UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

COMMISSION FILE NUMBER: 001-38728

AVALON GLOBOCARE CORP.

(Exact name of Registrant as specified in its charter)

Delaware		47-1685128
(State of incorporation)		(I.R.S. Employer Identification No.)

4400 Route 9 South, Suite 3100, Freehold, New Jersey 07728

(Address of principal executive offices) (zip code)

(732) 780-4400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Trading Symbol		Name of each exchange on which registered
Common Stock, $0.0001 par value per share		AVCO		The NASDAQ Stock Market LLC

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date.

Class		Outstanding August 16, 2021
Common Stock, $0.0001 par value per share		85,405,919 shares

AVALON GLOBOCARE CORP.

FORM 10-Q

June 30, 2021

TABLE OF CONTENTS

		Page No.

PART I. - FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of June 30, 2021 (Unaudited) and December 31, 2020	1
	Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2021 and 2020	2
	Unaudited Condensed Consolidated Statement of Changes in Equity for the Three and Six Months Ended June 30, 2021 and 2020	3
	Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2021 and 2020	5
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4	Controls and Procedures	36

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	37
Item 1A.	Risk Factors	37
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3.	Defaults upon Senior Securities	39
Item 4.	Mine Safety Disclosures	39
Item 5.	Other Information	39
Item 6.	Exhibits	40

FORWARD LOOKING STATEMENTS

This report contains forward-looking statements regarding our business, financial condition, results of operations and prospects. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates” and similar expressions or variations of such words are intended to identify forward-looking statements, but are not deemed to represent an all-inclusive means of identifying forward-looking statements as denoted in this report. Additionally, statements concerning future matters are forward-looking statements.

Although forward-looking statements in this report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include, without limitation, those specifically addressed under the headings “Risks Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K, in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-Q and information contained in other reports that we file with the SEC. You are urged not to place undue reliance on these forward-looking statements, which speak only as of the date of this report.

We file reports with the SEC. The SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. You can also read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC 20549. You can obtain additional information about the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.

We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.

Unless otherwise indicated, references in this report to “we,” “us”, “Avalon” or the “Company” refer to Avalon GloboCare Corp. and its consolidated subsidiaries.

PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements.

AVALON GLOBOCARE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2021			2020
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	685,304		$	726,577
Rent receivable		23,650			35,395
Deferred financing costs		168,531			222,141
Prepaid expenses and other current assets		447,844			302,224

Total Current Assets		1,325,329			1,286,337

NON-CURRENT ASSETS:
Rent receivable - noncurrent portion		106,558			111,840
Security deposit		19,953			-
Deferred leasing costs		125,503			144,197
Operating lease right-of-use assets, net		210,781			137,333
Property and equipment, net		442,668			479,115
Investment in real estate, net		7,613,111			7,685,686
Equity method investment		533,949			521,758

Total Non-current Assets		9,052,523			9,079,929

Total Assets	$	10,377,852		$	10,366,266
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Accrued professional fees	$	1,688,929		$	1,212,822
Accrued research and development fees		587,805			513,533
Accrued payroll liability and directors' compensation		182,474			154,292
Accrued liabilities and other payables		330,710			367,411
Accrued liabilities and other payables - related parties		359,236			267,956
Operating lease obligation		140,978			76,379
Note payable - related party		390,000			-

Total Current Liabilities		3,680,132			2,592,393

NON-CURRENT LIABILITIES:
Operating lease obligation - noncurrent portion		75,803			66,954
Note payable - related party		-			390,000
Loan payable - related party		3,393,188			3,200,000

Total Non-current Liabilities		3,468,991			3,656,954

Total Liabilities		7,149,123			6,249,347

Commitments and Contingencies

EQUITY:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; no shares issued and outstanding at June 30, 2021 and December 31, 2020		-			-
Common stock, $0.0001 par value; 490,000,000 shares authorized; 85,600,919 shares issued and 85,080,919 shares outstanding at June 30, 2021; 82,795,297 shares issued and 82,275,297 shares outstanding at December 31, 2020		8,560			8,279
Additional paid-in capital		50,687,940			46,856,447
Less: common stock held in treasury, at cost; 520,000 shares at June 30, 2021 and December 31, 2020		(522,500	)		(522,500	)
Accumulated deficit		(46,773,403	)		(42,041,375	)
Statutory reserve		6,578			6,578
Accumulated other comprehensive loss - foreign currency translation adjustment		(178,446	)		(190,510	)
Total Avalon GloboCare Corp. stockholders' equity		3,228,729			4,116,919
Non-controlling interest		-			-

Total Equity		3,228,729			4,116,919

Total Liabilities and Equity	$	10,377,852		$	10,366,266

See accompanying notes to the condensed consolidated financial statements.

AVALON GLOBOCARE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2021			2020			2021			2020

REVENUES
Real property rental	$	280,232		$	301,267		$	570,006		$	598,223

COSTS AND EXPENSES
Real property operating expenses		205,147			272,764			422,041			527,265

GROSS PROFIT
Real property operating income		75,085			28,503			147,965			70,958

OTHER OPERATING EXPENSES:
Professional fees		1,357,079			1,561,650			2,738,257			3,115,348
Compensation and related benefits		547,829			1,054,052			1,109,835			2,182,520
Research and development expenses		238,793			161,101			451,981			436,503
Other general and administrative		233,664			254,527			453,760			561,606

Total Other Operating Expenses		2,377,365			3,031,330			4,753,833			6,295,977

LOSS FROM OPERATIONS		(2,302,280	)		(3,002,827	)		(4,605,868	)		(6,225,019	)

OTHER INCOME (EXPENSE)
Interest expense - related party		(46,131	)		(42,469	)		(91,280	)		(84,638	)
Loss from equity method investment		(15,418	)		(11,332	)		(33,932	)		(20,416	)
Other (expense) income		(1,081	)		246			(948	)		2,910

Total Other Expense, net		(62,630	)		(53,555	)		(126,160	)		(102,144	)

LOSS BEFORE INCOME TAXES		(2,364,910	)		(3,056,382	)		(4,732,028	)		(6,327,163	)

INCOME TAXES		-			-			-			-

NET LOSS	$	(2,364,910	)	$	(3,056,382	)	$	(4,732,028	)	$	(6,327,163	)

LESS: NET LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST		-			-			-			-

NET LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS	$	(2,364,910	)	$	(3,056,382	)	$	(4,732,028	)	$	(6,327,163	)

COMPREHENSIVE LOSS:
NET LOSS	$	(2,364,910	)	$	(3,056,382	)	$	(4,732,028	)	$	(6,327,163	)
OTHER COMPREHENSIVE INCOME (LOSS)
Unrealized foreign currency translation gain (loss)		14,786			3,309			12,064			(18,757	)
COMPREHENSIVE LOSS		(2,350,124	)		(3,053,073	)		(4,719,964	)		(6,345,920	)
LESS: COMPREHENSIVE LOSS ATTRIBUTABLE TO NON-CONTROLLING INTEREST		-			-			-			-
COMPREHENSIVE LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS	$	(2,350,124	)	$	(3,053,073	)	$	(4,719,964	)	$	(6,345,920	)

NET LOSS PER COMMON SHARE ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS:
Basic and diluted	$	(0.03	)	$	(0.04	)	$	(0.06	)	$	(0.08	)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and diluted		84,623,723			78,887,380			84,021,787			77,799,722

See accompanying notes to the condensed consolidated financial statements.

AVALON GLOBOCARE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three and Six Months Ended June 30, 2021

(Unaudited)

	Avalon GloboCare Corp. Stockholders' Equity
	Preferred Stock				Common Stock						Treasury Stock											Accumulated
	Number				Number				Additional		Number											Other
	of				of				Paid-in		of						Accumulated			Statutory		Comprehensive			Non-controlling		Total
	Shares		Amount		Shares		Amount		Capital		Shares			Amount			Deficit			Reserve		Loss			Interest		Equity

Balance, January 1, 2021		-	$	-		82,795,297	$	8,279	$	46,856,447		(520,000	)	$	(522,500	)	$	(42,041,375	)	$	6,578	$	(190,510	)	$	-	$	4,116,919

Sale of common stock, net		-		-		1,848,267		185		2,337,074		-			-			-			-		-			-		2,337,259

Issuance of common stock for services		-		-		300,000		30		359,970		-			-			-			-		-			-		360,000

Stock-based compensation		-		-		-		-		202,505		-			-			-			-		-			-		202,505

Foreign currency translation adjustment		-		-		-		-		-		-			-			-			-		(2,722	)		-		(2,722	)

Net loss for the three months ended March 31, 2021		-		-		-		-		-		-			-			(2,367,118	)		-		-			-		(2,367,118	)

Balance, March 31, 2021		-		-		84,943,564		8,494		49,755,996		(520,000	)		(522,500	)		(44,408,493	)		6,578		(193,232	)		-		4,646,843

Issuance of common stock for settlement of accrued professional fees		-		-		167,355		17		202,483		-			-			-			-		-			-		202,500

Issuance of common stock for services		-		-		490,000		49		534,251		-			-			-			-		-			-		534,300

Stock-based compensation		-		-		-		-		195,209		-			-			-			-		-			-		195,209

Foreign currency translation adjustment		-		-		-		-		-		-			-			-			-		14,786			-		14,786

Net loss for the three months ended June 30, 2021		-		-		-		-		-		-			-			(2,364,910	)		-		-			-		(2,364,910	)

Balance, June 30, 2021		-	$	-		85,600,919	$	8,560	$	50,687,939		(520,000	)	$	(522,500	)	$	(46,773,403	)	$	6,578	$	(178,446	)	$	-	$	3,228,728

See accompanying notes to the condensed consolidated financial statements.

AVALON GLOBOCARE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three and Six Months Ended June 30, 2020

(Unaudited)

	Avalon GloboCare Corp. Stockholders' Equity
	Preferred Stock				Common Stock						Treasury Stock											Accumulated
	Number				Number				Additional		Number											Other
	of				of				Paid-in		of						Accumulated			Statutory		Comprehensive			Non-controlling		Total
	Shares		Amount		Shares		Amount		Capital		Shares			Amount			Deficit			Reserve		Loss			Interest		Equity

Balance, January 1, 2020		-	$	-		76,730,802	$	7,673	$	34,593,006		(520,000	)	$	(522,500	)	$	(29,361,937	)	$	6,578	$	(257,747	)	$	-	$	4,465,073

Sale of common stock, net		-		-		980,358		98		1,539,153		-			-			-			-		-			-		1,539,251

Issuance of common stock for services		-		-		222,577		22		213,278		-			-			-			-		-			-		213,300

Stock-based compensation		-		-		-		-		785,350		-			-			-			-		-			-		785,350

Foreign currency translation adjustment		-		-		-		-		-		-			-			-			-		(22,066	)		-		(22,066	)

Net loss for the three months ended March 31, 2020		-		-		-		-		-		-			-			(3,270,781	)		-		-			-		(3,270,781	)

Balance, March 31, 2020		-		-		77,933,737		7,793		37,130,787		(520,000	)		(522,500	)		(32,632,718	)		6,578		(279,813	)		-		3,710,127

Sale of common stock, net		-		-		1,795,150		180		2,959,687		-			-			-			-		-			-		2,959,867

Issuance of common stock for services		-		-		380,000		38		398,692		-			-			-			-		-			-		398,730

Stock-based compensation		-		-		-		-		726,600		-			-			-			-		-			-		726,600

Foreign currency translation adjustment		-		-		-		-		-		-			-			-			-		3,309			-		3,309

Net loss for the three months ended June 30, 2020		-		-		-		-		-		-			-			(3,056,382	)		-		-			-		(3,056,382	)

Balance, June 30, 2020		-	$	-		80,108,887	$	8,011	$	41,215,766		(520,000	)	$	(522,500	)	$	(35,689,100	)	$	6,578	$	(276,504	)	$	-	$	4,742,251

See accompanying notes to the condensed consolidated financial statements.

AVALON GLOBOCARE CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Six Months Ended June 30,
	2021			2020

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(4,732,028	)	$	(6,327,163	)
Adjustments to reconcile net loss to net cash used in operating activities:
Bad debt provision		-			4,664
Depreciation		141,285			152,579
Amortization of straight-line rent receivable		4,934			16,910
Amortization of right-of-use asset		60,254			-
Stock-based compensation and service expense		1,086,546			2,448,748
Loss on equity method investment		33,932			20,416
Loss on fixed assets disposal		-			2,628
Changes in operating assets and liabilities:
Accounts receivable - related party		-			213,274
Rent receivable		12,093			(36,749	)
Security deposit		6,015			-
Deferred leasing costs		5,492			-
Prepaid expenses and other current assets		42,555			(124,246	)
Accrued liabilities and other payables		714,348			(385,791	)
Accrued liabilities and other payables - related parties		91,280			83,828
Operating lease obligation		(60,254	)		6,000

NET CASH USED IN OPERATING ACTIVITIES		(2,593,548	)		(3,924,902	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Improvement of commercial real estate		(10,332	)		-
Additional investment in equity method investment		(40,179	)		(28,437	)

NET CASH USED IN INVESTING ACTIVITIES		(50,511	)		(28,437	)

CASH FLOWS FROM FINANCING ACTIVITIES
Repayments of note payable - related party		-			(200,000	)
Proceeds received from loan payable - related party		193,188			300,000
Proceeds received from equity offering		2,481,405			4,703,890
Disbursements for equity offering costs		(74,442	)		(361,947	)

NET CASH PROVIDED BY FINANCING ACTIVITIES		2,600,151			4,441,943

EFFECT OF EXCHANGE RATE ON CASH		2,635			(4,394	)

NET (DECREASE) INCREASE IN CASH		(41,273	)		484,210

CASH - beginning of period		726,577			764,891

CASH - end of period	$	685,304		$	1,249,101

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for future services	$	234,750		$	17,500
Common stock issued for accrued liabilities	$	261,032		$	-
Deferred financing costs in accrued liabilities	$	16,093		$	33,025
Accrued professional fees relieved for shares issued	$	202,500		$	-

See accompanying notes to the condensed consolidated financial statements.

AVALON GLOBOCARE CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS

Avalon GloboCare Corp. (the “Company” or “AVCO”) is a Delaware corporation. The Company was incorporated under the laws of the State of Delaware on July 28, 2014. On October 19, 2016, the Company entered into and closed a Share Exchange Agreement with the shareholders of Avalon Healthcare System, Inc., a Delaware corporation (“AHS”), each of which were accredited investors (“AHS Shareholders”) pursuant to which we acquired 100% of the outstanding securities of AHS in exchange for 50,000,000 shares of the Company’s common stock (the “AHS Acquisition”). AHS was incorporated on May 18, 2015 under the laws of the State of Delaware.

For accounting purposes, AHS was the surviving entity. The transaction was accounted for as a recapitalization of AHS pursuant to which AHS was treated as the accounting acquirer, surviving and continuing entity although the Company is the legal acquirer. The Company did not recognize goodwill or any intangible assets in connection with this transaction. Accordingly, the Company’s historical financial statements are those of AHS and its wholly-owned subsidiary, Avalon (Shanghai) Healthcare Technology Co., Ltd. (“Avalon Shanghai”) immediately following the consummation of this reverse merger transaction. AHS owns 100% of the capital stock of Avalon Shanghai, which is a wholly foreign-owned enterprise organized under the laws of the People’s Republic of China (“PRC”). Avalon Shanghai was incorporated on April 29, 2016 and is engaged in medical related consulting services for customers.

The Company is a clinical-stage, vertically integrated, leading CellTech bio-developer dedicated to advancing and empowering innovative, transformative immune effector cell therapy, exosome technology, as well as COVID-19 related diagnostics and therapeutics. The company also provides strategic advisory and outsourcing services to facilitate and enhance its clients' growth and development, as well as competitiveness in healthcare and CellTech industry markets. Through its subsidiary structure with unique integration of verticals from innovative research and development (“R&D”) to automated bioproduction and accelerated clinical development, the Company is establishing a leading role in the fields of cellular immunotherapy (including CAR-T/NK), exosome technology (ACTEX™), and regenerative therapeutics.

On January 23, 2017, the Company incorporated Avalon (BVI) Ltd., a British Virgin Island company. There was no activity for the subsidiary since its incorporation through June 30, 2021. Avalon (BVI) Ltd. is dormant and is in process of being dissolved.

On February 7, 2017, the Company formed Avalon RT 9 Properties, LLC (“Avalon RT 9”), a New Jersey limited liability company. On May 5, 2017, Avalon RT 9 purchased a real property located in Township of Freehold, County of Monmouth, State of New Jersey, having a street address of 4400 Route 9 South, Freehold, NJ 07728. This property was purchased to serve as the Company’s world-wide headquarters for all corporate administration and operations. In addition, the property generates rental income. Avalon RT 9 owns this office building. Currently, 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, 2021, the occupancy rate of the building is 89.4%.

On July 31, 2017, the Company formed Genexosome Technologies Inc. (“Genexosome”) in Nevada. Genexosome was engaged in developing proprietary diagnostic and therapeutic products using exosomes. Genexosome owns 100% of the capital stock of Beijing Jieteng (Genexosome) Biotech Co., Ltd., a corporation incorporated in the People’s Republic of China on August 7, 2015 (“Beijing Genexosome”), and the Company holds 60% of Genexosome and Dr. Yu Zhou holds 40% of Genexosome. The Company had not been able to realize the financial projections provided by Dr. Zhou at the time of the acquisition and has decided to impair the intangible asset associated with this acquisition to zero. Dr. Zhou was terminated as Co-CEO of Genexosome on August 14, 2019. Since the fourth quarter of 2019, the non-controlling interest has remained inactive.

On July 18, 2018, the Company formed a wholly owned subsidiary, Avactis Biosciences Inc., a Nevada corporation, which will focus on accelerating commercial activities related to cellular therapies, including regenerative medicine with stem/progenitor cells as well as cellular immunotherapy including CAR-T, CAR-NK, TCR-T and others. The subsidiary is designed to integrate and optimize our global scientific and clinical resources to further advance the use of cellular therapies to treat certain cancers.

On June 13, 2019, the Company formed a wholly owned subsidiary, International Exosome Association LLC, a Delaware company. There was no activity for the subsidiary since its incorporation through June 30, 2021.

AVALON GLOBOCARE CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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, 2021 are as follows:

Name of Subsidiary	Place and date of Incorporation	Percentage of Ownership	Principal Activities
Avalon Healthcare System, Inc. (“AHS”)	Delaware May 18, 2015	100% held by AVCO	Provides medical related consulting services and developing Avalon Cell and Avalon Rehab in United States of America (“USA”)

Avalon (BVI) Ltd. (“Avalon BVI”)	British Virgin Island January 23, 2017	100% held by AVCO	Dormant, is in process of being dissolved

Avalon RT 9 Properties LLC (“Avalon RT 9”)	New Jersey February 7, 2017	100% held by AVCO	Owns and operates an income-producing real property and holds and manages the corporate headquarters

Avalon (Shanghai) Healthcare Technology Co., Ltd. (“Avalon Shanghai”)	PRC April 29, 2016	100% held by AHS	Provides medical related consulting services and developing Avalon Cell and Avalon Rehab in China

Genexosome Technologies Inc. (“Genexosome”)	Nevada July 31, 2017	60% held by AVCO	Dormant

Beijing Jieteng (Genexosome) Biotech Co., Ltd. (“Beijing Genexosome”)	PRC August 7, 2015	100% held by Genexosome	Dormant

Avactis Biosciences Inc. (“Avactis”)	Nevada July 18, 2018	100% held by AVCO	Integrate and optimize global scientific and clinical resources to further advance cellular therapies, including regenerative medicine with stem/progenitor cells as well as cellular immunotherapy including CAR-T, CAR-NK, TCR-T and others to treat certain cancers

International Exosome Association LLC (“Exosome”)	Delaware June 13, 2019	100% held by AVCO	Promotes standardization related to exosome industry

NOTE 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 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. GAAP”). The Company’s condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission on March 30, 2021.

AVALON GLOBOCARE CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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

Going Concern

The Company is a clinical-stage, vertically integrated, leading CellTech bio-developer dedicated to advancing and empowering innovative, transformative immune effector cell therapy, exosome technology, as well as COVID-19 related diagnostics and therapeutics. The Company also provides strategic advisory and outsourcing services to facilitate and enhance its clients' growth and development, as well as competitiveness in healthcare and CellTech industry markets. Through its subsidiary structure with unique integration of verticals from innovative research and development (“R&D”) to automated bioproduction and accelerated clinical development, the Company is establishing a leading role in the fields of cellular immunotherapy (including CAR-T/NK), exosome technology (ACTEX™), and regenerative therapeutics.

In addition, the Company owns commercial real estate that houses its headquarters in Freehold, New Jersey and provides outsourced, customized international healthcare services to the rapidly changing health care industry primarily focused in the People’s Republic of China. The Company did not generate any revenue from medical related consulting services segment during the three and six months ended June 30, 2021. These condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business.

As reflected in the accompanying condensed consolidated financial statements, the Company had working capital deficit of $2,354,803 as of June 30, 2021 and has incurred recurring net loss and generated negative cash flow from operating activities of $4,732,028 and $2,593,548 for the six months ended June 30, 2021, respectively. The Company has a limited operating history and its continued growth is dependent upon the continuation of providing medical consulting services to its only few clients who are related parties and generating rental revenue from its income-producing real estate property in New Jersey; hence generating revenues, and obtaining additional financing to fund future obligations and pay liabilities arising from normal business operations. In addition, the current cash balance cannot be projected to cover the operating expenses for the next twelve months from the release date of this report. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital, implement its business plan, and generate significant revenues. There are no assurances that the Company will be successful in its efforts to generate significant revenues, maintain sufficient cash balance or report profitable operations or to continue as a going concern. The Company plans on raising capital through the sale of equity to implement its business plan. However, there is no assurance these plans will be realized and that any additional financings will be available to the Company on satisfactory terms and conditions, if any.

The occurrence of an uncontrollable event such as the COVID-19 pandemic had negatively impact on the Company’s operations. Our general development operations have continued during the COVID-19 pandemic and we have not had significant disruption. However, we are uncertain if the COVID-19 pandemic will impact future operations at our laboratory, or our ability to collaborate with other laboratories and universities. In addition, we are unsure if the COVID-19 pandemic will impact future clinical trials. Given the dynamic nature of these circumstances, the duration of business disruption and reduced traffic, the related financial effect cannot be reasonably estimated at this time but is expected to adversely impact the Company’s business for the rest of 2021.

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 the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Significant estimates during the three and six months ended June 30, 2021 and 2020 include the useful life of property and equipment and investment in real estate, assumptions used in assessing impairment of long-term assets, valuation of deferred tax assets and the associated valuation allowances, and valuation of stock-based compensation.

AVALON GLOBOCARE CORP. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Fair Value of Financial Instruments and Fair Value Measurements

The Company adopted the guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the 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 on the best available information.

SEC Form 10-Q filed by Avalon GloboCare Corp.