making or party to, or associated

or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a

“Fundamental Transaction”), then, the Series A Holder shall have the right to receive, for each conversion share that would

have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation

set forth in the Series A Certificate of Designation on the conversion of the Series A Preferred Stock), the number of shares of common

stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and/or any additional consideration

(the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number of shares

of common stock for which the Series A Preferred Stock is convertible immediately prior to such Fundamental Transaction (without regard

to the limitations set forth in the Series A Certificate of Designation on the conversion of the Series A Preferred Stock).

of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration

based on the amount of Alternate Consideration issuable in respect of one share of common stock in such Fundamental Transaction, and the

Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of

any different components of the Alternate Consideration.

If holders of common stock are given any choice as to the securities, cash or

property to be received in a Fundamental Transaction, then the Series A Holder shall be given the same choice as to the Alternate Consideration

it receives upon such Fundamental Transaction.

Voting Rights.

The Series A Holders will have no voting rights, except as otherwise required by the Delaware General Corporation Law.

Notwithstanding

the foregoing, as long as any shares of Series A Preferred Stock are outstanding, the Company shall not, without the affirmative vote

of the holders of a majority of the then outstanding shares of Series A Preferred Stock, voting as a separate class, (a) alter or change

adversely the powers, preferences or rights given to the Series A Preferred Stock in the Series A Certificate of Designation, (b) increase

the number of authorized shares of Series A Preferred Stock, (c) authorize or issue an additional class or series of capital stock that

ranks senior to the Series A Preferred Stock with respect to the distribution of assets on liquidation or (d) enter into any agreement

with respect to any of the foregoing.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – EQUITY

The Company is authorized to issue an aggregate of 490,000,000 shares

of common stock and 10,000,000 shares of “blank check” preferred stock.

Series A Convertible

Preferred Stock (continued)

Fractional Shares.

No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Series A Preferred Stock.

any fraction of a share of Company common stock which a Series A Holder would otherwise be entitled to upon such conversion, the Company

will, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by

the Conversion Price or round up to the next whole share.

Notwithstanding the foregoing, nothing shall prevent any Series A Holder from

converting fractional shares of Series A Preferred Stock.

Series B Convertible

Preferred Stock

As described in Note

20 - Amended and Restated Membership Interest Purchase Agreement, in conjunction with the transaction, on February 9, 2023, the Company

filed a Certificate of Designation of Preferences, Rights and Limitations of the Series B Preferred Stock (the “Series B Certificate

of Designation”), which became effective immediately with the Secretary of State of the State of Delaware.

The Company designated

up to 15,000 shares of the Company’s previously undesignated preferred stock as Series B Preferred Stock.

Each share of Series B

Preferred Stock shall have a par value of $ 0.0001 per share and a stated value equal to $ 1,000 (the “Series B Stated Value”).

The shares of Series

B Preferred Stock have identical terms and include the terms as set forth below.

Series B Holders shall be entitled to receive, and the Company shall pay, dividends on shares of Series B Preferred Stock equal (on an

as-if-converted-to-common-stock basis, disregarding for such purpose any conversion limitations set forth in the Series B Certificate

of Designations) to and in the same form as dividends actually paid on shares of the Company’s common stock when, as and if such

dividends are paid on shares of the common stock.

No other dividends shall be paid on shares of Series B Preferred Stock.

will not pay any dividends on its common stock unless the Company simultaneously complies with the terms set forth in the Series B Certificate

of Designation.

B Preferred Stock will rank subordinate to the shares of the Company’s Series A Preferred Stock.

any Liquidation, the Series B Holders will be entitled to receive out of the assets available for distribution to stockholders, (i) after

and subject to the payment in full of all amounts required to be distributed to the holders of another class or series of stock of the

Company ranking on liquidation prior and in preference to the Series B Preferred Stock, including the Series A Preferred Stock, (ii) ratably

with any class or series of stock ranking on liquidation on parity with the Series B Preferred Stock and (iii) in preference and priority

to the holders of the shares of common stock, an amount equal to one hundred percent ( 100 %) of the Series B Stated Value and no more,

in proportion to the full and preferential amount that all shares of the Series B Preferred Stock are entitled to receive.

shall mail written notice of any such Liquidation not less than twenty (20) days prior to the payment date stated therein, to each Series

share of Series B Preferred Stock shall be convertible, at any time and from time to time from and after the later of (i) the date of

the stockholder approval and (ii) the one year anniversary of the Closing Date (the “Lock Up Period”), at the option of the

Series B Holder thereof, into that number of shares of common stock (subject to the limitations set forth in Series B Certificate of Designation

determined by dividing the Series B Stated Value of such share of Series B Preferred Stock by the conversion price of the Series B Preferred

Series B Holders may effect conversions by providing the Company with the form of conversion notice attached as Annex A to the

Series B Certificate of Designation.

The Series B Preferred Stock will be convertible into shares of the Company’s common stock

at a conversion price per share equal to $ 3.78 , subject to the adjustments set forth in the Series B Certificate of Designation.

Notwithstanding

the foregoing or the transactions contemplated by the Amended MIPA, until the consummation of the Lock Up Period, the Series B Holders

shall not, directly or indirectly, sell, transfer or otherwise dispose of any Series B Preferred Stock issued upon conversion of the Series

B Conversion Shares or pursuant to the Equity Earnout Payment (the “Restricted Securities”) without Company’s prior

written consent;

provided, however, the Series B Holders may sell, transfer or otherwise dispose of Restricted Securities to an Affiliate,

as defined in the Amended MIPA, of a Series B Holder without Company’s prior written consent;

provided, further, that such Series

B Holder provide prompt written notice to Company of such transfer, including the name and contact information of the Affiliate transferee,

and such Affiliate transferee agrees in writing to be bound by the terms of the transaction documents contemplated by the Amended MIPA

to which the Series B Holder is a party (which agreement shall also be provided to Company with such notice).

After the expiration of

the Lock Up Period, the Series B Holder agrees that it and any of its Affiliate transferees shall not be entitled to in any calendar month,

sell a number of shares of Company common stock into the open market in an amount exceeding more than ten percent ( 10 %) of the total number

of shares of Company common stock issuable upon conversion of the Company common stock then held by the Seller and its Affiliates.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – EQUITY

Series B Convertible

Preferred Stock (continued)

Conversion Price Adjustment:

Stock Dividends and

Stock Splits.

If the Company, at any time while the Series B Preferred Stock is outstanding:

(i) pays a stock dividend or otherwise

makes a distribution or distributions payable in shares of common stock on shares of common stock or any other common stock equivalents

(which, for avoidance of doubt, shall not include any shares of common stock issued by the Company upon conversion of, or payment of a

dividend on, the Series B Preferred Stock), (ii) subdivides outstanding shares of common stock into a larger number of shares, (iii) combines

(including by way of a reverse stock split) outstanding shares of common stock into a smaller number of shares, or (iv) issues, in the

event of a reclassification of shares of the common stock, any shares of capital stock of the Company, then the conversion price of the

Series B Preferred Stock shall be multiplied by a fraction of which the numerator shall be the number of shares of common stock (excluding

any treasury shares of the Company) outstanding immediately before such event, and of which the denominator shall be the number of shares

of common stock outstanding immediately after such event.

Any of the foregoing adjustments shall become effective immediately after the

record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately

after the effective date in the case of a subdivision, combination or re-classification.

Fundamental Transaction.

If, at any time while the Series B Preferred Stock is outstanding, (i) the Company, directly or indirectly, in one or more related transactions

effects any merger or consolidation of the Company with or into another Person, (ii) the Company (and all of its subsidiaries, taken as

a whole), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially

all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange

offer (whether by the Company or another Person) is completed pursuant to which holders of the Company’s common stock are permitted

to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of fifty percent

( 50 %) or more of the outstanding common stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any

reclassification, reorganization or recapitalization of the common stock or any compulsory share exchange pursuant to which the common

stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in

one or more related transactions consummates a Fundamental Transaction, then, at the closing of such Fundamental Transaction, without

any action on the part of the Series B Holder, the Series B Holder shall have the right to receive, for each conversion share that would

have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation

in the Series B Certificate of Designation on the conversion of the Series B Preferred Stock), the number of shares of common stock of

the successor or acquiring corporation or of the Company, if it is the surviving corporation, and/or any Alternate Consideration receivable

as a result of such Fundamental Transaction by a holder of the number of shares of common stock for which the Series B Preferred Stock

is convertible immediately prior to such Fundamental Transaction (without regard to the limitations set forth in the Series B Certificate

of Designation on the conversion of the Series B Preferred Stock).

For purposes of any such conversion, the determination of the conversion

price of the Series B Preferred Stock shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of

Alternate Consideration issuable in respect of one share of common stock in such Fundamental Transaction, and the Company shall apportion

the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components

of the Alternate Consideration.

If holders of common stock are given any choice as to the securities, cash or property to be received

in a Fundamental Transaction, then the Series B Holder shall be given the same choice as to the Alternate Consideration it receives upon

such Fundamental Transaction.

Voting Rights .

The Series B Holders will have no voting rights, except as otherwise required by the Delaware General Corporation Law.

Notwithstanding

the foregoing, in addition, as long as any shares of Series B Preferred Stock are outstanding, the Company shall not, without the affirmative

vote of the holders of a majority of the then outstanding shares of the Series B Preferred Stock, voting as a separate class, (a) alter

or change adversely the powers, preferences or rights given to the Series B Preferred Stock in the Series B Certificate of Designation,

(b) increase the number of authorized shares of Series B Preferred Stock, (c) except with respect to the Series A Preferred Stock, authorize

or issue an additional class or series of capital stock that ranks senior to the Series B Preferred Stock with respect to the distribution

of assets on liquidation or (d) enter into any agreement with respect to any of the foregoing.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – EQUITY

Series B Convertible

Preferred Stock (continued)

Fractional Shares.

No fractional shares

or scrip representing fractional shares shall be issued upon the conversion of the Series B Preferred Stock.

As to any fraction of a share

which a Series B Holder would otherwise be entitled to upon such conversion, the Company shall at its election, either pay a cash adjustment

in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price or round up to the next whole

Notwithstanding the foregoing, nothing shall prevent any Series B Holder from converting fractional shares of Series B Preferred

Series A Convertible

Preferred Stock Sold for Cash

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 .

During the year ended

14 unchanged sentences

268 – Presentation in Financial Statements of “Redeemable Preferred Stocks” (“ASR 268”).

As of December 31, 2023

and 2022, 9,000 shares of Series A Preferred Stock were issued and outstanding.

Series B Convertible

Preferred Stock

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 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 — 7 - Investment in Laboratory Services MSO, LLC).

As of December 31, 2023, 11,000 shares

of Series B Preferred Stock were issued and outstanding.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – EQUITY

Common Shares Sold

On December 13, 2019, the Company entered into

an Open Market Sale Agreement SM (the “Sales Agreement”) with Jefferies LLC, as sales agent (“Jefferies”),

pursuant to which the Company may offer and sell, from time to time, through Jefferies, shares of its common stock.

During the year ended

December 31, 2022, Jefferies sold an aggregate of 17,064 shares of common stock at an average price of $ 7.9 per share to investors and

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

the year ended December 31, 2021, Jefferies sold an aggregate of 220,684 shares of common stock at an average price of $ 13.0 per

share to investors and the Company recorded net proceeds of $ 2,553,409 , net of commission and other offering costs of $ 306,895 .

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

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

The Company received proceeds of $ 350,000 (see Note 12 - Common Shares Sold to Related Party for Cash).

On December 13, 2019, the Company entered into an Open Market Sale

Agreement SM (the “Sales Agreement”) with Jefferies LLC, as sales agent (“Jefferies”), pursuant

to which the Company may offer and sell, from time to time, through Jefferies, shares of its common stock.

During the year ended December

31, 2022, Jefferies sold an aggregate of 17,064 shares of common stock at an average price of $ 7.9 per share to investors

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

The Open Market Sale Agreement SM

was terminated in 2023.

On August 5, 2022, the Company sold 32,051 shares

of its common stock at a purchase price of $ 7.8 per share to an investor pursuant to a subscription agreement.

The Company received proceeds

of $ 250,000 .

The Company received

proceeds of $ 250,000 .

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

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

a subscription agreement.

The Company received proceeds of $ 350,000 (see Note 12 - Common Shares Sold to Related Party 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 year

ended December 31, 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 .

Common Shares Issued for Services

During the year ended December 31, 2022, the

Company issued a total of 40,896 shares of its common stock for services rendered.

These shares were valued at $ 340,950 , the

fair market values on the grant dates using the reported closing share prices on the dates of grant, and the Company recorded stock-based

compensation expense of $ 310,950 for the year ended December 31, 2022 and reduced accrued liabilities of $ 30,000 .

During the year ended December 31, 2023, the

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

These shares were valued at $ 999,655 , 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 $ 834,784 for the year ended December 31, 2023 and reduced accrued liabilities of $ 164,871 .

Common Shares Issued

During the year ended December 31, 2022, the Company

issued a total of 40,896 shares of its common stock for services rendered.

These shares were valued at $ 340,950 , the fair market

values on the grant dates using the reported closing share prices on the dates of grant, and the Company recorded stock-based compensation

expense of $ 310,950 for the year ended December 31, 2022 and reduced accrued liabilities of $ 30,000 .

During the year ended December 31, 2021, the Company

issued a total of 140,568 shares of its common stock for services rendered and to be rendered.

These shares were valued at $ 1,507,488 ,

the fair market values on the grant dates using the reported closing share prices on the dates of grant, and the Company recorded stock-based

compensation expense of $ 1,075,756 for the year ended December 31, 2021 and reduced accrued liabilities of $ 276,032 and recorded

prepaid expense of $ 155,700 as of December 31, 2021 which will be amortized over the rest of corresponding service periods.

as Convertible Note Payable Commitment Fee

During the year ended

December 31, 2023, the Company issued a total of 170,000 shares of its common stock as commitment fee for the purchases of

convertible note.

These shares were valued at $ 236,400 , the fair market values on the grant dates using the reported closing share prices

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

Common Shares Issued for Debt Conversion

On July 25, 2022, the Company and 2022 Convertible

Note holder entered into a Conversion Agreement pursuant to which the investor converted its Convertible Notes in the principal amount

of $ 3,718,943 and unpaid interest of $ 9,751 into 573,645 shares of common stock of the Company at a per share

price of $ 6.5 (see Note 9).

The Company recorded a conversion inducement charge of $ 344,264 as a result of the Conversion Agreement,

representing the value of common stock issued upon conversion in excess of the common stock issuable under the original terms of the

2022 Convertible Note.

Common Shares Issued Pursuant to Related Party

Debt Settlement Agreement and Release

On July 25, 2022, the Company and Mr.

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

the Line of Credit and unpaid interest of $ 448,331 by issuance of 444,399 shares of common stock of the Company (see Note

12 - Borrowings from Related Party – Line of Credit ).

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

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

Lu’s relationship with

AVALON GLOBOCARE CORP.

2 unchanged sentences

NOTE 14 – EQUITY

Shares Issued for Settlement of Accrued Professional Fees

2021, the Company issued 16,736 shares of its common stock to settle accrued and unpaid professional fees of $ 202,500 .

The 16,736 shares

issued had a fair value of $ 202,500 .

Shares Issued for Debt Conversion

25, 2022, the Company and 2022 Convertible Note holder entered into a Conversion Agreement pursuant to which the investor converted its

Convertible Notes in the principal amount of $ 3,718,943 and unpaid interest of $ 9,751 into 573,645 shares of

common stock of the Company at a per share price of $ 6.5 (see Note 9).

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

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

under the original terms of the 2022 Convertible Note.

Shares Issued Pursuant to Related Party Debt Settlement Agreement and Release

25, 2022, the Company and Mr.

Lu entered into and closed a Debt Settlement Agreement and Release pursuant to which the Company settled

$2,440,262 debt owed under the Line of Credit and unpaid interest of $448,331 by issuance of 444,399 shares of common

stock of the Company (see Note 12 - Borrowings from Related Party – Line of Credit ).

The total amount of the debt settled

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

relationship with the Company.

December 21, 2021, the Company and Mr.

Lu entered into and closed a Debt Settlement Agreement and Release pursuant to which The Company

settled $ 3.0 million debt owed under the Line of Credit by issuance of the Company’s 240,000 shares of common stock (see Note 12

– Borrowings from Related Party – Line of Credit ).

The 240,000 shares issued had a fair market value of $ 3 million.

The following table summarizes the shares of the

Company’s common stock issuable upon exercise of options outstanding at December 31, 2022:

The following table summarizes the shares of

the Company’s common stock issuable upon exercise of options outstanding at December 31, 2023:

Options Outstanding

Options Exercisable

Range of Exercise Price

Number Outstanding at December 31, 2022

Weighted Average Remaining Contractual Life (Years)

Weighted Average Exercise Price

Number Exercisable at December 31, 2022

Outstanding at

Weighted Average Remaining

Contractual Life (Years)

Weighted Average Exercise Price

$ 4.25 – 8.20

Exercisable at

Weighted Average Exercise

$ 0.59 – 2.08

1 unchanged sentence

$ 0.59 – 20.00

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – EQUITY

Options (continued)

Stock option activities

Stock option activity

for the years ended December 31, 2023 and 2022 were as follows:

6 unchanged sentences

Options expected to vest

The aggregate intrinsic value of stock options

outstanding and stock options exercisable at December 31, 2022 was $ 59,000 and $ 40,634 , respectively.

The aggregate intrinsic value of both stock options

outstanding and stock options exercisable at December 31, 2023 was $ 0 .

The fair values of options granted during the

year ended December 31, 2023 were estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

volatility of 74.8 % - 117.46 %, risk-free rate of 1.37 % - 4.48 %, annual dividend yield of 0 %, and expected life of 3 .00 - 5 .00 years.

aggregate fair value of the options granted during the year ended December 31, 2022 was $ 421,428 .

values of options granted during the year ended December 31, 2021 were estimated at the date of grant using the Black-Scholes option-pricing

model with the following assumptions:

volatility of 119.21 % - 128.42 %, risk-free rate of 0.33 % - 1.20 %, annual dividend yield of 0 %, and

expected life of 3.00 - 5.00 years.

volatility of 79.76 % - 96.37 %, risk-free rate of 3.58 % - 4.76 %, annual dividend yield of 0 %, and expected life

of 3.00 - 5.00 years.

The aggregate fair value of the options granted during the year ended December 31, 2023 was

For the years ended December 31, 2022 and 2021,

stock-based compensation expense associated with stock options granted amounted to $ 358,113 and $ 769,334 , of which, $ 234,856 and $ 544,785

was recorded as compensation and related benefits, $ 84,064 and $ 157,207 was recorded as professional fees, and $ 39,193 and $ 67,342 was

recorded as research and development expenses, respectively.

The fair values of options granted during the

year ended December 31, 2022 were estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

volatility of 74.8 % - 117.46 %, risk-free rate of 1.37 % - 4.48 %, annual dividend yield of 0 %, and expected life

of 3.00 - 5.00 years.

The aggregate fair value of the options granted during the year ended December 31, 2022 was $ 421,428 .

For the year ended December

31, 2023 and 2022, stock-based compensation expense associated with stock options granted amounted to $ 284,977 and $ 358,113 , of

which, $ 172,943 and $ 234,856 was recorded as compensation and related benefits, $ 106,565 and $ 84,064 was recorded

as professional fees, and $ 5,469 and $ 39,193 was recorded as research and development expenses, respectively.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – EQUITY

Options (continued)

A summary of the status of the Company’s

5 unchanged sentences

Nonvested at December 31, 2023

The following table summarizes the shares of

the Company’s common stock issuable upon exercise of warrants outstanding at December 31, 2023:

Warrants Outstanding

Warrants Exercisable

Outstanding at

Weighted Average

Contractual Life

Exercisable at

$ 1.80 – 2.50

$ 1.80 – 12.50

Stock warrant activity for the years ended December

31, 2023 and 2022 were as follows:

Number of Warrants

Weighted Average Exercise Price

Outstanding at January 1, 2022

Outstanding at December 31, 2022

Outstanding at December 31, 2023

Warrants exercisable at December 31, 2023

Warrants expected to vest

The aggregate intrinsic value of both stock warrants

outstanding and stock warrants exercisable at December 31, 2023 was $ 0 .

AVALON GLOBOCARE CORP.

2 unchanged sentences

NOTE 14 – EQUITY

Warrants (continued)

Warrants Issued in

On March 28, 2022, the Company entered into Securities

2 unchanged sentences

In addition to the 2022 Convertible Note,

the investor also received a Stock Purchase Warrant (“2022 Warrant”) to acquire an aggregate of 123,964 shares of

common stock.

the investor also received a Stock Purchase Warrant (“2022 Warrant”) to acquire an aggregate of 123,964 shares

of common stock.

The 2022 Warrant is exercisable for five years at an exercise price of $ 12.5 .

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

the following assumptions:

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

expected life of 5 years.

The warrants issued to the investor to purchase 123,964 shares of the Company’s common

stock were treated as a discount on the convertible note payable and were valued at $ 498,509 and had been amortized over the term

of the 2022 Convertible Note.

There were no stock warrants issued, terminated/forfeited

and exercised during the year ended December 31, 2021.

Stock warrants activities during the year

ended December 31, 2022 were as follows:

Number of Warrants

Exercise Price

Outstanding at January 1, 2022

Expired/exercised

Outstanding and exercisable at December 31, 2022

The following table summarizes the shares of the

Company’s common stock issuable upon exercise of warrants outstanding at December 31, 2022:

Warrants Outstanding

Warrants Exercisable

Exercise Price

Outstanding at

Average Remaining

Contractual Life

Exercisable at

Exercise Price

The aggregate intrinsic value of both stock warrants

outstanding and stock warrants exercisable at December 31, 2022 was $ 0 .

The fair values of the warrants

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

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

The warrants issued to the investor to purchase 123,964 shares of the Company’s common stock were treated as a discount

on the convertible note payable and were valued at $ 498,509 and had been amortized over the term of the 2022 Convertible Note.

Warrants Issued in

In connection with the

issuance of May 2023 Convertible Note (See Note 9), 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 May 23, 2023 to a third party as

a finder’s fee.

Based 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 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 to be

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.

The 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.

The 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.

Warrants Issued in

In connection with the

issuance of July 2023 Convertible Note (See Note 9), 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.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – EQUITY

Warrants (continued)

Warrants Issued in

July 2023 (continued)

Based 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 to be

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.

The 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.

The 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.

Warrants Issued in

In connection with the

issuance of October 2023 Convertible Note (See Note 9), the Company issued (i) a warrant to purchase 105,000 shares of common

stock with an exercise price of $2.50 exercisable until the five-year anniversary of October 9, 2023, (ii) a warrant to purchase 87,500

shares of common stock with an exercise price of $1.80 exercisable until the five-year anniversary of October 9, 2023, which warrant

shall be cancelled and extinguished against payment of the October 2023 Convertible Note, to Mast Hill and Firstfire;

and issued a warrant

to purchase 8,400 shares of common stock with an exercise price of $2.50 exercisable until the five-year anniversary of

October 9, 2023 to a third party as a finder’s fee.

Based upon the Company’s analysis of the

criteria contained in ASC 815, the Company determined that all the warrants issued to Mast Hill and 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 87,500 warrants with an exercise price of $ 1.80 exercisable until the five-year anniversary of October 9, 2023, which

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

the fair value of the 113,400 warrants with an exercise price of $ 2.50 exercisable until the five-year anniversary of

October 9, 2023 was classified as a derivative liability on October 9, 2023.

The fair values of the 113,400 warrants with an

exercise price of $ 2.50 exercisable until the five-year anniversary of October 9, 2023 issued on October 9, 2023 were computed using

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

stock price of $ 0.77 , volatility of 89.70 %, risk-free rate

of 4.75 %, annual dividend yield of 0 % and expected life of 5 years.

The warrants with

an exercise price of $ 2.50 exercisable until the five-year anniversary of October 9, 2023 issued to Mast Hill and Firstfire to purchase 105,000 shares

of the Company’s common stock were treated as a discount on the convertible note payable and were valued at $ 39,848 and

will be amortized over the term of the October 2023 Convertible Note.

The warrants with an exercise price of $ 2.50 exercisable

until the five-year anniversary of October 9, 2023 issued to a third party as a finder’s fee to purchase 8,400 shares

of the Company’s common stock were treated as convertible debt issuance costs and were valued at $ 3,380 and will be amortized

over the term of the October 2023 Convertible Note.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – EQUITY

Warrants (continued)

Warrants Issued in October 2023 (continued)

A summary of the status

of the Company’s nonvested stock warrants issued as of December 31, 2023 and changes during the years ended December 31, 2023

and 2022 is presented below:

Nonvested at January 1, 2022

Nonvested at December 31, 2022

Nonvested at December 31, 2023

NOTE 15 – STATUTORY

RESERVE AND RESTRICTED NET ASSETS

The Company’s PRC

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

The 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

6 unchanged sentences

Appropriations

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

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

Appropriations to the discretionary surplus reserve are made at

the discretion of the Board of Directors.

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

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

did not make any appropriation to statutory reserve for Avalon Shanghai during the years ended December 31, 2022 and 2021 as it incurred

net loss in the periods.

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

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 years ended December 31, 2023 and 2022

as it incurred net loss in the periods.

As of December 31, 2023 and 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

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

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

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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 – NONCONTROLLING

December 31, 2022, Dr.

Yu Zhou, former director and former co-chief executive officer of Genexosome, who owns 40 % of the equity interests

of Genexosome, which is not under the Company’s control.

years ended December 31, 2022 and 2021, the Company did not allocate any net loss and foreign currency translation adjustment to the noncontrolling

interest holder due to its inability to satisfy these deficits.

NOTE 17 – CONDENSED

FINANCIAL INFORMATION OF THE PARENT COMPANY

As of December 31, 2023, Dr.

Yu Zhou, former

director and former co-chief executive officer of Genexosome, who owns 40 % of the equity interests of Genexosome, which is not under

the Company’s control.

During the years ended December 31, 2023 and 2022, the Company did not allocate any net loss and foreign

currency translation adjustment to the noncontrolling interest holder due to its inability to satisfy these deficits.

NOTE 17 – CONDENSED FINANCIAL INFORMATION

OF THE PARENT COMPANY

Pursuant to the requirements

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

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

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

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

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

of a third party.

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.

The Company performed

a test on the restricted net assets of consolidated subsidiary in accordance with such requirement and concluded that it was not applicable

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

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

NOTE 18 - CONCENTRATIONS

The following

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

31, 2022 and 2021.

Years Ended December 31,

A (Hebei Daopei, a related party)

* Less than 10 %

Two customers,

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

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

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

Two customers,

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

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

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

accounted for 10 % or more of the Company’s purchase during the years ended December 31, 2022 and 2021.

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

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

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19 – SEGMENT INFORMATION

year ended December 31, 2022 and 2021, the Company operated in two reportable business segments - (1) the real property operating segment,

and (2) the medical related consulting services segment.

The Company’s reportable segments are strategic business units that offer

different services and products.

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

CONCENTRATIONS

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

for the years ended December 31, 2023 and 2022.

Years Ended December 31,

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, 2023, accounted for 80.6 % of the Company’s total outstanding rent receivable

at December 31, 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, 2022.

No supplier accounted for 10% or more of the

Company’s purchase during the years ended December 31, 2023 and 2022.

NOTE 19 – SEGMENT INFORMATION

For the year ended December 31, 2022, the Company

operated in two reportable business segments - (1) the real property operating segment, and (2) the medical related consulting services

The Company’s reportable segments are strategic business units that offer different services and products.

They are managed

separately based on the fundamental differences in their operations.

Due to the winding down of the medical related

3 unchanged sentences

no longer reviews medical related consulting services operating results.

Information with respect to these reportable business

segments for the years ended December 31, 2022 and 2021 was as follows:

Years Ended December 31,

Real property operations

Medical related consulting services

Costs and expenses

Real property operations

Medical related consulting services

Real property operations

Medical related consulting services

Other operating expenses

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 year ended December 31, 2023, the Company operated in two reportable business segments:

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.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19 – SEGMENT

INFORMATION (continued)

Information with respect

to these reportable business segments for the years ended December 31, 2023 and 2022 was as follows:

Year Ended December 31, 2023

Real Property Operations

Medical related consulting services

Lab Services MSO

Corporate / Other

Real property rental revenue

Real property operating expenses

( 1,017,493 )

Real property operating income

Loss from equity method investment - Lab Services MSO

( 8,571,647 )

Other operating expenses

( 7,072,868 )

( 7,420,224 )

Other (expense) income:

Interest expense

Corporate/Other

( 1,351,502 )

$ ( 1,028,038 )

Other income (expense)

Real property operations

Medical related consulting services

Corporate/Other

Total other expense, net

$ ( 8,571,647 )

$ ( 7,107,325 )

$ ( 16,707,010 )

Year Ended December 31, 2022

Real Property Operations

1 unchanged sentence

Corporate / Other

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 19 – SEGMENT INFORMATION

Real property rental revenue

Real property operating expenses

Real property operating income

Other operating expenses

( 8,309,470 )

( 9,065,623 )

Other (expense) income:

Interest expense

( 3,576,333 )

$ ( 225,575 )

$ ( 11,625,983 )

$ ( 11,930,847 )

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

4 unchanged sentences

United States

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 20 – COMMITMENTS

AND CONTINCENGIES

to time, the Company is subject to ordinary routine litigation incidental to its normal business operations.

The Company is not currently

a party to, and its property is not subject to, any material legal proceedings, except as set forth below.

25, 2017, Genexosome entered into and closed a Stock Purchase Agreement with Beijing Genexosome and Yu Zhou, MD, PhD, the sole shareholder

of Beijing Genexosome, pursuant to which Genexosome acquired all of the issued and outstanding securities of Beijing Genexosome in consideration

of a cash payment in the amount of $ 450,000 , of which $ 100,000 is still owed.

Further, on October 25, 2017, Genexosome entered into and

closed an Asset Purchase Agreement with Dr.

Zhou, pursuant to which the Company acquired all assets, including all intellectual property

and exosome separation systems, held by Dr.

Zhou pertaining to the business of researching, developing and commercializing exosome technologies.

In consideration of the assets, Genexosome paid Dr.

Zhou $ 876,087 in cash, transferred 50,000 shares of common stock of the Company to

Zhou and issued Dr.

Zhou 400 shares of common stock of Genexosome.

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

projections provided by Dr.

Zhou at the time of the acquisition and has decided to impair the intangible asset associated with this acquisition

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

Further, on October 28, 2019, Research Institute at Nationwide

Children’s Hospital (“Research Institute”) filed a Complaint in the United States District Court for the Southern District

of Ohio Eastern Division against Dr.

Zhou, Li Chen, the Company and Genexosome with various claims against the Company and Genexosome.

The criminal proceedings against Dr.

Zhou and Li Chen have been concluded.

The Company, Genexosome and the Research Institute entered

into a Settlement Agreement dated June 7, 2022 (the “Settlement Date”) whereby the Company agreed to pay the Research Institute

$ 450,000 on each of the sixty-day, one year and two-year anniversaries of the Settlement Date.

In addition, the Company agreed to pay

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

of $3,333,333 and 10% of the Company’s third pre-tax profit of $3,333,333.

The parties provided a mutual release as well.

2022, the Company paid $ 450,000 to Research Institute.

As of December 31, 2022, the accrued litigation settlement amounted to $ 900,000 .

The Company’s management determine the likelihood of payment for pre-tax profit is remote.

Leases Commitment

is a party to leases for office space.

Operating Leases Commitment

The Company is a party to leases for office

These lease agreements will expire through February 2025.

Rent expense under all operating leases

amounted to approximately $ 141,000 and $ 143,000 for the years ended December 31, 2022 and 2021, respectively.

cash flow information related to leases for the years ended December 31, 2022 and 2021 is as follows:

Rent expense under all operating leases amounted to approximately $ 129,000 and

$ 141,000 for the years ended December 31, 2023 and 2022, respectively.

Supplemental cash flow information related to

leases for the years ended December 31, 2023 and 2022 is as follows:

Years Ended December 31,

3 unchanged sentences

Operating lease

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 20 – COMMITMENTS

AND CONTINCENGIES (continued)

Leases Commitment (continued)

The following table summarizes the lease term

7 unchanged sentences

Operating Lease

2024 and thereafter

Total lease payments

3 unchanged sentences

Long-term portion

Equity Investment Commitment

On May 29, 2018, Avalon

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

(“Unicorn”), pursuant

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

(“Epicon”) was formed on August 14, 2018.

Epicon is owned 60 % by Unicorn

and 40 % by Avalon Shanghai.

Within five years of execution of the Joint Venture Agreement, Unicorn shall invest cash into Epicon in an

amount not less than RMB 8,000,000 (approximately $ 1.1 million) and the premises of the laboratories of Nanjing Hospital of Chinese Medicine

for exclusive use by Epicon, and Avalon Shanghai shall invest cash into Epicon in an amount not less than RMB 10,000,000 (approximately

$ 1.4 million).

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

research purposes and the clinical transformation of scientific achievements.

As of December 31, 2022, Avalon Shanghai has contributed

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

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

Joint Venture – Avactis Biosciences Inc.

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.

a Sino-foreign equity joint venture, pursuant to an Equity Joint Venture Agreement (the “AVAR Agreement”), which was to be

owned 60 % by Avactis and 40 % by Arbele.

On April 6, 2022, the

Company, Acactis, Arbele and Arbele Biotherapeutics Limited (“Arbele Biotherapeutics”), a wholly owned subsidiary of Arbele,

entered into an Amendment No.

1 to the Equity Joint Venture Agreement pursuant to which Arbele Biotherapeutics acquired 40 % of Avactis

for the purpose of the Company and Arbele establishing a joint venture in the United States and the parties agreed that they would no

longer pursue AVAR as a joint venture.

Further, all rights and obligations under the AVAR Agreement were assigned by Avactis to Avalon

and by Arbele to Arbele Biotherapeutics.

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

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

AVAR, as licensee (the “Arbele License Agreement”), was assigned to Avactis and Avalon and Arbele agreed to enter into a new

Arbele License Agreement with Avactis on the same/similar terms as the Arbele License Agreement.

Anthony Chan was appointed

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

Avactis purpose and business scope is to research,

research, develop, produce, sell, distribute and generally commercialize CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy globally.

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.

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.

AVALON GLOBOCARE CORP.

3 unchanged sentences

AND CONTINCENGIES (continued)

Joint Venture – Avactis Biosciences Inc.

Joint Venture – Avactis Biosciences

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.

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

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

1 unchanged sentence

Avactis and services.

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

the Company is responsible for :

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

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

assisting Avactis in recruiting, hiring and retaining personnel;

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

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

providing Avactis with advice pertaining to conducting clinicals in China;

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

Under AVAR Agreement, as amended, Arbele Biotherapeutics

shall be responsible for the following:

Entering into a License Agreement with Avactis;

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

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

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

Line of Credit Agreement

On August 29, 2019, the Company entered into a

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

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

The Line of Credit

allows the Company to request loans thereunder and to use the proceeds of such loans for working capital and operating expense purposes

until the facility matures on December 31, 2024.

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

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

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

may, at its option, prepay any borrowings under the Line of Credit, in whole or in part at any time prior to maturity, without premium

The Line of Credit Agreement includes customary events of default.

If any such event of default occurs, the Lender may declare

all outstanding loans under the Line of Credit to be due and payable immediately.

As of December 31, 2022, $ 0 was outstanding under the

Line of Credit.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 20 – COMMITMENTS

AND CONTINCENGIES (continued)

Amended and Restated Membership Interest

Purchase Agreement

On November 7, 2022,

Avalon Laboratory Services, Inc.

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

(the “Company”),

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

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

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

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

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

The consideration to

be paid for the Purchased Interests consists of up to thirty-one million dollars ($31,000,000), of which (i) five million dollars ($5,000,000)

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

million dollars ($15,000,000) will be paid pursuant to the issuance of 15,000 shares of the Company’s newly designated Series B

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

which Series B Preferred Stock will be convertible into shares of the Company’s common stock at a conversion price per share equal

to $5.75 or an aggregate of 2,608,696 shares of the Company’s common stock, which are subject to the Lock Up Period and the restrictions

on sale, and (iv) one million dollars ($1,000,000) will be paid on the first anniversary of the closing date (the “Anniversary Payment”).

The Seller is also eligible to receive certain earnout payments upon achievement of certain operating results, which may be comprised

of up to ten million dollars ($10,000,000) of which (x) five million dollars ($5,000,000) will be paid in cash and (y) five million dollars

($5,000,000) will be paid pursuant to the issuance of the number of shares of Company common stock valued at five million dollars ($5,000,000),

calculated using the closing price of the Company’s common stock on December 31, 2023 (collectively, the “Earnout Payments”).

February 9, 2023 (the “Closing Date”), the Company entered into and closed an Amended and Restated Membership

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

Services, Inc., a wholly-owned subsidiary of the Company (the “Buyer”), SCBC Holdings LLC (the “Seller”), the

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

Laboratory Services MSO, LLC (“Laboratory Services MSO”).

The Amended MIPA amends and restates, in its entirety, that certain

Membership Interest Purchase Agreement, dated November 7, 2023 (the “Original MIPA”).

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

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

The consideration paid by Buyer to Seller for the Purchased Interests consisted of $21,000,000, which comprised of (i) $9,000,000 in cash,

(ii) $11,000,000 pursuant to the issuance of 11,000 shares of the Company’s newly designated Series B Convertible Preferred Stock

(the “Series B Preferred Stock”), stated value $1,000 (the “Series B Stated Value”), and (iii) a $1,000,000 cash

payment on February 9, 2024 (the “Anniversary Payment”).

The Series B Preferred Stock will be convertible into shares of the

Company’s common stock at a conversion price per share equal to $3.78 or an aggregate of 2,910,053 shares of the Company’s

common stock and are subject to the Lock Up Period and the restrictions on sale .

The Seller is also eligible, under the terms

set forth in the Amended MIPA, to receive certain earnout payments upon achievement of certain operating results, which may be comprised

of up to $10,000,000 of which (x) up to $5,000,000 will be paid in cash and (y) up to $5,000,000 will be paid pursuant to the issuance

of the number of shares of Company common stock valued at $5,000,000, calculated using the closing price of the Company’s common

stock on December 31, 2023, rounded down to the nearest whole share (collectively, the “Earnout Payments”).

Amended MIPA contains customary representations and warranties and covenants.

The Anniversary Payment and the Earnout Payments will be

available to compensate the Buyer for certain losses it may incur pursuant the indemnification provisions set forth in the Amended MIPA.

In addition, at any time

during the period beginning on the Closing Date and ending on the date nine (9) months after the Closing Date, the Buyer, or its designated

affiliates under the Amended MIPA, may purchase from the Seller twenty percent ( 20 %) of the total issued and outstanding equity interests

of Laboratory Services MSO for the purchase price of (i) $ 6,000,000 in cash and (ii) the issuance of an additional 4,000 shares of Series

B Preferred Stock valued at $ 4,000,000 , in accordance with the terms and conditions set forth in the Amended MIPA.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 21 – SUBSEQUENT EVENTS

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

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

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 2024.

NOTE 21 – SUBSEQUENT

The Company evaluated

2 unchanged sentences

or disclosure in the financial statements.

Reverse Stock Split

The Company effected a one-for-ten

reverse stock split of its outstanding shares of common stock on January 5, 2023.

The reverse split did not change the number of authorized

shares of common stock or par value.

All references in these consolidated financial statements to shares, share prices, exercise prices,

and other per share information in all periods have been adjusted, on a retroactive basis, to reflect the reverse stock split.

Second Amended and

Restated Limited Liability Company Agreement

In connection with the

Closing of the Transaction, Laboratory Services MSO entered into a Second Amended and Restated Limited Liability Company Agreement, dated

February 9, 2023 (the “Amended Operating Agreement”), by and among the Seller, the Zoe Family Trust, the Owners, and the members

named therein.

The terms of the Amended Operating Agreement, include, but are not limited to:

(i) establishing Laboratory Services MSO

as a multi-member entity as of the Closing Date of the Transaction;

(ii) reaffirming the Buyer’s right to purchase an additional

twenty percent ( 20 %) of the issued and outstanding units of Laboratory Services MSO, as described above;

(iii) allocating the profits

and losses of Laboratory Services MSO among the parties to the agreement;

and (iv) providing for the management rights of the members.

Common Shares Issued

In March 2023, the Company issued a total of 202,731 shares

of its common stock for services rendered and to be rendered.

These shares were valued at $ 463,375 , the fair market values on the grant

dates using the reported closing share prices on the dates of grant.

Line of Credit

As disclosed elsewhere,

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

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

and director of the Company.

Under the Line of Credit, the Company received a loan from the Lender of $ 750,000 in March 2023.

under the Line of Credit bear interest at an annual rate of 5 % and each individual loan will be payable three years from the date of issuance.

The Company may, at its option, prepay any borrowings under the Line of Credit, in whole or in part at any time prior to maturity, without

premium or penalty.

March 2024 Convertible

Note Financing

In March 2024, the Company

entered into security purchase agreement with a lender (the “March 2024 Lender”) and closed on the issuance of 13.0 % senior

secured convertible promissory note in the principal amount of $ 700,000 (the “March 2024 Note”), as well as the issuance

of 105,000 shares of common stock as a commitment fee and warrants for the purchase of up to 252,404 shares of the Company’s common

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 March 2024 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-K

Item 9A. Controls and Procedures