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UNITED

STATES

SECURITIES

AND EXCHANGE COMMISSION

Washington,

D.C. 20549

FORM

10-K

☒ ANNUAL

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

For

the fiscal year ended December 31, 2021

☐

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

Commission

file number: 000-55709

(Name

of registrant as specified in its charter)

(State or other jurisdiction of (I.R.S. Employer

incorporation or organization) Identification No.)

(Address of principal executive offices) (Registrant’s telephone number)

SECURITIES

REGISTERED PURSUANT TO SECTION 12(b) OF THE EXCHANGE ACT:

Title of each Class: Trading Symbol Name of Each Exchange

Common Stock, $0.0001 par value per share AVCO The NASDAQ Stock Market LLC

SECURITIES

REGISTERED PURSUANT TO SECTION 12(g) OF THE EXCHANGE ACT:

None.

Indicate

by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate

by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained

herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated

by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☐

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 ☐

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 has filed a report on and attestation to its management’s assessment of the effectiveness

of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered

public accounting firm that prepared or issued its audit report. Yes ☐ No ☒

Indicate

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

of June 30, 2021, the last business day of the Registrant’s most recently completed second fiscal quarter, the market value of

our common stock held by non-affiliates was approximately $30,394,000.

The number of shares of the Registrant’s

common stock, $0.0001 par value per share, outstanding as of March 30, 2022, was 88,625,709.

Documents

incorporated by reference: NONE

TABLE

OF CONTENTS

PART I

Item 1. Business 1

Item 1A. Risk Factors 15

Item 1B. Unresolved Staff Comments 44

Item 2. Properties 44

Item 3. Legal Proceedings 44

Item 4. Mine Safety Disclosures 44

PART II

Item 6. [Reserved] 46

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 56

Item 8. Financial Statements and Supplementary Data 56

Item 9A. Controls and Procedures 56

Item 9B. Other Information 57

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 57

PART III

Item 10. Directors, Executive Officers and Corporate Governance 58

Item 11. Executive Compensation 65

Item 14. Principal Accounting Fees and Services 71

PART IV

Signatures 76

Forward-Looking

Statements

CERTAIN

STATEMENTS IN THIS ANNUAL REPORT MAY CONSTITUTE “FORWARD LOOKING STATEMENTS”. WHEN THE WORDS “BELIEVES,” “EXPECTS,”

“PLANS,” “PROJECTS,” “ESTIMATES” AND SIMILAR EXPRESSIONS ARE USED, THEY IDENTIFY FORWARD-LOOKING

STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON MANAGEMENT’S CURRENT BELIEFS AND ASSUMPTIONS AND INFORMATION CURRENTLY

AVAILABLE TO MANAGEMENT AND INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE

OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY

THESE FORWARD-LOOKING STATEMENTS. INFORMATION CONCERNING FACTORS THAT COULD CAUSE OUR ACTUAL RESULTS TO DIFFER MATERIALLY FROM THESE

FORWARD-LOOKING STATEMENTS CAN BE FOUND IN OUR PERIODIC REPORTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. WE UNDERTAKE NO OBLIGATION

TO PUBLICLY RELEASE REVISIONS TO THESE FORWARD-LOOKING STATEMENTS TO REFLECT FUTURE EVENTS OR CIRCUMSTANCES OR REFLECT THE OCCURRENCE

OF UNANTICIPATED EVENTS.

Unless

otherwise indicated, references to “we,” “us,” “our,” “Company,” or “Avalon”

mean Avalon GloboCare Corp. and its subsidiaries, and references to “fiscal” mean the Company’s fiscal year ended December

31. References to the “parent company” mean Avalon GloboCare Corp.

PART

ITEM 1.

BUSINESS

Overview

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 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 (ACTEXTM), and COVID-19 related vaccine and therapeutics.

Avalon

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

clinical programs and product commercialization. Avalon’s upstream innovative research includes:

● Development of Avalon Clinical-grade Tissue-specific Exosome (“ACTEXTM”)

Avalon’s

midstream bio-processing and bio-production facility is located in Nanjing, China with state-of-the-art, automated GMP and QC/QA infrastructure

for standardized bio-manufacturing of clinical-grade cellular products involved in our clinical programs in immune effector cell therapy,

regenerative therapeutics, as well as bio-banking.

Avalon’s

downstream medical team and facility consists of top-rated affiliated hospital network and experts specialized in hematology, oncology,

cellular immunotherapy, hematopoietic stem/progenitor cell transplant, as well as regenerative therapeutics. Our major clinical programs

include:

For

the year ended December 31, 2021 we generated revenue by providing medical related consulting services in advanced areas of immunotherapy

and second opinion/referral services through our wholly-owned subsidiary Avalon (Shanghai) Healthcare Technology Co., Ltd., or Avalon

Shanghai. We also own and operate rental commercial real property in New Jersey, where we are headquartered.

COVID-19

has not significantly impacted Company operations or the work performed as part of our clinical trials in China. The clinical trials

are being conducted at Hebei Yanda Lu Daopei Hospital and Beijing Lu Daopei Hospital. Both hospitals are considered primarily hematology

specialty hospitals and experienced minor disruption as part of the pandemic.

While

Avalon is not a People’s Republic of China (the “PRC”) operating company, certain of its subsidiaries are PRC operating

companies and through them Avalon currently has operations in PRC, which involves unique risks. See “China Operations” below,

and “Risk Factors—Risks Related to Doing Business in China.”

Corporate

Information/Company History

were incorporated under the laws of the State of Delaware on July 28, 2014 under the name Global Technologies Corp.

own 100% of the capital stock of Avalon Healthcare Systems, Inc., a Delaware corporation, or AHS, which we acquired on October 19, 2016.

AHS was incorporated on May 18, 2015 under the laws of the State of Delaware. In addition, we own through AHS 100% of the capital stock

of Avalon (Shanghai) Healthcare Technology Co., Ltd., or Avalon Shanghai, which is a wholly foreign-owned enterprise, or WOFE, organized

under the laws of the People’s Republic of China, or PRC or China. Avalon Shanghai was incorporated on April 29, 2016 and is engaged

in medical related consulting services for customers. On January 23, 2017, we incorporated Avalon (BVI) Ltd, a British Virgin Islands

company (dormant and in process of being dissolved). On February 7, 2017, we formed Avalon RT 9 Properties, LLC, a New Jersey limited

liability company. In July 2017, we formed Genexosome Technologies Inc., a Nevada corporation, or Genexosome. Effective October 25, 2017,

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. Both Genexosome and Beijing Genexosome are inactive now.

May 29, 2018, Avalon Shanghai entered into a Joint Venture Agreement with Jiangsu Unicorn Biological Technology Co., Ltd., or Unicorn,

pursuant to which a company named Epicon Biotech Co., Ltd. (“Epicon”) was formed on August 14, 2018. Epicon is owned 60%

by Unicorn and 40% by Avalon Shanghai. Within five years of execution of the Joint Venture Agreement, Unicorn shall invest cash into

Epicon in an amount not less than RMB 8,000,000 (approximately $1.2 million) and the premises of the laboratories of Nanjing Hospital

of Chinese Medicine for exclusive operation by Epicon, and Avalon Shanghai shall invest cash into Epicon in an amount not less than RMB

10,000,000 (approximately $1.5 million). The board of directors of Epicon shall consist of five members with Unicorn appointing three

members and Avalon Shanghai appointing two members. As of December 31, 2021, Unicorn has invested the premises of the laboratories of

Nanjing BENQ hospital as GMP level research and manufacture facility and Avalon Shanghai has contributed RMB 4,760,000 (approximately

$0.7 million). Epicon is focused on cell preparation, third party testing, biological sample repository for commercial and scientific

research purposes and the clinical transformation of scientific achievements.

July 18, 2018, we formed a wholly owned subsidiary, Avactis Biosciences Inc. (“Avactis”), a Nevada corporation, which will

be focused 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 October

23, 2018, Avactis and Arbele Limited (“Arbele”) agreed to the establishment of AVAR BioTherapeutics (China) Co. Ltd. (“AVAR”),

a Sino-foreign equity joint venture, pursuant to an Equity Joint Venture Agreement (the “AVAR Agreement”), which will be

owned 60% by Avactis and 40% by Arbele. The purpose and business scope of the Joint Venture is to research, develop, produce, sell, distribute

and generally commercialize CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy in China. Avactis 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 AVAR and Avactis in writing subject to Avactis’ cash reserves. Within 30 days, Arbele shall make contribution of $6.66

million in the form of entering into a License Agreement with AVAR granting AVAR with 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 upon Avactis and AVAR and services. As of the date

hereof, the License Agreement has not been finalized.

The

following diagram illustrates our corporate structure:

June 13, 2021, the Company entered into a Share Purchase Agreement (the “Purchase Agreement”), by and among the Company,

Lonlon Biotech Ltd., a company incorporated in the British Virgin Islands (“BVI”) (“Sen Lang BVI”), the holders

of the share capital of Sen Lang BVI (the “Sen Lang BVI Shareholders”), the ultimate beneficial owners of the Sen Lang BVI

Shareholders (the “Sen Lang BVI Beneficial Shareholders” and, together with the Sen Lang BVI Shareholders, the “Sen

Lang BVI Owners”) and a representative of the Sen Lang BVI Owners (the “Sen Lang BVI Representative”). On January 1,

2022, the Company, on the one hand, and Sen Lang BVI, the Sen Lang Shareholders, the Sen Lang Beneficial Shareholders and Ding Wei, in

his capacity as the Sen Lang Representative, on the other hand, terminated the Purchase Agreement.

China

Operations

Certain of Avalon’s

subsidiaries are PRC operating companies, and through them Avalon currently has operations in the People’s Republic of China, which

involves unique risks.

The

method by which cash is transferred in Avalon’s organization, in light of its PRC subsidiaries, is complex. The payment and amount

of any future dividend of the PRC subsidiaries to Avalon will be restricted by PRC laws and regulations regarding dividends and PRC foreign

exchange regulations. PRC laws require that dividends be paid only out of the profit for the year calculated according to PRC accounting

principles. PRC laws also require foreign-invested enterprises to set aside at least 10% of their after-tax profits as the statutory

common reserve fund until the cumulative amount of the statutory common reserve fund reaches 50% or more of such enterprises’ registered

capital, if any, to fund its statutory common reserves, which are not available for distribution as cash dividends. Avalon and, ultimately,

Avalon stockholders will receive the economic benefit of its PRC subsidiaries by way of dividends, which are subject to restrictions

under current United States (“U.S.”) laws and regulations regarding dividends. Furthermore, under applicable PRC laws and

regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities within

ten years after the taxable year when the transactions are conducted. Avalon and its subsidiaries may face material and adverse tax consequences

if the PRC tax authorities determine that the contractual arrangements were not entered into on an arm’s length basis.

Pursuant

to the PRC Enterprise Income Tax Law, a withholding tax rate of 10% currently applies to dividends paid by a PRC resident enterprise

to a foreign enterprise investor, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China

that provides for preferential tax treatment. Avalon currently believes that its PRC subsidiaries’ distribution of dividends to

Avalon, if any, shall be subject to a withholding tax rate of 10%, unless a reduced rate under a tax treaty is applicable. Avalon reported

net losses and had negative net cash flows from operations in 2021. No net income will be generated from Avalon’s PRC subsidiaries’

operations in the foreseeable future and therefore no dividends or distributions will be paid by such subsidiaries to Avalon and its

stockholders in the foreseeable future. However, if such subsidiaries do make distributions of cash or property to Avalon, absent a distribution

by Avalon to the U.S. holders of Avalon common stock, there would be no flow-through of such income to the U.S. holders of Avalon common

stock for U.S. federal income tax purposes. As of the date of this report, no transfers, dividends or distributions from our PRC subsidiaries

to Avalon have been made to date.

As described below under “Holding

Foreign Companies Accountable Act Compliance,” the Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on

December 18, 2020. According to the HFCA Act, if the SEC determines that Avalon has filed audit reports issued by a registered public

accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning in 2021, the SEC will prohibit

Avalon’s securities from being traded on a national securities exchange or in the over-the-counter trading market in the United

States. Avalon’s auditor is Marcum LLP (“Marcum”), based in New York, New York. Marcum is registered with the PCAOB

and is subject to laws in the United States pursuant to which the PCAOB conducts regular inspections to assess their compliance with the

applicable professional standards. Since Marcum is located in the United States, the PCAOB has been able to conduct inspections of Marcum.

In addition, Marcum is not among the PCAOB registered public accounting firms registered in mainland China or Hong Kong that are subject

to PCAOB’s determination on December 16, 2021. Although Avalon is currently not subject to the HFCA Act, any uncertainty of its

applicability to Avalon, for example if Avalon switched to using a PRC-based auditing firm, could cause the market price of Avalon’s

securities to be materially and adversely affected and could cause Avalon’s securities to be delisted or prohibited from being traded

“over-the-counter”. If Avalon’s securities are unable to be listed on another securities exchange, such a delisting

would substantially impair your ability to sell or purchase Avalon’s securities when you wish to do so, and the risk and uncertainty

associated with a potential delisting would have a negative impact on the price of Avalon’s securities.

Moreover,

Avalon’s business operations in the PRC are governed by PRC laws, rules and regulations. The associated legal and operational risks

could result in a material change in the business operations of Avalon’s PRC subsidiaries and could negatively impact the value

of Avalon’s common stock or could even cause the value of such securities to significantly decline or be worthless. The PRC government

has recently announced its plans to enhance its regulatory oversight of Chinese companies listing overseas, and there is some uncertainty

with respect to the interpretation and implementation of such plans. The PRC government has also issued statements and has undertaken

regulatory actions related to the use of variable interest entities, data security and anti-monopoly concerns. The PRC government may

promulgate relevant laws, internal rules and regulations that may impose additional and significant obligations and liabilities on overseas

listed Chinese companies regarding data security, cross-border data flow, compliance with PRC securities laws and anti-monopoly laws.

These laws and regulations can be complex and stringent, and can be subjected to change and uncertain interpretation, which could limit

Avalon’s ability to conduct its business and accept foreign investments, or could significantly impact its operating results and

stock price. However, because Avalon is the issuer of the common stock listed on Nasdaq and is a Delaware operating and holding company,

no approval or permission is required under current applicable PRC laws and regulations for any future issuances of Avalon securities

to non-PRC investors. Nevertheless, PRC laws, regulations and/or their interpretations may change in the future, such that they may have

an extraterritorial effect, whereby Avalon may be required to obtain such approval or permission under PRC laws and regulations. In such

event, Avalon may face the risk that these future regulatory actions by the PRC government could significantly limit or completely hinder

Avalon’s ability to offer future securities to investors. Under this scenario, Avalon’s ability to raise capital and thereby

execute its business plan would be significantly limited or completely hindered, which would likely result in a material change in Avalon’s

operations and the value of Avalon’s common stock, including that it could cause the value of such securities to significantly

decline or become worthless. In addition, Avalon faces the risk that Avalon may not currently ascertain, and therefore may not actually

have, all requisite permissions to offer securities, which would likely result in a material change in Avalon’s operations and/or

value of Avalon’s common stock, including that it could cause the value of such securities to significantly decline or become worthless.

See “Risk Factors—The PRC government exerts substantial influence over the manner in which Avalon must conduct its business

activities and Avalon may face the risk that the future regulatory actions by the PRC government could significantly limit or completely

hinder Avalon’s ability to offer future securities to investors.

Sales

and Marketing

seek to develop new business through relationships driven by our senior management, which have extensive contacts throughout the healthcare

system. Our senior management will be seeking opportunities for joint ventures, strategic relationships and acquisitions in consulting,

biomedical innovations, laboratory, and medical device companies.

Services

currently generate revenue from related party strategic relationships through Avalon Shanghai that provide consultative services in advanced

areas of immunotherapy and second opinion/referral services. In addition, our services are targeted at serving our clients and using

our insights and deep expertise to produce tangible and significant results. Our services include research studies, executive education,

daily online executive briefings, tailored expert advisory services, and consulting and management services. We typically charge an annual

fee. Through our services, we attempt to have our clients focus on important problems by providing an analysis of the evolving healthcare

industry and the methods prevalent in the industry to solve those problems through counsel, business planning and support. We tailor

these solutions to the client’s specific strategic challenges, operational issues, and management concerns.

Strategic

Partnerships and Acquisitions

are actively seeking potential strategic partnerships in our area of focus. In addition, we are actively seeking target acquisitions

that add accretive value to our strategic plan. There is no guarantee that we will be able to successfully sign a definitive agreement,

close or implement such business arrangement.

Markets

focus on the following markets in developing our core business:

Revenue

Avalon

RT 9 Properties, LLC

May 2017, we acquired commercial property located in Freehold, New Jersey. This property is now our corporate headquarters and contains

several commercial tenants that generate revenue through rental income.

Avalon

Shanghai

currently generate revenue by providing medical related consulting services in advanced areas of immunotherapy and second opinion/referral

services through Avalon (Shanghai) Healthcare Technology Co., Ltd., or Avalon Shanghai. Our medical related consulting services include

research studies, executive education, daily online executive briefings, tailored expert advisory services, and consulting and management

services. Through our services we attempt to have our clients focus on important problems by providing an analysis of the evolving healthcare

industry and the methods prevalent in the industry to solve those problems through counsel, business planning and support. The revenue

generated from our related parties in China is managed by our employees residing in China and contactors who are retained as needed.

Consulting services have been provided by Avalon Shanghai under the contract include:

● providing scientific research consulting services;

● providing technical education and training; and

● assisting in publication of academic papers.

Strategic

Development

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

acquisition, licensing or joint ventures with major universities and biotech companies. We will also consider a third avenue of investing

in certain technologies for cell related diagnostics and therapeutics and are seeking laboratory or medical device acquisitions.

Intellectual

Property

Our

goal is to obtain, maintain and enforce patent rights for our products, formulations, processes, methods of use and other proprietary

technologies, preserve our trade secrets, and operate without infringing on the proprietary rights of other parties, both in the United

States and abroad. Our policy is to actively seek to obtain, where appropriate, the broadest intellectual property protection possible

for our current product candidates and any future product candidates, proprietary information and proprietary technology through a combination

of contractual arrangements and patents, both in the United States and abroad. Even patent protection, however, may not always afford

us with complete protection against competitors who seek to circumvent our patents. If we fail to adequately protect or enforce our intellectual

property rights or secure rights to patents of others, the value of our intellectual property rights would diminish. To this end, we

require all of our employees, consultants, advisors and other contractors to enter into confidentiality agreements that prohibit the

disclosure and use of confidential information and, where applicable, require disclosure and assignment to us of the ideas, developments,

discoveries and inventions relevant to our technologies and important to our business.

Competition

Avalon

Shanghai

our current consulting business in the People’s Republic of China, or PRC or China, we compete with a number of advisory firms

offering similar service including consulting and strategy firms; market research, data, benchmarking, and forecasting providers; technology

vendors and services firms; healthcare information technology firms; technology advisory firms; outsourcing firms; and specialized providers

of educational and training services. Other organizations, such as state and national trade associations, group purchasing organizations,

non-profit think-tanks, and database companies, also may offer research, consulting, tools, and education services to health care and

education organizations.

believe that the principal competitive factors in our market include quality and timeliness of our services, strength and depth of relationships

with our clients, ability to meet the changing needs of current and prospective clients, measurable returns on customer investment, and

service and affordability.

our business develops and we expand through joint ventures, acquisitions and strategic partnerships in the U.S. and PRC, we will have

competition with other direct service providers, emerging technologies and medical communication platforms. We will seek to maintain

a competitive advantage through intellectual property, superior quality management and cutting-edge technology.

Avalon

RT 9 Properties LLC

Our

executive commercial building in Freehold, New Jersey is located on a major highway and is one of the largest buildings in the surrounding

areas. It is centrally located and maintains high occupancy. There are other commercial properties in the vicinity that offer similar

amenities. However, premier executive offices are limited and as such we expect to continue to maintain high occupancy in the near term.

Employees

of March 30, 2022, we employed six employees, five of which are full time employees. None of our employees are represented by a collective

bargaining arrangement.

Government

Regulation

Overview

The

healthcare industry in the PRC and U.S. is highly regulated and subject to changing political, legislative, regulatory, and other influences.

Further, the healthcare industry is currently undergoing rapid change. We are uncertain how, when or in what context these new changes

will be adopted or implemented. These new regulations could create unexpected liabilities for us, could cause us or our members to incur

additional costs and could restrict our or our clients’ operations. Many of the laws are complex and their application to us, our

clients, or the specific services and relationships we have with our members are not always clear. Our failure to anticipate accurately

the application of these laws and regulations, or our other failure to comply, could create liability for us, result in adverse publicity,

and otherwise negatively affect our business.

PRC

Regulation

Despite

efforts to develop its legal system over the past several decades, including but not limited to legislation dealing with economic matters

such as foreign investment, corporate organization and governance, commerce, taxation and trade, the PRC continues to lack a comprehensive

system of laws. Further, the laws that do exist in the PRC are often vague, ambiguous and difficult to enforce, which could negatively

affect our ability to do business in China and compete with other companies in our segments.

September 2006, the Ministry of Commerce, or MOFCOM, promulgated the Regulations on Foreign Investors’ Mergers and Acquisitions

of Domestic Enterprises, or the M&A Regulations, in an effort to better regulate foreign investment in the PRC. The M&A Regulations

were adopted in part as a needed codification of certain joint venture formation and operating practices, and also in response to the

government’s increasing concern about protecting domestic companies in perceived key industries and those associated with national

security, as well as the outflow of well-known trademarks, including traditional Chinese brands.

a U.S. based company doing business in the PRC, we seek to comply with all PRC laws, rules and regulations and pronouncements, and endeavor

to obtain all necessary approvals from applicable PRC regulatory agencies such as the MOFCOM, the State Assets Supervision and Administration

Commission, the State Administration for Taxation, the State Administration for Industry and Commerce, the China Securities Regulatory

Commission, and the State Administration of Foreign Exchange, or SAFE.

Our

PRC subsidiary, Avalon Shanghai, provides outsourced and customized healthcare services to the rapidly changing health care industry.

Currently, our PRC subsidiary, Beijing Genexosome, is dormant. These subsidiaries have obtained their respective business licenses, which

permit each of them to operate its business in the PRC. No other special permission is required for our PRC subsidiaries to conduct their

respective current business under applicable PRC regulations and laws. Additionally, the operation of Avalon and its PRC subsidiaries

are not covered by permissions requirements of the China Securities Regulatory Commission (CSRC) or the Cyberspace Administration of

China (CAC).

Because

Avalon is the issuer of the common stock listed on Nasdaq and is a Delaware operating and holding company, no approval or permission

is required under current applicable PRC laws and regulations for any future issuances of Avalon securities to non-PRC investors. Nevertheless,

according to the Opinions of the General Office of the CPC Central Committee and the General Office of the State Council on Strictly

Cracking Down on Illegal Securities Activities in accordance with the Law (“Opinions”), the PRC intends to establish and

improve the system of extraterritorial application of the PRC securities laws. Although the details of the extraterritorial application

of the PRC securities laws are still scarce as of the date of this report, PRC laws, regulations and/or their interpretations may change

in the future, such that they have may an extraterritorial effect, whereby Avalon may be required to obtain such approval or permission

under PRC laws and regulations. In such event, Avalon may face the risk that these future regulatory actions by the PRC government could

significantly limit or completely hinder Avalon’s ability to offer future securities to investors. Under this scenario, Avalon’s

ability to raise capital and thereby execute its business plan would be significantly limited or completely hindered, which would likely

result in a material change in Avalon’s operations and the value of Avalon’s common stock, including that it could cause

the value of such securities to significantly decline or become worthless. In addition, Avalon faces the risk that Avalon may not currently

ascertain, and therefore may not actually have, all requisite permissions to offer securities, which would likely result in a material

change in Avalon’s operations and/or value of Avalon’s common stock, including that it could cause the value of such securities

to significantly decline or become worthless.

The

Flow of Economic Benefits from PRC Subsidiaries

The

payment and amount of any future dividend of Avalon’s PRC subsidiaries to Avalon will be restricted by PRC laws and regulations

regarding dividends and PRC foreign exchange regulations. PRC laws require that dividends be paid only out of the profit for the year

calculated according to PRC accounting principles, which differ in certain respects from the generally accepted accounting principles

in other jurisdictions, including accounting principles generally accepted in the United States of America, or US GAAP, and international

financial reporting standards as issued by the International Accounting Standards Board, or IFRS. PRC laws also require foreign-invested

enterprises to set aside at least 10% of their after-tax profits as the statutory common reserve fund until the cumulative amount of

the statutory common reserve fund reaches 50% or more of such enterprises’ registered capital, if any, to fund its statutory common

reserves, which are not available for distribution as cash dividends. Furthermore, under applicable PRC laws and regulations, arrangements

and transactions among related parties may be subject to audit or challenge by the PRC tax authorities within ten years after the taxable

year when the transactions are conducted.

Pursuant

to the PRC Enterprise Income Tax Law, a withholding tax rate of 10% currently applies to dividends paid by a PRC resident enterprise

to a foreign enterprise investor, unless any such foreign investor’s jurisdiction of incorporation has a tax treaty with China

that provides for preferential tax treatment. Furthermore, the Announcement of State Taxation Administration on Promulgation of the Administrative

Measures on Non-Resident Taxpayers Enjoying Treaty Benefits, issued on October 14, 2019 by the PRC State Taxation Administration, which

became effective from January 1, 2020, requires non-resident enterprises to determine whether they are qualified to enjoy the preferential

tax treatment under the tax treaties and make appropriate filings with the competent tax authorities. In addition, based on the Notice

on Issues concerning Beneficial Owner in Tax Treaties, or Circular 9, issued on February 3, 2018 by the PRC State Taxation Administration,

which became effective from April 1, 2018, when determining the applicant’s “beneficial owner” status regarding tax

treatments in connection with dividends, interests or royalties in the tax treaties, several factors, including, without limitation,

whether the applicant is obligated to pay more than 50% of the applicant’s income for twelve months to residents in a third country

or region, whether the business operated by the applicant constitutes the actual business activities, and whether the counterparty country

or region to the tax treaties does not levy any tax or grant tax exemption on relevant incomes or levy tax at an extremely low rate,

will be taken into account, and it will be analyzed according to the actual circumstances of the specific cases. There are also other

conditions for enjoying the reduced withholding tax rate according to other relevant tax rules and regulations. Therefore, Avalon currently

believes that dividends from its PRC subsidiaries to Avalon, if any, shall be subject to a withholding tax rate of 10%, unless a reduced

rate under a tax treaty is applicable. Avalon reported net losses and had negative net cash flows from operations in 2021. No net income

will be generated from Avalon’s PRC subsidiaries’ operations in the foreseeable future and therefore no dividends or distributions

will be paid by such subsidiaries to Avalon and its stockholders in the foreseeable future. However, if such subsidiaries do make distributions

of cash or property to Avalon, absent a distribution by Avalon to the U.S. holders of Avalon common stock, there would be no flow-through

of such income to the U.S. holders of Avalon common stock for U.S. federal income tax purposes.

of the date of this report, no transfers, dividends or distributions from our PRC subsidiaries to Avalon have been made to date.

Restrictions

on Foreign Exchange and Avalon’s Ability to Transfer Cash Across Borders

The

PRC government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency

out of China. Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade

and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from the State Administration

of Foreign Exchange, or SAFE, by complying with certain procedural requirements. However, approval from or registration with appropriate

governmental authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses.

As a result, SAFE approval may need to be obtained to use cash generated from the operations of Avalon’s PRC subsidiaries. Any

failure to comply with applicable foreign exchange regulations may subject us to administrative fines.

Holding

Foreign Companies Accountable Act Compliance

The

Holding Foreign Companies Accountable Act, or the HFCA Act, was enacted on December 18, 2020. According to the HFCA Act, if the SEC determines

that Avalon has filed audit reports issued by a registered public accounting firm that has not been subject to inspection by the PCAOB

for three consecutive years beginning in 2021, the SEC will prohibit Avalon’s securities from being traded on a national securities

exchange or in the over-the-counter trading market in the United States.

On December 16, 2021, the PCAOB

issued a Determination Report which reported that the PCAOB is unable to inspect or investigate completely registered public accounting

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

in mainland China; and (2) Hong Kong, a Special Administrative Region of the PRC, because of a position taken by one or more authorities

in Hong Kong.

Avalon’s auditor is Marcum

LLP (“Marcum”), based in New York, New York. Marcum is registered with the PCAOB and is subject to laws in the United States

pursuant to which the PCAOB conducts regular inspections to assess their compliance with the applicable professional standards. Since

Marcum is located in the United States, the PCAOB has been able to conduct inspections of Marcum. In addition, Marcum is not among the

PCAOB registered public accounting firms registered in mainland China or Hong Kong that are subject to PCAOB’s determination on

December 16, 2021.

Although

the audit reports of Avalon are prepared by U.S. auditors that are subject to inspection by the PCAOB, the PCAOB is currently unable

to conduct inspections over the audit work of Avalon’s independent registered public accounting firms with respect to Avalon’s

operations in mainland China without the approval of certain Chinese authorities. Also, there is no guarantee that future audit reports

will be prepared by auditors that are completely inspected by the PCAOB and, as such, future investors may be deprived of such inspections,

which could result in limitations or restrictions to Avalon’s access of the U.S. capital markets.

Inspections

of certain other firms that the PCAOB has conducted outside of China have identified deficiencies in those firms’ audit procedures

and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality. However, the

PCAOB is currently unable to inspect an auditor’s audit work related to a company’s operations in China where such documentation

of the audit work is located in China. As a result, Avalon’s investors may be deprived of the benefits of the PCAOB’s oversight

of auditors that are located in China through such inspections.

March 24, 2021, the SEC adopted interim final rules relating to the implementation of certain disclosure and documentation requirements

of the HFCA Act. Avalon will be required to comply with these rules if the SEC identifies us as having a “non-inspection”

year under a process to be subsequently established by the SEC. The SEC is assessing how to implement other requirements of the HFCA

Act, including the listing and trading prohibition requirements described above.

June 22, 2021, the U.S. Senate passed a bill which, if passed by the U.S. House of Representatives and signed into law, would reduce

the number of consecutive non-inspection years required for triggering the prohibitions under the HFCA Act from three years to two, which

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

November 5, 2021, the SEC approved Rule 6100 adopted by the PCAOB to determine its inability to inspect or investigate registered firms

completely under the HFCA Act. This rule establishes the framework for the PCAOB to make these required determinations. The trading in

Avalon’s securities may be prohibited under the HFCA Act if the PCAOB subsequently determines Avalon’s audit work is performed

by auditors that the PCAOB is unable to inspect or investigate completely pursuant to Rule 6100, and as a result, U.S. national securities

exchanges, such as Nasdaq, may determine to delist Avalon’s securities. Such a delisting would likely cause the value of such securities

to significantly decline or become worthless.

The

SEC may propose additional regulatory or legislative requirements or guidance that could impact us if our auditor is not subject to PCAOB

inspection. For example, on August 6, 2020, the President’s Working Group on Financial Markets, or the PWG, issued the Report on

Protecting United States Investors from Significant Risks from Chinese Companies to the then President of the United States. This report

recommended the SEC implement five recommendations to address companies from jurisdictions that do not provide the PCAOB with sufficient

access to fulfil its statutory mandate. Some of the concepts of these recommendations were implemented with the enactment of the HFCA

Act. However, some of the recommendations were more stringent than the HFCA Act. For example, if a company was not subject to PCAOB inspection,

the report recommended that the transition period before a company would be delisted would end on January 1, 2022.

The

SEC has announced that the SEC staff is preparing a consolidated proposal for the rules regarding the implementation of the HFCA Act

and to address the recommendations in the PWG report. It is unclear when the SEC will complete its rulemaking and when such rules will

become effective and what, if any, of the PWG recommendations will be adopted. The implications of this possible regulation in addition

to the requirements of the HFCA Act are uncertain. Although Avalon is currently not subject to the HFCA Act, any uncertainty of its applicability

to Avalon, for example if Avalon switched to using a PRC-based auditing firm, could cause the market price of Avalon’s securities

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

If Avalon’s securities are unable to be listed on another securities exchange, such a delisting would substantially impair your

ability to sell or purchase Avalon’s securities when you wish to do so, and the risk and uncertainty associated with a potential

delisting would have a negative impact on the price of Avalon’s securities. See “Risk Factors— Trading in Avalon’s

securities may be restricted under the Holding Foreign Companies Accountable Act if the PCAOB determines that it cannot inspect or fully

investigate Avalon’s auditors, and as a result, U.S. national securities exchanges, such as Nasdaq, may determine to delist Avalon’s

securities.

Drug

Approval Process

The

research, development, testing, manufacture, labeling, promotion, advertising, distribution and marketing, among other things, of our

product candidates are extensively regulated by governmental authorities in the United States and other countries. In the United States,

the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or the FDCA, and its implementing regulations. Failure to comply

with the applicable U.S. requirements may subject us to administrative or judicial sanctions, such as the FDA’s refusal to approve

a pending new drug application, or NDA, or a pending biologics license application, or BLA, warning letters, product recalls, product

seizures, total or partial suspension of production or distribution, injunctions and/or criminal prosecution.

Pharmaceutical

products such as ours may not be commercially marketed without prior approval from the FDA and comparable regulatory agencies in other

countries. In the United States, the process to receiving such approval is long, expensive and risky, and includes the following steps:

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

● submission to the FDA of an NDA or BLA;

● FDA review and approval of the NDA or BLA.

Regulation

by U.S. and foreign governmental authorities is a significant factor affecting our ability to commercialize any of our products, as well

as the timing of such commercialization and our ongoing research and development activities. The commercialization of drug products requires

regulatory approval by governmental agencies prior to commercialization. Various laws and regulations govern or influence the research

and development, non-clinical and clinical testing, manufacturing, processing, packing, validation, safety, labeling, storage, record

keeping, registration, listing, distribution, advertising, sale, marketing and post-marketing commitments of our products. The lengthy

process of seeking these approvals, and the subsequent compliance with applicable laws and regulations, require expending substantial

resources.

The

results of pre-clinical testing, which include laboratory evaluation of product chemistry and formulation, animal studies to assess the

potential safety and efficacy of the product and its formulations, details concerning the drug manufacturing process and its controls,

and a proposed clinical trial protocol and other information must be submitted to the FDA as part of an IND that must be reviewed and

become effective before clinical testing can begin. The study protocol and informed consent information for patients in clinical trials

must also be submitted to an independent Institutional Review Board, or IRB, for approval covering each institution at which the clinical

trial will be conducted. Once a sponsor submits an IND, the sponsor must wait 30 calendar days before initiating any clinical trials.

If the FDA has comments or questions within this 30-day period, the issue(s) must be resolved to the satisfaction of the FDA before clinical

trials can begin. In addition, the FDA, an IRB or the company may impose a clinical hold on ongoing clinical trials due to safety concerns.

If the FDA imposes a clinical hold, clinical trials can only proceed under terms authorized by the FDA. Our pre-clinical and clinical

studies must conform to the FDA’s Good Laboratory Practice, or GLP, and Good Clinical Practice, or GCP, requirements, respectively,

which are designed to ensure the quality and integrity of submitted data and protect the rights and well-being of study patients. Information

for certain clinical trials also must be publicly disclosed within certain time limits on the clinical trial registry and results databank

maintained by the NIH.

Typically,

clinical testing involves a three-phase process; however, the phases may overlap or be combined:

therapeutic product candidate being studied in clinical trials may be made available for treatment of individual patients, in certain

circumstances. Pursuant to the 21st Century Cures Act (Cures Act), which was signed into law in December 2016. The manufacturer of an

investigational product for a serious disease or condition is required to make available, such as by posting on its website, its policy

on evaluating and responding to requests for individual patient access to such investigational product.

The

results of the pre-clinical and clinical testing, chemistry, manufacturing and control information, proposed labeling and other information

are then submitted to the FDA in the form of either an NDA or BLA for review and potential approval to begin commercial sales. In responding

to an NDA or BLA, the FDA may grant marketing approval, request additional information in a Complete Response Letter, or CRL, or deny

the approval if it determines that the NDA or BLA does not provide an adequate basis for approval. A CRL generally contains a statement

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

when those conditions have been met to the FDA’s satisfaction, the FDA will typically issue an approval letter, which authorizes

commercial marketing of the product with specific prescribing information for specific indications, and sometimes with specified post-marketing

commitments and/or distribution and use restrictions imposed under a Risk Evaluation and Mitigation Strategy program. Any approval required

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

Among

the conditions for an NDA or BLA approval is the requirement that the manufacturing operations conform on an ongoing basis with cGMPs.

In complying with cGMPs, we must expend time, money and effort in the areas of training, production and quality control within our own

organization and at our contract manufacturing facilities. A successful inspection of the manufacturing facility by the FDA is usually

a prerequisite for final approval of a pharmaceutical product. Following approval of the NDA or BLA, we and our manufacturers will remain

subject to periodic inspections by the FDA to assess compliance with cGMPs requirements and the conditions of approval. We will also

face similar inspections coordinated by foreign regulatory authorities.

Disclosure

of Clinical Trial Information

ALBT US Equity

ALBT · 10-K · period ended 2021-12-31

ITEM 1.

ALBT US Equity☆

ALBT · 10-K · period ended 2021-12-31

ITEM 1.

ALBT US Equity