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Item 1. Financial Statements

2024-11-12 compared with 2024-08-19 · 1048 added, 1282 removed, 498 unchanged (82% of the section changed)

3 unchanged sentences

CONSOLIDATED BALANCE SHEETS

September 30,

CURRENT ASSETS:

21 unchanged sentences

Derivative liability

Note payable, net

Convertible note payable, net

2 unchanged sentences

Operating lease obligation - noncurrent portion

Note payable, net

Note payable, net - noncurrent portion

Loan payable - related party

4 unchanged sentences

10,000,000 shares authorized;

Series A Convertible Preferred Stock, 9,000 shares issued and outstanding at June 30, 2024 and December 31, 2023 Liquidation preference $ 9 million at June 30, 2024

Series B Convertible Preferred Stock, 11,000 shares issued and outstanding at June 30, 2024 and December 31, 2023 Liquidation preference $ 11 million at June 30, 2024

Series A Convertible Preferred Stock, 9,000 shares issued and outstanding at September 30, 2024 and December 31, 2023

Liquidation preference $ 9 million at September 30, 2024

Series B Convertible Preferred Stock, 11,000 shares issued and outstanding at September 30, 2024 and December 31, 2023

Liquidation preference $ 11 million at September 30, 2024

Common stock, $ 0.0001 par value;

490,000,000 shares authorized;

11,558,534 shares issued and 11,506,534 shares outstanding at June 30, 2024;

1,097,688 shares issued and 1,094,221 shares outstanding at September 30, 2024;

736,769 shares issued and 733,302 shares outstanding at December 31, 2023

1 unchanged sentence

common stock held in treasury, at cost;

52,000 shares at June 30, 2024 and December 31, 2023

3,467 shares at September 30, 2024 and December 31, 2023

Accumulated deficit

( 83,269,270 )

( 79,769,731 )

Statutory reserve

4 unchanged sentences

Total Liabilities and Equity

accompanying notes to the condensed consolidated financial statements.

See accompanying notes to the condensed consolidated

financial statements.

GLOBOCARE CORP.

2 unchanged sentences

For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

REAL PROPERTY RENTAL REVENUE

15 unchanged sentences

Interest expense - amortization of debt discount and debt issuance costs

( 1,115,433 )

Interest expense - other

2 unchanged sentences

Impairment of equity method investment - Epicon

Other expense

Other (expense) income

Total Other Expense, net

( 1,561,353 )

( 1,189,045 )

LOSS BEFORE INCOME TAXES

42 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

the Three and Six Months Ended June 30, 2024

GloboCare Corp.

the Three and Nine Months Ended September 30, 2024

Avalon GloboCare Corp.

Stockholders' Equity

A Preferred Stock

B Preferred Stock

Comprehensive

January 1, 2024

$ ( 522,500 )

$ ( 79,769,731 )

$ ( 231,727 )

of common stock as convertible note payable commitment fee

currency translation adjustment

loss for the three months ended March 31, 2024

( 1,367,513 )

March 31, 2024

( 81,137,244 )

of common stock as convertible note payable commitment fee

conversion feature related to convertible note payable

currency translation adjustment

loss for the three months ended June 30, 2024

( 2,132,026 )

June 30, 2024

$ ( 522,500 )

$ ( 83,269,270 )

$ ( 231,941 )

Series A Preferred Stock Series B Preferred Stock Common Stock Treasury Stock Accumulated

Additional Other

Number of Number of Number of Paid-in Number of Accumulated Statutory Comprehensive Noncontrolling Total

Shares Amount Shares Amount Shares Amount Capital Shares Amount Deficit Reserve Loss Interest Equity

Balance, January 1, 2024 9,000 $ 9,000,000 11,000 $ 11,000,000 736,769 $ 74 $ 67,886,082 ( 3,467 ) $ ( 522,500 ) $ ( 79,769,731 ) $ 6,578 $ ( 231,727 ) $ - $ 7,368,776

Issuance of common stock as convertible note payable commitment fee - - - - 7,000 1 41,999 - - - - - - 42,000

Stock-based compensation - - - - - - 13,533 - - - - - - 13,533

Foreign currency translation adjustment - - - - - - - - - - - ( 2,920 ) - ( 2,920 )

Net loss for the three months ended March 31, 2024 - - - - - - - - - ( 1,367,513 ) - - - ( 1,367,513 )

Balance, March 31, 2024 9,000 9,000,000 11,000 11,000,000 743,769 75 67,941,614 ( 3,467 ) ( 522,500 ) ( 81,137,244 ) 6,578 ( 234,647 ) - 6,053,876

Issuance of common stock as convertible note payable commitment fee - - - - 26,800 2 278,544 - - - - - - 278,546

Stock-based compensation - - - - - - 12,256 - - - - - - 12,256

Beneficial conversion feature related to convertible note payable - - - - - - 201,595 - - - - - - 201,595

Foreign currency translation adjustment - - - - - - - - - - - 2,706 - 2,706

Net loss for the three months ended June 30, 2024 - - - - - - - - - ( 2,132,026 ) - - - ( 2,132,026 )

Balance, June 30, 2024 9,000 9,000,000 11,000 11,000,000 770,569 77 68,434,009 ( 3,467 ) ( 522,500 ) ( 83,269,270 ) 6,578 ( 231,941 ) - 4,416,953

Sale of common stock, net - - - - 281,843 28 2,544,283 - - - - - - 2,544,311

To correct beneficial conversion feature related to convertible note payable - - - - - - ( 201,595 ) - - - - - - ( 201,595

Issuance of common stock for services - - - - 45,153 5 306,345 - - - - - - 306,350

Stock-based compensation - - - - - - 11,542 - - - - - - 11,542

Shares issued for adjustments for 1:15 reverse split - - - - 123 - - - - - - - - -

Foreign currency translation adjustment - - - - - - - - - - - 3,043 - 3,043

Net loss for the three months ended September 30, 2024 - - - - - - - - - ( 1,679,200 ) - - - ( 1,679,200 )

Balance, September 30, 2024 9,000 $ 9,000,000 11,000 $ 11,000,000 1,097,688 $ 110 $ 71,094,584 ( 3,467 ) $ ( 522,500 ) $ ( 84,948,470 ) $ 6,578 $ ( 228,898 ) $ - $ 5,401,404

accompanying notes to the condensed consolidated financial statements.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

the Three and Six Months Ended June 30, 2023

GloboCare Corp.

the Three and Nine Months Ended September 30, 2023

Avalon GloboCare Corp.

Stockholders' Equity

A Preferred Stock

B Preferred Stock

Comprehensive

January 1, 2023

$ ( 522,500 )

$ ( 63,062,721 )

$ ( 213,137 )

of Series B Convertible Preferred Stock for equity method investment

of common stock for services

currency translation adjustment

loss for the three months ended March 31, 2023

( 2,919,744 )

March 31, 2023

( 65,982,465 )

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

( 2,747,057 )

June 30, 2023

$ ( 522,500 )

$ ( 68,729,522 )

$ ( 220,478 )

Series A Preferred Stock Series B Preferred Stock Common Stock Treasury Stock Accumulated

Additional Other

Number of Number of Number of Paid-in Number of Accumulated Statutory Comprehensive Non-controlling Total

Shares Amount Shares Amount Shares Amount Capital Shares Amount Deficit Reserve Loss Interest Equity

Balance, January 1, 2023 9,000 $ 9,000,000 - $ - 667,572 $ 67 $ 65,950,661 ( 3,467 ) $ ( 522,500 ) $ ( 63,062,721 ) $ 6,578 $ ( 213,137 ) $ - $ 11,158,948

Issuance of Series B Convertible Preferred Stock for equity method investment - - 11,000 11,000,000 - - - - - - - - - 11,000,000

Issuance of common stock for services - - - - 13,515 1 463,375 - - - - - - 463,376

Stock-based compensation - - - - - - 68,262 - - - - - - 68,262

Foreign currency translation adjustment - - - - - - - - - - - 3,670 - 3,670

Net loss for the three months ended March 31, 2023 - - - - - - - - - ( 2,919,744 ) - - - ( 2,919,744 )

Balance, March 31, 2023 9,000 9,000,000 11,000 11,000,000 681,087 68 66,482,298 ( 3,467 ) ( 522,500 ) ( 65,982,465 ) 6,578 ( 209,467 ) - 19,774,512

To correct shares issued for adjustments for 1:10 reverse split - - - - 3,333 - - - - - - - - -

Issuance of common stock for services - - - - 10,573 1 536,279 - - - - - - 536,280

Issuance of common stock as convertible note payable commitment fee - - - - 5,000 1 146,999 - - - - - - 147,000

Stock-based compensation - - - - - - 112,015 - - - - - - 112,015

Foreign currency translation adjustment - - - - - - - - - - - ( 11,011 ) - ( 11,011 )

Net loss for the three months ended June 30, 2023 - - - - - - - - - ( 2,747,057 ) - - - ( 2,747,057 )

Balance, June 30, 2023 9,000 9,000,000 11,000 11,000,000 699,993 70 67,277,591 ( 3,467 ) ( 522,500 ) ( 68,729,522 ) 6,578 ( 220,478 ) - 17,811,739

Sale of common stock, net - - - - 30,442 3 414,393 - - - - - - 414,396

Issuance of common stock as convertible note payable commitment fee - - - - 1,667 - 35,500 - - - - - - 35,500

Stock-based compensation - - - - - - 54,653 - - - - - - 54,653

Foreign currency translation adjustment - - - - - - - - - - - ( 8,685 ) - ( 8,685 )

Net loss for the three months ended September 30, 2023 - - - - - - - - - ( 1,485,075 ) - - - ( 1,485,075 )

Balance, September 30, 2023 9,000 $ 9,000,000 11,000 $ 11,000,000 732,102 $ 73 $ 67,782,137 ( 3,467 ) $ ( 522,500 ) $ ( 70,214,597 ) $ 6,578 $ ( 229,163 ) $ - $ 16,822,528

accompanying notes to the condensed consolidated financial statements.

2 unchanged sentences

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

For the Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

1 unchanged sentence

$ ( 7,151,876 )

Adjustments to reconcile net loss to net cash used in

operating activities:

Adjustments to reconcile net loss to

net cash used in operating activities:

Change in straight-line rent receivable

1 unchanged sentence

Stock-based compensation and service expense

Loss from equity method investments

Loss (income) from equity method investments

Distribution of earnings from equity method investment

Impairment of equity method investment

Impairment of equity method investment - Epicon

Amortization of debt issuance costs and debt discount

6 unchanged sentences

Accrued liabilities and other payables

( 1,176,402 )

Accrued liabilities and other payables - related parties

16 unchanged sentences

Advance from pending sale of noncontrolling interest in subsidiary

Proceeds from equity offering

Disbursements for equity offering costs

NET CASH PROVIDED BY FINANCING ACTIVITIES

EFFECT OF EXCHANGE RATE ON CASH

NET DECREASE IN CASH

NET INCREASE (DECREASE) IN CASH

( 1,649,139 )

12 unchanged sentences

Common stock issued as convertible notes payable commitment fee

Beneficial conversion feature related to convertible note payable

Convertible debts issuance costs in accrued liabilities

Deferred financing costs in accrued liabilities

Equity method investment payable paid by a related party

Reclassification of deferred offering costs

accompanying notes to the condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION

AND NATURE OF OPERATIONS

Avalon GloboCare Corp.

(the “Company”

or “ALBT”) 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

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.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 – ORGANIZATION AND NATURE OF OPERATIONS

GloboCare Corp.

(the “Company” or “ALBT”) was incorporated under the laws of the State of Delaware on July 28,

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 results.

The Company also provides laboratory services, offering a broad portfolio of

diagnostic tests, including drug testing, toxicology, and a broad array of test services, from general bloodwork to anatomic pathology,

and urine toxicology.

May 18, 2015, Avalon Healthcare System, Inc.

(“AHS”) was incorporated under the laws of the State of Delaware.

owns 100 % of the capital stock of Avalon (Shanghai) Healthcare Technology Co., Ltd.

(“Avalon Shanghai”), which is a wholly

foreign-owned enterprise organized under the laws of the People’s Republic of China (“PRC”).

Avalon Shanghai was incorporated

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

AHS owns 100 %

of the capital stock of Avalon (Shanghai) Healthcare Technology Co., Ltd.

(“Avalon Shanghai”), which is a wholly foreign-owned

enterprise organized under the laws of the People’s Republic of China (“PRC”).

Avalon Shanghai was incorporated on

April 29, 2016, and was engaged in medical related consulting services for customers.

Due to the winding down of the medical related

10 unchanged sentences

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

As of June 30, 2024, the occupancy rate of the building is 89.4 %.

September 30, 2024, the occupancy rate of the building is 98.5 %.

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

(“Avactis”), a Nevada corporation, which

is a patent holding company.

(“Avactis”), a Nevada corporation,

which is a patent holding company.

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.

Currently, Avactis and Avactis Nanjing are dormant and are in process of being dissolved.

On October 14, 2022, the Company formed a wholly

owned subsidiary, Avalon Laboratory Services, Inc.

(“Avalon Lab”), a Delaware company.

On February 9, 2023, Avalon Lab purchased

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.

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.

Avactis and Avactis Nanjing are dormant and are in process of being dissolved.

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 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.

May 1, 2024, the Company formed a wholly owned subsidiary, Q&A Distribution LLC (“Q&A Distribution”), a Texas company.

AVALON GLOBOCARE CORP.

Q&A Distribution is engaged in distribution of KetoAir device.

GLOBOCARE CORP.

AND SUBSIDIARIES

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 June 30, 2024 are as follows:

Name of Subsidiary Place and Date of

Incorporation Percentage of

Ownership Principal Activities

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1 – ORGANIZATION AND NATURE OF OPERATIONS (continued)

of the Company’s subsidiaries which are included in these condensed consolidated financial statements as of September 30, 2024

are as follows:

Name of Subsidiary Place and Date of Incorporation Percentage of Ownership Principal Activities

Avalon Healthcare System, Inc.

24 unchanged sentences

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

Q&A Distribution LLC

Distribution LLC

(“Q&A Distribution”)

1 unchanged sentence

2 – BASIS OF PRESENTATION AND GOING CONCERN CONDITION

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 (the “SEC”) 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.

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 (the “SEC”)

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.

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, 2023 filed with the SEC on April

AVALON 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 SEC on April 15, 2024.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

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 unaudited 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

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

$7, 880,000 at June 30, 2024 and had incurred recurring net losses and generated negative cash flow from operating activities

of approximately $ 3,500,000 and $ 1,998,000 for the six months ended June 30, 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 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 Quarterly Report on Form

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 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, New Jersey.

These unaudited 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 unaudited condensed consolidated financial

statements, the Company had a working capital deficit of approximately $ 10,935,000 at September 30, 2024 and had incurred recurring net

losses and generated negative cash flow from operating activities of approximately $ 5,179,000 and $ 3,891,000 for the nine months ended

September 30, 2024, 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 40 % interest in Lab Services

MSO and obtaining additional financing to fund future obligations and pay liabilities arising from normal business operations.

the current cash balance cannot be projected to cover the operating expenses for the next twelve months from the release date of this

Quarterly Report on Form 10-Q.

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

The ability of the Company

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

generate significant revenues.

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

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

The Company plans to raise 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

The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital, implement

its business plan, and generate significant revenues.

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

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

plans to raise 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

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 during the three and six months ended June 30, 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, beneficial conversion

feature 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.

Accordingly, the actual results could differ significantly from

those estimates.

Significant estimates during

the three and nine months ended September 30, 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.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

Fair Value of Financial Instruments and Fair Value Measurements

The Company adopted the

guidance of the Financial Accounting Standards Board’s (“FASB”) 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:

● Level 1-Inputs are unadjusted quoted prices in active markets

for identical assets or liabilities available at the measurement date.

● Level 2-Inputs are unadjusted quoted prices for similar assets

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

other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

● Level 3-Inputs are unobservable inputs which reflect the

reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Value of Financial Instruments and Fair Value Measurements

Company adopted the guidance of the Financial Accounting Standards Board’s (“FASB”) 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:

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

available at the measurement date.

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

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

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

by observable market data.

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

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

on the best available information.

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 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.

and liabilities measured at fair value on a recurring basis.

Certain assets

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

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

These assets and liabilities include derivative liability.

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

The table below reflects the activity of derivative liability measured at fair value for the six months ended June 30, 2024:

Certain assets and liabilities are measured at fair value on

a recurring basis.

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

These assets and liabilities include

derivative liability.

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

The table below reflects the activity

of derivative liability measured at fair value for the nine months ended September 30, 2024:

Balance of derivative liability as of January 1, 2024

1 unchanged sentence

Gain from change in the fair value of derivative liability

Balance of derivative liability as of June 30, 2024

“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 instruments.

Cash and Cash Equivalents

At June 30, 2024 and

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

United States

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 June 30, 2024 and December 31, 2023.

AVALON GLOBOCARE CORP.

Balance of derivative liability as of September 30, 2024

and liabilities measured at fair value on a nonrecurring basis.

Certain assets and liabilities are measured at fair value

on a nonrecurring basis.

These assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value

adjustments in certain circumstances.

These assets and liabilities include equity method investment that is written down to fair value

when it is impaired.

method investment in Laboratory Services MSO, LLC The factors used to determine fair value are subject to management’s

judgment and expertise.

These assumptions represent Level 3 inputs.

Impairment of equity method investment in Laboratory Services MSO,

LLC for the nine months ended September 30, 2024 was $ 259,579 .

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

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.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

and Cash Equivalents

September 30, 2024 and December 31, 2023, the Company’s cash balances by geographic area were as follows:

September 30, 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, 2024 and December 31, 2023.

Risk and Uncertainties

Company 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 June 30, 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

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 influence.

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.

At September 30, 2024, the

Company’s cash balances in United States bank accounts had approximately $ 514,000 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 Company

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 influence.

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.

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

or changes in circumstances indicate that recorded value may not be recoverable.

If the Company considers any decline to be other than

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

would be recorded to estimated fair value.

Impairment of equity method investment amounted to $ 259,579 and $ 0 for the nine months ended

September 30, 2024 and 2023, respectively.

See Note 5 for discussion of equity method investments.

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.

Beneficial Conversion Feature and Warrants

The Company evaluates the conversion feature of

convertible debt instruments to determine whether the conversion feature is beneficial as described in ASC 470-20, Debt with Conversion

and Other Options.

The Company records a beneficial conversion feature (“BCF”) related to the issuance of convertible debt

that has conversion features at fixed or adjustable rates that are in-the-money when issued and records the relative fair value of any

warrants issued with those instruments.

The BCF for the convertible instruments is recognized and measured by allocating a portion of

the proceeds to the warrants and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic value of the

conversion features, both of which are credited to additional paid-in capital.

The Company calculates the fair value of warrants with

the convertible instruments using the Black-Scholes valuation model.

Under these guidelines, the Company first allocates

the value of the proceeds received from a convertible debt transaction between the convertible debt instrument and any other detachable

instruments included in the transaction (such as warrants) on a relative fair value basis.

A BCF is then measured as the intrinsic value

of the conversion option at the commitment date, representing the difference between the effective conversion price and the Company’s

stock price on the commitment date multiplied by the number of shares into which the debt instrument is convertible.

The allocated value

of the BCF and warrants are recorded as a debt discount and accreted over the expected term of the convertible debt as interest expense.

If the intrinsic value of the BCF is greater than the proceeds allocated to the convertible debt instrument, the amount of the discount

assigned to the BCF is limited to the amount of the proceeds allocated to the convertible debt instrument.

Real Property Rental Revenue

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

Rental income

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.

AVALON GLOBOCARE CORP.

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.

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 rent receivable on the condensed consolidated balance sheets.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

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.

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.

Per Share Data

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.

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

3 unchanged sentences

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

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 six months

ended June 30, 2024 and 2023, potentially dilutive common shares consist of the common shares issuable upon the conversion of convertible

preferred stock and convertible notes (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:

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, 2024 and 2023, potentially dilutive common shares consist of the common shares issuable upon the conversion

of convertible preferred stock and convertible notes (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:

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Options to purchase common stock

4 unchanged sentences

Potentially dilutive securities

(*) Assumed the Series A convertible preferred stock was converted

into shares of common stock of the Company at a conversion price of $ 10.00 per share .

(**) 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.

the Series A convertible preferred stock was converted into shares of common stock of the Company at a conversion price of $ 150.00 per

the Series B convertible preferred stock was converted into shares of common stock of the Company at a conversion price of $ 56.70 per

(***) 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 and

$ 0.75 per share for the three and six months ended June 30, 2024.

Assumed the convertible note was converted into shares of common

stock of the Company at a conversion price of $ 4.50 per share for the three and six months ended June 30, 2023.

the convertible notes were converted into shares of common stock of the Company at a conversion price of $ 67.50 and $ 22.50 and $ 15.00

and $ 11.25 per share for the three and nine months ended September 30, 2024.

the convertible notes were converted into shares of common stock of the Company at a conversion price of $ 67.50 per share for the three

and nine months ended September 30, 2023.

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.

AVALON GLOBOCARE CORP.

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.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

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 and six months ended June 30, 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 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.

Recent Accounting Standards

In August 2020,

the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic

470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40), to simplify accounting for certain

financial instruments.

ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion

features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts

in an entity’s own equity.

The new standard also introduces additional disclosures for convertible debt and freestanding instruments

that are indexed to and settled in an entity’s own equity.

ASU 2020-06 amends the diluted earnings per share guidance, including

the requirement to use the if-converted method for all convertible instruments.

ASU 2020-06 is effective for fiscal years beginning after

December 15, 2023, including interim periods within those fiscal years, with early adoption permitted.

The adoption of ASU 2020-06 did

not have a material effect on the Company’s consolidated financial statements and related disclosures.

2023, the FASB ASU 2023-09, Income Taxes (Topic 740):

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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.

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, 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 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.

The Company effectuated a 1-for-15 reverse stock split of its outstanding

shares of common stock on October 28, 2024.

The reverse split did not change the par value of common stock.

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

In August 2020, the FASB issued

Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives

and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40), to simplify accounting for certain financial instruments.

ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible

instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s

The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed

to and settled in an entity’s own equity.

ASU 2020-06 amends the diluted earnings per share guidance, including the requirement

to use the if-converted method for all convertible instruments.

ASU 2020-06 is effective for fiscal years beginning after December 15,

2022, including interim periods within those fiscal years, with early adoption permitted.

The adoption of ASU 2020-06 did not have a material

effect on the Company’s consolidated financial statements and related disclosures.

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounting Standards (continued)

December 2023, the FASB 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.

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

6 unchanged sentences

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 June 30, 2024 and December 31, 2023, prepaid

expense and other current assets consisted of the following:

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, 2024 and December 31, 2023, prepaid expense and other current assets consisted of the following:

September 30,

Advance to supplier

6 unchanged sentences

Due from broker

AVALON GLOBOCARE CORP.

5 – EQUITY METHOD INVESTMENTS

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 Lab, SCBC Holdings LLC (the “Seller”), the Zoe Family Trust,

Bryan Cox and Sarah Cox as individuals (each an “Owner” and collectively, the “Owners”), and Lab Services MSO.

to the terms and conditions set forth in the Amended MIPA, Avalon Lab acquired from the Seller, 40 % of the issued and outstanding equity

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

The consideration paid by Avalon Lab 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.

The Series B Preferred Stock is convertible into shares of the Company’s common stock at a conversion price per share equal to

$ 56.70 , which approximated the market price at the date of closing, or an aggregate of 194,004 shares of the Company’s common stock,

which are subject to a lock-up period and restrictions on sale.

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.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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 Lab, SCBC Holdings LLC (the “Seller”), the Zoe Family Trust, Bryan Cox and Sarah Cox as individuals (each

an “Owner” and collectively, the “Owners”), and Lab Services MSO.

Pursuant to the terms and conditions set forth

in the Amended MIPA, Avalon Lab acquired from the Seller, 40 % of the issued and outstanding equity interests of Lab Services MSO (the

“Purchased Interests”).

The consideration paid by Avalon Lab 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.

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 , 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.

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.

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5 – EQUITY METHOD INVESTMENTS (continued)

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).

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.

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.

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.

three months ended June 30, 2024 and 2023, amortization expense of these intangible assets amounted to $ 166,733 and $ 203,744 , respectively,

which was included in (loss) income from equity method investment — Lab Services MSO in the accompanying condensed consolidated

statements of operations and comprehensive loss.

For the six months ended June 30, 2024 and for the period from February 9, 2023 (date

of investment) through June 30, 2023, amortization expense of these intangible assets amounted to $ 333,466 and $ 339,574 , respectively,

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 September 30, 2024 and 2023, amortization expense of these intangible assets amounted to $ 166,733 and $ 203,744 , respectively, which

was included in (loss) income from equity method investment — Lab Services MSO in the accompanying condensed consolidated statements

of operations and comprehensive loss.

For the nine months ended September 30, 2024 and for the period from February 9, 2023 (date of

investment) through September 30, 2023, amortization expense of these intangible assets amounted to $ 500,199 and $ 543,318 , respectively,

which was included in (loss) income 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.

Goodwill 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 June 30, 2024 and 2023, the Company’s share of Lab Services MSO’s net loss was $ 162,604 and the Company’s share

of Lab Services MSO’s net income was $ 104,651 , respectively, which was included in (loss) income from equity method investment —

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

For the six months ended

June 30, 2024 and for the period from February 9, 2023 (date of investment) through June 30, 2023, the Company’s share of Lab Services

MSO’s net income was $ 111,598 and $ 15,560 , respectively, which was included in (loss) income from equity method investment

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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – EQUITY METHOD INVESTMENTS

In the six months ended

June 30, 2024, activity recorded for the Company’s equity method investment in Lab Services MSO is summarized in the following

represents the excess of the purchase price paid over the fair value of net assets acquired in the business acquisition of Lab Services

MSO incurred on February 9, 2023.

Goodwill is not amortized but is tested for impairment at least once annually, or more frequently if

events or changes in circumstances indicate that the asset might be impaired.

September 2024, the Company assessed its equity method investment in Laboratory Services MSO, LLC for any impairment and concluded that

there were indicators of impairment as of September 30, 2024.

The Company calculated that the estimated undiscounted cash flows of goodwill

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

The Company has recognized an impairment loss

of $ 259,579 related to the equity method investment for the nine months ended September 30, 2024.

the three months ended September 30, 2024 and 2023, the Company’s share of Lab Services MSO’s net loss was $ 21,597 and $ 558,244 ,

respectively, which was included in (loss) 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, 2024 and for 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 $ 90,001 and $ 913,378 , respectively, which was included in (loss) income

from equity method investment — Lab Services MSO in the accompanying condensed consolidated statements of operations and comprehensive

the nine months ended September 30, 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

2 unchanged sentences

Distribution of earnings from equity investment

Equity investment carrying amount at June 30, 2024

As of June 30, 2024, the Company’s carrying

value of the identified intangible assets and goodwill which are included in the equity investment carrying amount was $ 9,059,178 and

Impairment of goodwill

Equity investment carrying amount at September 30, 2024

of September 30, 2024, the Company’s carrying value of the identified intangible assets and goodwill which are included in the

equity investment carrying amount was $ 8,892,445 and $ 0 , 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.

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.

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5 – EQUITY METHOD INVESTMENTS (continued)

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

September 30,

Current assets

2 unchanged sentences

Noncurrent liabilities

September 30,

(Date of Investment)

(Loss) income from operation

September 30,

Income (loss) from operation

Net (loss) income

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 the Company’s common stock, 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 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 were convertible into shares of common stock of the Company at a conversion price of $ 4.50

per share unless the Company failed to make an amortization payment when due, in which case the conversion price would 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 .

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 the Company’s common stock, as well as the issuance of 5,000 shares of common stock as

a commitment fee and warrants for the purchase of 15,366 shares of common stock of the Company.

The Company and its subsidiaries 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 were convertible into shares of common stock of the Company at a conversion price

of $ 67.50 per share unless the Company failed to make an amortization payment when due, in which case the conversion price would be the

lower of $ 67.50 or the trading price of the shares, subject to a floor of $ 22.50 .

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 8,333 shares of common stock with an exercise

price of $ 4.50 exercisable until the five-year anniversary of May 23, 2023 (“First Warrant”), (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 (“Second Warrant”).The

Second Warrant was never fair valued and was 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.

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.

AVALON GLOBOCARE CORP.

price of $ 67.50 exercisable until the five-year anniversary of May 23, 2023 (“First Warrant”), (ii) a warrant to purchase

7,033 shares of common stock with an exercise price of $ 48.00 exercisable until the five-year anniversary of May 23, 2023 (“Second

Warrant”).The Second Warrant was never fair valued and was cancelled and extinguished against payment of the May 2023 Convertible

Note, and (iii) 5,000 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 was obligated to make amortization payments in cash to Mast Hill toward the repayment of the May 2023 Convertible Note, as described

in the May 2023 Convertible Note.

As of September 30, 2024, the May 2023 Convertible Note was repaid in full.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6 – CONVERTIBLE NOTE PAYABLE (continued)

May 2023 Convertible

Note (continued)

The Company was obligated

to make amortization payments in cash to Mast Hill toward the repayment of the May 2023 Convertible Note, as described in the May 2023

2023 Convertible Note

As of June 30, 2024, the May 2023 Convertible Note was repaid in full.

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 was capitalized and had been amortized into interest expense over the term of the May 2023 Convertible Note.

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

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

under certain circumstances.

Through life of the May 2023 Convertible Note, management determined the probability of failing to make an

amortization payment when due was remote and as such the estimated fair value of the 105,500 warrants with an exercise price of $ 3.20 ,

which warrant was cancelled and extinguished against payment of the May 2023 Convertible Note, was 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 were 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 were accounted for as derivative liability.

The remainder of the proceeds were allocated to the debt instrument portion of the

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, through

life of the May 2023 Convertible Note, management determined the probability of failing to make an amortization payment when due was remote

and as such the estimated fair value of the embedded conversion feature was 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 had been amortized over the term of the May 2023 Convertible Note.

For the three months ended June 30, 2024 and 2023,

amortization of debt discount and debt issuance costs related to the May 2023 Convertible Note amounted to $ 86,489 and $ 44,715 , 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 six months ended June 30, 2024 and 2023,

amortization of debt discount and debt issuance costs related to the May 2023 Convertible Note amounted to $ 217,693 and $ 44,715 ,

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 June 30, 2024 and 2023,

interest expense related to the May 2023 Convertible Note amounted to $ 6,981 and $ 20,836 , respectively, which have been included

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

For the six months ended June 30, 2024 and 2023,

interest expense related to the May 2023 Convertible Note amounted to $ 36,774 and $ 20,836 , respectively, which have been included

in 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)

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 the Company’s common stock, 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 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 were convertible into shares of common stock of the Company at a conversion price of $ 4.50

per share unless the Company failed to make an amortization payment when due, in which case the conversion price would 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, 2023, the Company issued (i) a warrant to purchase 41,665 shares of common stock with an exercise price of $ 4.50 exercisable

until the five-year anniversary of July 6, 2023 (“First Warrant”), (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 (“Second Warrant”).

The Second Warrant was never fair valued and was cancelled and extinguished against payment of the July 2023 Convertible Note, and (iii) 25,000 shares

of common stock as a commitment fee for the purchase of the July 2023 Convertible Note, which were earned in full as of July 6, 2023.

On July 6, 2023, the Company delivered such duly executed July 2023 Convertible Note, warrants and common stock to Firstfire against delivery

of such purchase price.

The Company was obligated

to make amortization payments in cash to Firstfire toward the repayment of the July 2023 Convertible Note, as described in the July 2023

Convertible Note.

As of June 30, 2024, the July 2023 Convertible Note was repaid in full.

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 was capitalized and had been amortized into interest expense over the term of the July 2023 Convertible Note.

Based upon the Company’s analysis of the

criteria contained in ASC 815, the Company determined that all the warrants issued to Firstfire and a third party as a finder’s

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

life of the July 2023 Convertible Note, management determined the probability of failing to make an amortization payment when due was

remote and as such the estimated fair value of the 35,165 warrants with an exercise price of $ 3.20 , which warrant was cancelled

and extinguished against payment of the July 2023 Convertible Note, was zero.

Accordingly, the fair value of the 44,998 warrants

with an exercise price of $ 4.50 exercisable until the five-year anniversary of July 6, 2023 was classified as a derivative liability

on July 6, 2023.

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

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

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

In accordance with ASC 470-20-25-2, proceeds from

the sale of a debt instrument with stock purchase warrants were 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 were accounted for as derivative liability.

The remainder of the proceeds were allocated to the debt instrument portion of the

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, through life of the July 2023 Convertible Note, management determined the probability of

failing to make an amortization payment when due was remote and as such the estimated fair value of the embedded conversion feature was

The Company recorded a total debt discount of

$ 89,191 related to the original issue discount, common shares issued and warrants issued to Firstfire, which had been amortized over

the term of the July 2023 Convertible Note.

For the three and six months ended June 30, 2024,

amortization of debt discount and debt issuance costs related to the July 2023 Convertible Note amounted to $ 43,572 and $ 84,420 ,

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.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – CONVERTIBLE NOTE PAYABLE

July 2023 Convertible

Note (continued)

For the three and six months ended June 30, 2024,

interest expense related to the July 2023 Convertible Note amounted to $ 5,122 and $ 18,123 , respectively, which have been included

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

Convertible Note

On October 9, 2023, the Company entered into securities

purchase agreements with Mast Hill and Firstfire for the issuance of 13.0 % senior secured promissory notes in the aggregate principal

amount of $ 700,000 (collectively, the “October 2023 Convertible Note”) convertible into shares of the Company’s

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 the Company’s

common stock, as well as the issuance of 1,667 shares of common stock as a commitment fee and warrants for the purchase of 5,122 shares

of common stock of the Company.

The Company and its subsidiaries also 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 were convertible into shares of common stock of the Company at a conversion price of $ 1.50 per share unless the Company failed to

make an amortization payment when due, in which case the conversion price would 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 (“First Warrant”), (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 (“Second Warrant”).

The Second Warrant was never fair valued and was 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

The Company and its subsidiaries 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 were

convertible into shares of common stock of the Company at a conversion price of $ 67.50 per share unless the Company failed to make an

amortization payment when due, in which case the conversion price would be the lower of $ 67.50 or the trading price of the shares, subject

to a floor of $ 22.50 .

FirstFire acquired the July 2023 Convertible Note with principal amount

of $ 500,000 and paid the purchase price of $ 475,000 after an original issue discount of $ 25,000 .

On July 6, 2023, the Company issued (i)

a warrant to purchase 2,778 shares of common stock with an exercise price of $ 67.50 exercisable until the five-year anniversary of July

6, 2023 (“First Warrant”), (ii) a warrant to purchase 2,344 shares of common stock with an exercise price of $ 48.00 exercisable

until the five-year anniversary of July 6, 2023 (“Second Warrant”).

The Second Warrant was never fair valued and was cancelled

and extinguished against payment of the July 2023 Convertible Note, and (iii) 1,667 shares of common stock as a commitment fee for the

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

On July 6, 2023, the Company delivered such

duly executed July 2023 Convertible Note, warrants and common stock to FirstFire against delivery of such purchase price.

The Company was obligated to make amortization payments in cash to

FirstFire toward the repayment of the July 2023 Convertible Note, as described in the July 2023 Convertible Note.

As of September 30,

2024, the July 2023 Convertible Note was repaid in full.

Convertible Note

On October 9, 2023, the Company entered into securities purchase agreements

with Mast Hill and FirstFire for the issuance of 13.0 % senior secured promissory notes in the aggregate principal amount of $ 700,000 (collectively,

the “October 2023 Convertible Note”) convertible into shares of the Company’s common stock, as well as the issuance

of 4,666 shares of common stock as a commitment fee and warrants for the purchase of 12,834 shares of common stock of the Company.

Company and its subsidiaries also 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 were convertible into shares

of common stock of the Company at a conversion price of $ 22.50 per share unless the Company failed to make an amortization payment when

due, in which case the conversion price would be the lower of $ 22.50 or the market price (as defined in the October 2023 Convertible Note)

of the shares.

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 3,500 shares of common stock with an exercise

price of $ 37.50 exercisable until the five-year anniversary of October 9, 2023 (“First Warrant”), (ii) a warrant to purchase

2,917 shares of common stock with an exercise price of $ 27.00 exercisable until the five-year anniversary of October 9, 2023 (“Second

The Second Warrant was never fair valued and was cancelled and extinguished against payment of the October 2023 Convertible

Note, and (iii) 2,333 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.

1 unchanged sentence

common stock to Mast Hill against delivery of such purchase price.

The Company was obligated to make amortization

payments in cash to Mast Hill toward the repayment of the October 2023 Convertible Note, as described in the October 2023 Convertible

As of June 30, 2024, the October 2023 Convertible Note was repaid in full.

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 was 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.

Company was obligated to make amortization payments in cash to Firstfire toward the repayment of the October 2023 Convertible Note, as

Company was obligated to make amortization payments in cash to Mast Hill toward the repayment of the October 2023 Convertible Note, as

described in the October 2023 Convertible Note.

As of June 30, 2024, the October 2023 Convertible Note was repaid in full.

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 was capitalized and had been amortized into interest expense over the term of the October 2023 Convertible

AVALON GLOBOCARE CORP.

As of September 30, 2024, the October 2023 Convertible Note was repaid in full.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – CONVERTIBLE

NOTE PAYABLE (continued)

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6 – CONVERTIBLE NOTE PAYABLE (continued)

Convertible Note (continued)

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.

Through life of the October 2023 Convertible Note, management determined the probability

of failing to make an amortization payment when due was remote and as such the estimated fair value of the 87,500 warrants with

an exercise price of $ 1.80 , which warrant was cancelled and extinguished against payment of the October 2023 Convertible Note, was 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 assumptions:

stock price of $ 0.77 , volatility of 89.70 %, risk-free

rate of 4.75 %, annual dividend yield of 0 % and expected life of 5 years.

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 were accounted for as derivative liability.

The remainder of the proceeds were 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, through life of the October 2023 Convertible Note, management determined the probability

of failing to make an amortization payment when due was remote and as such the estimated fair value of the embedded conversion feature

The Company 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 had been

amortized over the term of the October 2023 Convertible Note.

For the three and six months ended June 30, 2024,

amortization of debt discount and debt issuance costs related to the October 2023 Convertible Note amounted to $ 116,717 and $ 172,741 ,

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 and six months ended June 30, 2024,

interest expense related to the October 2023 Convertible Note amounted to $ 14,036 and $ 36,724 , respectively, which have been included

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

March 2024 Convertible Note

On March 7, 2024, the

Company entered into securities purchase agreements with Mast Hill 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 the Company’s

common stock, 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 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

were convertible into shares of common stock of the Company at a conversion price of $ 1.00 per share unless the Company failed to make

an amortization payment when due, in which case the conversion price would 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 (“First Warrant”), (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 (“Second Warrant”).

The Second Warrant was never fair valued and was 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.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – CONVERTIBLE

NOTE PAYABLE (continued)

March 2024 Convertible Note (continued)

The Company was obligated to make amortization

payments in cash to Mast Hill toward the repayment of the March 2024 Convertible Note, as described in the March 2024 Convertible Note.

As of June 30, 2024, the March 2024 Convertible Note was repaid in full.

In connection with the issuance of the March 2024

Convertible Note, the Company incurred debt issuance costs of $ 99,379 (including the issuance of 10,500 warrants as a finder’s

fee) which was capitalized and had been amortized into interest expense over the term of the March 2024 Convertible Note.

Based upon the Company’s analysis of the

criteria contained in ASC 815, the Company determined that all the warrants issued to Mast Hill and a third party as a finder’s

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

life of the March 2024 Convertible Note, management determined the probability of failing to make an amortization payment when due was

remote and as such the estimated fair value of the 121,154 warrants with an exercise price of $ 1.30 , which warrant was cancelled

and extinguished against payment of the March 2024 Convertible Note, was 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.

The portion of the proceeds allocated to the

warrants were accounted for as derivative liability.

The remainder of the proceeds were allocated to the debt instrument portion of the

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, through life of the March 2024 Convertible Note, management determined the probability

of failing to make an amortization payment when due was remote and as such the estimated fair value of the embedded conversion feature

The Company recorded a total debt discount of

$ 97,374 related to the original issue discount, common shares issued and warrants issued to Mast Hill, which had been amortized over

the term of the March 2024 Convertible Note.

For the three and six months ended June 30, 2024,

amortization of debt discount and debt issuance costs related to the March 2024 Convertible Note amounted to $ 182,440 and $ 196,753 ,

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 and six months ended June 30, 2024,

interest expense related to the March 2024 Convertible Note amounted to $ 15,855 and $ 22,088 , respectively, which have been included in

interest expense — other on the accompanying condensed consolidated statements of operations and comprehensive loss.

June 2024 Convertible Note

On June 5, 2024, the

Company entered into securities purchase agreements with Mast Hill for the issuance of 13.0 % senior secured promissory notes in the aggregate

principal amount of $ 2,845,000 (collectively, the “June 2024 Convertible Note”) convertible into shares of the Company’s

common stock, as well as the issuance of 402,000 shares of common stock as a commitment fee and warrants for the purchase of 2,200,000

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 June 2024 Convertible Note.

Principal amount and interest under the June 2024 Convertible

Note are convertible into shares of common stock of the Company at a conversion price of $ 0.75 per share unless the Company fails to make

an amortization payment when due, in which case the conversion price shall be the lesser of $ 0.75 or the market price (as defined in the

June 2024 Convertible Note).

AVALON GLOBOCARE CORP.

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 3,500 shares of common stock with an exercise price of $ 37.50 exercisable until the five-year anniversary

of October 9, 2023 (“First Warrant”), (ii) a warrant to purchase 2,917 shares of common stock with an exercise price of $ 27.00

exercisable until the five-year anniversary of October 9, 2023 (“Second Warrant”).

The Second Warrant was never fair valued

and was cancelled and extinguished against payment of the October 2023 Convertible Note, and (iii) 2,333 shares of common stock as a commitment

fee for the purchase of the October 2023 Convertible Note, which were earned in full as of October 9, 2023.

On October 9, 2023, the Company

delivered such duly executed October 2023 Convertible Note, warrants and common stock to FirstFire against delivery of such purchase price.

The Company was obligated to

make amortization payments in cash to FirstFire toward the repayment of the October 2023 Convertible Note, as described in the October

2023 Convertible Note.

As of September 30, 2024, the October 2023 Convertible Note was repaid in full .

2024 Convertible Note

March 7, 2024, the Company entered into securities purchase agreements with Mast Hill 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 the Company’s common stock, as well as the issuance of 7,000 shares of common stock as a commitment fee and warrants for the

purchase of 16,827 shares of common stock of the Company.

The Company and its subsidiaries 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 were convertible into shares of common stock of the Company at a conversion price of $ 15.00 per share unless the Company

failed to make an amortization payment when due, in which case the conversion price would be the lower of $ 15.00 or the market price

(as defined in the March 2024 Convertible Note) of the shares.

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 8,750 shares of common stock with an exercise

price of $ 30.00 exercisable until the five-year anniversary of March 7, 2024 (“First Warrant”), (ii) a warrant to purchase

8,077 shares of common stock with an exercise price of $ 19.50 exercisable until the five-year anniversary of March 7, 2024 (“Second

The Second Warrant was never fair valued and was cancelled and extinguished against payment of the March 2024 Convertible

Note, and (iii) 7,000 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.

Company was obligated to make amortization payments in cash to Mast Hill toward the repayment of the March 2024 Convertible Note, as

described in the March 2024 Convertible Note.

As of September 30, 2024, the March 2024 Convertible Note was repaid in full.

2024 Convertible Note

June 5, 2024, the Company entered into securities purchase agreements with Mast Hill for the issuance of 13.0 % senior secured promissory

notes in the aggregate principal amount of $ 2,845,000 (collectively, the “June 2024 Convertible Note”) convertible into shares

of the Company’s common stock, as well as the issuance of 26,800 shares of common stock as a commitment fee and warrants for the

purchase of 146,667 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 June 2024 Convertible Note.

Principal amount and interest under the June

2024 Convertible Note are convertible into shares of common stock of the Company at a conversion price of $ 11.25 per share unless the

Company fails to make an amortization payment when due, in which case the conversion price shall be the lesser of $ 11.25 or the market

price (as defined in the June 2024 Convertible Note).

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – CONVERTIBLE

NOTE PAYABLE (continued)

June 2024 Convertible Note (continued)

Mast Hill acquired the

June 2024 Convertible Note with principal amount of $ 2,845,000 and paid the purchase price of $ 2,702,750 after an original issue discount

of $ 142,250 .

On June 5, 2024, the Company issued (i) a warrant to purchase 1,000,000 shares of common stock with an exercise price of

$ 0.65 exercisable until the five-year anniversary of June 5, 2024 (“First Warrant”), (ii) a warrant to purchase 1,200,000

shares of common stock with an exercise price of $ 0.50 exercisable until the five-year anniversary of June 5, 2024 (“Second Warrant”).

The Second Warrant will not be fair valued and shall be cancelled and extinguished against payment of the June 2024 Convertible Note,

and (iii) 402,000 shares of common stock as a commitment fee for the purchase of the June 2024 Convertible Note, which were earned in

full as of June 5, 2024.

On June 5, 2024, the Company delivered such duly executed June 2024 Convertible Note, warrants and common stock

to Mast Hill against delivery of such purchase price.

The Company received

net cash amount of $ 881,210 from the June 2024 Convertible Note financing after using the proceeds to pay off all previously issued convertible

notes to Mast Hill of $ 1,206,867 and FirstFire of $ 454,673 , respectively, and to pay finder’s fee of $ 120,000 and lender’s

costs of $ 40,000 related to this financing.

The Company is obligated

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

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6 – CONVERTIBLE NOTE PAYABLE (continued)

2024 Convertible Note (continued)

Hill acquired the June 2024 Convertible Note with principal amount of $ 2,845,000 and paid the purchase price of $ 2,702,750 after an original

issue discount of $ 142,250 .

On June 5, 2024, the Company issued (i) a warrant to purchase 66,667 shares of common stock with an exercise

price of $ 9.75 exercisable until the five-year anniversary of June 5, 2024 (“First Warrant”), (ii) a warrant to purchase

80,000 shares of common stock with an exercise price of $ 7.50 exercisable until the five-year anniversary of June 5, 2024 (“Second

The Second Warrant will not be fair valued and shall be cancelled and extinguished against payment of the June 2024

Convertible Note, and (iii) 26,800 shares of common stock as a commitment fee for the purchase of the June 2024 Convertible Note, which

were earned in full as of June 5, 2024.

On June 5, 2024, the Company delivered such duly executed June 2024 Convertible Note, warrants

and common stock to Mast Hill against delivery of such purchase price.

Company received net cash amount of $ 881,210 from the June 2024 Convertible Note financing after using the proceeds to pay off all previously

issued convertible notes to Mast Hill of $ 1,206,867 and FirstFire of $ 454,673 , respectively, and to pay finder’s fee of $ 120,000

and lender’s costs of $ 40,000 related to this financing.

Company is obligated to make amortization payments in cash to Mast Hill toward the repayment of the June 2024 Convertible Note, as provided

in the following table :

Payment Date:

7 unchanged sentences

June 5, 2025 The entire remaining outstanding balance of the June 2024 Convertible Note

In connection

with the issuance of the June 2024 Convertible Note, the Company incurred debt issuance costs of $ 224,221 (including the issuance of 80,000

warrants as a finder’s fee) which is capitalized and will be amortized into interest expense over the term of the June 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 meet the definition of a derivative liability, as the Company cannot avoid a net cash settlement

connection with the issuance of the June 2024 Convertible Note, the Company incurred debt issuance costs of $ 224,221 (including the issuance

of 5,333 warrants as a finder’s fee) which is capitalized and will be amortized into interest expense over the term of the June

2024 Convertible Note.

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

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

under certain circumstances.

9 unchanged sentences

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.

In accordance

with ASC 470-20, the Company determined that the conversion feature is beneficial and the Company valued the beneficial conversion feature

(“BCF”) separately, recording debt discount and additional paid-in capital.

AVALON GLOBOCARE CORP.

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.

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.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – CONVERTIBLE

NOTE PAYABLE (continued)

June 2024 Convertible Note (continued)

recorded a total debt discount of $ 1,040,585 related to the original issue discount, BCF, common shares issued and warrants issued to

Mast Hill, which will be amortized over the term of the June 2024 Convertible Note.

three and six months ended June 30, 2024, amortization of debt discount and debt issuance costs related to the June 2024 Convertible Note

amounted to $ 105,401 , 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.

three and six months ended June 30, 2024, interest expense related to the June 2024 Convertible Note amounted to $ 26,345 , which have been

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

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6 – CONVERTIBLE NOTE PAYABLE (continued)

2024 Convertible Note (continued)

The Company recorded a total

debt discount of $ 838,990 related to the original issue discount, common shares issued and warrants issued to Mast Hill, which will be

amortized over the term of the June 2024 Convertible Note.

For the three months ended September

30, 2024 and 2023, amortization of debt discount and debt issuance costs related to convertible note payable amounted to $ 249,004 and

$ 169,329 , respectively, which have been included in interest expense — amortization of debt discount and debt issuance costs on

the accompanying condensed consolidated statements of operations and comprehensive loss.

For the nine months ended September

30, 2024 and 2023, amortization of debt discount and debt issuance costs related to the convertible note payable amounted to $ 1,026,012

and $ 214,044 , respectively, which have been included in interest expense — amortization of debt discount and debt issuance costs

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

the three months ended September 30, 2024 and 2023, interest expense related to convertible note payable amounted to $ 93,222 and $ 64,644 ,

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, 2024 and 2023, interest expense related to convertible note payable amounted to $ 233,276 and $ 85,480 ,

respectively, which have been included in interest expense — other on the accompanying condensed consolidated statements of operations

and comprehensive loss.

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 these convertible notes payable contained an embedded derivative feature in the form of a conversion provision

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

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

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

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

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 was remote and as

such the estimated fair value of the embedded conversion feature was zero.

As of June 5, 2024, these convertible notes were repaid in

in Note 6, June 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 June 5, 2024 and

June 30, 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.

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

Upon evaluation,

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

certain circumstances.

Through life of the May 2023 Convertible Note, management determined the probability of failing to make

an amortization payment when due was remote and as such the estimated fair value of the 105,500 warrants with an exercise price

of $ 3.20 , which warrant was cancelled and extinguished against payment of the May 2023 Convertible Note, was 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.

30, 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 $ 10,409 .

The estimated fair value of the warrants was computed as of June 30, 2024 using Black-Scholes

option-pricing model, with the following assumptions:

stock price of $ 0.47 , volatility of 80.89 %, risk-free rate of 4.52 %, annual dividend

yield of 0 % and expected life of 3.9 years.

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 ASC 815, as the Company cannot avoid a net cash settlement under certain

circumstances.

Through life of the July 2023 Convertible Note, management determined the probability of failing to make an amortization

payment when due was remote and as such the estimated fair value of the 35,165 warrants with an exercise price of $ 3.20 , which warrant

was cancelled and extinguished against payment of the July 2023 Convertible Note, was zero.

stated in Note 6, June 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 June 5, 2024

and September 30, 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.

May 23, 2023, the Company issued 9,000 warrants with an exercise price of $ 67.50 exercisable until the five-year anniversary of May 23,

2023 to Mast Hill and a third party as a finder’s fee.

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.

Accordingly, the fair value of the

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.

30, 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 $ 3,482 .

The estimated fair value of the warrants was computed as of June 30, 2024 using Black-Scholes

option-pricing model, with the following assumptions:

stock price of $ 0.47 , volatility of 79.79 %, risk-free rate of 4.33 %, annual dividend

yield of 0 % and expected life of 4.0 years.

AVALON GLOBOCARE CORP.

9,000 warrants was classified as a derivative liability on May 23, 2023 .

On September 30, 2024, the estimated fair value of the 9,000 warrants was $ 2,735 .

The estimated

fair value of the warrants was computed as of September 30, 2024 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 3.12 , volatility of 89.35 %, risk-free rate of 3.58 %, annual dividend yield of 0 % and expected life of 3.6 years.

On July 6, 2023, the Company

issued 3,000 warrants with an exercise price of $ 67.50 exercisable until the five-year anniversary of July 6, 2023 to FirstFire and a

third party as a finder’s fee.

Upon evaluation, the warrants meet the definition of a derivative liability under ASC 815, as the

Company cannot avoid a net cash settlement under certain circumstances.

Accordingly, the fair value of the 3,000 warrants was classified

as a derivative liability on July 6, 2023.

On September 30, 2024, the estimated fair value of the 3,000 warrants was $ 937 .

The estimated

fair value of the warrants was computed as of September 30, 2024 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 3.12 , volatility of 88.35 %, risk-free rate of 3.58 %, annual dividend yield of 0 % and expected life of 3.8 years.

On October 9, 2023, the Company issued 7,560 warrants with an exercise

price of $ 37.50 exercisable until the five-year anniversary of October 9, 2023 to Mast Hill and FirstFire and a third party as a finder’s

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

settlement under certain circumstances.

Accordingly, the fair value of the 7,560 warrants was classified as a derivative liability on

October 9, 2023.

On September 30, 2024, the estimated fair value of the 7,560 warrants was $ 4,060 .

The estimated fair value of the warrants

was computed as of September 30, 2024 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 3.12 ,

volatility of 85.84 %, risk-free rate of 3.58 %, annual dividend yield of 0 % and expected life of 4.0 years.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7 – DERIVATIVE LIABILITY (continued)

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).

March 7, 2024, the Company issued 9,450 warrants with an exercise price of $ 30.00 exercisable until the five-year anniversary of March

7, 2024 to Mast Hill and a third party as a finder’s fee.

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.

Accordingly, the fair value of the

9,450 warrants was classified as a derivative liability on March 7, 2024.

On September 30, 2024, the estimated fair value of the 9,450

warrants was $ 6,886 .

The estimated fair value of the warrants was computed as of September 30, 2024 using Black-Scholes option-pricing

model, with the following assumptions:

stock price of $ 3.12 , volatility of 85.16 %, risk-free rate of 3.58 %, annual dividend yield of

0 % and expected life of 4.4 years.

June 5, 2024, the Company issued 152,000 warrants to Mast Hill and a third party as a finder’s fee (see Note 6).

Upon evaluation,

1 unchanged sentence

circumstances.

Through life of the October 2023 Convertible Note, management determined the probability of failing to make an amortization

payment when due was remote and as such the estimated fair value of the 87,500 warrants with an exercise price of $ 1.80 , which warrant

was cancelled and extinguished against payment of the October 2023 Convertible Note, was 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.

30, 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 $ 16,700 .

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

30, 2024 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 0.47 , volatility of 83.41 %,

risk-free rate of 4.33 %, annual dividend yield of 0 % and expected life of 4.3 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.

life of the March 2024 Convertible Note, management determined the probability of failing to make an amortization payment when due was

remote and as such the estimated fair value of the 121,154 warrants with an exercise price of $ 1.30 , which warrant was cancelled and extinguished

against payment of the March 2024 Convertible Note, was 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.

30, 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 $ 27,699 .

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

30, 2024 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 0.47 , volatility of 86.34 %,

risk-free rate of 4.33 %, annual dividend yield of 0 % and expected life of 4.7 years.

On June 5, 2024, the Company issued 2,280,000 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 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 1,200,000 warrants

with an exercise price of $ 0.50 exercisable until the five-year anniversary of June 5, 2024, which warrant shall be cancelled and

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

Accordingly, the fair value of the 1,080,000 warrants

with an exercise price of $ 0.65 exercisable until the five-year anniversary of June 5, 2024 was classified as a derivative liability

on June 5, 2024.

On June 30, 2024, the estimated fair value of

the 1,080,000 warrants with an exercise price of $ 0.65 exercisable until the five-year anniversary of June 5, 2024 as derivative

liability was $ 323,130 .

The estimated fair value of the warrants was computed as of June 30, 2024 using Black-Scholes option-pricing

model, with the following assumptions:

stock price of $ 0.47 , volatility of 85.15 %, risk-free rate of 4.33 %, annual dividend

yield of 0 % and expected life of 4.9 years.

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

fair value of the 80,000 warrants with an exercise price of $ 7.50 exercisable until the five-year anniversary of June 5, 2024, which

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

the fair value of the 72,000 warrants with an exercise price of $ 9.75 exercisable until the five-year anniversary of June 5, 2024 was

classified as a derivative liability on June 5, 2024.

On September 30, 2024, the estimated fair value of the 72,000 warrants with an

exercise price of $ 9.75 exercisable until the five-year anniversary of June 5, 2024 as derivative liability was $ 108,888 .

The estimated

fair value of the warrants was computed as of September 30, 2024 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 3.12 , volatility of 88.45 %, risk-free rate of 3.58 %, annual dividend yield of 0 % and expected life of 4.7 years.

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

1 unchanged sentence

The changes to the derivative liability resulted in a decrease

of $ 180,337 and $ 41,721 in the derivative liability and the corresponding increase in other income as a gain for the three months

ended June 30, 2024 and 2023, respectively.

The changes to the derivative liability resulted in a decrease of $ 211,549 and $ 41,721

in the derivative liability and the corresponding increase in other income as a gain for the six months ended June 30, 2024 and 2023,

of $ 169,209 and $ 87,173 in the derivative liability and the corresponding increase in other income as a gain for the three months ended

September 30, 2024 and 2023, respectively.

The changes to the derivative liability resulted in a decrease of $ 380,758 and $ 128,894 in

the derivative liability and the corresponding increase in other income as a gain for the nine months ended September 30, 2024 and 2023,

respectively.

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 07728.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – NOTE PAYABLE, NET

In May 2023, the Company

borrowed $ 1,000,000 from the same lender.

The principal of $ 1,000,000 accrues interest at an annual rate of 13.0 % and is

payable in monthly installments of interest-only in the amount of $ 10,833 , commencing in June 2023 and continuing through October 2025

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).

1 unchanged sentence

mortgage on certain real property and improvements located at 4400 Route 9, Freehold, Monmouth County, New Jersey.

The note payable as of

June 30, 2024 and December 31, 2023 was as follows:

note payable as of September 30, 2024 and December 31, 2023 was as follows:

September 30,

Principal amount

1 unchanged sentence

Note payable, net

For the three months ended June 30, 2024 and 2023,

amortization of debt issuance costs related to note payable amounted to $ 29,807 and $ 24,738 , 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 six months ended June 30, 2024 and 2023, amortization of debt issuance costs related to

note payable amounted to $ 59,614 and $ 46,943 , 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 June 30, 2024 and 2023,

interest expense related to note payable amounted to $ 164,500 and $ 145,722 , respectively, which have been included in interest expense

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

For the six months ended June 30,

2024 and 2023, interest expense related to note payable amounted to $ 329,000 and $ 277,722 , respectively, which have been included

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

NOTE 9 – RELATED PARTY TRANSACTIONS

Current portion

Long-term portion

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8 – NOTE PAYABLE, NET (continued)

the three months ended September 30, 2024 and 2023, amortization of debt issuance costs related to note payable amounted to $ 29,807 and

$ 29,807 , respectively, which have been included in interest expense — amortization of debt discount and debt issuance costs on

the accompanying condensed consolidated statements of operations and comprehensive loss.

the nine months ended September 30, 2024 and 2023, amortization of debt issuance costs related to note payable amounted to $ 89,421 and

$ 76,750 , respectively, which have been included in interest expense — amortization of debt discount and debt issuance costs on

the accompanying condensed consolidated statements of operations and comprehensive loss.

the three months ended September 30, 2024 and 2023, interest expense related to note payable amounted to $ 164,500 and $ 164,500 , respectively,

which have been included in interest expense - other on the accompanying condensed consolidated statements of operations and comprehensive

the nine months ended September 30, 2024 and 2023, interest expense related to note payable amounted to $ 493,500 and $ 442,222 , respectively,

which have been included in interest expense - other on the accompanying condensed consolidated statements of operations and comprehensive

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 D.P.

Capital Investments LLC, which is controlled

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

The term of the related party lease agreement

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

For both the three months ended June 30, 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.

For both the six months ended June 30, 2024 and 2023, the related party

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

of operations and comprehensive loss.

At June 30, 2024 and December 31, 2023, the related party rent receivable totaled $ 0 and

$ 124,500 , respectively, which has been included in rent receivable on the accompanying condensed consolidated balance sheets.

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 September 30, 2024 and 2023, the related party rental revenue amounted to $ 12,600 and has been included in

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

nine months ended September 30, 2024 and 2023, the related party rental revenue amounted to $ 37,800 and has been included in real property

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

At September 30, 2024 and

December 31, 2023, the related party rent receivable totaled $ 0 and $ 124,500 , respectively, which has been included in rent receivable

on the accompanying condensed consolidated balance sheets.

Provided by Related Party

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 $ 20,535 and $ 22,185 for the three months ended June 30, 2024

and 2023, respectively, which have been included in professional fees on the accompanying condensed consolidated statements of operations

and comprehensive loss.

As compensation for professional services provided, the Company recognized consulting expenses of $ 37,266 and

$ 48,642 for the six months ended June 30, 2024 and 2023, respectively, which have been included in professional fees on the accompanying

condensed consolidated statements of operations and comprehensive loss.

As of both June 30, 2024 and December 31, 2023, the accrued

and unpaid services charge related to this director’s son amounted to $ 15,000 , which have been included in accrued professional

fees on the accompanying condensed consolidated balance sheets.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – RELATED PARTY TRANSACTIONS (continued)

Accrued Liabilities and Other Payables –

Related Parties

In 2017, the Company acquired Beijing Genexosome

for a cash payment of $ 450,000 .

As of June 30, 2024 and December 31, 2023, the unpaid acquisition consideration of $ 100,000 , was payable

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

As compensation for

professional services provided, the Company recognized consulting expenses of $ 10,738 and $ 20,049 for the three months ended September

30, 2024 and 2023, respectively, which have been included in professional fees on the accompanying condensed consolidated statements

of operations and comprehensive loss.

As compensation for professional services provided, the Company recognized consulting expenses

of $ 48,004 and $ 68,691 for the nine months ended September 30, 2024 and 2023, respectively, which have been included in professional

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

As of both September 30, 2024 and December

31, 2023, the accrued and unpaid services charge related to this director’s son amounted to $ 15,000 , which have been included in

accrued professional fees on the accompanying condensed consolidated balance sheets.

Liabilities and Other Payables – Related Parties

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

As of September 30, 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.

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

In addition, Lab Services MSO made a payment of $ 566,667

for equity method investment payable on behalf of the Company in the nine months ended September 30, 2024.

As of September 30, 2024 and

December 31, 2023, the balance due to Lab Services MSO amounted to $ 597,662 and $ 72,746 , respectively, which 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 June 30, 2024 and December 31, 2023, the balance due to Lab Services MSO amounted

to $ 566,666 and $ 72,746 , respectively, which has been included in accrued liabilities and other payables — related parties

on the accompanying condensed consolidated balance sheets.

As of June 30, 2024 and December 31, 2023, $ 54,904 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

On August 29, 2019, the Company entered into a

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

“Line of Credit”) from Mr.

Lu, the Company’s largest shareholder and Chairman of the Board of Directors of the Company.

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

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

The loans are unsecured and are not convertible into equity of

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 Mr.

Lu, 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

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

was no Line of Credit activity during the six months ended June 30, 2024.

As of both June 30, 2024 and December 31, 2023,

the outstanding principal balance was $ 850,000 .

For the three months ended June 30, 2024 and 2023,

the interest expense related to related party borrowing amounted to $ 10,596 and $ 10,267 , respectively, and has been reflected as

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

For the six months ended June 30, 2024 and 2023,

the interest expense related to related party borrowing amounted to $ 21,192 and $ 12,288 , respectively, and has been reflected as interest

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

As of June 30, 2024 and December 31, 2023, the

related accrued and unpaid interest for Line of Credit was $ 54,904 and $ 33,712 , respectively, and has been included in accrued liabilities

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

of June 30, 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.

AVALON GLOBOCARE CORP.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – RELATED PARTY TRANSACTIONS (continued)

Membership Interest

Purchase Agreement

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9 – RELATED PARTY TRANSACTIONS (continued)

Liabilities and Other Payables – Related Parties (continued)

of September 30, 2024 and December 31, 2023, $ 15,617 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.

from Related Party

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

with a $ 20 million line of credit (the “Line of Credit”) from Mr.

Lu, the Company’s largest shareholder and Chairman

of the Board of Directors of the Company.

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

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

The loans are unsecured

and are not convertible into equity of the Company.

Loans drawn under the Line of Credit bear interest at an annual rate of 5 % and each

individual loan is payable three years from the date of issuance.

The Company has a right to draw down on the line of credit and not

at the discretion of Mr.

Lu, 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, Mr.

Lu may declare all outstanding loans under the Line of Credit to be due and payable

was no Line of Credit activity during the nine months ended September 30, 2024.

As of both September 30, 2024 and December 31, 2023,

the outstanding principal balance was $ 850,000 .

both the three months ended September 30, 2024 and 2023, the interest expense related to related party borrowing amounted to $ 10,712 ,

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

and comprehensive loss.

the nine months ended September 30, 2024 and 2023, the interest expense related to related party borrowing amounted to $ 31,904 and $ 23,000 ,

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

of operations and comprehensive loss.

of September 30, 2024 and December 31, 2023, the related accrued and unpaid interest for Line of Credit was $ 15,617 and $ 33,712 , respectively,

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

of September 30, 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.

Interest Purchase Agreement

17, 2023, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with Mr.

2 unchanged sentences

Lu will acquire from the Company

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, Mr.

Lu 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.

Company received $ 2,486,241 and $ 485,714 from Wenzhao Lu as of June 30, 2024 and December 31, 2023, respectively, which was

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

NOTE 10 – EQUITY

Common Shares Issued

as Convertible Note Payable Commitment Fee

During the six months ended June 30, 2024, the

Company issued a total of 507,000 shares of its common stock as commitment fee for the purchase of March 2024 Convertible

Note and June 2024 Convertible Note.

These shares were valued at $ 320,546 , the fair market value on the grant dates using the reported

closing share prices on the dates of grant, and the Company recorded it as debt discount.

The following table summarizes

the shares of the Company’s common stock issuable upon exercise of options outstanding at June 30, 2024:

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, Mr.

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 Company received $ 2,508,159 and $ 485,714 from Wenzhao Lu as of September 30, 2024 and December 31, 2023, respectively,

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

balance sheets.

The Acquisition is expected to be closed in 2025.

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Shares Issued as Convertible Note Payable Commitment Fee

the nine months ended September 30, 2024, the Company issued a total of 33,800 shares of its common stock as commitment fee for the purchase

of March 2024 Convertible Note and June 2024 Convertible Note.

These shares were valued at $ 320,546 , the fair market value on the grant

dates using the reported closing share prices on the dates of grant, and the Company recorded it as debt discount.

Shares Sold for Cash

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, 2024, Roth sold an aggregate of 281,843 shares of common stock at an average price of

$ 10.14 per share to investors and the Company recorded net proceeds of $ 2,544,311 , net of commission and other offering costs of

Shares Issued for Services

the nine months ended September 30, 2024, the Company issued a total of 45,153 shares of its common stock for services rendered and to

These shares were valued at $ 306,350 , 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 $ 217,471 for the nine months ended September 30,

2024 and reduced accrued liabilities of $ 60,000 and recorded prepaid expense of $ 28,879 as of September 30, 2024 which will be amortized

over the rest of corresponding service periods.

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

Options Outstanding Options Exercisable

1 unchanged sentence

Outstanding at

September 30,

2024 Weighted

1 unchanged sentence

(Years) Weighted

Exercise Price Number

Exercise Price

Exercisable at

September 30,

2024 Weighted

4 unchanged sentences

$ 2.93 – 289.50 52,612 3.10 $ 89.24 45,119 $ 102.27

Stock option activity

for the six months ended June 30, 2024 was as follows:

Average Exercise Price

option activity for the nine months ended September 30, 2024 was as follows:

Number of Options

Weighted Average Exercise Price

Outstanding at January 1, 2024

Outstanding at June 30, 2024

Options exercisable at June 30, 2024

Outstanding at September 30, 2024

Options exercisable at September 30, 2024

Options expected to vest

The aggregate intrinsic value of stock options

outstanding and stock options exercisable at June 30, 2024 was $ 3,626 an $ 7 , respectively.

The fair values of options granted during the

six months ended June 30, 2024 were estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

volatility of 83.10 % - 91.17 %, risk-free rate of 3.93 % - 4.79 %, annual dividend yield of 0 %, and expected life of 3.00

- 5.00 years.

The aggregate fair value of the options granted during the six months ended June 30, 2024 was $ 15,483 .

AVALON GLOBOCARE CORP.

aggregate intrinsic value of stock options outstanding and stock options exercisable at September 30, 2024 was approximately $ 1,000 an

$ 300 , respectively.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – EQUITY (continued)

Options (continued)

fair values of options granted during the six months ended June 30, 2023 were estimated at the date of grant using the Black-Scholes option-pricing

model with the following assumptions:

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10 – EQUITY (continued)

fair values of options granted during the nine months ended September 30, 2024 were estimated at the date of grant using the Black-Scholes

option-pricing model with the following assumptions:

volatility of 83.10 % - 91.17 %, risk-free rate of 3.47 % - 4.79 %, annual dividend

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

The aggregate fair value of the options granted during the

six months ended June 30, 2023 was $313 ,144.

For the three months ended June 30, 2024 and 2023,

stock-based compensation expense associated with stock options granted amounted to $ 12,256 and $ 112,015 , of which $ 4,488 and

$ 38,191 was recorded as compensation and related benefits, $ 7,768 and $ 73,824 was recorded as professional fees, and $ 0 and

$ 0 was recorded as research and development expenses, respectively.

For the six months ended June 30, 2024 and 2023,

stock-based compensation expense associated with stock options granted amounted to $ 25,789 and $ 180,277 , of which, $ 9,591 and

$ 89,527 was recorded as compensation and related benefits, $ 16,198 and $ 85,281 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 June 30, 2024 and changes during the six months ended June 30, 2024 is presented below:

The aggregate fair value of the options granted during the nine months ended September

30, 2024 was $ 26,548 .

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 .

the three months ended September 30, 2024 and 2023, stock-based compensation expense associated with stock options granted amounted to

$ 11,542 and $ 54,654 , of which $ 3,798 and $ 42,906 was recorded as compensation and related benefits and $ 7,744 and $ 11,748 was recorded

as professional fees, respectively.

the nine months ended September 30, 2024 and 2023, stock-based compensation expense associated with stock options granted amounted to

$ 37,331 and $ 234,931 , of which, $ 13,389 and $ 132,433 was recorded as compensation and related benefits, $ 23,942 and $ 97,029 was recorded

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

summary of the status of the Company’s nonvested stock options granted as of September 30, 2024 and changes during the nine months

ended September 30, 2024 is presented below:

Number of Options

Weighted Average Exercise Price

Nonvested at January 1, 2024

Nonvested at June 30, 2024

The following table summarizes the shares of the

Company’s common stock issuable upon exercise of warrants outstanding at June 30, 2024:

Nonvested at September 30, 2024

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

Warrants Outstanding Warrants Exercisable

1 unchanged sentence

Outstanding at

2024 Weighted

September 30,

2024 Weighted Average

Contractual Life

(Years) Weighted

Exercise Price Number

Exercisable at

September 30,

2024 Weighted

Exercise Price

$ 7.50 – 37.50 169,010 4.64 $ 11.06 89,010 $ 14.26

2 unchanged sentences

$ 7.50 – 187.50 189,274 4.49 $ 22.34 109,274 $ 33.21

AVALON GLOBOCARE CORP.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – EQUITY

Warrants (continued)

Stock warrant activity

for the six months ended June 30, 2024 was as follows:

Exercise Price

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10 – EQUITY (continued)

warrant activity for the nine months ended September 30, 2024 was as follows:

Number of Warrants

Weighted Average Exercise Price

Outstanding at January 1, 2024

Cancelled (*)

Outstanding at June 30, 2024

Warrants exercisable at June 30, 2024

Outstanding at September 30, 2024

Warrants exercisable at September 30, 2024

Warrants expected to vest

* Second Warrant, which was issued on May 23, 2023, July 6, 2023,

October 9, 2023, and March 7, 2024, was cancelled in June 2024.

First Warrant, which was issued on May 23, 2023, July 6, 2023, October

9, 2023, and March 7, 2024, is still outstanding as of June 30, 2024.

First Warrant and Second Warrant, which are issued on June 5, 2024,

are still outstanding as of June 30, 2024.

The aggregate intrinsic

value of both stock warrants outstanding and stock warrants exercisable at June 30, 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, which warrant was cancelled and extinguished against payment of the March 2024 Convertible

Second Warrant, which was issued on May 23, 2023, July 6, 2023, October 9, 2023, and March 7, 2024, was cancelled in June 2024.

Warrant, which was issued on May 23, 2023, July 6, 2023, October 9, 2023, and March 7, 2024, is still outstanding as of September 30,

First Warrant and Second Warrant, which are issued on June 5, 2024, are still outstanding as of September 30, 2024.

aggregate intrinsic value of both stock warrants outstanding and stock warrants exercisable at September 30, 2024 was $ 0 .

Issued in March 2024

connection with the issuance of March 2024 Convertible Note (See Note 6), the Company issued (i) a warrant to purchase 8,750 shares of

common stock with an exercise price of $30.00 exercisable until the five-year anniversary of March 7, 2024 (“First Warrant”),

(ii) a warrant to purchase 8,077 shares of common stock with an exercise price of $19.50 (“Second Warrant”), which warrant

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

and issued a warrant to purchase 700

shares of common stock with an exercise price of $30.00 exercisable until the five-year anniversary of March 7, 2024 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 a derivative liability, as the Company cannot avoid a net cash settlement

under certain circumstances.

The 8,077 warrants with an exercise price of $ 19.50 were cancelled and extinguished against payment of the

March 2024 Convertible Note.

The fair value of the 9,450 warrants with an exercise price of $ 30.00 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 9,450 warrants with an exercise price

of $ 30.00 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 $ 6.00 , volatility of 85.24 %, risk-free rate of 4.07 %, annual dividend

yield of 0 % and expected life of 5 years.

warrants with an exercise price of $ 30.00 exercisable until the five-year anniversary of March 7, 2024 issued to Mast Hill to purchase

8,750 shares of the Company’s common stock were treated as a discount on the convertible note payable and were valued at $ 20,374

and were amortized over the term of the March 2024 Convertible Note.

warrants with an exercise price of $ 30.00 exercisable until the five-year anniversary of March 7, 2024 issued to a third party as a finder’s

fee to purchase 700 shares of the Company’s common stock were treated as convertible debt issuance costs and were valued at $ 1,679

and were amortized over the term of the March 2024 Convertible Note.

Issued in June 2024

connection with the issuance of June 2024 Convertible Note (See Note 6), the Company issued (i) a warrant to purchase 66,667 shares of

common stock with an exercise price of $9.75 exercisable until the five-year anniversary of June 5, 2024 (“First Warrant”),

(ii) a warrant to purchase 80,000 shares of common stock with an exercise price of $7.50 exercisable until the five-year anniversary

of June 5, 2024 (“Second Warrant”), which warrant shall be cancelled and extinguished against payment of the June 2024 Convertible

Note, to Mast Hill;

and issued a warrant to purchase 5,333 shares of common stock with an exercise price of $9.75 exercisable until the

five-year anniversary of March 7, 2024 to a third party as a finder’s fee.

Based upon the Company’s

analysis of the criteria contained in ASC 815, the Company determined that all the warrants issued to Mast Hill and a third party as a

finder’s fee meet the definition of a derivative liability, as the Company cannot avoid a net cash settlement under certain circumstances.

The 121,154 warrants with an exercise price of $ 1.30 were cancelled and extinguished against payment of the March 2024

Convertible Note.

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 were

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 were amortized over the term of the March 2024 Convertible Note.

Warrants Issued in

In connection with the

issuance of June 2024 Convertible Note (See Note 6), the Company issued (i) a warrant to purchase 1,000,000 shares of common stock with

an exercise price of $0.65 exercisable until the five-year anniversary of June 5, 2024, (ii) a warrant to purchase 1,200,000 shares of

common stock with an exercise price of $0.50 exercisable until the five-year anniversary of June 5, 2024, which warrant shall be cancelled

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

and issued a warrant to purchase 80,000 shares of common

stock with an exercise price of $0.65 exercisable until the five-year anniversary of June 5, 2024 to a third party as a finder’s

AVALON GLOBOCARE CORP.

five-year anniversary of June 5, 2024 to a third party as a finder’s fee.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – EQUITY

Warrants (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 meet the definition of a derivative liability, as the Company cannot avoid a net cash settlement

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

10 – EQUITY (continued)

Issued in June 2024 (continued)

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.

9 unchanged sentences

0 % and expected life of 5 years.

The warrants with an

exercise price of $ 0.65 exercisable until the five-year anniversary of June 5, 2024 issued to Mast Hill to purchase 1,000,000 shares of

the Company’s common stock were treated as a discount on the convertible note payable and were valued at $ 418,194 and will be amortized

over the term of the June 2024 Convertible Note.

The warrants with an

exercise price of $ 0.65 exercisable until the five-year anniversary of June 5, 2024 issued to a third party as a finder’s fee to

purchase 80,000 shares of the Company’s common stock were treated as convertible debt issuance costs and were valued at $ 39,221

warrants with an exercise price of $ 9.75 exercisable until the five-year anniversary of June 5, 2024 issued to Mast Hill to purchase

66,667 shares of the Company’s common stock were treated as a discount on the convertible note payable and were valued at $ 418,194

and will be amortized over the term of the June 2024 Convertible Note.

Warrants Cancelled

As of June 5, 2024, the

Company paid in full of its outstanding May 2023 Convertible Note, July 2023 Convertible Note, October 2023 Convertible Note, and March

2024 Convertible Note and cancelled 349,319 warrants since these convertible notes were fully extinguished.

A summary of the status

of the Company’s nonvested stock warrants issued as of June 30, 2024 and changes during the six months ended June 30, 2024 is presented

Exercise Price

warrants with an exercise price of $ 9.75 exercisable until the five-year anniversary of June 5, 2024 issued to a third party as a finder’s

fee to purchase 5,333 shares of the Company’s common stock were treated as convertible debt issuance costs and were valued at $ 39,221

and will be amortized over the term of the June 2024 Convertible Note.

Cancelled in June 2024

of June 5, 2024, the Company paid in full of its outstanding May 2023 Convertible Note, July 2023 Convertible Note, October 2023 Convertible

Note, and March 2024 Convertible Note and cancelled 23,288 warrants since these convertible notes were fully extinguished.

summary of the status of the Company’s nonvested stock warrants issued as of September 30, 2024 and changes during the nine months

ended September 30, 2024 is presented below:

Number of Warrants

Weighted Average Exercise Price

Nonvested at January 1, 2024

( 1,221,750 )

Nonvested at June 30, 2024

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.

Nonvested at September 30, 2024

11 – STATUTORY RESERVE AND RESTRICTED NET ASSETS

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

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

Regulations in the PRC

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

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

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

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

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

Appropriations to the discretionary surplus

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

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

and may be used for general business expansion and production or increase in registered capital, but are not distributable

as cash dividends.

The Company did not make any appropriation to statutory reserve for Avalon Shanghai during the six months ended June

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, 2024 as it incurred net loss in the period.

As of June 30, 2024 and December 31, 2023, the restricted amount as determined pursuant

to PRC statutory laws totaled $ 6,578 .

AVALON GLOBOCARE CORP.

As of both September 30, 2024 and December 31, 2023, the restricted amount as determined

pursuant to PRC statutory laws totaled $ 6,578 .

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 - STATUTORY

RESERVE AND RESTRICTED NET ASSETS (continued)

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 June 30, 2024

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

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

11 – STATUTORY RESERVE AND RESTRICTED NET ASSETS (continued)

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

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 September 30, 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 % of consolidated net assets as of the end of the

most recently completed fiscal year.

For purposes of this test, restricted net assets of consolidated subsidiary shall mean that amount

of the Company’s proportionate share of net assets of consolidated subsidiary (after intercompany eliminations) which as of the

end of the most recent fiscal year may not be transferred to the parent company by subsidiary in the form of loans, advances or

cash dividends without the consent of a third party.

The Company performed a test on the restricted

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

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

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

NOTE 13 - CONCENTRATIONS

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

for the three and six months ended June 30, 2024 and 2023.

shall be filed when the restricted net assets of consolidated subsidiary exceed 25 % 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.

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, 2024 and 2023.

Three Months Ended

Six Months Ended

Two customers, which are third parties, whose

outstanding receivable accounted for 10% or more of the Company’s total outstanding rent receivable at June 30, 2024, accounted

for 69.8 % of the Company’s total outstanding rent receivable at June 30, 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.

No supplier accounted for 10% or more of the Company’s

purchase during the three and six months ended June 30, 2024 and 2023.

NOTE 14 – SEGMENT INFORMATION

On February 9, 2023,

the Company purchased 40 % of Lab Services MSO.

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

management of Lab Services MSO.

During the three and six months ended June 30, 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 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.

AVALON GLOBOCARE CORP.

September 30,

Nine Months Ended

September 30,

customer, which is a third party, whose outstanding receivable accounted for 10% or more of the Company’s total outstanding rent

receivable at September 30, 2024, accounted for 74.9 % of the Company’s total outstanding rent receivable at September 30, 2024.

customers, of which one is a related party and the other is a third party, whose outstanding receivables 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.

supplier accounted for 10% or more of the Company’s purchase during the three and nine months ended September 30, 2024 and 2023.

14 – SEGMENT INFORMATION

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, 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.

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

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – SEGMENT INFORMATION

Information with respect

to these reportable business segments for the three and six months ended June 30, 2024 and 2023 was as follows:

Three Months Ended June 30, 2024

Real Property

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14 – SEGMENT INFORMATION (continued)

with respect to these reportable business segments for the three and nine months ended September 30, 2024 and 2023 was as follows:

Three Months Ended September 30, 2024

Real Property Operations

Lab Services MSO

Corporate / Other

Real property rental revenue

3 unchanged sentences

Other operating expenses

( 1,123,371 )

( 1,217,425 )

Other (expense) income:

Interest expense

Other (expense) income

$ ( 166,464 )

2 unchanged sentences

$ ( 1,679,200 )

Three Months Ended June 30, 2023

Real Property

Three Months Ended September 30, 2023

Real Property Operations

Lab Services MSO

Corporate / Other

Real property rental revenue

7 unchanged sentences

Interest expense

Other income (expense)

Net (loss) income

1 unchanged sentence

$ ( 1,485,075 )

Six Months Ended June 30, 2024

Real Property

Nine Months Ended September 30, 2024

Real Property Operations

Lab Services MSO

Corporate / Other

Real property rental revenue

8 unchanged sentences

( 1,291,192 )

( 1,874,113 )

Other (expense) income

3 unchanged sentences

$ ( 5,178,739 )

AVALON GLOBOCARE CORP.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – SEGMENT INFORMATION

Six Months Ended June 30, 2023

Real Property

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

14 – SEGMENT INFORMATION (continued)

Nine Months Ended September 30, 2023

Real Property Operations

Lab Services MSO

Corporate / Other

Real property rental revenue

11 unchanged sentences

$ ( 7,407,943 )

Identifiable long-lived tangible assets at June 30, 2024 and December 31, 2023 June 30,

2024 December 31,

$ ( 7,151,876 )

Identifiable long-lived tangible assets at September 30, 2024 and December 31, 2023

September 30,

Real property operations

Corporate/Other

Total $ 7,140,480 $ 7,229,487

Identifiable long-lived tangible assets at June 30, 2024 and December 31, 2023

Identifiable long-lived tangible assets at September 30, 2024 and December 31, 2023

September 30,

United States

NOTE 15 – COMMITMENTS

AND CONTINGENCIES

Operating Leases Commitment

15 – COMMITMENTS AND CONTINGENCIES

Leases Commitment

Company is a party to leases for office space.

These lease agreements will expire through February 2025.

Rent expense under all

operating leases amounted to approximately $ 64,000 and $ 66,000 for the six months ended June 30, 2024 and 2023, respectively.

Supplemental cash flow

information related to leases for the six months ended June 30, 2024 and 2023 is as follows:

Six Months Ended

Rent expense under all operating

leases amounted to approximately $ 96,000 and $ 97,000 for the nine months ended September 30, 2024 and 2023, respectively.

cash flow information related to leases for the nine months ended September 30, 2024 and 2023 is as follows:

Nine Months Ended

September 30,

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

2 unchanged sentences

Operating lease

AVALON GLOBOCARE CORP.

GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – COMMITMENTS

AND CONTINGENCIES (continued)

Operating Leases Commitment (continued)

The following table summarizes the lease term

and discount rate for the Company’s operating lease as of June 30, 2024:

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

15 – COMMITMENTS AND CONTINGENCIES (continued)

Leases Commitment (continued)

following table summarizes the lease term and discount rate for the Company’s operating lease as of September 30, 2024:

Operating Lease

Weighted average remaining lease term (in years) 0.33

Weighted average discount rate 11.0 %

The following table summarizes the maturity of lease liabilities under

operating lease as of June 30, 2024:

For the Twelve-month Period Ending June 30:

following table summarizes the maturity of lease liabilities under operating lease as of September 30, 2024:

For the Twelve-month Period Ending September 30:

Operating Lease

2026 and thereafter

2 unchanged sentences

Total present value of operating lease liabilities (current liability)

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.

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

1 unchanged sentence

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

Company is required to contribute $ 10 million (or equivalent in RMB) in cash and/or services, which shall be contributed in tranches

based on milestones to be determined jointly by Avactis and the Company in writing subject to the Company’s cash reserves.

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

granting Avactis an exclusive right and license in China to its technology and intellectual property pertaining to CAR-T/CAR-NK/TCR-T/universal

cellular immunotherapy technology and any additional technology developed in the future with terms and conditions to be mutually agreed

1 unchanged sentence

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

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 the rest of 2024.

NOTE 16 – SUBSEQUENT

The Company evaluated

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

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

or disclosure in the financial statements.

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.

2024 to August 16, 2024, Roth sold an aggregate of 4,227,651 shares of common stock at an average price of $ 0.68 per share to investors.

The Company received net cash proceeds of $ 2,771,992 , net of commission paid for sales agent and other fees of $ 85,860 .

Common Shares Issued for

In August 2024, the Company

issued 250,000 shares of its common stock for services rendered and to be rendered.

These shares were valued at $112,500, the fair market

value on the grant date using the reported closing share price on the date of grant, and the Company recorded stock-based compensation

expense of $112,500.

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 the rest of 2024 or into the foreseeable future.

16 – 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.

to Article of Incorporation

On October 23, 2024, the Company filed a certificate of amendment (the

“Amendment”) to its Certificate of Incorporation with the Secretary of State of the State of Delaware to effectuate the reverse

stock split at a ratio of 1-for-15 as well as the decrease of the number of authorized shares of common stock from 490,000,000 shares

to 100,000,000 shares.

The Amendment became effective at 5:00 PM ET on October 25, 2024.

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