What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-31 compared with 2023-11-14 · 1221 added, 1418 removed, 280 unchanged (90% of the section changed)

Financial Statements.

GLOBOCARE CORP.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

September 30,

CONDENSED CONSOLIDATED BALANCE SHEETS

CURRENT ASSETS:

Rent receivable

expense and other current assets

Current Assets

NON-CURRENT ASSETS:

Operating lease right-of-use

Property and equipment,

Investment in real estate,

Equity method investments,

Advances for equity

interest purchase

non-current assets

Prepaid expense and other current assets

Total Current Assets

NON-CURRENT ASSETS:

Operating lease right-of-use assets, net

Property and equipment, net

Investment in real estate, net

Equity method investments, net

Other non-current assets

Total Non-current Assets

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

Accrued professional

Accrued research and

development fees

Accrued payroll liability

and compensation

Accrued professional fees

Accrued research and development fees

Accrued payroll liability and compensation

Accrued litigation settlement

Accrued liabilities

and other payables

Accrued liabilities

and other payables - related parties

Accrued liabilities and other payables

Accrued liabilities and other payables - related parties

Operating lease obligation

Equity method investment

Advance from pending sale of noncontrolling interest -

related party

Equity method investment payable

Derivative liability

note payable, net

Current Liabilities

Convertible note payable, net

Total Current Liabilities

NON-CURRENT LIABILITIES:

Operating lease obligation

- noncurrent portion

Accrued litigation settlement

- noncurrent portion

Operating lease obligation - noncurrent portion

Note payable, net

payable - related party

Non-current Liabilities

Commitments and Contingencies

Loan payable - related party

Total Non-current Liabilities

Total Liabilities

Commitments and Contingencies (Note 15)

Preferred stock, $ 0.0001 par value;

10,000,000 shares authorized;

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

Liquidation preference $ 9 million at September 30, 2023

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

Liquidation preference $ 11 million at September 30, 2023

Series A Convertible Preferred Stock, 9,000 shares issued and outstanding at March 31, 2024 and December 31, 2023 Liquidation preference $ 9 million at March 31, 2024

Series B Convertible Preferred Stock, 11,000 shares issued and outstanding at March 31, 2024 and December 31, 2023 Liquidation preference $ 11 million at March 31, 2024

Common stock, $ 0.0001 par value;

490,000,000 shares authorized;

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

11,156,534 shares issued and 11,104,534 shares outstanding at March 31, 2024;

11,051,534 shares issued and 10,999,534 shares outstanding at December 31, 2023

1 unchanged sentence

common stock held in treasury, at cost;

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

52,000 shares at March 31, 2024 and December 31, 2023

Accumulated deficit

2 unchanged sentences

Statutory reserve

other comprehensive loss

Total Avalon GloboCare

Accumulated other comprehensive loss

Total Avalon GloboCare Corp.

stockholders’ equity

Non-controlling

Liabilities and Equity

accompanying notes to the condensed consolidated financial statements.

GLOBOCARE CORP.

Noncontrolling interest

Total Liabilities and Equity

See accompanying notes to the condensed consolidated

financial statements.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

For the Three Months Ended

September 30,

For the Nine Months Ended

September 30,

RENTAL REVENUE

OPERATING EXPENSES

OPERATING INCOME

INCOME FROM EQUITY METHOD INVESTMENT - LAB SERVICES MSO

REAL PROPERTY RENTAL REVENUE

REAL PROPERTY OPERATING EXPENSES

REAL PROPERTY OPERATING INCOME

INCOME (LOSS) FROM EQUITY METHOD INVESTMENT - LAB SERVICES MSO

OTHER OPERATING EXPENSES:

2 unchanged sentences

Compensation and related benefits

Research and development expenses

Litigation settlement

Other general and administrative expenses

2 unchanged sentences

( 2,753,327 )

( 1,589,099 )

( 5,962,831 )

( 6,559,612 )

OTHER (EXPENSE) INCOME

Interest expense - amortization of debt discount and debt issuance cost

( 3,248,597 )

( 3,303,282 )

Interest expense - other

Interest expense - related party

Conversion inducement expense

Loss from equity method investment - Epicon

Change in fair value of derivative liability

Impairment of equity method investment - Epicon

Other expense

Total Other Expense, net

( 3,825,055 )

( 1,189,045 )

( 2,953,554 )

LOSS BEFORE INCOME TAXES

3 unchanged sentences

$ ( 2,919,744 )

$ ( 1,485,075 )

$ ( 5,414,154 )

$ ( 7,151,876 )

$ ( 9,513,166 )

NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST

NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

NET LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

2 unchanged sentences

$ ( 2,919,744 )

$ ( 7,151,876 )

$ ( 9,513,166 )

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:

1 unchanged sentence

$ ( 2,919,744 )

$ ( 7,151,876 )

$ ( 9,513,166 )

OTHER COMPREHENSIVE LOSS

Unrealized foreign currency translation loss

OTHER COMPREHENSIVE (LOSS) INCOME

Unrealized foreign currency translation (loss) gain

COMPREHENSIVE LOSS

1 unchanged sentence

( 2,916,074 )

( 7,167,902 )

( 9,591,681 )

COMPREHENSIVE LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST

COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

COMPREHENSIVE LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

2 unchanged sentences

$ ( 2,916,074 )

$ ( 7,167,902 )

$ ( 9,591,681 )

NET LOSS PER COMMON SHARE ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

COMMON SHAREHOLDERS:

Basic and diluted

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic and diluted

accompanying notes to the condensed consolidated financial statements.

GLOBOCARE CORP.

See accompanying notes to the condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

the Three and Nine Months Ended September 30, 2023

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

For the Three Months Ended March 31, 2024

GloboCare Corp.

3 unchanged sentences

Comprehensive

Non-controlling

Noncontrolling

January 1, 2024

2 unchanged sentences

$ ( 231,727 )

of Series B Convertible Preferred Stock for equity method investment

of common stock for services

of common stock as convertible note payable commitment fee

currency translation adjustment

4 unchanged sentences

$ ( 522,500 )

correct shares issued for adjustments for 1:10 reverse split

of common stock for services

of common stock as convertible note payable commitment fee

currency translation adjustment

loss for the three months ended June 30, 2023

$ ( 81,137,244 )

$ ( 234,647 )

June 30, 2023

( 68,729,522 )

of common stock, net

of common stock as convertible note payable commitment fee

currency translation adjustment

loss for the three months ended September 30, 2023

( 1,485,075 )

September 30, 2023

$ ( 522,500 )

$ ( 70,214,597 )

$ ( 229,163 )

accompanying notes to the condensed consolidated financial statements.

GLOBOCARE CORP.

See accompanying notes to the condensed consolidated

financial statements.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

the Three and Nine Months Ended September 30, 2022

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

For the Three Months Ended March 31, 2023

GloboCare Corp.

Stockholders’ Equity

Preferred Stock

Comprehensive

Non-controlling

January 1, 2023

2 unchanged sentences

$ ( 213,137 )

of common stock, net

of Series B Convertible Preferred Stock for equity method investment

of common stock for services

currency translation adjustment

4 unchanged sentences

$ ( 522,500 )

issued with convertible debt offering

of common stock for services

currency translation adjustment

loss for the three months ended June 30, 2022

$ ( 65,982,465 )

$ ( 209,467 )

June 30, 2022

( 55,230,886 )

of convertible note payable and accrued interest into common stock

Reclassification

of derivative liability to equity

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

of common stock - related party

of common stock

currency translation adjustment

loss for the three months ended September 30, 2022

( 5,414,154 )

September 30, 2022

$ ( 522,500 )

$ ( 60,645,040 )

$ ( 243,781 )

accompanying notes to the condensed consolidated financial statements.

GLOBOCARE CORP.

See accompanying notes to the condensed consolidated

financial statements.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

the Nine Months Ended

September 30,

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

1 unchanged sentence

$ ( 2,919,744 )

Adjustments to reconcile

net loss to net cash used in operating activities:

Bad debt provision

Change in straight-line

rent receivable

Amortization of operating

lease right-of-use asset

Stock-based compensation

and service expense

(Income) loss from equity

method investments

Impairment of equity

method investment

Amortization of debt

issuance costs and debt discount

Conversion inducement

Change in fair market

value of derivative liability

Changes in operating

assets and liabilities:

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

Change in straight-line rent receivable

Amortization of operating lease right-of-use asset

Stock-based compensation and service expense

(Income) loss from equity method investments

Distribution of earnings from equity method investment

Amortization of debt issuance costs and debt discount

Change in fair market value of derivative liability

Changes in operating assets and liabilities:

Rent receivable

1 unchanged sentence

Deferred leasing costs

Prepaid expense and other

Accounts payable

Accrued liabilities and

other payables

Accrued liabilities and

other payables - related parties

Prepaid expense and other assets

Accrued liabilities and other payables

Accrued liabilities and other payables - related parties

Operating lease obligation

1 unchanged sentence

( 1,834,810 )

( 5,072,932 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property

and equipment

Additional investment

in equity method investment

Purchase of property and equipment

NET CASH USED IN INVESTING ACTIVITIES

CASH FLOWS FROM FINANCING ACTIVITIES

Repayments of note payable

- related party

Proceeds from loan payable

- related party

Repayments of loan payable

- related party

Proceeds from issuance

of convertible debt and warrants

Payments of convertible

debt issuance costs

Proceeds from issuance

of balloon promissory note

Payments of balloon

promissory note issuance costs

Proceeds from equity

Disbursements for equity

offering costs

Proceeds from loan payable - related party

Proceeds from issuance of convertible debt and warrants

Payments of convertible debt issuance costs

Repayments of convertible debt

Advance from sale of noncontrolling interest in subsidiary

NET CASH PROVIDED BY FINANCING ACTIVITIES

EFFECT OF EXCHANGE RATE ON CASH

NET (DECREASE) INCREASE IN CASH

NET INCREASE (DECREASE) IN CASH

( 1,103,879 )

4 unchanged sentences

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Common stock issued

for future services

Common stock issued

for accrued liabilities

Reclassification of

advances for equity interest purchase to equity method investment

Series B Convertible

Preferred Stock issued related to equity method investment

Accrued purchase price

related to equity method investment

Warrants issued as convertible

note payable finder's fee

Warrants issued with

convertible note payable recorded as debt discount

Bifurcated embedded

conversion feature recorded as derivative liability and debt discount

Common stock issued

as convertible note payable commitment fee

Deferred financing costs

in accrued liabilities

Conversion of convertible

note payable and accrued interest into common stock

Reclassification of

derivative liability to equity

Related party loan and

accrued interest settled in shares

accompanying notes to the condensed consolidated financial statements.

GLOBOCARE CORP.

Common stock issued for future services

Common stock issued for accrued liabilities

Reclassification of advances for equity interest purchase to equity method investment

Series B Convertible Preferred Stock issued related to equity method investment

Accrued purchase price related to equity method investment

Warrants issued as convertible note payable finder’s fee

Warrants issued with convertible note payable recorded as debt discount

Common stock issued as convertible note payable commitment fee

Equity method investment payable paid by a related party

See accompanying notes to the condensed consolidated financial

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 — ORGANIZATION AND NATURE OF OPERATIONS

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 the Company acquired 100 % of the outstanding securities of AHS in exchange for 50,000,000 shares

of the Company’s common stock (the “AHS Acquisition”).

AHS was incorporated on May 18, 2015 under the laws of the State

accounting purposes, AHS was the surviving entity.

The transaction was accounted for as a recapitalization of AHS, pursuant to which

AHS was treated as the accounting acquirer, surviving and continuing entity although the Company was the legal acquirer.

did not recognize goodwill or any intangible assets in connection with this transaction.

Accordingly, the Company’s historical

financial statements are those of AHS and its wholly owned subsidiary, Avalon (Shanghai) Healthcare Technology Co., Ltd.

Shanghai”) immediately following the consummation of this reverse merger transaction.

AHS owns 100 % of the capital stock of

Avalon Shanghai, which is a wholly foreign-owned enterprise organized under the laws of the People’s Republic of China (“PRC”).

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

Due to the winding down of the medical related consulting services in 2022, the Company decided to cease all operations of Avalon Shanghai

and no longer has any material revenues or expenses in Avalon Shanghai.

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

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

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

On May 5, 2017, Avalon RT 9 purchased a real property located in Township of Freehold, County of Monmouth, State of New Jersey, having

a street address of 4400 Route 9 South, Freehold, NJ 07728.

This property was purchased to serve as the Company’s world-wide headquarters

for all corporate administration and operations.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION

AND NATURE OF OPERATIONS

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.

The Company is a commercial stage company dedicated

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

The Company is working

to establish a leading role in the innovation of diagnostic testing, utilizing proprietary technology to deliver precise, genetics-driven

Through its membership interest in a laboratory, 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

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

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

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

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

In addition, the property generates rental income.

Avalon RT 9 owns this office building.

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

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

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

(“Avactis”), a Nevada corporation,

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

CAR-NK, TCR-T and others.

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

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

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

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

Avactis owns 100 % of

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

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

October 14, 2022, the Company formed a wholly owned subsidiary, Avalon Laboratory Services, Inc.

(“Avalon Lab”), a Delaware

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

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

and its subsidiaries.

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

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

GLOBOCARE CORP.

Avalon RT 9’s business consists of the

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

As of March 31, 2024, the occupancy rate of the building

On July 18, 2018, the Company formed a wholly

owned subsidiary, Avactis Biosciences Inc.

(“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 % of

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.

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.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 — ORGANIZATION AND NATURE OF OPERATIONS (continued)

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

of Subsidiary

and Date of Incorporation

Healthcare System, Inc.

100% held by ALBT

Developing Avalon Cell and Avalon Rehab in United States of America (“USA”)

RT 9 Properties LLC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION

AND NATURE OF OPERATIONS (continued)

Details of the Company’s subsidiaries which

are included in these condensed consolidated financial statements as of March 31, 2024 are as follows:

Name of Subsidiary Place and Date of

Incorporation Percentage of

Ownership Principal Activities

Avalon Healthcare System, Inc.

100% held by ALBT Holding company for payroll and other expenses

Avalon RT 9 Properties LLC

(“Avalon RT 9”)

February 7, 2017

100% held by ALBT

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

(Shanghai) Healthcare Technology Co., Ltd.

100% held by ALBT Owns and operates an income-producing real property and holds and manages the corporate headquarters

Avalon (Shanghai) Healthcare Technology Co., Ltd.

(“Avalon Shanghai”)

April 29, 2016

100% held by AHS

Ceased operations and is not considered an operating entity

Technologies Inc.

100% held by AHS Is not considered an operating entity

Genexosome Technologies Inc.

(“Genexosome”)

July 31, 2017

60% held by ALBT

No current activities to report, dormant

Biosciences Inc.

60% held by ALBT No current activities to report, dormant

Avactis Biosciences Inc.

July 18, 2018

60% held by ALBT

Patent holding company

Nanjing Biosciences Ltd.

100% held by Avactis

Owns a patent and is not considered an operating entity

International

Exosome Association LLC

June 13, 2019

100% held by ALBT

No activity, dormant

Laboratory Services, Inc.

60% held by ALBT Patent holding company

Avactis Nanjing Biosciences Ltd.

(“Avactis Nanjing”)

100% held by Avactis Owns a patent and is not considered an operating entity

Avalon Laboratory Services, Inc.

(“Avalon Lab”)

October 14, 2022

100% held by ALBT

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

100% held by ALBT Laboratory holding company with a 40% membership interest in Lab Services MSO

2 – BASIS OF PRESENTATION AND GOING CONCERN CONDITION

of Presentation

interim condensed consolidated financial statements of the Company and its subsidiaries are unaudited.

In the opinion of management,

all adjustments (consisting of normal recurring accruals) and disclosures necessary for a fair presentation of these interim condensed

consolidated financial statements have been included.

The results reported in the condensed consolidated financial statements for any

interim periods are not necessarily indicative of the results that may be reported for the entire year.

The accompanying condensed consolidated

financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission and do

not include all information and footnotes necessary for a complete presentation of financial statements in conformity with accounting

principles generally accepted in the United States (“U.S.

The Company’s condensed consolidated financial statements

include the accounts of the Company and its subsidiaries.

All significant intercompany accounts and transactions have been eliminated

in consolidation.

information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S.

Basis of Presentation

These interim condensed consolidated financial

statements of the Company and its subsidiaries are unaudited.

In the opinion of management, all adjustments (consisting of normal recurring

accruals) and disclosures necessary for a fair presentation of these interim condensed consolidated financial statements have been included.

The results reported in the condensed consolidated financial statements for any interim periods are not necessarily indicative of the

results that may be reported for the entire year.

The accompanying condensed consolidated financial statements have been prepared in accordance

with the rules and regulations of the Securities and Exchange Commission and do not include all information and footnotes necessary for

a complete presentation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S.

The Company’s condensed consolidated financial statements include the accounts of the Company and its subsidiaries.

All significant intercompany accounts and transactions have been eliminated in consolidation.

Certain information and footnote disclosures normally

included in the annual consolidated financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted.

These condensed consolidated financial statements should be read in conjunction with the Company’s

audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended

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

GLOBOCARE CORP.

These condensed

consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and

notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the Securities

and Exchange Commission on April 15, 2024.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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

addition, the Company owns commercial real estate that houses its headquarters in Freehold, New Jersey.

The Company also has income from

equity method investment through its forty percent ( 40 %) interest in Lab Services MSO.

These condensed consolidated financial statements

have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization

of assets and the satisfaction of liabilities in the normal course of business.

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

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

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

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

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.

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 toxicology.

In addition, the Company owns commercial real estate that houses its headquarters in Freehold,

These condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern,

which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business.

As reflected in the accompanying

condensed consolidated financial statements, the Company had a working capital deficit of approximately $ 7,026,000 at March 31, 2024 and

had incurred recurring net losses and generated negative cash flow from operating activities of approximately $ 1,368,000 and $ 916,000

for the three months ended March 31, 2024, 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.

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.

accompanying condensed consolidated financial statements do not include any adjustments related to the recoverability or classification

of asset-carrying amounts or the amounts and classification of liabilities that may result should the Company be unable to continue as

a going concern.

3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Policies

have been no changes to the Company’s significant accounting policies described in the Company’s 2022 Annual Report on Form

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

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

GAAP requires management to make estimates and assumptions

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

The ability of the Company to

continue as a going concern is dependent on the Company’s ability to raise additional capital, implement its business plan, and

generate significant revenues.

There are no assurances that the Company will be successful in its efforts to generate significant revenues,

maintain sufficient cash balance or report profitable operations or to continue as a going concern.

The Company plans on raising capital

through the sale of equity to implement its business plan.

However, there is no assurance these plans will be realized and that any additional

financings will be available to the Company on satisfactory terms and conditions, if any.

The accompanying condensed

consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts

or the amounts and classification of liabilities that may result should the Company be unable to continue as a going concern.

NOTE 3 – SUMMARY

OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation

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

GAAP requires management to make estimates and assumptions that

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

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

Changes in these estimates and assumptions

may have a material impact on the condensed consolidated financial statements and accompanying notes.

Changes in these estimates and assumptions may

have a material impact on the condensed consolidated financial statements and accompanying notes.

Making estimates requires management

3 unchanged sentences

change in the near term due to one or more future confirming events.

Accordingly, the actual results could differ significantly from

those estimates.

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

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

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

of Lab Services MSO.

GLOBOCARE CORP.

Accordingly, the actual results could differ significantly from those

estimates during the three months ended March 31, 2024 and 2023 include the useful life of 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 MSO.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

of Financial Instruments and Fair Value Measurements

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

the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs

used in measuring fair value as follows:

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fair Value of Financial Instruments and Fair Value Measurements

The Company adopted

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

of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring

fair value as follows:

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

7 unchanged sentences

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 condensed consolidated financial statements, primarily

due to their short-term nature.

fair v alue 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 condensed

consolidated financial statements, primarily due to their short-term nature.

and liabilities measured at fair value on a recurring basis.

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

These assets and liabilities are measured at fair value on an

ongoing basis.

These assets and liabilities include derivative liability.

Derivative liability is

carried at fair value and measured on an ongoing basis.

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

value for the nine months ended September 30, 2023:

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.

and liabilities include derivative liability.

Derivative liability is carried at fair value and measured on an ongoing basis.

The table below reflects the activity of derivative liability measured at fair value for the three months ended March 31, 2024:

Balance of derivative liability as of January 1, 2024

Initial fair value of derivative

liability attributable to warrants issuance with fund raise

Gain from change in the fair value of derivative

Balance of derivative liability as of September 30, 2023

and liabilities measured at fair value on a nonrecurring basis.

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

These assets and liabilities are not measured at fair value

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

These assets and liabilities can include equity

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

method investment in Epicon Biotech Co., Ltd.

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

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

These assumptions

represent Level 3 inputs.

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

for the nine months ended September 30,

2023 was $ 464,406 .

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

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

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

and Cash Equivalents

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

Initial fair value of derivative liability attributable to warrants issuance with March 2024 fund

Gain from change in the fair value of derivative liability

Balance of derivative liability as of March 31, 2024

ASC 825-10 “Financial

Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value

The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs.

If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings

at each subsequent reporting date.

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

Cash and Cash Equivalents

At March 31, 2023 and

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

March 31, 2024

December 31, 2023

United States

purposes of the condensed consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity

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

The Company had no cash equivalents at September

30, 2023 and December 31, 2022.

Risk and Uncertainties

portion of the Company’s cash is maintained with state-owned banks within the PRC.

Balances at state-owned banks within the

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

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

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

by such limited insurance.

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

For purposes of the condensed consolidated statements

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

accounts to be cash equivalents.

The Company had no cash equivalents at March 31, 2024 and December 31, 2023.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

Credit Risk and Uncertainties

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

that at times may exceed federally-insured

4 unchanged sentences

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

At September 30, 2023, the

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

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

also performs ongoing credit evaluations of its tenants to help further reduce credit risk.

in Unconsolidated Companies

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

At March 31, 2024, 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.

Investment in Unconsolidated

The Company uses the equity method

of accounting for its investment in, and earning or loss of, investees that it does not control but over which it does exert significant

The Company applies the equity method by initially recording these investments at cost, as equity method investments, subsequently

adjusted for equity in earnings and cash distributions.

considers whether the fair value of its equity method investment has declined below its carrying value whenever adverse events or changes

in circumstances indicate that recorded value may not be recoverable.

If the Company considers any decline to be other than temporary

(based on various factors, including historical financial results and the overall health of the investee), then a write-down would be

recorded to estimated fair value.

See Note 5 for discussion of equity method investments.

Property Rental Revenue

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

income from operating leases is recognized on a straight-line basis under the guidance of ASC 842.

Lease payments under tenant leases

are recognized on a straight-line basis over the term of the related leases.

The cumulative difference between lease revenue recognized

under the straight-line method and contractual lease payments are included in account receivable on the consolidated balance sheets.

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

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

and Contingencies

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.

The Company classifies

distributions received from equity method investments using the cumulative earnings approach.

Distributions received are considered returns

on the investment and classified as cash inflows from operating activities.

If, however, the investor’s cumulative distributions

received, less distributions received in prior periods determined to be returns of investment, exceeds cumulative equity in earnings recognized,

the excess is considered a return of investment and is classified as cash inflows from investing activities.

Real Property Rental Revenue

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

Rental income

from operating leases is recognized on a straight-line basis under the guidance of ASC 842.

Lease payments under tenant leases are recognized

on a straight-line basis over the term of the related leases.

The cumulative difference between lease revenue recognized under the straight-line

method and contractual lease payments are included in rent receivable on the condensed consolidated balance sheets.

Commitments 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.

for such contingencies are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably

Per Share Data

Topic 260 “Earnings per Share,” requires presentation of both basic and diluted earnings per share (“EPS”) with

1 unchanged sentence

Basic EPS excludes dilution.

Diluted EPS reflects the potential dilution

that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in

the issuance of common stock that then shared in the earnings of the entity.

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

stock outstanding during the period.

Diluted net loss per share is computed by dividing net loss by the weighted average number of shares

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

For the three and nine

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

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

(using the treasury stock method).

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

effect would be anti-dilutive.

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

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

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

potential shares was antidilutive:

September 30,

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common

stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

Per Share Data (continued)

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

outstanding during the period.

Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of

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

For the three

months ended March 31, 2024 and 2023, potentially dilutive common shares consist of the common shares issuable upon the conversion of

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

the treasury stock method).

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

would be anti-dilutive.

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

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

The following

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

shares was antidilutive:

Three Months Ended

Options to purchase common stock

2 unchanged sentences

Series B convertible preferred stock (**)

Convertible note (***)

Convertible notes (***)

Potentially dilutive securities

1 unchanged sentence

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

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

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

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.

the three and nine months ended September 30, 2022, the Company operated in two reportable business segments - (1) the real property

operating segment, and (2) the medical related consulting services segment.

These reportable segments offer different services and products,

have different types of revenue, and are managed separately as each requires different operating strategies and management expertise.

Due to the winding down of the medical related consulting services segment in 2022, the Company decided to cease all operations of this

segment and no longer has any material revenues or expenses in this segment.

As a result, commencing from the first quarter of 2023,

the Company’s chief operating decision maker no longer reviews medical related consulting services operating results.

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Reporting (continued)

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

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

is active in the management of Lab Services MSO.

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

reportable business segments:

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

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

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

The Company regularly

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

(***) Assumed the convertible notes were converted into shares of common stock of the Company at a conversion price of $ 4.50 and $ 1.50 and $ 1.00 per share for the three months ended March 31, 2024.

Segment Reporting

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.

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

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

the management of Lab Services MSO.

During the three months ended March 31, 2024 and 2023, the Company operated in two reportable business

(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.

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 condensed 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.

Accounting Standards

June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (“Topic 326”).

The ASU introduces a new accounting

model, the Current Expected Credit Losses model (“CECL”), which requires earlier recognition of credit losses and additional

disclosures related to credit risk.

The CECL model utilizes a lifetime expected credit loss measurement objective for the recognition

of credit losses at the time the financial asset is originated or acquired.

ASU 2016-13 is effective for annual period beginning after

December 15, 2022, including interim reporting periods within those annual reporting periods.

The adoption of this new guidance did not

have any material impact on the Company’s condensed consolidated financial statements.

October 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.

ASU 2021-08 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 condensed consolidated financial statements.

accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have

a material impact on the consolidated financial statements upon adoption.

The Company does not discuss recent pronouncements that are

not anticipated to have an impact on or are unrelated to its consolidated financial condition, results of operations, cash flows or disclosures.

4 — PREPAID EXPENSE AND OTHER CURRENT ASSETS

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

September 30,

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.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

Recent Accounting Standards

2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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.

and 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 condensed consolidated

financial statements disclosures.

Other accounting

standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material

impact on the consolidated financial statements upon adoption.

The Company does not discuss recent pronouncements that are not anticipated

to have an impact on or are unrelated to its consolidated financial condition, results of operations, cash flows or disclosures.

NOTE 4 – PREPAID EXPENSE

AND OTHER CURRENT ASSETS

At March 31, 2024 and December 31, 2023, prepaid

expense and other current assets consisted of the following:

Prepaid professional fees

Prepaid directors and officers liability insurance

Prepaid directors and officers’ liability insurance premium

Prepaid NASDAQ listing fee

2 unchanged sentences

Security deposit

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5 — EQUITY METHOD INVESTMENTS

in Epicon Biotech Co., Ltd.

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

(“Epicon”) amounted

to $ 0 and $ 485,008 , respectively.

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

Epicon was incorporated on August 14, 2018 in PRC.

Avalon Shanghai and an unrelated company, Jiangsu Unicorn Biological Technology

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

Epicon is focused on

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

of scientific achievements.

The Company is not involved in the management of Epicon.

Therefore, it is a passive investment.

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

impairment as of June 30, 2023.

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

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

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

The Company calculated that the estimated undiscounted cash flows

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

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

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

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

to record its share of losses resulting in a negative equity method investment, which would be presented as a liability on the condensed

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.

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

in Laboratory Services MSO, LLC

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

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

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

The consideration paid by Buyer to Seller

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

issuance of 11,000 shares of the Company’s Series B Convertible

Preferred Stock (the “Series B Preferred Stock”), stated value $1,000 (the “Series B Stated Value”), and (iii)

a $1,000,000 cash payment on February 9, 2024.

The Series B Preferred Stock will be convertible into shares of the Company’s common

stock at a conversion price per share equal to $3.78 or an aggregate of 2,910,053 shares of the Company’s common stock, which are

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

The Seller is also eligible, under the terms set forth in the Amended MIPA, to receive certain earnout payments upon achievement

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

paid pursuant to the issuance of the number of shares of the Company’s common stock valued at $5,000,000, calculated using the

closing price of the Company’s common stock on December 31, 2023, rounded down to the nearest whole share (collectively, the “Earnout

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

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

The estimated earnout is a level 3 valuation which will be

measured at the end of the applicable reporting period.

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

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

As of September

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

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 condensed consolidated financial statements

under the equity method.

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

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

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

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

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

loss relating to the investment.

GLOBOCARE CORP.

Due from broker

NOTE 5 – EQUITY METHOD INVESTMENTS

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.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5 — EQUITY METHOD INVESTMENTS (continued)

in Laboratory Services MSO, LLC (continued)

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

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

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

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

MSO is summarized in the following table:

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – EQUITY METHOD INVESTMENTS

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.

For the three months ended March 31, 2024

and for the period from February 9, 2023 (date of investment) through March 31, 2023, amortization expense of these intangible assets

amounted to $ 166,733 and $ 135,830 , respectively, which was included in income (loss) from equity method investment — Lab Services

MSO in the accompanying condensed consolidated statements of operations and comprehensive loss.

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.

is not amortized but is tested for impairment at least once annually, or more frequently if events or changes in circumstances indicate

that the asset might be impaired.

For the three months

ended March 31, 2024 and for the period from February 9, 2023 (date of investment) through March 31, 2023, the Company’s share of

Lab Services MSO’s net income was $ 274,202 and $ 46,739 , respectively, which was included in income (loss) from equity method investment

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

In the three months ended

March 31, 2024, activity recorded for the Company’s equity method investment in Lab Services MSO is summarized in the

following table:

Equity investment carrying amount at January 1, 2024

Payment for equity method investment:

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

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

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

Lab Services MSO’s net income attributable to the Company

Intangible assets amortization amount

Equity investment carrying amount at September 30, 2023

As of September 30, 2023,

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

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

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

September 30,

Distribution of earnings from equity investment

Equity investment carrying amount at March 31, 2024

of March 31, 2024, the Company’s carrying value of the identified intangible assets and goodwill which are included in the equity

investment carrying amount was $ 9,225,911 and $ 259,579 , respectively.

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

2 unchanged sentences

Noncurrent liabilities

Three Months Ended

September 30,

Income from operation

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

2023, the Buyer, or its designated affiliates under the Amended MIPA, may purchase from the Seller twenty percent ( 20 %) of the total issued

and outstanding equity interests of Laboratory Services MSO for the purchase price of (i) $ 6,000,000 in cash and (ii) the issuance

of an additional 4,000 shares of Series B Preferred Stock valued at $ 4,000,000 , in accordance with the terms and conditions

set forth in the Amended MIPA.

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

Currently, both parties are negotiating the

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

GLOBOCARE CORP.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6 — CONVERTIBLE NOTE PAYABLE

2023 Convertible Note

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

(“Mast Hill”) for the issuance

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

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

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

of the Company.

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

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

obligations under the May 2023 Convertible Note.

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

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

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

a floor of $ 1.50 .

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

an original issue discount of $ 75,000 .

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

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

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

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

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

On May 23, 2023, the Company delivered

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

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

in the following table :

November 23, 2023

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

December 23, 2023

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

January 23, 2024

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – EQUITY METHOD INVESTMENTS

February 9, 2023

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

March 23, 2024

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

April 23, 2024

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

The entire remaining outstanding balance of the May 2023 Convertible Note

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

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

the term of the May 2023 Convertible Note.

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

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

(Date of Investment) through

Income from operation

6 – 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.

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.

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 price.

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

May 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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – CONVERTIBLE

NOTE PAYABLE (continued)

May 2023 Convertible

Note (continued)

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.

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.

accordance with ASC 480-10-25-14, the Company determined that the conversion provisions contain an embedded derivative feature and the

Company valued the derivative feature separately, recording debt discount and derivative liability in accordance with the provisions

of the convertible debt (see Note 7).

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

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

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

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

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6 — CONVERTIBLE NOTE PAYABLE (continued)

May 2023 Convertible Note (continued)

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

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

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

and comprehensive loss.

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

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

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

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 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.

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 7).

However, management determined the probability of failing to make an amortization payment when due to be remote and

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

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.

three months ended March 31, 2024, amortization of debt discount and debt issuance costs and interest expense related to the May 2023

Convertible Note amounted to $ 131,204 and $ 29,793 , respectively, which have been included in interest expense — amortization of

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

and comprehensive loss.

2023 Convertible Note

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

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

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

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

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

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

the July 2023 Convertible Note.

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

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

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

Firstfire acquired

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

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.

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

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 .

6 unchanged sentences

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

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

in the following table :

January 6, 2024

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

February 6, 2024

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

March 6, 2024

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

April 6, 2024

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

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

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

The entire remaining outstanding balance of the July 2023 Convertible Note

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

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

the term of the July 2023 Convertible Note.

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

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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – CONVERTIBLE

NOTE PAYABLE (continued)

July 2023 Convertible

Note (continued)

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

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

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

July 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

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

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

under certain circumstances.

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

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

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

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

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

The fair values of the 44,998 warrants

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

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

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

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

accordance with ASC 470-20-25-2, proceeds from the sale of a debt instrument with stock purchase warrants are allocated to the two elements

based on the relative fair values of the debt instrument without the warrants and of the warrants themselves at time of issuance.

The portion of the proceeds allocated to the warrants are accounted for as derivative liability.

The remainder of the proceeds are allocated

to the debt instrument portion of the transaction.

GLOBOCARE CORP.

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.

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.

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 7).

However, management determined the probability of failing to make an amortization payment when due to be remote and

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

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.

three months ended March 31, 2024, amortization of debt discount and debt issuance costs and interest expense related to the July 2023

Convertible Note amounted to $ 40,848 and $ 13,001 , respectively, which have been included in interest expense — amortization of debt

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

and comprehensive loss.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6 — CONVERTIBLE NOTE PAYABLE (continued)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – CONVERTIBLE NOTE PAYABLE

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,” and, collectively with the

May 2023 Convertible Note and the July 2023 Convertible Note, the “2023 Convertible Notes”) 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.

Principal 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.

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

May 9, 2024 $35,000 plus accrued interest through May 9, 2024

June 9, 2024 $46,667 plus accrued interest through June 9, 2024

July 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.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – CONVERTIBLE NOTE PAYABLE

Convertible Note (continued)

accordance with ASC 480-10-25-14, the Company determined that the conversion provisions contain an embedded derivative feature and the

Company valued the derivative feature separately, recording debt discount and derivative liability in accordance with the provisions

of the convertible debt (see Note 7).

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

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

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

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

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

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

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

of operations and comprehensive loss.

7 — DERIVATIVE LIABILITY

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

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

common stock.

In accordance with ASC 815-10-25, each derivative feature is initially recorded at its fair value using the Black-Scholes

option valuation method and then re-valued at each reporting date, with changes in the fair value reported in the statements of operations.

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

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

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

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

under certain circumstances.

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

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

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

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

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

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

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

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

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

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

The estimated fair value of the warrants was computed

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

stock price of $ 0.80 , volatility

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

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

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

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

May 9, 2024 $35,000 plus accrued interest through May 9, 2024

June 9, 2024 $46,667 plus accrued interest through June 9, 2024

July 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.

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 7).

However, management determined the probability of failing to make an amortization payment when due to be remote and

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

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.

three months ended March 31, 2024, amortization of debt discount and debt issuance costs and interest expense related to the October 2023

Convertible Note amounted to $ 56,024 and $ 22,688 , respectively, which have been included in interest expense — amortization

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

and comprehensive loss.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – CONVERTIBLE

NOTE PAYABLE (continued)

March 2024 Convertible Note

On March 7, 2024, the

Company entered into securities purchase agreements with Mast Hill Fund, L.P.

for the issuance of 13.0 % senior secured promissory notes

in the aggregate principal amount of $ 700,000 (collectively, the “March 2024 Convertible Note”) convertible into shares of

common stock, par value $ 0.0001 per share, of the Company, as well as the issuance of 105,000 shares of common stock as a commitment fee

and warrants for the purchase of 252,404 shares of common stock of the Company.

The Company and its subsidiaries have also entered into

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

performance and discharge in full of all of the Company’s obligations under the March 2024 Convertible Note.

Principal amount and

interest under the March 2024 Convertible Note are convertible into shares of common stock of the Company at a conversion price of $ 1.00

per share unless the Company fails to make an amortization payment when due, in which case the conversion price shall be the lower of

$ 1.00 or the market price (as defined in the March 2024 Convertible Note) of the shares.

Mast Hill acquired the

March 2024 Convertible Note with principal amount of $ 700,000 and paid the purchase price of $ 665,000 after an original issue discount

of $ 35,000 .

On March 7, 2024, the Company issued (i) a warrant to purchase 131,250 shares of common stock with an exercise price of $ 2.00

exercisable until the five-year anniversary of March 7, 2024, (ii) a warrant to purchase 121,154 shares of common stock with an exercise

price of $ 1.30 exercisable until the five-year anniversary of March 7, 2024, which warrant shall be cancelled and extinguished against

payment of the March 2024 Convertible Note, and (iii) 105,000 shares of common stock as a commitment fee for the purchase of the March

2024 Convertible Note, which were earned in full as of March 7, 2024.

On March 7, 2024, the Company delivered such duly executed March

2024 Convertible Note, warrants and common stock to Mast Hill against delivery of such purchase price.

The Company is obligated

to make amortization payments in cash to Mast Hill towards the repayment of the March 2024 Convertible Note, as provided in the following

Payment Date:

Payment Amount:

September 7, 2024 $70,000 plus accrued interest through September 7, 2024

October 7, 2024 $70,000 plus accrued interest through October 7, 2024

November 7, 2024 $93,334 plus accrued interest through November 7, 2024

December 7, 2024 $116,667 plus accrued interest through December 7, 2024

January 7, 2025 $116,667 plus accrued interest through January 7, 2025

February 7, 2025 $140,000 plus accrued interest through February 7, 2025

March 7, 2025 The entire remaining outstanding balance of the March 2024 Convertible Note

In connection

with the issuance of the March 2024 Convertible Note, the Company incurred debt issuance costs of $ 74,379 (including the issuance of 10,500

warrants as a finder’s fee) which is capitalized and will be amortized into interest expense over the term of the March 2024 Convertible

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

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

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

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

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

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

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

GLOBOCARE CORP.

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

as such the fair value of the 121,154 warrants with an exercise price of $ 1.30 exercisable until the five-year anniversary of March 7,

2024, which warrant shall be cancelled and extinguished against payment of the March 2024 Convertible Note, has been estimated to be zero.

Accordingly, the fair value of the 141,750 warrants with an exercise price of $ 2.00 exercisable until the five-year anniversary of March

7, 2024 was classified as derivative liability on March 7, 2024.

The fair values of the 141,750 warrants with an exercise price of $ 2.00

exercisable until the five-year anniversary of March 7, 2024 issued on March 7, 2024 were computed using the Black-Scholes option-pricing

model with the following assumptions:

stock price of $ 0.40 , volatility of 85.24 %, risk-free rate of 4.07 %, 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.

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

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – CONVERTIBLE

NOTE PAYABLE (continued)

March 2024 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 7).

However, management determined the probability of failing to make an amortization payment when due to be remote and

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

recorded a total debt discount of $ 97,374 related to the original issue discount, common shares issued and warrants issued to Mast Hill,

which will be amortized over the term of the March 2024 Convertible Note.

three months ended March 31, 2024, amortization of debt discount and debt issuance costs and interest expense related to the March 2024

Convertible Note amounted to $ 14,313 and $ 6,233 , respectively, which have been included in interest expense — amortization of debt

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

and comprehensive loss.

2023 Convertible Notes

and March 2024 Convertible Notes – Events of Default

Convertible Notes and the March 2024 Convertible Note contain customary events of default, upon the occurrence of which (after giving

effect to the right to cure of the borrower), the notes shall become due and payable and the borrower shall pay to the lender/s an amount

equal to the principal amount then outstanding under such notes plus accrued interest (including any Default Interest, as defined in the

2023 Convertible Notes and the March 2024 Convertible Note, respectively), provided, however, that Mast Hill and Firstfire (collectively,

the “Convertible Notes Lenders”) may in their sole discretion determine to accept payment part in shares of the Company’s

common stock (pursuant to the conversion formula set forth in the 2023 Convertible Notes and the March 2024 Convertible Note) and part

During the quarter ended March

31, 2024, the Company’s market capitalization fell below $ 5 million, which constitutes an event of default under the 2023 Convertible Notes

and the March 2024 Convertible Note.

Pursuant to Section 3.22

of the 2023 Convertible Notes (and the March 2024 Convertible Note), the Company (as borrower under such notes) has a right to cure such

default within ten (10) calendar days (the “Cure Period”) after the earlier of (i) the date the borrower receives notice from

the lenders demanding cure of such default, or (ii) the first date that the then Chief Executive Officer, Chief Financial Officer, or

Board of Directors of the borrower has actual knowledge of the existence of the default.

The Company did not receive any notice from the

Convertible Notes Lenders with respect to the event of default.

The Company first had actual knowledge of the existence of the default

on April 29, 2024 and received a waiver from the Convertible Notes Lenders, waiving this event of default on May 29, 2024.

Although this

waiver was not within the Cure Period, the Convertible Notes Lenders provided a full waiver to the event of default prior to the issuance

of this report.

On May 23, 2024, the Company received a waiver

to the required amortization payment under the May 2023 Convertible Note.

Pursuant to the waiver, the Company received an extension until

June 10, 2024 to allow time for the payment to be made or to allow the Company to refinance the Convertible Notes.

In addition, the Company failed to file this report

in a timely manner during the prescribed period following the Company’s filing of a 12b-25 extension with respect thereto, which

would have triggered an event of default under the 2023 Convertible Notes and the March 2024 Convertible

Note but for receipt by the Company of the waiver with respect to this event of default from the Convertible Notes Lenders on the original

due date of this report (which was reaffirmed by the waiver dated May 29, 2024) .

As a result, the 2023 Convertible

Notes and the March 2024 Convertible Note are no longer in default as of the date of this report.

The events of default described above

did not have an accounting impact on the Company’s unaudited financial statements for the quarter ended March 31, 2024 since the

events of default were cured either within the Cure Period or prior to the date of this report and no penalties associated with such events

of default under the 2023 Convertible Notes and the March 2024 Convertible Note were ever triggered.

In addition, the Company is in the

process of refinancing the 2023 Convertible Notes and the March 2024 Convertible Note into one new note, which will also remove the $ 5

million market capitalization covenant so that it is not an event of default in the future.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7 – DERIVATIVE LIABILITY

in Note 6, May 2023 Convertible Note, July 2023 Convertible Note, October 2023 Convertible Note, and March 2024 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, March 7, 2024, and

March 31, 2024, 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.

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

Upon evaluation, the warrants

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

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

105,500 warrants with an exercise price of $ 3.20 exercisable until the five-year anniversary of May 23, 2023, which warrant shall be cancelled

and extinguished against payment of the May 2023 Convertible Note, has been estimated 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.

31, 2024, 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 $ 5,796 .

The estimated fair value of the warrants was computed as of March 31, 2024 using Black-Scholes

option-pricing model, with the following assumptions:

stock price of $ 0.32 , volatility of 81.49 %, risk-free rate of 4.21 %, annual dividend

yield of 0 % and expected life of 4.1 years.

On July 6, 2023, the Company

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

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

31, 2024, 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 $ 2,314 .

The estimated fair value of the warrants was computed as of March 31, 2024 using Black-Scholes

option-pricing model, with the following assumptions:

stock price of $ 0.32 , volatility of 84.10 %, risk-free rate of 4.21 %, annual dividend

yield of 0 % and expected life of 4.3 years.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7 – DERIVATIVE LIABILITY (continued)

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

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

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

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 6).

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.

31, 2024, 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 $ 9,422 .

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

31, 2024 using Black-Scholes option-pricing model, with the following assumptions:

1 unchanged sentence

risk-free rate of 4.21 %, annual dividend yield of 0 % and expected life of 4.5 years.

On March 7, 2024, the

Company issued 262,904 warrants to Mast Hill and a third party as a finder’s fee (see Note 6).

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 121,154 warrants

with an exercise price of $ 1.30 exercisable until the five-year anniversary of March 7, 2024, which warrant shall be cancelled and

extinguished against payment of the March 2024 Convertible Note, has been estimated to be zero.

Accordingly, the fair value of the 141,750 warrants

with an exercise price of $ 2.00 exercisable until the five-year anniversary of March 7, 2024 was classified as a derivative liability

on March 7, 2024.

31, 2024, the estimated fair value of the 141,750 warrants with an exercise price of $ 2.00 exercisable until the five-year

anniversary of March 7, 2024 as derivative liability was $ 14,742 .

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

31, 2024 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 0.32 , volatility of 81.89 %,

risk-free rate of 4.21 %, annual dividend yield of 0 % and expected life of 4.9 years.

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

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

The changes to the derivative liability

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

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

8 — NOTE PAYABLE, NET

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

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

Interest is due in monthly payments of $ 44,000 beginning

November 1, 2022 and payable monthly thereafter until September 1, 2025 when the principal outstanding and all remaining interest is

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

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

The principal of $ 4,800,000 is secured by a first mortgage

on the Company’s real property located in Township of Freehold, County of Monmouth, State of New Jersey, having a street address

of 4400 Route 9 South, Freehold, NJ 07728.

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

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

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

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

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

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

September 30,

condensed consolidated statements of operations and comprehensive loss.

The changes to the derivative liability resulted in a decrease

of $ 31,212 in the derivative liability and the corresponding increase in other income as a gain for the three months ended March

NOTE 8 – NOTE PAYABLE, NET

On September 1, 2022,

the Company issued a balloon promissory note in the form of a mortgage on its headquarters to a third party company in the principal amount

of $ 4,800,000 , which carries interest of 11.0 % per annum.

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

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

The principal of

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

The Company may not prepay the principal

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

The principal of $ 4,800,000 is secured by a first mortgage on the Company’s real property

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

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.

The note payable as of

March 31, 2024 and December 31, 2023 is as follows:

Principal amount

1 unchanged sentence

Note payable, net

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

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

accompanying condensed consolidated statements of operations and comprehensive loss.

For the three months ended September 30, 2023 and

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

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

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

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

accompanying condensed consolidated statements of operations and comprehensive loss.

For the nine months ended September 30, 2023 and

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

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

9 — RELATED PARTY TRANSACTIONS

Revenue from Related Party and Rent Receivable — Related Party

Company leases space of its commercial real property located in New Jersey to a company, D.P.

Capital Investments LLC, which is

controlled by Wenzhao Lu, the Company’s largest shareholder and chairman of the Board of Directors.

The term of the related party

lease agreement is five years commencing on May 1, 2021 and will expire on April 30, 2026.

GLOBOCARE CORP.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9 — RELATED PARTY TRANSACTIONS (continued)

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

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

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

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – NOTE PAYABLE, NET

For the three months ended March 31, 2024 and

2023, amortization of debt issuance costs related to note payable amounted to $ 29,807 and $ 22,205 , respectively, which have been included

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

of operations and comprehensive loss.

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

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

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

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

deemed to be required on the receivable.

Provided by Related Parties

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

As compensation

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

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

For the three months ended March 31, 2024 and 2023, interest expense related to note payable amounted

to $ 164,500 and $ 132,000 , respectively, which have been included in interest expense - other on the accompanying condensed consolidated

statements of operations and comprehensive loss.

As compensation for professional services provided, the Company recognized consulting

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

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

Liabilities and Other Payables — Related Parties

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

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

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

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

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

consolidated balance sheets.

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

As of September

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

NOTE 9 – 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.

both the three months ended March 31, 2024 and 2023, the related party rental revenue amounted to $ 12,600 and has been included in

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

At March 31, 2024 and

December 31, 2023, the related party rent receivable totaled $ 12,100 and $ 124,500 , respectively, which has been included in rent receivable

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

Provided by Related Party

From time to time, Wilbert

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

As compensation for professional services provided,

the Company recognized consulting expenses of $ 16,731 and $ 26,457 for the three months ended March 31, 2024 and 2023, respectively, which

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

Accrued Liabilities and Other Payables –

Related Parties

In 2017, the Company

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

As of March 31, 2024 and December 31, 2023, the unpaid acquisition consideration

of $ 100,000 , was payable to Dr.

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

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

From time to time, Lab

Services MSO paid shared expense on behalf of the Company.

In addition, Lab Services MSO made a payment of $ 666,667 for equity method

investment payable on behalf of the Company in the first quarter of 2024.

As of March 31, 2024 and December 31, 2023, the balance due

to Lab Services MSO amounted to $ 666,666 and $ 72,746 , respectively, which has been included in accrued liabilities and other payables

— related parties on the accompanying condensed consolidated balance sheets.

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

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

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

from Related Party

As of March 31, 2024

and December 31, 2023, $ 44,308 and $ 33,712 of accrued and unpaid interest related to borrowings from Wenzhao Lu, the Company’s largest

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

related parties on the accompanying condensed consolidated balance sheets.

Borrowing from Related Party

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

3 unchanged sentences

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

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

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

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

The Company has a right to draw down on the line

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

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

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

The Line of Credit Agreement includes customary

events of default.

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

and payable immediately.

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

— RELATED PARTY TRANSACTIONS (continued)

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

Outstanding principal under the Line of Credit

at January 1, 2023

from Line of Credit

Outstanding principal

under the Line of Credit at September 30, 2023

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

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

of operations and comprehensive loss.

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

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

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

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

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

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

remaining available under the Line of Credit.

A Convertible Preferred Stock

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

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

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

The Series A Preferred Stock

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

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

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

and similar matters.

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

B Convertible Preferred Stock Issued for Equity Method Investment

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

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

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

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

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

common stock at a conversion price per share equal to $ 3.78 or an aggregate of 2,910,053 shares of the Company’s

common stock and are subject to a lock-up period and restrictions on sale (See Note — 5 - Investment in Laboratory Services

Shares Sold for Cash

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

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

offering price of up to $ 3.5 million.

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

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

offering costs of $ 220,995 .

Shares Issued for Services

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

and to be rendered.

These shares were valued at $ 999,656 , the fair market values on the grant dates using the reported closing share

prices on the dates of grant, and the Company recorded stock-based compensation expense of $ 776,285 for the nine months ended September

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

will be amortized over the rest of corresponding service periods.

GLOBOCARE CORP.

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

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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10 — EQUITY (continued)

Shares Issued as Convertible Note Payable Commitment Fee

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

May 2023 Convertible Note.

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

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

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

July 2023 Convertible Note.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – RELATED PARTY TRANSACTIONS (continued)

Borrowing from Related Party (continued)

was no Line of Credit activity during the three months ended March 31, 2024.

As of both March

31, 2024 and December 31, 2023, the outstanding principal balance was $ 850,000 .

three months ended March 31, 2024 and 2023, the interest expense related to related party borrowing amounted to $ 10,596 and $ 2,021 , respectively,

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

comprehensive loss.

31, 2024 and December 31, 2023, the related accrued and unpaid interest for Line of Credit was $ 44,308 and $ 33,712 , respectively, and

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

31, 2024, the Company has used approximately $ 6.8 million of the credit facility, and has approximately $ 13.2 million remaining available

under the Line of Credit.

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 Company received $ 1,696,186 and $ 485,714 from Wenzhao Lu as of March 31, 2024 and December 31, 2023, respectively,

which was recorded as advance from sale of noncontrolling interest – related party on the accompanying condensed consolidated balance

As of the date of this report, the Acquisition has not been consummated and the performance of the Company’s obligations

under the Purchase Agreement is subject to the Company obtaining written consent from Mast Hill and Firstfire under the 2023 Convertible

Notes, so the consummation of the Acquisition would not constitute an event of default under such notes.

In addition, the Company received

a waiver from Mast Hill and First Fire on May 29, 2024 stating that the consummation of this transaction in the future will not be considered

an event of default under the provisions of the Convertible Notes.

NOTE 10 – EQUITY

Common Shares Issued

as Convertible Note Payable Commitment Fee

During the three months

ended March 31, 2024, the Company issued a total of 105,000 shares of its common stock as commitment fee for the purchase of

March 2024 Convertible Note.

These shares were valued at $ 42,000 , the fair market value on the grant date using the reported closing share

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

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

Exercise Price

The following table summarizes the shares of the

Company’s common stock issuable upon exercise of options outstanding at March 31, 2024:

Options Outstanding Options Exercisable

Exercise Price Number

Outstanding at

September 30,

2024 Weighted

Contractual Life

Exercise Price

(Years) Weighted

Exercise Price Number

Exercisable at

September 30,

Average Exercise

2024 Weighted

Exercise Price

$ 0.48 – 2.08 185,000 3.96 $ 1.48 88,000 $ 1.61

1 unchanged sentence

10.20 – 19.30 216,500 3.48 13.87 216,500 13.87

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

$ 0.48 – 19.30 709,303 3.31 $ 6.90 612,303 $ 7.78

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – EQUITY

Options (continued)

Stock option activity

for the three months ended March 31, 2024 was as follows:

Exercise Price

Outstanding at January 1, 2024

Outstanding at September 30, 2023

Options exercisable at September 30, 2023

Outstanding at March 31, 2024

Options exercisable at March 31, 2024

Options expected to vest

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

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

option-pricing model with the following assumptions:

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

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

The aggregate fair value of the options

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

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

option-pricing model with the following assumptions:

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

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

The aggregate fair value of the options

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

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10 — EQUITY (continued)

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

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

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

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

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

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

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

ended September 30, 2023 is presented below:

The aggregate

intrinsic value of both stock options outstanding and stock options exercisable at March 31, 2024 was $ 0 .

values of options granted during the three months ended March 31, 2024 were estimated at the date of grant using the Black-Scholes option-pricing

model with the following assumptions:

volatility of 91.17 %, risk-free rate of 3.93 %, annual dividend yield of 0 %, and expected life of

The aggregate fair value of the options granted during the three months ended March 31, 2024 was $ 12,137 .

The fair values of options granted during the

three months ended March 31, 2023 were estimated at the date of grant using the Black-Scholes option-pricing model with the following

volatility of 143.99 % - 145.73 %, risk-free rate of 3.58 % - 3.94 %, annual dividend yield of 0 %, and

expected life of 5.00 years.

The aggregate fair value of the options granted during the three months ended March 31, 2023 was

For the three months

ended March 31, 2024 and 2023, stock-based compensation expense associated with stock options granted amounted to $ 13,533 and $ 68,262 ,

of which, $ 5,103 and $ 51,336 was recorded as compensation and related benefits, $ 8,430 and $ 11,457 was recorded as

professional fees, and $ 0 and $ 5,469 was recorded as research and development expenses, respectively.

A summary of the status of the Company’s

nonvested stock options granted as of March 31, 2024 and changes during the three months ended March 31, 2024 is presented below:

Exercise Price

Nonvested at January 1, 2024

Nonvested at September 30, 2023

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

Nonvested at March 31, 2024

The following table summarizes the shares of the

Company’s common stock issuable upon exercise of warrants outstanding at March 31, 2024:

Warrants Outstanding Warrants Exercisable

Exercise Price Number

Outstanding at

September 30,

2024 Weighted

Contractual Life

Average Exercise

(Years) Weighted

Exercise Price Number

Exercisable at

September 30,

2024 Weighted

Exercise Price

$ 1.30 – 2.50 463,804 4.76 $ 1.90 255,150 $ 2.22

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

3.20 - 4.50 320,663 4.18 3.93 179,998 4.50

12.50 123,964 3.06 12.50 123,964 12.50

$ 1.30 – 12.50 908,431 4.32 $ 4.06 559,112 $ 5.23

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – EQUITY

Warrants (continued)

Stock warrant activity

for the three months ended March 31, 2024 was as follows:

Exercise Price

Outstanding at January 1, 2024

Outstanding at September 30, 2023

Warrants exercisable at September 30, 2023

Outstanding at March 31, 2024

Warrants exercisable at March 31, 2024

Warrants expected to vest

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

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10 — EQUITY (continued)

Issued in May 2023

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

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

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

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

and issued a warrant

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

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

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

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

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

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

The fair values of the 135,000 warrants

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

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

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

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

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

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

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

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

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

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

Issued in July 2023

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

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

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

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

and issued a warrant

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

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

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

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

The aggregate intrinsic

value of both stock warrants outstanding and stock warrants exercisable at March 31, 2024 was $ 0 .

Warrants Issued in

In connection with the

issuance of March 2024 Convertible Note (See Note 6), the Company issued (i) a warrant to purchase 131,250 shares of common stock with

an exercise price of $2.00 exercisable until the five-year anniversary of March 7, 2024, (ii) a warrant to purchase 121,154 shares of

common stock with an exercise price of $1.30 exercisable until the five-year anniversary of March 7, 2024, which warrant shall be cancelled

and extinguished against payment of the March 2024 Convertible Note, to Mast Hill;

and issued a warrant to purchase 10,500 shares of common

stock with an exercise price of $2.00 exercisable until the five-year anniversary of March 7, 2024 to a third party as a finder’s

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 a derivative liability, as the Company cannot avoid a net cash settlement

under certain circumstances.

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

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

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

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

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

The fair values of the 44,998 warrants

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

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

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

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

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

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

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

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10 — EQUITY (continued)

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

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

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

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

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

Average Exercise Price

as such the fair value of the 121,154 warrants with an exercise price of $ 1.30 exercisable until the five-year anniversary of March 7,

2024, which warrant shall be cancelled and extinguished against payment of the March 2024 Convertible Note, has been estimated to be zero.

Accordingly, the fair value of the 141,750 warrants with an exercise price of $ 2.00 exercisable until the five-year anniversary of March

7, 2024 was classified as a derivative liability on March 7, 2024.

The fair values of the 141,750 warrants with an exercise price of $ 2.00

exercisable until the five-year anniversary of March 7, 2024 issued on March 7, 2024 were computed using the Black-Scholes option-pricing

model with the following assumptions:

stock price of $ 0.40 , volatility of 85.24 %, risk-free rate of 4.07 %, annual dividend yield of 0 %

and expected life of 5 years.

The warrants with an exercise price of $ 2.00 exercisable

until the five-year anniversary of March 7, 2024 issued to Mast Hill to purchase 131,250 shares of the Company’s common stock were

treated as a discount on the convertible note payable and were valued at $ 20,374 and will be amortized over the term of the March 2024

Convertible Note.

The warrants with an exercise price of $ 2.00 exercisable

until the five-year anniversary of March 7, 2024 issued to a third party as a finder’s fee to purchase 10,500 shares of the Company’s

common stock were treated as convertible debt issuance costs and were valued at $ 1,679 and will be amortized over the term of the March

2024 Convertible Note.

A summary of the status of the Company’s

nonvested stock warrants issued as of March 31, 2024 and changes during the three months ended March 31, 2024 is presented below:

Exercise Price

Nonvested at January 1, 2024

Nonvested at September 30, 2023

11 - STATUTORY RESERVE AND RESTRICTED NET ASSETS

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

The payment of dividends by entities organized in China is subject to limitations, procedures and formalities.

Regulations in the PRC

currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations

Nonvested at March 31, 2024

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - STATUTORY

RESERVE AND RESTRICTED NET ASSETS

The Company’s PRC subsidiary, Avalon Shanghai,

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

The payment of dividends by entities organized in

China is subject to limitations, procedures and formalities.

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

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

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

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

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

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

Appropriations to the discretionary

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

The statutory reserve may be applied against prior year losses,

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

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

The Company did not make any appropriation to statutory

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

As of September

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

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

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

cash dividends.

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

the consent of a third party.

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

$ 1,006,578 , respectively.

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

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

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

Appropriations to the discretionary surplus reserve

are made at the discretion of the Board of Directors.

The statutory reserve may be applied against prior year losses, if any, and may

be used for general business expansion and production or increase in registered capital, but are not distributable as cash dividends.

The Company did not make any appropriation to statutory reserve for Avalon Shanghai during the three months ended March 31, 2024 as it

incurred net loss in the period.

As of March 31, 2024 and December 31, 2023, 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 its statutory reserve and

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

Only PRC entity’s accumulated

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

As of both March 31, 2024

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

12 – CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

to the requirements of Rule 12-04(a), 5-04(c) and 4-08(e)(3) of Regulation S-X, the condensed financial information of the parent company

shall be filed when the restricted net assets of consolidated subsidiary exceed 25 percent of consolidated net assets as of

the end of the most recently completed fiscal year.

For purposes of this test, restricted net assets of consolidated subsidiary shall

mean that amount of the Company’s proportionate share of net assets of consolidated subsidiary (after intercompany eliminations)

which as of the end of the most recent fiscal year may not be transferred to the parent company by subsidiary in the form of loans, advances

or cash dividends without the consent of a third party.

Company performed a test on the restricted net assets of consolidated subsidiary in accordance with such requirement and concluded that

it was not applicable to the Company as the restricted net assets of the Company’s PRC subsidiary did not exceed 25 % of the

consolidated net assets of the Company, therefore, the condensed financial statements for the parent company have not been required.

GLOBOCARE CORP.

shall be filed when the restricted net assets of consolidated subsidiary exceed 25 percent of consolidated net assets as of the end of

the most recently completed fiscal year.

For purposes of this test, restricted net assets of consolidated subsidiary shall mean that amount

of the Company’s proportionate share of net assets of consolidated subsidiary (after intercompany eliminations) which as of the

end of the most recent fiscal year may not be transferred to the parent company by subsidiary in the form of loans, advances or cash dividends

without the consent of a third party.

performed a test on the restricted net assets of consolidated subsidiary in accordance with such requirement and concluded that it was

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

net assets of the Company, therefore, the condensed financial statements for the parent company have not been required.

NOTE 13 - CONCENTRATIONS

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

months ended March 31, 2024 and 2023 .

Three Months Ended

Two customers, which are third party, whose outstanding

receivable accounted for 10 % or more of the Company’s total outstanding rent receivable at March 31, 2024, accounted for 72.7 % of

the Company’s total outstanding rent receivable at March 31, 2024.

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.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

13 - CONCENTRATIONS

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

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

September 30,

customers, of which, one is a related party and the other is a third party, whose outstanding receivable accounted for 10 % or more

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

outstanding rent receivable at September 30, 2023.

customers, of which, one is a related party and the other is a third party, whose outstanding receivable accounted for 10 % or more

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

outstanding rent receivable at December 31, 2022.

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

14 — SEGMENT INFORMATION

the three and nine months ended September 30, 2022, the Company operated in two reportable business segments - (1) the real property

operating segment, and (2) the medical related consulting services segment.

The Company’s reportable segments are strategic business

units that offer different services and products.

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

to the winding down of the medical related consulting services segment in 2022, the Company decided to cease all operations of this segment

and no longer has any material revenues or expenses in this segment.

As a result, commencing from the first quarter of 2023, the Company’s

chief operating decision maker no longer reviews medical related consulting services operating results.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - CONCENTRATIONS (continued)

No supplier accounted for 10% or more of the Company’s

purchase during the three months ended March 31, 2024 and 2023.

NOTE 14 – SEGMENT INFORMATION

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

1 unchanged sentence

is active in the management of Lab Services MSO.

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

reportable business segments:

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

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

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

The Company regularly

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

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

Months Ended September 30, 2023

Property Operations

Real property rental revenue

Real property operating expenses

Real property operating income

Income from equity method investment - Lab

Other operating expenses

( 1,465,751 )

( 1,538,843 )

Other (expense) income:

Interest expense

Net (loss) income

$ ( 1,809,694 )

$ ( 1,485,075 )

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14 — SEGMENT INFORMATION (continued)

Months Ended September 30, 2022

Property Operations

Related Consulting Services

Real property rental revenue

Real property operating expenses

Real property operating income

Other operating expenses

( 1,486,717 )

( 1,659,337 )

Other (expense) income:

Interest expense

( 3,303,502 )

Other income (expense)

$ ( 105,169 )

$ ( 5,302,928 )

$ ( 5,414,154 )

Months Ended September 30, 2023

Property Operations

During the three months ended March 31, 2024 and 2023, the Company operated in two reportable

business segments:

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

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

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

The Company regularly reviews

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

with respect to these reportable business segments for the three months ended March 31, 2024 and 2023 was as follows:

Three Months Ended March 31, 2024

Real property rental revenue

1 unchanged sentence

Real property operating income

Income from equity method investment - Lab

Income from equity method investment - Lab Services MSO

Other operating expenses

( 1,001,993 )

( 6,485,320 )

Other (expense) income:

5 unchanged sentences

$ ( 1,367,513 )

Months Ended September 30, 2022

Property Operations

Related Consulting Services

Three Months Ended March 31, 2023

Real property rental revenue

1 unchanged sentence

Real property operating income

Loss from equity method investment - Lab Services MSO

Other operating expenses

3 unchanged sentences

Interest expense

( 3,436,931 )

Other income (expense)

$ ( 2,764,666 )

$ ( 2,919,744 )

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

September 30,

Identifiable long-lived tangible assets at March 31, 2024 and December 31, 2023

Real property operations

Medical related consulting services

Corporate/Other

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

September 30,

United States

GLOBOCARE CORP.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

— COMMITMENTS AND CONTINGENCIES

Leases Commitment

NOTE 14 – SEGMENT

INFORMATION (continued)

Identifiable long-lived tangible assets at March 31, 2024 and December 31, 2023

United States

NOTE 15 – COMMITMENTS

AND CONTINGENCIES

Operating Leases Commitment

The Company is a party

2 unchanged sentences

Rent expense under all operating leases amounted

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

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

September 30,

to approximately $ 32,000 and $ 33,000 for the three months ended March 31, 2024 and 2023, respectively.

Supplemental cash flow

information related to leases for the three months ended March 31, 2024 and 2023 is as follows:

Three Months Ended

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

Operating cash flows paid for operating

Right-of-use assets obtained in exchange for

lease obligation:

Operating cash flows paid for operating lease

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

Operating lease

The following

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

Weighted average remaining lease

term (in years)

The following table summarizes the lease term

and discount rate for the Company’s operating lease as of March 31, 2024:

Weighted average remaining lease term (in years) 0.83

Weighted average discount rate 11.0 %

The following

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

For the Twelve-month

Period Ending September 30:

The following table summarizes the maturity of lease liabilities under

operating lease as of March 31, 2024:

For the Twelve-month Period Ending March 31:

2026 and thereafter

Total lease payments

Amount of lease payments

representing interest

Total present value of

operating lease liabilities

Current portion

Long-term portion

Venture — Avactis Biosciences Inc.

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

(“Avactis”), a Nevada corporation,

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

CAR-NK, TCR-T and others.

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

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

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

As of April 6, 2022, the Company owns 60 % of Avactis and

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

Avactis owns 100 % of the capital stock of

Avactis Nanjing Biosciences Ltd., a company incorporated in the PRC on May 8, 2020 (“Avactis Nanjing”), which only owns a

patent and is not considered an operating entity.

Company is required to contribute $ 10 million (or equivalent in RMB) in cash and/or services, which shall be contributed in tranches

based on milestones to be determined jointly by Avactis and the Company in writing subject to the Company’s cash reserves.

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

granting Avactis an exclusive right and license in China to its technology and intellectual property pertaining to CAR-T/CAR-NK/TCR-T/universal

Amount of lease payments representing interest

Total present value of operating lease liabilities (current liability)

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – COMMITMENTS

AND CONTINGENCIES (continued)

Joint Venture – Avactis Biosciences Inc.

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

(“Avactis”), a Nevada corporation, which

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

TCR-T and others.

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

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

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

As of April 6, 2022, the Company owns 60 % of Avactis and Arbele Biotherapeutics

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

Avactis owns 100 % of the capital stock of Avactis Nanjing Biosciences

Ltd., a company incorporated in the PRC on May 8, 2020 (“Avactis Nanjing”), which only owns a patent and is not considered

an operating entity.

is required to contribute $ 10 million (or equivalent in RMB) in cash and/or services, which shall be contributed in tranches based on

milestones to be determined jointly by Avactis and the Company in writing subject to the Company’s cash reserves.

Within 30 days,

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

Avactis an exclusive right and license in China to its technology and intellectual property pertaining to CAR-T/CAR-NK/TCR-T/universal

cellular immunotherapy technology and any additional technology developed in the future with terms and conditions to be mutually agreed

1 unchanged sentence

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

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

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

subject to the Company’s discretion.

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

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

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

15 — COMMITMENTS AND CONTINGENCIES (continued)

of Credit Agreement

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

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

and director of the Company.

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

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

The loans are unsecured and are not

convertible into equity of the Company.

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

loan will be payable three years from the date of issuance.

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

discretion of the related party Lender.

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

part at any time prior to maturity, without premium or penalty.

The Line of Credit Agreement includes customary events of default.

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

As of September 30, 2023, $ 850,000 was outstanding under the Line of Credit.

16 — RESTATEMENTS OF PREVIOUSLY ISSSUED FINANCIAL STATEMENTS

months ended March 31, 2023

the three months ended March 31, 2023, the Company misstated the equity method investment and income from equity method investments.

The impact of these errors was an overstatement of total assets and total equity by approximately $ 136,000 and an overstatement of income

from equity method investments of approximately $ 136,000 for the three months ended March 31, 2023.

These errors did not have any impact

on consolidated cash flow.

The Company’s March 31, 2023 financial statements have been restated for the impact of these adjustments

Condensed Consolidated Balance Sheet As of March 31, 2023

Equity method investments

$ ( 135,830 )

Accumulated deficit

$ ( 65,846,635 )

$ ( 135,830 )

$ ( 65,982,465 )

$ ( 135,830 )

Total liabilities and equity

$ ( 135,830 )

Condensed Consolidated

Statement of Operations and Comprehensive Loss for the Three Months Ended March 31, 2023

Income from equity method investments

$ ( 135,830 )

Total other expense, net

$ ( 119,678 )

$ ( 135,830 )

$ ( 255,508 )

Loss before income taxes

$ ( 2,783,914 )

$ ( 135,830 )

$ ( 2,919,744 )

$ ( 2,783,914 )

$ ( 135,830 )

$ ( 2,919,744 )

Net loss attributable to Avalon Globocare Corp.

common shareholders

$ ( 2,783,914 )

$ ( 135,830 )

$ ( 2,919,744 )

Comprehensive loss

$ ( 2,780,244 )

$ ( 135,830 )

$ ( 2,916,074 )

Comprehensive loss attributable to Avalon Globocare

common shareholders

$ ( 2,780,244 )

$ ( 135,830 )

$ ( 2,916,074 )

Net loss per common share attributable to Avalon Globocare Corp.

common shareholders:

months ended June 30, 2023

the six months ended June 30, 2023, the Company misstated the equity method investment and income from equity method investments.

impact of these errors was an overstatement of total assets and total equity by approximately $ 340,000 and an overstatement of income

from equity method investment — Lab Services MSO of approximately $ 204,000 and $ 340,000 for the three and six months ended June

30, 2023, respectively.

These errors did not have any impact on consolidated cash flow.

The Company’s June 30, 2023 financial statements

have been restated for the impact of these adjustments as follows:

Condensed Consolidated Balance Sheet As of June 30, 2023

Equity method investments, net

$ ( 339,574 )

Accumulated deficit

$ ( 68,389,948 )

$ ( 339,574 )

$ ( 68,729,522 )

$ ( 339,574 )

Total liabilities and equity

$ ( 339,574 )

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

16 — RESTATEMENTS OF PREVIOUSLY ISSSUED FINANCIAL STATEMENTS (continued)

months ended June 30, 2023 (continued)

Condensed Consolidated

Statement of Operations and Comprehensive Loss for the Three Months Ended June 30, 2023

from equity method investment - Lab Services MSO

$ ( 203,744 )

from operations

$ ( 1,864,624 )

$ ( 203,744 )

$ ( 2,068,368 )

before income taxes

$ ( 2,543,313 )

$ ( 203,744 )

$ ( 2,747,057 )

$ ( 2,543,313 )

$ ( 203,744 )

$ ( 2,747,057 )

loss attributable to Avalon Globocare Corp.

common shareholders

$ ( 2,543,313 )

$ ( 203,744 )

$ ( 2,747,057 )

Comprehensive

$ ( 2,554,324 )

$ ( 203,744 )

$ ( 2,758,068 )

Comprehensive

loss attributable to Avalon Globocare Corp.

common shareholders

$ ( 2,554,324 )

$ ( 203,744 )

$ ( 2,758,068 )

Net loss per common share attributable to Avalon Globocare Corp.

common shareholders:

Condensed Consolidated

Statement of Operations and Comprehensive Loss for the Six Months Ended June 30, 2023

from equity method investment - Lab Services MSO

$ ( 339,574 )

from operations

$ ( 4,482,121 )

$ ( 339,574 )

$ ( 4,821,695 )

before income taxes

$ ( 5,327,227 )

$ ( 339,574 )

$ ( 5,666,801 )

$ ( 5,327,227 )

$ ( 339,574 )

$ ( 5,666,801 )

loss attributable to Avalon Globocare Corp.

common shareholders

$ ( 5,327,227 )

$ ( 339,574 )

$ ( 5,666,801 )

Comprehensive

$ ( 5,334,568 )

$ ( 339,574 )

$ ( 5,674,142 )

Comprehensive

loss attributable to Avalon Globocare Corp.

common shareholders

$ ( 5,334,568 )

$ ( 339,574 )

$ ( 5,674,142 )

Net loss per common share attributable to Avalon Globocare Corp.

common shareholders:

17 — SUBSEQUENT EVENTS

Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements

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

required adjustment or disclosure in the financial statements.

2023 Convertible Note Financing

October 2023, the Company entered into securities purchase agreements with certain lenders (the “October 2023 Lenders”) and

closed on the issuance of 13.0 % senior secured convertible promissory notes in the aggregate principal amount of $ 700,000 (the “October

2023 Note”), as well as the issuance of 70,000 shares of common stock as a commitment fee and warrants for the purchase of up to

105,000 shares of the Company’s common stock.

The Company and its subsidiaries have also entered into security agreements, creating

a security interest in certain property of the Company and its subsidiaries to secure the prompt payment, performance and discharge in

full of all of the Company’s obligations under the October 2023 Note.

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 the rest of 2024.

NOTE 16 – SUBSEQUENT

Management has evaluated subsequent events through the date of the

issuance date of these financial statements.

Management is not aware of any significant events that occurred subsequent to the balance

sheet date that would have a material effect on the financial statements and would require adjustment or disclosure thereto.

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

What changed 10-Q

Item 1. Financial Statements