Filed 2026-03-30 · Period ending 2025-12-31 · 73,658 words · SEC EDGAR
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# Avalon GloboCare Corp. (ALBT) — 10-K
**Filed:** 2026-03-30
**Period ending:** 2025-12-31
**Accession:** 0001213900-26-036474
**Source:** [SEC EDGAR](https://www.sec.gov/Archives/edgar/data/1630212/000121390026036474/)
**Origin leaf:** e0b1c9af44e7bdb68eec055acc143bd5650cafb16e7510a0e23a68dcba772f00
**Words:** 73,658
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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, 2025**
**OR**
** TRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE EXCHANGE ACT**
**Commission file number: 001-38728**
**AVALON GLOBOCARE CORP.**
(Exact name of registrant as specified in its charter)
| Delaware | | 47-1685128 | |
| (State or other jurisdiction of | | (I.R.S. Employer | |
| incorporation or organization) | | Identification No.) | |
| 4400 Route 9 South, Suite 3100 | | | |
| Freehold, New Jersey | | 07728 | |
| (Address of principal executive offices) | | (Zip Code) | |
**(732) 780-4400**
(Registrants telephone number, including
area code)
Securities registered pursuant to Section 12(b)
of the Act:
| Title of each Class: | | Trading Symbol | | Name of Each Exchange | |
| Common Stock, par value $0.0001 per share | | ALBT | | The Nasdaq Capital Market | |
Securities registered pursuant to Section 12(g) of the 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 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
has filed a report on and attestation to its managements 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
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements.
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrants
executive officers during the relevant recovery period pursuant to 240.10D-1(b).
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of June 30, 2025, the last business day of
the registrants most recently completed second fiscal quarter, the market value of our common stock held by non-affiliates was
approximately $5,482,000.
The number of shares of our common stock, $0.0001
par value per share, outstanding as of March 25, 2026, was 8,023,609.
Documents incorporated by reference: Portions
of the registrants definitive proxy statement for the annual stockholder meeting to be held in 2026 are incorporated by reference
into Part III of this Annual Report on Form 10-K as noted herein. The registrant intends to file its proxy statement within 120 days
after its fiscal year end.
**TABLE OF CONTENTS**
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PART I |
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Item 1. |
Business |
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Item 1A. |
Risk Factors |
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Item 1B. |
Unresolved Staff Comments |
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Item 1C. |
Cybersecurity |
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Item 2. |
Properties |
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Item 3. |
Legal Proceedings |
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Item 4. |
Mine Safety Disclosures |
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PART II |
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Item
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Market
for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
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Item 6. |
[Reserved] |
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Item 7. |
Managements Discussion
and Analysis of Financial Condition and Results of Operations |
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Item 7A. |
Quantitative and Qualitative
Disclosures About Market Risk |
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Item 8. |
Financial Statements and
Supplementary Data |
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Item 9. |
Changes in and Disagreements
with Accountants on Accounting and Financial Disclosure |
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Item 9A. |
Controls and Procedures |
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Item 9B. |
Other Information |
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Item 9C. |
Disclosure Regarding Foreign Jurisdictions that Prevent
Inspections |
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PART III |
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Item 10. |
Directors, Executive Officers
and Corporate Governance |
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Item 11. |
Executive Compensation |
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Item 12. |
Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder Matters |
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Item 13. |
Certain Relationships
and Related Transactions, and Director Independence |
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Item 14. |
Principal Accounting Fees
and Services |
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PART IV |
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Item 15. |
Exhibits |
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Item 16. |
Form 10-K Summary |
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Signatures |
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i
**Cautionary Statement
Regarding Forward-Looking Statements**
Certain statements in
this Annual Report on Form 10-K for the year ended December31, 2025 may constitute forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), Section 21E of the Securities
Exchange Act of 1934, as amended (the Exchange Act), or the Private Securities Litigation Reform Act of 1995. All statements,
other than statements of historical facts, included herein and public statements by our officers or representatives, that address activities,
events or developments that our management expects or anticipates will or may occur in the future are forward-looking statements, including
but not limited to such things as future business strategy, plans and goals, competitive strengths and expansion and growth of our business.
The words estimate, plan, anticipate, expect, intend, believe,
target, budget, may, can, will, would, could,
should, seeks, or scheduled to and similar words or expressions, or negatives of these terms
or other variations of these terms or comparable language or any discussion of strategy or intention identify forward-looking statements.
Forward-looking statements address activities, events or developments that the Company expects or anticipates will or may occur in the
future and are based on current expectations and assumptions.
These statements involve
known and unknown risks, uncertainties, assumptions and other factors which may cause our actual results, performance or achievements
to be materially different from any results, performance or achievements expressed or implied by such forward-looking statements. See
our other reports filed with the Securities and Exchange Commission (the SEC) for more information about these and other
risks. You are cautioned against attributing undue certainty to forward-looking statements. Although we have attempted to identify important
factors that could cause actual results to differ materially from those described in forward-looking statements, there may be other factors
that cause results not to be as anticipated, estimated or intended. Although these forward-looking statements were based on assumptions
that the Company believes are reasonable when made, you are cautioned that forward-looking statements are not guarantees of future performance
and that actual results, performance or achievements may differ materially from those made in or suggested by the forward-looking statements
contained in this Annual Report on Form 10-K. In addition, even if our results, performance, or achievements are consistent with the forward-looking
statements contained in this Annual Report on Form 10-K, those results, performance or achievements may not be indicative of results,
performance or achievements in subsequent periods. Given these risks and uncertainties, you are cautioned not to place undue reliance
on these forward-looking statements. Any forward-looking statements made in this Annual Report on Form 10-K speak only as of the date
of those statements, and we undertake no obligation to update those statements or to publicly announce the results of any revisions to
any of those statements to reflect future events or developments. For information identifying important factors that could cause actual
results to differ materially from those anticipated in the forward-looking statements, see Item 1A. Risk Factors in this Annual Report
on Form 10-K.
Unless otherwise indicated, references to we,
us, our, Company, or Avalon mean Avalon GloboCare Corp. and its subsidiaries,
and references to fiscal mean the Companys fiscal year ended December 31.
ii
****
**PART I**
**ITEM 1. BUSINESS**
**Overview**
We are a technology-innovation company with a
strategic focus on developing innovative products and services that serve growing consumer health and technology markets. Throughout our
operating history, we have maintained our corporate identity, management team and original mission while strategically evolving our business
in response to market conditions and commercial opportunities, with each such evolution being the product of deliberate decisions. We
are actively seeking complementary bolt-on AI acquisitions that could generate near-term revenue to supplement our current operations
as both segments continue to develop. We believe our diverse and evolving portfolio of commercial activities reflects our ongoing commitment
to identifying and building value-oriented technology businesses for the benefit of its stockholders.
**Current Business Operations**
We currently operates through two business segments:
(i) a consumer health technology segment, through which we distributes the Keto Air breathalyzer device a non-invasive consumer
breathalyzer that measures ketosis levels and is sold in North America, bearing an FDA registration number; and (ii) an artificial intelligence
content technology segment, through which we develop and commercialize an AI-driven, short-form video generation platform operated by
Avalon Quantum AI, LLC, our wholly owned subsidiary formed in connection with our acquisition of RPM Interactive, Inc. in December 2025.
Each segment is described in full below.
****
**Consumer Health Technology Segment - Keto-Air
Breathalyzer**
**
*Overview*
Our consumer health technology segment is centered
on the Keto Air breathalyzer device, a non-invasive consumer health product that allows users to determine whether they are in a state
of nutritional ketosis, and at what level, by exhaling into a compact, pen-like breathalyzer. Ketosis is a metabolic state in which the
body burns fat for fuel rather than carbohydrates, and is widely associated with low-carbohydrate and ketogenic dietary regimens. The
Keto Air device represents a meaningful improvement over prior methods of measuring ketosis, such as urine test strips or earlier-generation
breathalyzers that required cartridge replacements, offering users a convenient, reusable, and non-invasive testing experience.
We entered into an exclusive North American distribution
agreement for the Keto-Air technology and device in 2024. Pursuant to this agreement, we have exclusive distribution rights in the United
States, Canada and Mexico through July of 2025 and since that time, we continue to be the only distributor in North America. We believe
this provides us with a meaningful competitive advantage in the North American ketosis monitoring market for the duration of the agreement.
We previously had a THC breathalyzer device under development. In March
2026, we discontinued development of that product due to a lack of available funding. The discontinuation of the THC breathalyzer does
not affect our Keto Air operations or sales of the Keto Air device..
**
*Market Opportunity*
Our commercial sales strategy for Keto Air utilizes
two primary channels: social media influencer relationships and a commercial relationship with the Law Enforcement Association of America,
which was developed through one of our consultants. We believe the Law Enforcement Association of America relationship is particularly
well-suited to the Keto Air product given the relevance of metabolic health monitoring to the wellness programs of law enforcement personnel
and their families.
We are currently in an early-stage commercial
testing phase, during which we are assessing broader market demand, refining our distribution and marketing approach, and evaluating the
most effective channels for scaling sales. We are continuing to assess the future strategic direction of our Keto Air product line in
light of its commercial performance and our overall business portfolio.
1
**
*Regulatory Status*
The Keto Air device bears an FDA registration
number, which is required for the commercial sale of such devices in the United States. The device is classified as a consumer product
and is not a regulated medical device requiring FDA pre-market approval, and accordingly may be sold directly to any consumer without
a prescription or other regulatory authorization. We believe this regulatory profile provides us with a straightforward commercial pathway
to market in the United States and across North America.
****
**Artificial Intelligence Content Technology
Segment Avalon Quantum AI, LLC / RPM Interactive**
**
*Overview*
Our artificial intelligence content technology segment is operated
through Avalon Quantum AI, LLC, a wholly owned subsidiary of our company organized in the State of Nevada and formed in connection with
our acquisition of RPM Interactive, Inc. ("RPM") in December 2025. RPM merged with and into Avalon Quantum AI, LLC pursuant
to the merger, and Avalon Quantum AI, LLC continues to operate as our wholly owned subsidiary.
**
*The RPM Platform Phase 1*
The RPM platform is an AI-driven, short-form video
generation software. In its current Phase 1 form, the platform enables content creators with an initial focus on the podcasting
market to input a topic of their choosing, after which the platform automatically scrapes the internet for relevant videos, identifies
the most-viewed or most-discussed content on that topic, and generates a structured, three-minute video featuring an AI-generated avatar
of the creator that replicates their voice and likeness. Each generated video consists of three segments: an introduction delivered by
the creator's AI avatar, the featured video clip sourced by the platform, and a concluding statement also delivered by the AI avatar.
The core appeal of the RPM platform to content
creators is efficiency: the software automates the time-consuming process of identifying and sourcing video content, writing scripts,
and producing recordings, enabling creators to generate daily content at scale and drive increased views, clicks, and subscriber engagement
across their platforms. We believe the demand for automated, high-quality content generation tools among the creator economy is substantial
and growing, and that the RPM platform is well-positioned to address this demand.
The platform is currently in beta testing with
a limited number of content creators. We are using this beta period to refine the platform's AI avatar generation capabilities, test the
content sourcing and curation algorithms, and gather user feedback in advance of a broader commercial launch.
**
*Phase 2 Development*
Phase 2 of the RPM platform is currently in development and is expected
to launch in Q3 of 2026. Phase 2 is expected to expand the platform's user base beyond podcasters to a substantially broader range of content creators
and marketers, including social media influencers and individuals or businesses engaged in product marketing and e-commerce. Phase 2 will
also feature a more refined AI avatar generation system, with enhanced voice and likeness replication capabilities designed to produce
higher-quality, more personalized content at scale.
We believe the expansion of the platform's addressable
market from podcasters to the broader creator and marketer economy in Phase 2 represents a significant step toward the commercial scaling
of the RPM platform, and we intend to pursue a phased commercial launch strategy following the completion of Phase 2 development.
While we continue to develop and complete Phase 2, we continue to evaluate
possible AI acquisitions that we believe could generate near-term revenue to supplement our current operations while the RPM platform
continues through its development and commercial launch phases. We have not entered into any definitive agreement with respect to any
such acquisition as of the date of this Annual Report, and there can be no assurance that we will identify, complete, or successfully
integrate any such acquisition.
2
****
**History of Operations**
****
**Wind-Down of China Operations (20222023)**
Our initial commercial strategy was focused on
the cellular therapy sector, where we sought to advance innovative cellular therapy technologies in both the United States and China.
Beginning in 2022 and continuing through 2023, our Board of Directors determined to wind down our operations in the People's Republic
of China and to divest all assets, subsidiaries, and relationships associated with our China-based activities. This decision reflected
both the changed commercial and regulatory landscape applicable to our cellular therapy program and our inability to secure the capital
necessary to advance the program at the scale required to achieve commercial viability. By November 2022, we had ceased all active operations
in the PRC, and the wind-down was completed during 2023.
****
**Laboratory Services Strategy (20232025)**
In February 2023, through our subsidiary Avalon Lab, LLC, we acquired
a 40% equity interest in Laboratory Services MSO, LLC, a California-based clinical laboratory company, for total consideration of approximately
$20.7 million, comprised of approximately $9.0 million in cash, 11,000 shares of our Series B Convertible Preferred Stock, and an additional
$666,667 cash payment made in February 2024. On February 26, 2025, we exited the investment entirely pursuant to a Redemption and Abandonment
Agreement, receiving cash proceeds of $1,745,000 and surrendering our Series B Preferred Stock.
****
**Search for Strategic Acquisitions and YOOV
Merger Agreement (20242025)**
In early 2024, our Board made a strategic determination to focus our
acquisition efforts on YOOV Group Holding Limited ("YOOV"), a Hong Kong-based company. We conducted extensive due diligence,
engaging on-site due diligence meetings with the YOOV management team. On March 7, 2025, we entered into an Agreement and Plan of Merger
with YOOV and Nexus MergerSub Limited, pursuant to which YOOV would have become a direct, wholly owned subsidiary of our company. During
our continued review of YOOV's financial statements for the fiscal year ended December 31, 2024, our Board of Directors determined that
it was not in the best interests of our stockholders to proceed with the transaction. We terminated the merger agreement with YOOV effective
January 21, 2026.
****
**Acquisition of RPM Interactive, Inc. and
Formation of Avalon Quantum AI, LLC (December 2025)**
On December 15, 2025, we completed the acquisition of RPM Interactive,
Inc. ("RPM"), a generative artificial intelligence software company, through a subsidiary merger whereby RPM merged with and
into Avalon Quantum AI, LLC, a newly formed, wholly owned subsidiary of our company organized in the State of Nevada. Avalon Quantum AI,
LLC is the surviving entity and continues as our wholly owned subsidiary. We, as the surviving listed parent entity, continue to operate
under our existing Nasdaq listing, and neither our corporate identity, our Nasdaq listing, nor our principal executive offices were altered
as a result of the acquisition. The acquisition was effected as an all-stock transaction pursuant to which we issued 19,500 shares of
our Series E Non-Voting Convertible Preferred Stock to RPM's former stockholders at a stated value of $1,000 per share, for a total stated
purchase price of $19.5 million. Each share of Series E Preferred Stock is convertible into shares of our common stock at a conversion
price of $1.50 per share, subject to: (i) a beneficial ownership cap of 4.99% per holder; (ii) an exchange cap preventing issuance in
excess of applicable Nasdaq thresholds (the "Exchange Cap"); and (iii) stockholder approval required under Nasdaq Listing Rule
5635, which we intend to seek at our 2026 annual meeting of stockholders. The Series E Preferred Stock is non-voting prior to conversion.
In connection with the acquisition, we appointed Michael Mathews to our Board of Directors. A full description of our RPM platform and
Phase 2 development plans is set forth in Item 1.B above.
3
**Intellectual Property**
****
**Cellular Therapy Patent Portfolio**
We hold a portfolio of patents developed during
our cellular therapy operating period. This portfolio includes patents that are co-owned with the Massachusetts Institute of Technology
("MIT"), arising from a prior joint research agreement between our company and MIT, as well as patents co-owned with Arbelli,
a Hong Kong-based company that collaborated with us during our cellular therapy research activities. We regard the MIT co-ownership as
a material component of our patent portfolio, and we disclose it accordingly.
Although we have ceased all active research and
development activities related to cellular therapy, we have made a deliberate decision to continue actively maintaining, or "prosecuting,"
these patents rather than allowing them to lapse or be abandoned. We believe the patents may have potential future value whether
through licensing, sale, or the resumption of activity in the cellular therapy space and we intend to continue maintaining them
for so long as we consider it commercially reasonable to do so. Any decisions regarding the licensing or enforcement of co-owned patents
are subject to the terms of our co-ownership arrangements with MIT and Arbelli, which may limit our ability to license or enforce such
patents unilaterally without the consent of our co-owners.
**Artificial Intelligence Platform
Provisional Patent Applications**
In connection with our acquisition of RPM Interactive,
Inc. and the development of our generative AI content platform operated through Avalon Quantum AI, LLC, we have filed three provisional
patent applications relating to aspects of the RPM platform's technology. Provisional applications establish an early filing date and
provide a twelve-month period during which we may file corresponding non-provisional patent applications. We intend to evaluate the commercial
and strategic value of converting these provisional applications into non-provisional applications during the applicable filing window.
There can be no assurance that any patents will issue from these applications, or that any issued patents will provide meaningful competitive
protection.
**General Intellectual Property Policy**
****
Our general policy is to seek, where appropriate,
broad intellectual property protection for our current and future products, technologies, and proprietary information through a combination
of patents, trade secrets, contractual arrangements, and other available means, both in the United States and internationally. We require
all employees, consultants, advisors, and contractors to enter into confidentiality agreements that prohibit the disclosure and unauthorized
use of our confidential information and, where applicable, require the disclosure and assignment to us of ideas, developments, discoveries,
and inventions relevant to our technologies and important to our business. We also rely on trade secret protection for certain aspects
of our proprietary technology and business processes, including aspects of the RPM platform's content sourcing and curation algorithms
that we have determined are better protected as trade secrets than through patent disclosure.
**Competition**
We operate in two distinct and competitive markets,
each with its own competitive dynamics. We face competition in both our consumer health technology segment and our artificial intelligence
content technology segment, as described below.
**Consumer Health Technology Keto
Air Breathalyzer**
The market for consumer ketosis monitoring products
is competitive and includes a range of products at varying price points and technology levels. Our primary competitors in this space include
manufacturers and distributors of urine-based ketone test strips, which represent the most widely used and lowest-cost method of ketosis
measurement and are available through a broad range of retail and online channels. We also compete with other breath-based ketone monitoring
devices, including earlier-generation breathalyzers that required consumable cartridge replacements and more recent reusable breath ketone
monitors that have been introduced to the market by consumer health technology companies.
We believe the Keto Air device competes favorably
on the basis of its reusable design, ease of use, and the convenience of non-invasive breath-based testing relative to urine strip alternatives.
As we are currently the only one selling the device in North America, we believe this provides us with a meaningful structural advantage
relative to other distributors of similar products in our territory.. However, many of our actual and potential competitors in this space
have significantly greater financial resources, brand recognition, established retail distribution networks, and marketing infrastructure
than we do, and we may not be able to compete effectively with them over the long term.
**Artificial Intelligence Content Technology
Avalon Quantum AI, LLC / RPM Platform**
The market for AI-driven content creation tools
is rapidly evolving, highly competitive, and characterized by continuous technological development and the frequent entry of new participants.
We compete with a broad range of companies offering AI-powered video generation, content automation, and creator economy tools, including
both established technology companies with significant resources and early-stage companies developing competing generative AI platforms.
4
Key competitive factors in this market include
the quality and realism of AI-generated content, the breadth of the platform's addressable user base, the speed and automation of content
generation workflows, the sophistication of voice and likeness replication technology, integration with major social media and content
distribution platforms, and the ability to scale rapidly to meet growing creator demand. We believe our RPM platform competes on the basis
of its end-to-end automation of the video content creation process from topic input through content sourcing, curation, avatar
generation, and final video production which we believe meaningfully reduces the time and technical burden on content creators
relative to less automated alternatives.
However, many of our actual and potential competitors
in the generative AI space have substantially greater financial resources, research and development capabilities, engineering talent,
data assets, and market presence than we do. Several large technology companies are actively investing in AI-generated content tools and
avatar technology, and we expect competition in this market to intensify significantly as the technology matures and the creator economy
continues to grow. Smaller and early-stage companies may also prove to be significant competitors, particularly those that secure strategic
partnerships with established platform operators or content networks.
**Employees**
As of March 25, 2026, we employed two full time
employees and several independent contractors. None of our employees is represented by a collective bargaining arrangement.
****
**Regulatory Environment**
****
Our business is subject to a variety of laws and
regulations in the United States and, to the extent we expand internationally, abroad. The principal regulatory frameworks applicable
to our two current operating segments are described below. We anticipate that the regulatory environment applicable to our business
particularly with respect to artificial intelligence and consumer data privacy will continue to evolve rapidly, and we intend
to monitor legislative and regulatory developments and adapt our compliance programs accordingly.
****
**Consumer Health Technology FDA Regulatory
Framework Applicable to Keto Air**
The Keto Air breathalyzer device is subject to
the regulatory authority of the U.S. Food and Drug Administration ("FDA") under the Federal Food, Drug, and Cosmetic Act ("FD&C
Act"). The device is currently classified as a consumer product bearing an FDA registration number, which is required for the lawful
commercial sale of such devices in the United States. The Keto Air device is not classified as a regulated medical device requiring FDA
pre-market approval or clearance under Section 510(k) of the FD&C Act, and accordingly may be sold directly to consumers without a
prescription or other regulatory authorization.
We are required to maintain the device's FDA registration
on an annual basis and to comply with applicable FDA general controls, including labeling requirements and prohibitions on the promotion
of the device for uses beyond its registered classification. We do not make any medical claims with respect to the Keto Air device, and
our marketing materials are reviewed to ensure compliance with FDA labeling and advertising standards. We are also subject to applicable
Consumer Product Safety Commission regulations governing the safety of consumer products sold in the United States.
We note that the regulatory classification of
consumer health and wellness devices is subject to ongoing FDA review and interpretation, and there can be no assurance that the FDA will
not, in the future, subject the Keto Air device or similar products to more stringent regulatory requirements, including pre-market approval
or clearance obligations. Any such reclassification could materially affect our ability to sell the Keto Air device in the United States.
See Item 1A Risk Factors for a further discussion of regulatory risks applicable to our consumer health technology segment.
****
**Artificial Intelligence Content Technology
AI-Specific Regulatory Landscape**
The regulatory environment applicable to our artificial
intelligence content technology segment is rapidly evolving and subject to significant uncertainty. The RPM platform generates AI-driven
short-form video content featuring AI-generated avatars that replicate the voice and likeness of content creators. This functionality
implicates a range of existing and emerging regulatory frameworks, each of which is described below.
5
**
*Right of Publicity and Name and Likeness Laws*
The RPM platform's AI avatar feature which
replicates the voice and likeness of a content creator based on input data provided by or about that creator implicates state
right of publicity laws in the United States, which protect individuals against the unauthorized commercial use of their name, image,
voice, and likeness. Right of publicity laws vary significantly across states, with particularly robust statutory frameworks in California,
New York, and Texas, among others. Several states have recently enacted or are actively considering legislation specifically addressing
the use of artificial intelligence to generate synthetic media replicating an individual's voice or likeness. We are actively monitoring
developments in this area and have structured our platform's onboarding process to require content creators to affirmatively authorize
the creation of their AI avatar as a condition of use. There can be no assurance, however, that our current practices will be sufficient
to satisfy the requirements of all applicable state laws as they continue to evolve.
**
*Federal Trade Commission Regulation*
The Federal Trade Commission ("FTC")
has broad authority to regulate unfair or deceptive acts and practices under Section 5 of the FTC Act, and has increasingly focused its
enforcement activity on the use of artificial intelligence in commercial contexts. The FTC has issued guidance requiring clear and conspicuous
disclosure of AI-generated content in advertising and commercial communications, and has signaled that the use of AI-generated endorsements,
testimonials, or representations of real individuals without adequate disclosure may constitute an unfair or deceptive trade practice.
We intend to comply with applicable FTC disclosure guidance in connection with the commercial deployment of the RPM platform and will
include appropriate disclosures in our platform's terms of service and content labeling practices.
**
*Platform Content Policies*
The RPM platform is designed to generate content
for distribution across major social media and content platforms, including YouTube, TikTok, Instagram, and others. Each of these platforms
maintains its own content policies governing the disclosure and permissibility of AI-generated content, synthetic media, and avatar-based
representations of real individuals. These policies are subject to frequent revision and vary across platforms. Failure to comply with
applicable platform content policies could result in the removal of content generated through the RPM platform, the suspension or termination
of creator accounts on those platforms, or other restrictions that could adversely affect the utility and commercial appeal of our platform
to content creators.
**
*Evolving Federal AI Regulation*
The U.S. Congress and various federal agencies
are actively considering comprehensive federal legislation and regulatory frameworks governing the development, deployment, and commercial
use of artificial intelligence technologies. While no comprehensive federal AI law has been enacted as of the date of this Annual Report,
we anticipate that federal AI regulation will develop in the near to medium term and may impose disclosure, transparency, accountability,
or other obligations on companies operating AI-powered content generation platforms such as ours. We are monitoring these legislative
and regulatory developments and intend to engage with applicable regulatory processes as they evolve.
**
*International Regulatory Considerations*
To the extent the RPM platform is accessed by
users located outside the United States, we may become subject to international AI regulatory frameworks, including the European Union
Artificial Intelligence Act (the "EU AI Act"), which entered into force in 2024 and establishes a tiered risk-based regulatory
framework for AI systems deployed in the European Union. AI systems that generate synthetic audio or video content depicting real individuals
may be subject to specific transparency and disclosure obligations under the EU AI Act. We are evaluating the extent to which our current
and planned platform activities may implicate obligations under the EU AI Act and other international AI regulatory frameworks.
6
**Data Privacy and Security**
Our business activities involve the collection,
storage, and processing of certain personal information, including consumer data collected through Keto Air device sales and email communications,
and content creator data including voice and likeness data collected through the RPM platform's beta program. We are subject
to a range of federal, state, and international data privacy and security laws and regulations governing the collection, use, sharing,
protection, and retention of personal data.
At the federal level, the FTC continues to apply
its general consumer protection authority under Section 5 of the FTC Act to commercial data practices, including data security failures
and unfair or deceptive privacy practices. At the state level, we are subject to the California Consumer Privacy Act, as amended by the
California Privacy Rights Act ("CPRA"), which establishes transparency obligations, restricts certain uses of personal information
of California residents, and provides California residents with rights to access, correct, and delete their personal information and to
opt out of the sale or sharing of their personal information. Similar state privacy laws have been enacted in a growing number of states,
and we are monitoring and evaluating our compliance obligations under each applicable framework. All U.S. states have enacted data breach
notification laws requiring notification to affected individuals and state regulators in the event of certain unauthorized access to or
disclosure of personal information.
The collection and processing of voice and likeness
data through the RPM platform's avatar generation feature may implicate additional obligations under state biometric data privacy laws,
including the Illinois Biometric Information Privacy Act ("BIPA") and similar statutes in other states, which impose specific
consent, retention, and data security requirements on the collection and use of biometric identifiers, including voiceprints. We are actively
evaluating our obligations under applicable biometric data privacy laws in connection with the commercial deployment of the RPM platform.
The scope and interpretation of applicable data
privacy laws continue to evolve rapidly, and we anticipate that our compliance obligations will increase as our platform scales and as
new laws are enacted. See Item 1A Risk Factors and Item 1C Cybersecurity for a further discussion of data privacy and
cybersecurity risks.
**Corporate and Available Information**
We were incorporated in Delaware. Our website
is located at *http://www.avalon-globocare.com.* On our website, investors can obtain, free of charge, a copy of our Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, our Code of Conduct and Business Ethics, including disclosure
related to any amendments or waivers thereto, and other reports and any amendments thereto filed or furnished pursuant to Section 13(a)
or 15(d) of the Exchange Act as soon as reasonably practicable after we file such material electronically with, or furnish it to, the
SEC. None of the information posted on our website is incorporated by reference into this Annual Report on Form 10-K. The SEC also maintains
a website at *http://www.sec.gov* that contains reports, proxy and information statements and other information regarding us and
other companies that file materials with the SEC electronically.
7
**ITEM 1A. RISK FACTORS**
****
*An investment in our securities involves a
high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this
Annual Report, before making an investment decision. Our business, financial condition, results of operations, and future prospects could
be materially and adversely affected by any of the following risks. The trading price of our common stock could decline due to any of
these risks, and you may lose all or part of your investment. The risks described below are not the only risks facing our company. Additional
risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect
our business operations.*
****
**Risks Relating to Our Business and Operations**
****
**We have a limited operating history in our
current business segments, which makes it difficult to evaluate our business and future prospects.**
We have a limited operating history in our current
businesses. We were initially pursuing a biotech platform and, through our acquisition of RPM in December 2025, have pivoted to primarily
operating as an AI company. Because of this limited history, it is difficult to evaluate our proposed business and future prospects, including
our ability to plan for and model future growth, and there is no guarantee that our AI platform or Keto Air businesses will result in
profit or growth. Investors should consider the risks, expenses, and difficulties frequently encountered by companies in the early stage
of development. There can be no assurance that we will successfully address any of these risks.
****
**We have a history of net losses and an
accumulated deficit, which raises substantial doubt about our ability to continue as a going concern.**
****
Our results of operations have not resulted in
profitability. We incurred net losses from continuing operations of approximately $17.5 million and $7.0 million for the years ended
December 31, 2025 and 2024, respectively. As of December 31, 2025, we had an accumulated deficit of approximately $105.9 million. There
is no assurance that we will be successful in executing our business plan or that we will be able to curtail our losses. There is substantial
doubt about our ability to continue as a going concern. Our independent registered public accounting firm has included an explanatory
paragraph in its audit report expressing substantial doubt about our ability to continue as a going concern. Our ability to continue
as a going concern depends on our ability to obtain additional equity or debt financing, attain further operating efficiencies, reduce
expenditures, and ultimately generate revenue.****
****
**We have not generated sustainable revenue since
inception, and we may not be able to generate sufficient revenue to achieve or maintain profitability.**
We have not yet developed a meaningful customer
base and have not generated sustainable revenue since inception. We are subject to the substantial risk of failure facing businesses seeking
to develop and commercialize new products and technologies, and maintaining and improving our platform will require significant capital.
Our Keto Air product has generated minimal revenue to date, and we anticipate that it will take approximately one year from the date of
this Annual Report for us to begin generating meaningful revenue from our RPM platform. There can be no assurance that we will generate
revenue at the levels we anticipate, or at all, and our failure to do so could have a material adverse effect on our business, financial
condition, and results of operations.
****
**We may not be successful in commercializing
our AI platform or our Keto Air product, either of which would materially harm our business.**
We may not be successful in our AI vodcasting
and podcasting platform businesses or our sales of Keto Air. Market acceptance of AI-driven offerings is uncertain, and we will rely on
other companies, developers, and partners to build our product offerings. Additionally, evolving laws and regulations in areas such as
privacy, intellectual property, safety, competition, content regulation, and consumer protection may delay or impede the development of
our products and services. Our Keto Air product is currently operating as an early-stage commercial activity, and we are continuing to
evaluate the future strategic direction of the Keto Air product line as we assess its commercial performance. There can be no assurance
that either of our current business segments will achieve market acceptance or commercial viability.
****
**Our RPM platform is in an early stage of
development and is based on new and evolving AI technologies, which are subject to significant uncertainty.**
Our Catch-Up Vodcast and Podcast Platform is
currently under development and is based on new and evolving AI systems and technologies. This exposes us to risks including failure
to gain market acceptance, inability to secure sufficient intellectual property rights, proprietary rights of third parties limiting
our marketing efforts, failure to obtain sufficient user exposure, superior competing products, and the unpredictability of AI
technology. Our platform is currently in beta testing with a limited number of users, and Phase 2 of the platform which will
expand our addressable market beyond podcasters is currently in development and expected to launch in Q3 of 2026. There can be no assurance that Phase 2 will be completed on schedule or that it will achieve the
commercial results we anticipate.
8
****
**We face intense competition in both of our
business segments, and many of our competitors have substantially greater resources than we do.**
We face intense competition from numerous technology
companies seeking to enter the generative AI-powered vodcasting and podcasting businesses. Many of our current and potential competitors
have significantly larger market presence, greater name recognition, access to more potential customers, and substantially greater financial,
technical, sales, marketing, management, support, and other resources than we do. In our consumer health technology segment, we compete
with manufacturers and distributors of urine-based ketone test strips and other breath-based ketone monitoring devices, many of which
have established retail distribution networks and marketing infrastructure that we currently lack. Our failure to compete effectively
in either segment could have a material adverse effect on our business, financial condition, and results of operations.
****
**Our business is subject to rapid technological
change, and if we fail to adapt, our business may be negatively impacted.**
Our industry is subject to rapid technological
change, and if we do not adapt to and appropriately allocate resources among emerging technologies and business models, our business may
be negatively impacted. Competitors may adapt to emerging technologies or business models more quickly or effectively than we do. The
generative AI industry in particular is evolving at an exceptionally rapid pace, and technologies, platforms, and distribution channels
that are relevant to our business today may be superseded or disrupted in ways that we cannot currently anticipate.
****
**We may encounter difficulties associated
with early-stage companies that could adversely affect our operations.**
We may encounter numerous difficulties frequently
encountered by early-stage companies, including implementing our growth strategy, countering competitors, pursuing new users, maintaining
adequate expense control, attracting and retaining qualified personnel, reacting to user preferences, successfully launching products,
and maintaining regulatory compliance. Failure to address any of these factors could have a material adverse effect on our business, financial
condition, results of operations, and future prospects.
****
**Our success depends on the continued services
of our key personnel, the loss of whom could materially harm our business.**
**
Our success depends on the continuing
services of Wenzhao Lu, our Chairman, Meng Li, Luisa Ingargiola, our Chief Financial Officer, our other executive officers, and
Michael Mathews, the Chief Executive Officer of RPM. The loss of any of these individuals could have a material and adverse effect
on our business operations. The supply of qualified technical, professional, managerial, and other personnel is currently
constrained, and competition for qualified employees is intense. In particular, our former Chief Executive Officer, David Jin, was
instrumental in sourcing our Keto Air distribution rights through his personal industry relationships, and the loss of his services
could adversely affect the continuation and development of that segment.
****
**Our strategy of continuing to evaluate
additional possible acquisitions to supplement our operations involves significant risks, and we may not be able to identify, complete,
or successfully integrate any such acquisitions.**
We are actively evaluating complementary possible artificial intelligence
acquisitions that we believe could generate near-term revenue to supplement our current operations. Strategic transactions, including
mergers, acquisitions, joint ventures, and investments, involve risks including the ability to integrate personnel, labor models, financial,
information technology, and other systems successfully; disruption of ongoing business; distraction of management; and the possibility
of material impairments of goodwill or other assets. We may not realize the anticipated benefits from such transactions and may be exposed
to additional liabilities of any acquired business. We have previously pursued and terminated multiple acquisition transactions, including
our proposed merger with YOOV Group Holding Limited, and there can be no assurance that future acquisition efforts will result in completed
transactions or, if completed, that such transactions will deliver the anticipated strategic or financial benefits.
9
****
**We depend on third parties for supplies
and services critical to our Keto Air business, and any disruption could adversely affect our operations.**
We depend on third parties to provide supplies
and services critical to our Keto Air business and are heavily reliant on third-party ground and air travel for transport of supplies.
Disruptions to supply and services could have a material adverse effect on our Keto Air business. We source the Keto Air device from a
single Hong Kong-based technology group pursuant to an exclusive distribution agreement, and any disruption to that supply relationship
whether due to manufacturing issues, geopolitical developments, shipping disruptions, or other factors could impair our
ability to fulfill customer orders and sustain revenue from this segment.
****
**The termination of our proposed merger with
YOOV Group Holding Limited may continue to adversely affect our business, financial condition, and stock price.**
The termination of the proposed merger with YOOV
Group Holding Limited may adversely affect our stock price, business, financial condition, and ability to raise capital; result in unrecoverable
costs; harm our reputation and relationships with investors, business partners, customers, vendors, and employees; create strategic uncertainty;
and expose us to potential litigation or regulatory proceedings. The three-year non-disparagement covenant in the Mutual Termination and
Release Agreement may also limit certain communications relating to the proposed merger and its termination.
****
**Risks Relating to Artificial Intelligence and
Technology**
****
**The use of AI in our platform may give rise
to legal liability, reputational harm, and regulatory scrutiny.**
Our use of AI in our vodcasting and podcasting
platform may give rise to risks related to harmful content, inaccuracies, discrimination, intellectual property infringement or misappropriation,
defamation, data privacy, and cybersecurity. We intend to deploy open-source third-party AI systems that are relatively new to the commercial
market and may at times generate inaccurate or low-quality content, which could lead to reputational harm and legal liability. Unintended
consequences of AI tools may negatively affect human rights, privacy, employment, or other social concerns, resulting in claims, lawsuits,
brand or reputational harm, and increased regulatory scrutiny.
****
**Our RPM platform's AI avatar feature, which
replicates individual voices and likenesses, exposes us to significant legal risks under right of publicity, biometric privacy, and related
laws.**
The RPM platform generates AI-produced video content
featuring avatars that replicate the voice and likeness of content creators. This functionality implicates state right of publicity laws
across the United States, which protect individuals against the unauthorized commercial use of their name, image, voice, and likeness.
Laws governing AI-generated synthetic media depicting real individuals vary significantly across states and are rapidly evolving, with
particularly robust statutory frameworks in California, New York, and Texas, among others. Several states have recently enacted or are
actively considering legislation specifically addressing AI-generated synthetic media and voice cloning.
Additionally, the collection and processing of
voice and likeness data through our platform's avatar generation feature may implicate obligations under state biometric data privacy
laws, including the Illinois Biometric Information Privacy Act ("BIPA") and similar statutes in other states, which impose specific
consent, notice, retention, and data security requirements on the collection and use of biometric identifiers, including voiceprints.
Failure to comply with applicable right of publicity or biometric privacy laws could result in significant legal liability, regulatory
enforcement actions, and reputational harm. There can be no assurance that the consent and authorization process we have implemented for
our platform's beta users will be sufficient to satisfy all applicable legal requirements as such laws continue to develop.
10
****
**The content generated by our platform may
infringe the intellectual property rights of third parties, which could expose us to significant liability.**
Our platform's content sourcing feature automatically
scrapes and curates video content from the internet for inclusion in AI-generated videos. This process may result in the reproduction
or republication of content that is protected by copyright or other intellectual property rights of third parties. While we intend to
implement appropriate content identification and licensing measures, there can be no assurance that all content sourced by our platform
will be free of third-party intellectual property claims. If third parties claim that we infringe their intellectual property, it may
result in costly litigation. We may not be able to adequately protect our proprietary technology, and competitors may be able to offer
similar products and services. Any such claims, regardless of their merit, could result in significant legal costs, distract management,
and adversely affect our business.
****
**We may not be able to protect our intellectual
property rights, which could impair our competitive position.**
We may face uncertainty and difficulty in obtaining
and enforcing our patents and other proprietary rights. Patent applications may not result in issued patents, and even if issued, they
may not provide meaningful protection. The Leahy-Smith America Invents Act introduced procedures that may make it easier for third parties
to challenge issued patents. Filing, prosecuting, and defending patents in all countries would be prohibitively expensive, and intellectual
property rights in some countries outside the United States may be less extensive. We have filed three provisional patent applications
in connection with our RPM platform, and there can be no assurance that any patents will issue from these applications, or that any issued
patents will provide meaningful competitive protection. Additionally, certain patents in our cellular therapy portfolio are co-owned with
MIT and Arbelli, and our ability to license or enforce such patents unilaterally may be limited by the terms of our co-ownership arrangements.
****
**Laws and regulations governing artificial
intelligence are rapidly evolving, and compliance may be costly and uncertain.**
Laws and regulations affecting AI are continually
evolving. Compliance with new laws can be costly and time-consuming, and we could be subject to regulatory enforcement actions or litigation
if we fail to comply. There is substantial uncertainty about the nature, direction, severity, and granularity of future AI regulation.
Government bodies have implemented laws and are considering further regulating AI and machine learning, which could negatively impact
our ability to use these technologies. New and changed rules regarding privacy, data protection, and cross-border transfers of customer
information could cause us to delay planned uses and disclosures of data. The European Union's Artificial Intelligence Act, which entered
into force in 2024, may impose specific obligations on AI systems that generate synthetic media depicting real individuals. To the extent
our platform is accessed by users in the European Union, we may become subject to these obligations, compliance with which could require
significant operational and legal resources.
****
**Our platform's content may be restricted
or removed by major social media and content distribution platforms, which could significantly impair the utility and commercial appeal
of our product.**
The RPM platform is designed to generate content
for distribution across major social media and content platforms, including YouTube, TikTok, Instagram, and others. Each of these platforms
maintains content policies governing the disclosure and permissibility of AI-generated content, synthetic media, and avatar-based representations
of real individuals. These policies are subject to frequent revision and vary across platforms. Failure to comply with applicable platform
content policies could result in the removal of content generated through our platform, the suspension or termination of creator accounts
on those platforms, or other restrictions that could adversely affect the utility and commercial appeal of our platform to content creators,
and in turn our ability to generate revenue.
****
**Our business depends on the reliable performance
of third-party cloud and infrastructure providers, and any disruption to these services could adversely affect our operations.**
**
We intend to rely on third-party providers for
computing infrastructure, secure network connectivity, and other technology-related services. Any disruption in services provided by such
third-party providers could adversely affect our business. These providers may take actions beyond our control, including discontinuing
or limiting access to their cloud platform, increasing pricing terms, terminating contractual relationships, or establishing more favorable
relationships with our competitors.
11
****
**Cybersecurity breaches or incidents could
damage our reputation and adversely affect our business.**
**
Security breaches and attacks against our systems
and network could damage our reputation and negatively impact our business. As a small company with limited resources, our cybersecurity
measures may not detect or prevent all attempts to compromise our systems, including distributed denial-of-service attacks, viruses, malicious
software, phishing attacks, and social engineering. Breaches could result in unauthorized access, misappropriation of information, deletion
or modification of user or consumer information, or denial-of-service interruptions. Our current data footprint is limited consisting
primarily of email communications, consumer purchase data collected through Keto Air sales, and content creator data gathered through
our limited RPM beta program but will expand significantly as our platform scales commercially. Any material cybersecurity incident
could adversely affect our reputation, expose us to regulatory enforcement, and result in significant costs.
****
**We are subject to data privacy and security
laws that impose significant compliance obligations, and any failure to comply could result in material liability.**
**
We are subject to laws and regulations concerning
privacy, information security, data protection, consumer protection, and protection of minors, including the California Consumer Privacy
Act, as amended by the California Privacy Rights Act, and similar state laws. Compliance has required significant operational resources
and expenses. Any failure or perceived failure to comply with privacy-related obligations may result in governmental enforcement actions,
investigations, litigation, or public statements against us, and could cause users to lose trust in our products and services. The collection
and processing of voice and likeness data through our RPM platform's avatar generation feature may also implicate obligations under applicable
biometric data privacy laws, including the Illinois Biometric Information Privacy Act and similar state statutes, and we are continuing
to evaluate our compliance obligations in this area.
****
**Risks Relating to Our Capital Structure and
Nasdaq Listing**
****
**We will need to raise additional capital
to fund our operations and growth, and we may not be able to do so on acceptable terms, or at all.**
**
We are currently operating at a loss and expect
our operating costs to increase significantly. As of December 31, 2025, we had cash from continuing operations of approximately $0.1 million.
We will need to raise additional capital or generate substantial revenue to support our development and commercialization efforts. We
have no arrangements or credit facilities currently in place as a source of funds, and there can be no assurance that we will be able
to raise sufficient additional capital on acceptable terms, or at all. If we are unable to raise additional capital as needed, we may
be required to curtail or cease our operations, delay or reduce the scope of our development activities, or relinquish rights to certain
of our assets or technologies.
****
**We have outstanding indebtedness that could
adversely affect our financial condition and liquidity.**
**
As of December 31, 2025, we had approximately
$1.1 million of outstanding indebtedness (excluding $5.8 million of outstanding indebtedness from discontinued operations). If we are
unable to generate sufficient cash to repay our debt obligations when they become due, we may not be able to obtain additional debt or
equity financing on favorable terms. If we breach any undertakings or default on any obligations under our agreements with lenders, our
outstanding indebtedness could become immediately due and payable.
12
**Future sales and issuances of our securities
could result in additional dilution of the percentage ownership of our stockholders and could cause our share price to fall.**
We expect that significant additional capital will be needed in the future to continue our planned operations,
including research and development, increased marketing, hiring new personnel, commercializing our products, and continuing activities
as an operating public company. To the extent we raise additional capital by issuing equity securities, our stockholders may experience
substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices
and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than
one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing
stockholders, and new investors could gain rights superior to our existing stockholders.
****
**Future issuances of our securities, including
upon conversion of our outstanding preferred stock, will dilute the ownership interests of our existing stockholders and may depress the
trading price of our common stock.**
**
Stockholders may experience dilution of their
ownership interests because of the future issuance of additional shares of our common or preferred stock or other securities that are
convertible into or exercisable for common or preferred stock. As of the date of filing, we have issued 3,800 shares of Series C Preferred
Stock, 5,000 shares of Series D Preferred Stock, and 19,500 shares of Series E Preferred Stock. The future issuance of any such additional
shares may create downward pressure on the trading price of our common stock. As of December 31, 2025, we had: 41,169 shares issuable
upon exercise of outstanding stock options; 95,746 shares issuable upon exercise of outstanding stock warrants; 1,576,763 shares issuable
upon conversion of outstanding Series C Preferred Stock; 2,074,689 shares issuable upon conversion of outstanding Series D Preferred Stock;
13,000,000 shares issuable upon conversion of outstanding Series E Preferred Stock; and 788,283 shares issuable upon conversion of outstanding
convertible notes and related accrued interest. If these shares are sold or perceived to be sold in the public market, the price of our
common stock could decline.
****
**Our Series E Non-Voting Convertible Preferred
Stock is subject to an Exchange Cap and requires stockholder approval under Nasdaq Listing Rule 5635 prior to conversion, and there can
be no assurance that we will obtain such approval.**
**
Our Series E Preferred Stock is convertible into
shares of our common stock at a conversion price of $1.50 per share, subject to: (i) a beneficial ownership cap of 4.99% applicable to
each holder; (ii) an Exchange Cap that prevents the issuance of shares of common stock upon conversion in excess of the number of shares
we may issue without breaching our obligations under applicable Nasdaq listing rules and regulations; and (iii) the receipt of stockholder
approval in accordance with Nasdaq Listing Rule 5635. We intend to seek this stockholder approval at our annual meeting of stockholders
currently scheduled to be held on or before May 12, 2026. There can be no assurance that our stockholders will approve the conversion
of the Series E Preferred Stock. If such approval is not obtained, the Series E Preferred Stock will remain unconverted, which could adversely
affect our ability to raise additional capital, may require us to redeem the Series E Preferred Stock, and could have a material adverse
effect on our business and financial condition.
****
**We must maintain compliance with Nasdaq
continued listing standards, and there can be no assurance that we will be able to do so.**
**
We are required to comply with certain Nasdaq
rules including those regarding minimum stockholders' equity, minimum share price, and certain corporate governance requirements. If we
fail to comply with these rules and are delisted, we could face significant consequences including limited availability of market quotations,
reduced liquidity, a determination that our common stock is a "penny stock," limited news and analyst coverage, and a decreased
ability to issue additional securities or obtain additional financing. We previously received a deficiency notice from Nasdaq relating
to our minimum stockholders' equity, and while we believe the completion of the RPM acquisition has resolved that deficiency, there can
be no assurance that Nasdaq will confirm such resolution or that we will not face future listing deficiencies. If we are unable to maintain
listing of our securities on The Nasdaq Capital Market or another reputable stock exchange, it may be more difficult for stockholders
to sell their securities, and a delisting is likely to reduce the liquidity of our common stock and may inhibit or preclude our ability
to raise additional financing.
**Significant related party transactions,
including the sale of our Route 9 property to a director, create conflicts of interest and could adversely affect stockholder confidence
in our corporate governance.**
On February 18, 2026, we completed the sale of
100% of the membership interests of Avalon RT 9 Properties, LLC to Wenzhao Lu, the Chairman of our Board of Directors, for a total aggregate
purchase price of approximately $9,000,000. This transaction, as well as other related party transactions in our history including
the exchange of Series A Preferred Stock for Series D Preferred Stock by our Chairman involve members of our board of directors
or their affiliates. Although all such transactions have been reviewed and approved by our Board of Directors, with the participation
of disinterested directors, and in accordance with our related party transaction policy, related party transactions present inherent conflicts
of interest and could adversely affect stockholder confidence in our corporate governance practices and the integrity of our financial
disclosures.
13
****
**Our officers, directors, and significant
stockholders collectively hold a significant percentage of our outstanding common stock, which may limit the ability of other stockholders
to influence corporate decisions.**
Our officers, directors, and 5% stockholders and
their affiliates beneficially own a significant percentage of our outstanding common stock. As a result, these stockholders have significant
influence and may be able to determine all matters requiring stockholder approval, including elections of directors, amendments of our
organizational documents, or approval of any merger, sale of assets, or other major corporate transactions. This concentration of ownership
may make it difficult for other stockholders to influence significant corporate decisions, may discourage potential acquirors from pursuing
a business combination with us, and may have a depressive effect on the trading price of our common stock.
****
**Provisions in our charter documents and
Delaware law may have anti-takeover effects that could prevent a change of control that stockholders may consider favorable.**
Our Board of Directors is authorized to issue
up to 10,000,000 shares of preferred stock with powers, rights, and preferences designated by it, which could be used to create voting
impediments or frustrate persons seeking to effect a takeover. Delaware law also prohibits corporations from engaging in a business combination
with any holders of 15% or more of their capital stock until the holder has held the stock for three years unless the Board of Directors
approves the transaction. These provisions, together with our outstanding preferred stock, could have the effect of delaying, deferring,
or preventing a change of control that stockholders might otherwise consider to be in their best interests.
****
**Our common stock price has been and may
continue to be highly volatile, and stockholders could suffer substantial losses.**
**
The price of our common stock has been, and is
expected to continue to be, volatile. The stock market in general, and the market for smaller technology and healthcare companies in particular,
has experienced extreme volatility that has often been unrelated to the operating performance of particular companies. Factors that may
cause volatility in our stock price include, among others, our quarterly financial results, announcements regarding our platform development,
changes in analyst estimates, developments in the AI industry, and broader market conditions. Stockholders may not be able to sell their
shares at or above the price at which they purchased them.
****
**Risks Relating to General Economic and Market
Conditions**
****
**Adverse economic conditions could reduce
demand for our products and services and harm our business.**
Our business is susceptible to market conditions
and risks associated with the digital entertainment and consumer health industries. Economic conditions that negatively impact discretionary
consumer spending, including inflation, slower growth, unemployment levels, tax rates, interest rates, energy prices, declining consumer
confidence, recession, and other macroeconomic conditions, including those resulting from geopolitical issues and uncertainty, could have
a material adverse impact on our business and results of operations. Demand for consumer health products such as Keto Air, and for subscription-based
content creation tools such as our RPM platform, may be disproportionately affected by economic downturns that reduce consumer and business
discretionary spending.
****
**Geopolitical developments and trade restrictions,
including those affecting our supply chain for the Keto Air device, could adversely affect our operations.**
We source the Keto Air breathalyzer device from
a Hong Kong-based technology group and rely on international shipping and logistics for delivery of inventory to North America. Geopolitical
tensions, trade restrictions, tariffs, export controls, or other regulatory developments affecting U.S.-China or U.S.-Hong Kong trade
could disrupt our supply chain, increase our costs, or prevent us from sourcing sufficient inventory to meet customer demand. Any such
disruption could have a material adverse effect on our consumer health technology segment.
****
**Changes in government spending priorities
and regulatory policy could affect our business in ways we cannot predict.**
**
Our ability to obtain reimbursement or funding
from federal programs may be impacted by possible reductions in federal spending. The U.S. federal budget remains subject to significant
uncertainty, and government cost reduction initiatives may impact the ability of relevant agencies such as the FDA to continue to function
at current levels. Additionally, changes in federal regulatory priorities with respect to artificial intelligence, data privacy, or consumer
protection could result in new or more stringent requirements being imposed on our business, which could require significant compliance
resources and adversely affect our operations.
14
****
**ITEM 1B. UNRESOLVED STAFF COMMENTS**
None.
**ITEM 1C. CYBERSECURITY**
****
**Cybersecurity Risk Management**
We, like other companies in our industry, face
several cybersecurity risks in connection with our business. Our business strategy, results of operations, and financial condition have
not, to date, been affected by risks from cybersecurity threats. During the reporting period, we have not experienced any material cyber
incidents, nor have we experienced a series of immaterial incidents, which would require disclosure.
In the ordinary course of our business, we use,
store and process a bare minimum of data. To effectively prevent, detect, and respond to cybersecurity threats, we contract with a third
party IT consultant, Night Fox Computing, to assist us to maintain secure email systems.
****
**Governance**
Under the ultimate direction of our CFO, with
oversight from the Board, we maintain a security governance structure to evaluate and address cyber risk.
Our Board is responsible for the oversight of
cybersecurity risk management. The Board delegates oversight of the cybersecurity risk management program to the Audit Committee. On a
quarterly and as-needed basis, the CFO reports to the Audit Committee on our cybersecurity risk management program, including any critical
cybersecurity risks, ongoing cybersecurity initiatives and strategies, and applicable regulatory requirements and industry standards.
The CFO also provides updates to the Audit Committee of any cybersecurity incidents (suspected or actual) and provides updates on the
incidents as well as cybersecurity risk mitigation activities as appropriate.
**ITEM 2. PROPERTIES**
Our principal executive offices are located at
4400 Route 9 South, Freehold, New Jersey 07728, where we have maintained our offices since our founding in 2014. We currently lease this
office space pursuant to a lease agreement, as described further below.
**Sale of Route 9 Property**
The building located at 4400 Route 9 South was
previously owned by our wholly owned subsidiary, Avalon RT 9 Properties, LLC. On February 18, 2026, we completed the sale of 100% of the
membership interests of Avalon RT 9 Properties, LLC to Wenzhao Lu, a director of our company, for a total aggregate purchase price of approximately
$9,000,000. The sale price was determined based on an independent appraisal of the property conducted by CBRE, which valued the building
at $8.7 million, and was reviewed and approved by the disinterested members of our Board of Directors in accordance with our related party
transaction policy. The transaction is described further in Item 13 Certain Relationships and Related Transactions of this Annual
Report. Following the completion of the sale, we continue to lease our principal executive offices at 4400 Route 9 South from the new
owner pursuant to a lease agreement.
****
**Other Office Space**
We lease additional office space to support our
operations. The location of our office facilities is not critical to our operations, and we anticipate no difficulty in extending our
existing leases or obtaining comparable office space on commercially reasonable terms as needed.
**Lease Obligations**
We are obligated under various lease agreements
providing for office space that expire at various dates through December 31, 2027. Total rent expense under these lease agreements was
approximately $97,000 and $127,000 for the fiscal years ended December 31, 2025 and 2024, respectively.
**Adequacy of Facilities**
We believe that our existing facilities are suitable
and adequate to meet our current operational needs. We intend to add new facilities or expand our existing facilities as we add employees
and as our business grows, and we believe that suitable additional or substitute space will be available on commercially reasonable terms
to accommodate any such expansion.
****
**ITEM 3. LEGAL PROCEEDINGS**
From time to time, we may become involved in various
lawsuits and legal proceedings, which arise in the ordinary course of business. Litigation is subject to inherent uncertainties, and an
adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such
legal proceedings or claims that will have, individually or in the aggregate, a material adverse effect on our business, financial condition
or operating results.
**ITEM 4. MINE SAFETY DISCLOSURES**
None.
15
****
**PART II**
**ITEM 5. MARKET FOR REGISTRANTS COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES**
**Market Information**
Our common stock is listed on The Nasdaq Capital
Market under the symbol ALBT. On March 16, 2026, the closing price of our common stock on The Nasdaq Capital Market was
$0.6687.
**Holders of Record**
As of March 17, 2026, there were approximately
240 registered holders of record of our shares of common stock, based upon information received from our stock transfer agent. However,
this number does not include beneficial owners whose shares were held of record by nominees or broker dealers.
**ITEM 6. [RESERVED]**
**ITEM 7. MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS**
****
The
following discussion and analysis of our financial condition and results of operations for the years ended December 31, 2025 and 2024
should be read in conjunction with our consolidated financial statements and related notes to those consolidated financial statements
that are included elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking
statements that involve risks and uncertainties.
****
**Special Note Regarding
Forward-looking Statements**
****
All statements other
than statements of historical fact included in this Annual Report Form 10-K including, without limitation, statements under Managements
Discussion and Analysis of Financial Condition and Results of Operations regarding our financial position, business strategy and
the plans and objectives of management for future operations, are forward-looking statements. When used in this Annual Report on Form
10-K, words such as anticipate, believe, estimate, expect, intend
and similar expressions, as they relate to us or our management, identify forward-looking statements. Such forward-looking statements
are based on the beliefs of management, as well as assumptions made by, and information currently available to, our management. Actual
results could differ materially from those contemplated by the forward-looking statements as a result of a number of factors, including
those set forth under the risk factors and business sections in this Annual Report on Form 10-K.
****
**Overview**
We are a technology-focused company developing
and acquiring innovative artificial intelligence platforms. Through our AI-driven subsidiary, we are advancing next-generation AI systems,
including automated video generation, enterprise documentation, and workflow automation solutions. We are also expanding our intellectual
property portfolio in cellular therapy and generative AI publishing and software. In addition, we are marketing the KetoAir breathalyzer
device, which is registered with the U.S. Food and Drug Administration as a Class I medical device, and plan to pursue additional diagnostic
applications for the technology. In addition, we owned and operated commercial real estate at our headquarters in Freehold, NJ through
February 2026.
We had the following
areas of focus in 2025 and 2024:
*Research and Development*
**
We are focused on bringing forward the existing
patent applications previously filed with the Massachusetts Institute of Technology (MIT). We completed a sponsored research
and co-development project with MIT led by Professor Shuguang Zhang as Principal Investigator. Using the unique QTY code protein design
platform, six water-soluble variant cytokine receptors have been successfully designed and tested in a laboratory to show binding affinity
to the respective cytokines. We currently are focused on bringing forward the existing patent applications previously filed as part of
this program. We also continue to bring forward the existing patent application previously filed with Arbele related to CAR-T cellular
therapy technologies.
16
**
*Product Commercialization*
We have begun the commercialization and development
of a versatile breathalyzer system.
We were granted distributorship rights for the
KetoAir from Qi Diagnostics for the following territories: North America, South America, the EU and the UK. For our commercialization
strategy, we intend to target the diabetes and obesity markets. We sell the product through the KetoAir website and social media. We believe
the KetoAir device has some competitive advantages to other methods for measuring ketosis.
The KetoAir is a handheld device that allows the
user to detect acetone levels in exhaled breath. The acetone level is in concentration units (ppm, part-per-million) such that the user
will know his/her real-time ketosis status: inadequate ketosis (0-3.99 ppm), mild ketosis (4-9.99 ppm), optimal ketosis (10-40 ppm), or
alarming level (> 40 ppm). The KetoAir is registered with the United States Food and Drug Administration as a Class I medical device.
The device is also paired with an AI Nutritionist software program (via Bluetooth connection) which is downloadable from
Google Play (for Android mobile phones, approved) and iPhone (the app is currently being reviewed by Apple iOS AppStore). It helps users
monitor and manage their ketogenic diet and related programs. We believe the KetoAir can be an essential tool to help diabetic patients
adhere to their therapeutic programs and optimize their ketogenic dietary management.
*Cessation of Laboratory Services*
**
During the first quarter of 2025, to preserve
cash, the Company entered into discussions with Lab Services MSO for the potential redemption of our investment and on February 26, 2025,
we and Lab Services MSO entered into a Redemption and Abandonment Agreement, whereby Lab Services MSO redeemed the 40% equity interest
in Lab Services MSO held by us. Accordingly, beginning in February 2025, we no longer offer laboratory services.
*Acquisition of an AI Generated Publishing Company*
**
On December 12, 2025, we acquired RPM Interactive,
Inc., a Nevada corporation (RPM). As a result of the acquisition, effective December
12, 2025, we are advancing next-generation AI systems, including automated video generation, enterprise documentation, and workflow automation
solutions.
*Other Areas*
In order to preserve cash and focus on product
commercialization, we have suspended all research and development efforts related to cellular therapy. We are redirecting our funding
efforts to our core business strategies outlined above.
**Going Concern**
Our consolidated financial statements have been
prepared assuming that we will continue as a going concern, which contemplates, among other things, the realization of assets and the
satisfaction of liabilities in the normal course of business.
As reflected in the accompanying consolidated
financial statements, we had working capital deficit of approximately $12,651,000 at December 31, 2025 and had incurred recurring net
losses from continuing operations and generated negative cash flow from operating activities of continuing operations of approximately
$17,519,000 and $4,581,000 for the year ended December 31, 2025, respectively.
We have a limited operating history and our continued
growth is dependent upon the continuation of generating revenue for selling of Keto Air, generating revenue from advanced Agentic AI systems,
including automated video generation and workflow automation, and obtaining additional financing to fund future obligations and pay liabilities
arising from ordinary course business operations. In addition, the current cash balance cannot be projected to cover our operating expenses
for the next twelve months from the release date of this Annual Report on Form 10-K. These matters raise substantial doubt about our ability
to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise additional capital, implement
our business plan, and generate sufficient revenues. There are no assurances that we will be successful in our efforts to generate sufficient
revenues, maintain sufficient cash balance or report profitable operations or to continue as a going concern. We plan on raising capital
through the sale of equity to implement our business plan. However, there is no assurance these plans will be realized and that any additional
financings will be available to us on satisfactory terms and conditions, or at all.
The accompanying consolidated financialstatements
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 we be unable to continue as a going concern.
17
**Critical
Accounting Policies**
****
**Use
of Estimates**
The preparation of the consolidated financial
statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires
management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.
Changes in these estimates and assumptions may have a material impact on the consolidated financial statements and accompanying notes.
Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect
of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in
formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could
differ significantly from those estimates.
Significant estimates during the years ended December
31, 2025 and 2024 include the useful life of intangible assets, the assumptions used in assessing impairment of long-term assets,the
allowance for credit loss, the valuation of deferred tax assets and the associated valuation allowances, the valuation of stock-based
compensation, the valuation of Series D convertible preferred stock (Series D Preferred Stock), the fair value of the consideration
given in the purchase of RPM, the fair value of assets acquired and liabilities assumed in acquisition, and the assumptions used to determine
fair value of warrants and embedded conversion features of convertible note payable.
**Income Taxes**
We are governed by the income tax laws of China
and the United States. Income taxes are accounted for pursuant to ASC 740 Accounting for Income Taxes, which is an asset
and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of
events that have been recognized in our financial statements or tax returns. The charge for taxes is based on the results for the period
as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is accounted for using the balance
sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities
in the financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax
liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probable
that taxable profit will be available against which deductible temporary differences can be utilized.
Deferred tax is calculated using tax rates that
are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the
income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is changed
to equity. Deferred tax assets and liabilities are offset when they related to income taxes levied by the same taxation authority and
we intend to settle its current tax assets and liabilities on a net basis.
**Recent Accounting Standards**
For details of applicable new accounting standards,
please, refer to Recent Accounting Standards in Note 3 of our consolidated financial statements accompanying this report.
**RESULTS OF OPERATIONS**
**Comparison of Results of Operations for the
Years Ended December 31, 2025 and 2024**
**Income (Loss) from
Equity Method Investment Lab Services MSO**
****
For the year ended December 31, 2025, we had income
from our investment in Lab Services MSO of $392,677, which consisted of our share of Lab Services MSOs net income of $503,833 and
amortization of identifiable intangible assets acquired from Lab Services MSO acquisition of $111,156. We sold our ownership of 40% of
Lab Services MSO on February 26, 2025.
For the year ended December
31, 2024, we had loss from our investment in Lab Services MSO of $846,588, which consists of our share of Lab Services MSOs net
income of $79,923, and amortization of identifiable intangible assets acquired from Lab Services MSO acquisition of $666,932, and impairment
of goodwill acquired from Lab Services MSO acquisition of $259,579, which was primarily attributable to Lab Services MSOs lower
revenues and net incomes than anticipated and the decline in our stock price and market capitalization.
18
**Other Operating Expenses**
For
the years ended December 31, 2025 and 2024, other operating expenses consisted of the following:
|
| |
Years Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Advertising and marketing expenses | |
$ | 843,497 | | |
$ | 237,671 | | |
|
Professional fees | |
| 5,254,207 | | |
| 1,590,268 | | |
|
Compensation and related benefits | |
| 1,101,574 | | |
| 1,308,854 | | |
|
Miscellaneous taxes | |
| 213,631 | | |
| 233,488 | | |
|
Directors and officers liability insurance premium | |
| 139,816 | | |
| 212,898 | | |
|
Travel and entertainment | |
| 127,468 | | |
| 109,244 | | |
|
Amortization | |
| 93,833 | | |
| - | | |
|
Rent and related utilities | |
| 28,119 | | |
| 62,294 | | |
|
Impairment of laboratory equipment | |
| - | | |
| 111,033 | | |
|
Other general and administrative | |
| 181,891 | | |
| 128,912 | | |
|
| |
$ | 7,984,036 | | |
$ | 3,994,662 | | |
|
| For the year ended December 31, 2025, advertising and marketing expenses increased by $605,826, or 254.9%,
as compared to the year ended December 31, 2024. The increase was primarily due to increased advertising activities in the year ended
December 31, 2025. We expect that our advertising and marketing expenses will likely remain at its current level with minimal increase
in the near future. | |
|
|
|
Professional fees primarily consisted of accounting fees, audit fees, legal service fees, consulting fees, investor relations service charges, fairness opinion charge, valuation service fees and other fees. For the year ended December 31, 2025, professional fees increased by $3,663,939, or 230.4%, as compared to the year ended December 31, 2024, which was primarily attributable to an increase in consulting fees of approximately $2,099,000, mainly due to the increase in use of consulting service providers related to capital markets advisory and services related to our potential merger with YOOV, an increase in accounting fees of approximately $537,000, mainly due to the increased accounting services related to our potential merger with YOOV, an increase in legal service fees of approximately $1,049,000, mainly due to the increased legal services related to our potential merger with YOOV, and an increase in fairness opinion charge of approximately $129,000 resulting from the increased fairness opinion services related to our potential merger with YOOV, offset by a decrease in audit fees of approximately $93,000, mainly due to our switching to a different audit service provider, resulting in a lower audit fee, and a decrease in other miscellaneous items of approximately $57,000. We expect that our professional fees will decrease in the near future. | |
|
| For the year ended December 31, 2025, compensation and related benefits
decreased by $207,280, or 15.8%, as compared to the year ended December 31, 2024. The decrease was primarily attributable to the decreased
compensation for our former executive officer, David Jin. We expect that our compensation and related benefits will likely remain at its
current level with minimal increase in the near future. | |
|
| For the year ended December 31, 2025, miscellaneous taxes decreased by $19,857, or 8.5%, as compared to
the year ended December 31, 2024. The decrease was primarily attributable to decreased Delaware state franchise tax. We expect that our
miscellaneous taxes will remain relatively steady, with minimal increase, in the near future. | |
19
|
| For the year ended December 31, 2025, directors and officers
liability insurance premium decreased by $73,082, or 34.3%, as compared to the year ended December 31, 2024. The decrease was mainly due
to our switching to a different insurance provider, resulting in a lower premium. | |
|
| For the year ended December 31, 2025, travel and entertainment expense
increased by $18,224, or 16.7%, as compared to the year ended December 31, 2024, which was primarily attributable to increased business
travel activities in the year ended December 31, 2025 as compared to the year ended December 31, 2024. | |
|
| For the year ended December 31, 2025, amortization expense increased by $93,833, or 100.0%, as compared
to the year ended December 31, 2024, which was attributable to increased amortization of identifiable intangible assets acquired, representing
developed technology and trade name, from December 12, 2025 (the date of acquisition) to December 31, 2025. There was no comparable amortization
prior to the date of acquisition. | |
|
| For the year ended December 31, 2025, rent and related utilities expenses decreased by $34,175, or 54.9%,
as compared to the year ended December 31, 2024. The decrease was mainly due to the decreased monthly rent driven by decreased office
space. | |
|
| In December 2024, we assessed our laboratory equipment for any impairment and concluded that there were
indicators of impairment as of December 31, 2024 and we calculated that the estimated undiscounted cash flows were less than the carrying
amount of the laboratory equipment. Based on our analysis, we recognized an impairment loss of $111,033 for the year ended December 31,
2024, which reduced the value of laboratory equipment to zero. We did not record any impairment charge for the year ended December 31,
2025. | |
|
| Other general and administrative expenses mainly consisted of NASDAQ
listing fee, SEC registration fees, office supplies, and other miscellaneous items. For the year ended December 31, 2025, other general
and administrative expenses increased by $52,979, or 41.1%, as compared to the year ended December 31, 2024, which was mainly attributable
to an increase in SEC registration fees of approximately $48,000 related to our registration statements on Form S-4 and Form S-3, and
an increase in other miscellaneous items of approximately $5,000. | |
**Loss from Operations**
As a result of the foregoing,
for the year ended December 31, 2025, loss from operations amounted to $7,591,359, as compared to $4,841,250 for the year ended December
31, 2024, representing an increase of $2,750,109, or 56.8%.
**Other (Expense)
Income**
Other (expense) income mainly includes third party
and related party interest expense, debt modification charge, change in fair value of derivative liability, loss on extinguishment of
debt, and other miscellaneous income (expense).
Other expense, net, totaled $9,927,514 for the
year ended December 31, 2025, as compared to $2,198,354 for the year ended December 31, 2024, representing an increase of $7,729,160,
or 351.6%, which was primarily attributable to an increase in loss on extinguishment of debt of approximately $9,077,000 resulted from
the reduction in the conversion price of our June 2024 Convertible Note, offset by a decrease in third party interest expense of approximately
$161,000, mainly driven by the decrease in amortization of debt discount and debt issuance costs of approximately $155,000, a decrease
in related party interest expense of approximately $42,000, a decrease in debt modification charge of approximately $839,000, an increase
in gain from change in fair value of derivative liability of approximately $164,000, and a decrease in other expense of approximately
$142,000 mainly due to the gain from litigation settlement.
20
**Income Taxes**
****
We did not
have any income taxes expense for the years ended December 31, 2025 and 2024 since we incurred losses in these periods.
**Net Loss from Continuing
Operations**
As a result of the factors described above, our
net loss from continuing operations was $17,518,873 for the year ended December 31, 2025, as compared to $7,039,604 for the year ended
December 31, 2024, representing an increase of $10,479,269, or 148.9%.
**Net Loss from Discontinued
Operations**
Our net loss from discontinued operations was
$742,103 for the year ended December 31, 2025, as compared to $863,790 for the year ended December 31, 2024, representing a decrease of
$121,687, or 14.1%.****
****
**Net Loss**
As a result of the factors described above, our
net loss was $18,260,976 for the year ended December 31, 2025, as compared to $7,903,394 for the year ended December 31, 2024, representing
an increase of $10,357,582, or 131.1%.
**Net Loss Attributable
to Avalon GloboCare Corp. Common Shareholders**
The net loss attributable to our common shareholders
(after taking into effect $162,473 in deemed contribution) was $18,098,503, or $5.64 per share (basic and diluted), for the year ended
December 31, 2025, as compared to $7,903,394, or $8.44 per share (basic and diluted), for the year ended December 31, 2024, representing
an increase of $10,195,109, or 129.0%.
**Foreign Currency
Translation Adjustment**
Our reporting currency
is the U.S. dollar. The functional currency of our parent company, AHS, Avalon Lab, and Q&A Distribution is the U.S.dollar and
the functional currency of Avalon Shanghai is the Chinese Renminbi (RMB). The financial statements of our subsidiary whose
functional currency is the RMB are translated to U.S. dollars using period end rate of exchange for assets and liabilities, average rate
of exchange for revenues, costs, and expenses and cash flows, and at historical exchange rate for equity. Net gains and losses resulting
from foreign exchange transactions are included in the results of operations. As a result of foreign currency translations, which are
a non-cash adjustment, we reported a foreign currency translation loss of $9,402 and $273 for the year ended December 31, 2025 and 2024,
respectively. This non-cash loss had the effect of increasing our reported comprehensive loss in each respective period.
**Comprehensive Loss**
**
As a result of our foreign currency translation
adjustment, we had comprehensive loss of $18,270,378 and $7,903,667 for the year ended December 31, 2025 and 2024, respectively.
**Liquidity and Capital
Resources**
We have a limited operating history and our continued
growth is dependent upon the continuation of generating revenue for selling of Keto Air, generating revenue from advanced Agentic AI systems,
including automated video generation and workflow automation, as well as obtaining additional financing to fund future obligations and
pay liabilities arising from ordinary course business operations. In addition, the current cash balance cannot be projected to cover our
operating expenses for the next twelve months from the release date of this report. These matters raise substantial doubt about our ability
to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise additional capital, implement
our business plan, and generate sufficient revenues. There are no assurances that we will be successful in our efforts to generate sufficient
revenues, maintain sufficient cash balance or report profitable operations or to continue as a going concern. We plan to raise capital
in the future through the sale of equity or debt to implement our business plan. However, there is no assurance these plans will be realized
and that any additional financings will be available to us on satisfactory terms and conditions, if at all.
21
Liquidity is the ability of a company to generate
funds to support its current and future operations, satisfy its obligations as they come due and otherwise operate on an ongoing basis.
At December 31, 2025 and 2024, we had a cash balance of approximately $109,000 and $2,658,000, respectively. These funds are kept in financial
institutions located as follows:
|
Country: | |
December 31, 2025 | | |
December 31, 2024 | | |
|
United States | |
$ | 108,599 | | |
| 99.5 | % | |
$ | 2,646,395 | | |
| 99.6 | % | |
|
China | |
| 492 | | |
| 0.5 | % | |
| 11,787 | | |
| 0.4 | % | |
|
Total cash | |
$ | 109,091 | | |
| 100.0 | % | |
$ | 2,658,182 | | |
| 100.0 | % | |
The following
table sets forth a summary of changes in our working capital deficit from December 31, 2024 to December 31, 2025:
|
| |
December 31, | | |
Changes in | | |
|
| |
2025 | | |
2024 | | |
Amount | | |
Percentage | | |
|
Working capital deficit: | |
| | |
| | |
| | |
| | |
|
Total current assets | |
$ | 1,495,877 | | |
$ | 3,236,498 | | |
$ | (1,740,621 | ) | |
| (53.8 | )% | |
|
Total current liabilities | |
| 14,147,114 | | |
| 13,882,555 | | |
| 264,559 | | |
| 1.9 | % | |
|
Working capital deficit | |
$ | (12,651,237 | ) | |
$ | (10,646,057 | ) | |
$ | (2,005,180 | ) | |
| 18.8 | % | |
Our working capital deficit increased by $2,005,180
to $12,651,237 at December 31, 2025 from $10,646,057 at December 31, 2024. The increase in working capital deficit was primarily attributable
to a decrease in cash of approximately $2,549,000, an increase in accrued professional fees of approximately $1,221,000 which was mainly
attributable to the increase in professional services related to our potential merger with YOOV, an increase in accrued payroll liability
and compensation of approximately $571,000, an increase in stock subscription liability of $150,000 resulting from the securities purchase
agreement signed in June 2025, and an increase in bridge loan payable, net, of approximately $197,000 driven by our bridge loan financing
in December 2025, offset by an increase in receivable from sale of equity method investment of $748,000 resulting from execution of the
Redemption Agreement signed on February 26, 2025 and the Confidential Settlement Agreement and Mutual Release signed on August 26, 2025
as described elsewhere in this report, a decrease in accrued liabilities and other payables related parties of approximately $633,000
which was extinguished upon our sale of equity method investment in the first quarter of 2025, and a decrease in convertible note payable,
net, of approximately $1,377,000 mainly due to the conversion of our June 2024 Convertible Note in the principal amount of approximately
$2,011,000 into our common stock in the year ended December 31, 2025 and the increase in debt discount of approximately $27,000 resulting
from our issuance of the July 2025 Convertible Note in the third quarter of 2025, which was offset by our issuance of the July 2025 Convertible
Note with principal of $200,000 in the third quarter of 2025 and the amortization of debt discount and debt issuance costs for our convertible
note of approximately $461,000 (excluding the initial fair value of the Second Warrant of $621,353) in the year ended December 31, 2025.
Because the exchange rate conversion is different
for the consolidated balance sheets and the consolidated statements of cash flows, the changes in assets and liabilities reflected on
the consolidated statements of cash flows are not necessarily identical with the comparable changes reflected on the consolidated balance
sheets.
22
**Cash
Flows for the Year Ended December 31, 2025 Compared to the Year Ended December 31, 2024**
The
following table summarizes the key components of our cash flows for the years ended December 31, 2025 and 2024:
|
| |
Years Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Net cash used in operating activities from continuing operations | |
$ | (4,580,620 | ) | |
$ | (4,668,458 | ) | |
|
Net cash provided by (used in) investing activities from continuing operations | |
| 1,083,026 | | |
| (100,000 | ) | |
|
Net cash provided by financing activities from continuing operations | |
| 1,400,820 | | |
| 7,638,667 | | |
|
Net cash flows used in discontinued operations | |
| (443,299 | ) | |
| (289,965 | ) | |
|
Effect of exchange rate on cash | |
| (9,018 | ) | |
| 1,447 | | |
|
Net (decrease) increase in cash | |
$ | (2,549,091 | ) | |
$ | 2,581,691 | | |
Net cash flow used in
operating activities from continuing operations for the year ended December 31, 2025 was $4,580,620, which primarily reflected our consolidated
net loss from continuing operations of approximately $17,519,000, and the non-cash item adjustments, consisting of income from equity
method investment of approximately $393,000, and change in fair market value of derivative liability of approximately $538,000, offset
by stock-based compensation and service expense of approximately $1,816,000, amortization of debt issuance costs and debt discount of
approximately $1,136,000, and loss on extinguishment of debt of approximately $9,077,000 resulted from the reduction in the conversion
price of our June 2024 Convertible Note, and the changes in operating assets and liabilities, primarily consisting of an increase in accrued
liabilities and other payables of approximately $1,750,000 which was mainly driven by the increase in accrued professional fees of approximately
$1,221,000 related to our potential merger with YOOV in the year ended December 31, 2025 and the increase in accrued payroll liability
and compensation of approximately $571,000.
Net cash
flow used in operating activities from continuing operations for the year ended December 31, 2024 was $4,668,458, which primarily reflected
our consolidated net loss from continuing operations of approximately $7,040,000, and the non-cash item adjustment, consisting of change
in fair market value of derivative liability of approximately $374,000, and the changes in operating assets and liabilities, primarily
consisting of an increase in prepaid expense and other assets of approximately $107,000 mainly due to the increase in finished goods of
approximately $92,000, a decrease in accrued liabilities and other payables of approximately $1,206,000 resulting from payments made to
our vendors in the year ended December 31, 2024, and a decrease in operating lease obligation of approximately $123,000, offset by the
non-cash items adjustment, primarily consisting of amortization of operating lease right-of-use asset of approximately $123,000, stock-based
compensation and service expense of approximately $522,000, loss from equity method investments of approximately $847,000 which was mainly
attributable to the amortization of identifiable intangible assets acquired from Lab Services MSO acquisition of approximately $667,000
and the impairment of goodwill acquired from Lab Services MSO acquisition of approximately $260,000, resulting from Lab Services MSOs
lower revenues and net incomes than anticipated and the decline in our stock price and market capitalization, distribution of earnings
from equity method investment ofapproximately $612,000, amortization of debt issuance costs and debt discount of approximately $1,292,000,
impairment of laboratory equipment of approximately $111,000, and debt modification charge of approximately $689,000.
We expect our cash used
in operating activities to increase in the next 12 months due to the following:
|
| the development and commercialization of new products; and | |
|
| an increase in public relations and/or sales promotions for
existing and/or new brands as we expand within existing markets or enter new markets. | |
Net cash flow provided by investing activities
from continuing operations was $1,083,026 for the year ended December 31, 2025, as compared to net cash flow used in investing activities
from continuing operations of $100,000 for the year ended December 31, 2024. During the year ended December 31, 2025, we received proceeds
from sale of equity method investment of $1,069,000 and acquired cash on acquisition of approximately $14,000. During the year ended December
31, 2024, we paid $100,000 for the acquisition of a 40% interest in Lab Services MSO.
23
Net cash flow provided by financing activities
from continuing operations was $1,400,820 for the year ended December 31, 2025, as compared to $7,638,667 for the year ended December
31, 2024. During the year ended December 31, 2025, we received proceeds from issuance of July 2025 Convertible Note of $200,000, proceeds
from stock subscription of $150,000, an advance from pending sale of noncontrolling interest in subsidiary of approximately $50,000, net
proceeds from the issuance of convertible preferred stock of $290,000 (net of cash paid for convertible preferred stock issuance costs
of $10,000), proceeds from the issuance of bridge loan of $300,000, and proceeds from issuance of common stock and warrants approximately
$476,000, offset by payments made for offering costs of approximately $65,000. During the year ended December 31, 2024, we received net
proceeds from the issuance of convertible debts and warrants of approximately $3,085,000 (net of original issue discount of approximately
$177,000 and cash paid for convertible note issuance costs of approximately $283,000), an advance from the pending sale of a noncontrolling
interest in a subsidiary of approximately $2,122,000, net proceeds from equity offering of approximately $2,719,000 (net of cash paid
for commission and other offering costs of approximately $138,000), and proceeds from issuance of convertible preferred stock of $3,500,000,
offset by repayments made for loan payable related party of $400,000, and made for convertible debts of approximately $3,388,000.
The following trends
are reasonably likely to result in a material decrease in our liquidity over the near to long term:
|
| an increase in working capital requirements to finance our current business; | |
|
| the use of capital for acquisitions and the development of business opportunities; and | |
|
| the cost of being a public company. | |
In addition, the impact that the imposition of
tariffs and changes to global trade policies could have on our results of operations is uncertain.
We estimate that, based on current plans and assumptions,
our available cash will be insufficient to satisfy our cash requirements under our present operating expectations through cash flow provided
by operations and sales of equity. Other than funds received as described above and cash resources generated from our operations, we presently
have no other significant alternative source of working capital. We have used these funds to fund our operating expenses, pay our obligations
and grow our company. We will need to raise significant additional capital to fund our operations and to provide working capital for our
ongoing operations and obligations. Therefore, our future operation is dependent on our ability to secure additional financing. Financing
transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However,
there can be no assurance that financing will be available in amounts or on terms acceptable to the Company. Additionally, the trading
price of our common stock and a downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through
the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected
costs and expenses or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue
additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences
or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital may restrict our ability
to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will
be required to cease our operations. To date, we have not considered this alternative, nor do we view it as a likely occurrence.
****
**Foreign Currency Exchange Rate Risk**
We ceased all operations
in China in 2022, with the exception of a small administrative office. We did not during the year ended December 31, 2025, and do not
expect in the foreseeable future, to generate any additional revenue from PRC operations. Thus, exchange rate fluctuations between the
RMB and the U.S. dollar do not, and are not expected to, have a material effect on us. For the years ended December 31, 2025 and 2024,
we had an unrealized foreign currency translation loss of approximately $9,400 and $300, respectively, because of changes in the exchange
rate.
**Inflation**
The effect of inflation
on our revenues and operating results was not significant for the years ended December 31, 2025 and 2024.
**Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**
As a smaller reporting company,
as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item.
**ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA**
The financial statements begin
on page F-1.
****
24
****
**ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE**
None.
**ITEM 9A. CONTROLS AND PROCEDURES**
**Evaluation of Disclosure Controls and Procedures**
We maintain disclosure controls and procedures
that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and to ensure that such information
is accumulated and communicated to our management, including our Chief Executive Officer (CEO) and Chief Financial Officer
(CFO) as appropriate, to allow timely decisions regarding required disclosure. We carried out an evaluation, under the supervision
and with the participation of our management, including the CEO and the CFO, of the effectiveness of the design and operation of our disclosure
controls and procedures, as defined in Rule 13(a)-15(e) under the Exchange Act, as of the end of the period covered by this report. Our
management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance
of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible
controls and procedures. During evaluation of disclosure controls and procedures as of December 31, 2025, conducted as part of our annual
audit and preparation of our annual financial statements, our management, including our CEO and CFO, conducted an evaluation of the effectiveness
of the design and operations of our disclosure controls and procedures and concluded that our disclosure controls and procedures were
not effective as of December 31, 2025 due to the reasons set forth below.
**Managements Report on Internal Control
over Financial Reporting**
Management is responsible for the preparation
and fair presentation of the financial statements included in this report. The financial statements have been prepared in conformity with
U.S. GAAP and reflect managements judgment and estimates concerning effects of events and transactions that are accounted for or
disclosed.
Management is also responsible for establishing
and maintaining adequate internal control over financial reporting. Our internal control over financial reporting includes those policies
and procedures that pertain to our ability to record, process, summarize and report reliable data. Management recognizes that there are
inherent limitations in the effectiveness of any internal control over financial reporting, including the possibility of human error and
the circumvention or overriding of internal control. Accordingly, even effective internal control over financial reporting can provide
only reasonable assurance with respect to financial statement presentation. Further, because of changes in conditions, the effectiveness
of internal control over financial reporting may vary over time.
Management regularly assesses our internal control
over financial reporting and did so most recently for our financial reporting as of December 31, 2025. This assessment was based on criteria
for effective internal control over financial reporting described in the Internal Control Integrated Framework issued by the Committee
of Sponsoring Organizations (COSO) of the Treadway Commission (2013). Based on this assessment, management has concluded that our internal
control over financial reporting was not effective as of December 31, 2025, due to the lack of segregation of duties resulting from our
small size and inability to perform an effective test of the operating effectiveness of the controls, including the oversight of our financial
statement close process. The Company has transitioned all email servers to the United States to enhance this aspect of internal controls.
In light of the material weaknesses described
above, we performed additional analyses and procedures in order to conclude that our consolidated financial statements for the year ended
December 31, 2025 included in this Annual Report on Form 10-K were fairly stated in accordance with U.S. GAAP. Accordingly, management
believes that despite the material weakness identified in our internal control over financial reporting, our consolidated financial statements
for the year ended December 31, 2025 are fairly stated, in all material respects, in accordance with U.S. GAAP.
25
****
**Changes in Internal Control over Financial
Reporting**
Other than those described above, there were no
changes in our internal control over financial reporting, as such term is defined in Rules 13a-15(f) under the Exchange Act, during the
quarter ended December 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting
**Attestation Report of the Registered Public
Accounting Firm**
This Annual Report on Form 10-K does not include
an attestation report by our independent registered public accounting firm, regarding internal control over financial reporting. As a
smaller reporting company, our internal control over financial reporting was not subject to audit by our independent registered public
accounting firm pursuant to rules of the SEC that permit us to provide only managements report.
**ITEM 9B. OTHER INFORMATION**
****
**Business Loan and Security Agreement**
****
On March 25, 2026, the Company entered into a
Business Loan and Security Agreement (the Business Loan Agreement) with a commercial funding source (the Lender),
pursuant to which the Company obtained a loan from the Lender in the principal amount of $787,500 (the Business Loan), with
net proceeds to the Company of $750,000, following the payment of an administration fee of $37,500, with a total repayment amount of $1,134,000,
including interest charges of $346,500 (assuming all payments are made on time and the Business Loan is not prepaid) repayable in 30 weekly
installments of $37,800 with a maturity date of October 20, 2026. Pursuant to the Business Loan Agreement, the Company granted the Lender
a continuing security interest in certain collateral (as defined in the Business Loan Agreement). In connection with the Business Loan,
the Company issued Lender a Confessed Judgement Secured Promissory Note (the Secured Note) dated March 25, 2026 in the amount
787,500 with a maturity date of October 20, 2026.
The foregoing descriptions of the Business Loan
Agreement are not complete and are qualified in their entirety by reference to the full text of the Business Loan Agreement and Secured
Note, copies of which are filed as Exhibit 10.123 and 4.20, respectively to this Annual Report on Form 10-K and is incorporated by reference
herein.
During the quarter ended December 31, 2025, none
of our directors or executive officers adopted or terminated a Rule 10b5-1 trading plan or a non-Rule 10b5-1 trading arrangement (as defined
in Item 408(c) of Regulation S-K).
**ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS
THAT PREVENT INSPECTIONS.**
****
Not applicable.
26
**PART III**
**ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE**
The information required by this Item will be
set forth in our definitive proxy statement with respect to our 2026 annual meeting of stockholders to be filed not later than 120 days
after the end of the 2025 fiscal year and is incorporated herein by reference.
We have adopted a code of business conduct and
ethics that applies to all our employees, officers and directors, including those officers responsible for financial reporting. Our code
of business conduct and ethics is available on the investor relations section of our website *www.avalon-globocare.com*.
We have adopted an insider trading policy applicable
to our directors, officers, employees, and other covered persons, and have implemented processes for the company, that we believe are
reasonably designed to promote compliance with insider trading laws, rules and regulations, and the Nasdaq Capital Marke listing standards.
Our insider trading policy is included as Exhibit 19.1 to this Annual Report on Form 10-K and is available in the investor relations section
of our website *www.avalon-globocare.com*.
****
**ITEM 11. EXECUTIVE COMPENSATION**
The information required by this Item will be set forth in our definitive
proxy statement with respect to our 2026 annual meeting of stockholders to be filed not later than 120 days after the end of the 2025
fiscal year, and is incorporated herein by reference.
**ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS**
The information required by this Item will be
set forth in our definitive proxy statement with respect to our 2026 annual meeting of stockholders to be filed not later than 120 days
after the end of the 2025 fiscal year, and is incorporated herein by reference.
**ITEM 13: CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS, AND DIRECTOR INDEPENDENCE**
The information required by this Item will be set forth in our definitive
proxy statement with respect to our 2026 annual meeting of stockholders to be filed not later than 120 days after the end of the 2025
fiscal year, and is incorporated herein by reference.
27
**ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**
The information required by this Item will be set forth in our definitive
proxy statement with respect to our 2026 annual meeting of stockholders to be filed not later than 120 days after the end of the 2025
fiscal year, and is incorporated herein by reference.
**ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES**
**(a) The following documents are filed as part
of this report:**
(1) Financial Statements:
|
Report of Independent Registered Public Accounting Firm (PCAOB ID: 2738) |
F-2 | |
|
Consolidated Balance Sheets as of December 2025 and 2024 |
F-3 | |
|
Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2025 and 2024 |
F-4 | |
|
Consolidated Statements of Changes in Stockholders Equity for the years ended December 31, 2025 and 2024 |
F-5 | |
|
Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024 |
F-6 | |
|
Notes to Consolidated Financial Statements |
F-7 | |
The consolidated financial statements required
by this Item are included beginning at page F-1.
(1) Financial Statement Schedules:
All financial statement schedules have been omitted
because they are not applicable, not required or the information required is shown in the consolidated financial statements or the notes
thereto.
28
**(b) Exhibits**
**EXHIBIT INDEX**
|
Exhibit
Number |
|
Description | |
|
|
|
| |
|
1.1 |
|
Open Market Sale AgreementSM, dated as of December 13, 2019, by and between Avalon GloboCare Corp. and Jefferies LLC. (incorporated by reference to Exhibit 1.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on December 13, 2019). | |
|
|
|
| |
|
2.1 |
|
Membership Interest Purchase Agreement, dated November 7, 2022, by and among the Registrant, Laboratory Services MSO, LLC, SCBC Holdings LLC, Avalon Laboratory Services, Inc., The Zoe Family Trust, Bryan Cox and Sarah Cox (incorporated by reference to Exhibit 2.1 of the Registrants Current Report on Form 8-K filed on November 8, 2022). | |
|
|
|
| |
|
2.2 |
|
Amended and Restated Membership Interest Purchase Agreement, dated February 9, 2023 by and among the Registrant, Laboratory Services MSO, LLC, SCBC Holdings LLC, Avalon Laboratory Services, Inc., the Zoe Family Trust, Bryan Cox and Sarah Cox (incorporated by reference to Exhibit 2.1 of the Registrants Current Report on Form 8-K filed on February 13, 2023). | |
|
|
|
| |
|
2.3 |
|
Agreement and Plan of Merger, dated March 7, 2025, by and among Avalon GloboCare Corp., Nexus MergerSub Limited and YOOV Group Holding Limited (incorporated by reference to Exhibit 2.1 to the registrants Current Report on Form 8-K filed on March 10, 2025). | |
|
|
|
| |
|
2.4 |
|
Agreement and Plan of Merger, dated December 12, 2025, by and among Avalon Globocare Corp., Avalon Quantum AI, LLC and RPM Interactive, Inc. (incorporated by reference to Exhibit 2.1 to the registrants Current Report on Form 8-K filed with the SEC on December 15, 2025) | |
|
|
|
| |
|
2.5 |
|
Amended and Restated Membership Interest Purchase Agreement dated February 18, 2026, dated February 18, 2026, between Avalon Globocare Corp. and Wenzhao Lu (incorporated by reference to Exhibit 2.1 to the registrants Current Report on Form 8-K filed with the SEC on February 19, 2026) | |
|
|
|
| |
|
3.1 |
|
Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on April 26, 2018). | |
|
|
|
| |
|
3.2 |
|
Certificate of Amendment to the Amended and Restated Certificate of Incorporation, as amended, of Avalon GloboCare Corp. (incorporated by reference to Exhibit 3.1 of the Registrants Current Report on Form 8-K filed on January 4, 2023). | |
|
|
|
| |
|
3.3 |
|
Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on April 26, 2018). | |
|
|
|
| |
|
3.4 |
|
Certificate of Designation of Preferences, Rights and Limitations of the Series A Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 of the Registrants Current Report on Form 8-K filed on November 8, 2022). | |
|
|
|
| |
|
3.5 |
|
Certificate of Designation of Preferences, Rights and Limitations of the Series B Convertible Preferred Stock (incorporated by reference to Exhibit 3.2 of the Registrants Current Report on Form 8-K filed on February 13, 2023). | |
29
|
3.6 |
|
Certificate of amendment dated October 23, 2024 (incorporated by reference to Exhibit 3.1 to the registrants Current Report on Form 8-K filed with the SEC on October 29, 2024). | |
|
|
|
| |
|
3.7 |
|
Certificate of Designations of Preferences and Rights of Series C Convertible Preferred Stock of the Company, as filed on December 13, 2024, with the Department of State, Division of Corporations, of the State of Delaware (incorporated by reference to Exhibit 10.3 to the registrants Current Report on Form 8-K filed with the SEC on December 19, 2024). | |
|
|
|
| |
|
3.8 |
|
Certificate of Designations of Preferences and Rights of Series D Convertible Preferred Stock of the Company, as filed on January 6, 2025, with the Department of State, Division of Corporations, of the State of Delaware (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the SEC on January 10, 2025). | |
|
|
|
| |
|
3.9 |
|
Certificate of Elimination relating to the Series A Preferred Stock, filed with the Secretary of State of Delaware on March 7, 2025 (incorporated by reference to Exhibit 3.1 to the registrants Current Report on Form 8-K filed with the SEC on March 10, 2025). | |
|
|
|
| |
|
3.10 |
|
Certificate of Elimination relating to the Series B Preferred Stock, filed with the Secretary of State of Delaware on March 7, 2025 (incorporated by reference to Exhibit 3.2 to the registrants Current Report on Form 8-K filed with the SEC on March 10, 2025). | |
|
3.11 |
|
Amendment No. 1 to the Avalon Bylaws, as adopted and approved by the Avalon Board on March 7, 2025 (incorporated by reference to Exhibit 3.3 to the registrants Current Report on Form 8-K filed with the SEC on March 10, 2025). | |
|
|
|
| |
|
3.12 |
|
Certificate of Amendment to the Series C Certificate of Designations, as filed on May 29, 2025, with the Department of State, Division of Corporations, of the State of Delaware (incorporated by reference to Exhibit 10.3 to the registrants Current Report on Form 8-K filed with the SEC on June 4, 2025) | |
|
|
|
| |
|
3.13 |
|
Certificate of Amendment to the Series C Certificate of Designations, as filed on May 29, 2025, with the Department of State, Division of Corporations, of the State of Delaware (incorporated by reference to Exhibit 3.1 to the registrants Current Report on Form 8-K filed with the SEC on August 29, 2025) | |
|
|
|
| |
|
3.14 |
|
Certificate of Designation of Series E Non-Voting Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the registrants Current Report on Form 8-K filed with the SEC on December 15, 2025) | |
|
|
|
| |
|
4.1 |
|
Form of Subscription Agreement by and between Avalon GloboCare Corp. and the December 2016 Accredited Investors (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on December 21, 2016). | |
|
|
|
| |
|
4.2 |
|
Stock Option issued to Luisa Ingargiola dated February 21, 2017 (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on February 21, 2017). | |
|
|
|
| |
|
4.3 |
|
Form of Subscription Agreement by and between Avalon GloboCare Corp. and the March 2017 Accredited Investor (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 7, 2017). | |
|
|
|
| |
|
4.4 |
|
Share Subscription Agreement between Avalon GloboCare Corp., Avalon (Shanghai) Healthcare Technology Co., Ltd., Beijing DOING Biomedical Technology Co., Ltd. and Daron Liang (incorporated by reference to Exhibit 4.2 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 7, 2017). | |
|
|
|
| |
|
4.5 |
|
Warranty Agreement by and between Lu Wenzhao and Beijing DOING Biomedical Technology Co., Ltd., dated February 27, 2017 (incorporated by reference to Exhibit 4.3 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 7, 2017). | |
30
|
4.6 |
|
Form of Subscription Agreement between Avalon GloboCare Corp. and the October 2017 Accredited Investors (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 26, 2017). | |
|
|
|
| |
|
4.7 |
|
Form of Warrant to Boustead Securities, LLC in connection with the private placements (incorporated by reference to Exhibit 4.8 of the Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on July 27, 2018). | |
|
|
|
| |
|
4.8 |
|
Form of Warrant (April 2019) (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 26, 2019). | |
|
|
|
| |
|
4.9* |
|
Description of Securities Registered under Section 12 of the Securities Exchange Act of 1934 | |
|
|
|
| |
|
4.10 |
|
Form of Subscription Agreement by and between Avalon GloboCare Corp. and Wenzhao Daniel Lu dated August 5, 2022 (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on August 8, 2022). | |
|
|
|
| |
|
4.11 |
|
Form of Subscription Agreement by and between Avalon GloboCare Corp. and Emma Li Xu Qingbo dated August 5, 2022 (incorporated by reference to Exhibit 4.2 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on August 8, 2022). | |
|
|
|
| |
|
4.12 |
|
Promissory Note between the Company and Anthony Macaluso, dated July 3, 2025 (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the SEC on July 9, 2025) | |
|
|
|
| |
|
4.13 |
|
Promissory Note between the Company and Lawrence Bruno, dated July 3, 2025 (incorporated by reference to Exhibit 10.2 to the registrants Current Report on Form 8-K filed with the SEC on July 9, 2025) | |
|
|
|
| |
|
4.15 |
|
Warrants issued by the Company to Investor dated as of July 14, 2025 (incorporated by reference to Exhibit 4.1 to the registrants Current Report on Form 8-K filed with the SEC on July 18, 2025) | |
|
|
|
| |
|
4.16 |
|
Bridge Note, between the Company and Allen O Cage Jr., dated as of December 11, 2025 (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the SEC on December 15, 2025) | |
|
|
|
| |
|
4.17 |
|
Promissory Note (incorporated by reference to Exhibit 4.1 to the registrants Current Report on Form 8-K filed with the SEC on February 18, 2026) | |
|
|
|
| |
|
4.18 |
|
Amendment to Unsecured Bridge Note dated December 11, 2025 (incorporated by reference to Exhibit 4.1 to the registrants Current Report on Form 8-K filed with the SEC on February 19, 2026) | |
|
|
|
| |
|
4.19 |
|
Promissory Note dated February 19, 2026 (incorporated by reference to Exhibit 10.2 to the registrants Current Report on Form 8-K filed with the SEC on February 25, 2026) | |
|
|
|
| |
|
4.20* |
|
Confessed Judgement Secured Promissory Note dated March 26, 2026 | |
|
|
|
| |
|
10.1 |
|
Share Exchange Agreement dated as of October 19, 2016 by and among Avalon Healthcare System, Inc., the shareholders of Avalon Healthcare System, Inc. and Avalon GloboCare Corp. (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 19, 2016). | |
|
10.2 |
|
Executive Employment Agreement, effective December 1, 2016, by and between Avalon GloboCare Corp. and David Jin (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on December 2, 2016). | |
31
|
10.3 |
|
Agreement of Sale by and between Freehold Craig Road Partnership and Avalon GloboCare Corp., dated December 22, 2016 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on December 23, 2016). | |
|
|
|
| |
|
10.4 |
|
Executive Employment Agreement by and between Avalon (Shanghai) Healthcare Technology Ltd. and Meng Li, dated January 11, 2017 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 11, 2017). | |
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10.5 |
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Executive Retention Agreement by and between Avalon GloboCare Corp. and Luisa Ingargiola, dated February 21, 2017 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on February 21, 2017). | |
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10.6 |
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Indemnification Agreement by and between Avalon GloboCare Corp. and Luisa Ingargiola, dated February 21, 2017 (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on February 21, 2017). | |
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10.7 |
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Director Agreement by and between Avalon GloboCare Corp. and Steven P. Sukel dated April 28, 2017 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 28, 2017). | |
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10.8 |
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Director Agreement by and between Avalon GloboCare Corp. and Yancen Lu dated April 28, 2017 (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 28, 2017). | |
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10.9 |
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Consultation Service Contract between Daopei Investment Management (Shanghai) Co., Ltd. and Avalon HealthCare System Inc. dated April 1, 2016 (English translation) (incorporated by reference to Exhibit 10.8 of Amendment No. 1 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on July 7, 2017). | |
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10.10 |
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Consultation Service Contract between Hebei Yanda Ludaopei Hospital Co., Ltd and Avalon HealthCare System Inc. dated April 1, 2016 (English translation) (incorporated by reference to Exhibit 10.9 of Amendment No. 1 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on July 7, 2017). | |
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10.11 |
|
Consultation Service Contract between Nanshan Memorial Stem Cell Biotechnology Co., Ltd. and Avalon HealthCare System Inc. dated April 1, 2016 (English translation) (incorporated by reference to Exhibit 10.10 of Amendment No. 1 to the Registration Statement on Form S-1 filed with the Securities and Exchange Commission on July 7, 2017). | |
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10.12 |
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Loan Agreement between Lotus Capital Overseas Limited and Avalon (Shanghai) Healthcare Technology Co., Ltd. dated April 19, 2017 (English translation) (incorporated by reference to Exhibit 10.12 of the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2017). | |
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10.13 |
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Securities Purchase Agreement between Avalon GloboCare Corp. and Genexosome Technologies Inc. dated October 25, 2017 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 26, 2017). | |
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10.14 |
|
Asset Purchase Agreement between Genexosome Technologies Inc. and Yu Zhou dated October 25, 2017 (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 26, 2017). | |
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10.15 |
|
Stock Purchase Agreement between Genexosome Technologies Inc., Beijing Jieteng (Genexosome) Biotech Co. Ltd. and Yu Zhou dated October 25, 2017 (incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 26, 2017). | |
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10.16 |
|
Executive Retention Agreement between Genexosome Technologies Inc. and Yu Zhou dated October 25, 2017 (incorporated by reference to Exhibit 10.4 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 26, 2017). | |
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10.17 |
|
Invention Assignment, Confidentiality, Non-Compete and Non-Solicit Agreement between Genexosome Technologies Inc. and Yu Zhou dated October 25, 2017 (incorporated by reference to Exhibit 10.5 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 26, 2017). | |
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10.18 |
|
Director Agreement by and between Avalon GloboCare Corp. and Wilbert J. Tauzin II dated November 1, 2017 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on November 7, 2017). | |
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10.19 |
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Agreement between Avalon GloboCare Corp. and Tauzin Consultants, LLC dated November 1, 2017 (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on November 7, 2017). | |
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10.20 |
|
Letter Agreement by and between Avalon GloboCare Corp. and David Jin dated April 3, 2018 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 4, 2018) . | |
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10.21 |
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Letter Agreement by and between Avalon GloboCare Corp. and Meng Li dated April 3, 2018 (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 4, 2018) . | |
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10.22 |
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Advisory Service Contract between Ludaopei Hematology Research Institute Co., Ltd. and Avalon (Shanghai) Healthcare Technology Co., Ltd. dated April 1, 2018 (English translation) (incorporated by reference to that Form S-1 Registration Statement filed with the Securities and Exchange Commission on April 19, 2018). | |
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10.23 |
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Form of Subscription Agreement by and between Avalon GloboCare Corp. and the April 2018 Accredited Investors (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 18, 2018). | |
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10.24 |
|
Supplementary Agreement Related to Share Subscription by and between Avalon GloboCare Corp., Avalon (Shanghai) Healthcare Technology Co., Ltd., Beijing DOING Biomedical Technology Co., Ltd. and Daron Liang dated April 23, 2018 (English translation) (incorporated by reference to Exhibit 4.2 of the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on April 26, 2018). | |
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10.25 |
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Loan Extension Agreement between Lotus Capital Overseas Limited and Avalon (Shanghai) Healthcare Technology Co., Ltd. dated May 3, 2018 (English translation) (incorporated by reference to Exhibit 10.18 of the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 11, 2018). | |
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10.26 |
|
Director Agreement by and between Avalon GloboCare Corp. and Tevi Troy dated June 4, 2018 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on June 6, 2018). | |
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10.27 |
|
Joint Venture Agreement by and between Avalon (Shanghai) Healthcare Technology Co., Ltd. and Jiangsu Unicorn Biological Technology Co., Ltd. dated May 29, 2018 (English translation) (incorporated by reference to Exhibit 99.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on June 6, 2018). | |
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| |
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10.28 |
|
Director Agreement by and between Avalon GloboCare Corp. and William Stilley, III dated July 5, 2018 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 10, 2018). | |
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10.29 |
|
Director Agreement by and between Avalon GloboCare Corp. and Steven A. Sanders dated July 30, 2018 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 31, 2018). | |
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10.30 |
|
Loan Extension Agreement between Lotus Capital Overseas Limited and Avalon (Shanghai) Healthcare Technology Co., Ltd. dated August 3, 2018 (English translation) (incorporated by reference to Exhibit 10.30 of the Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on August 7, 2018). | |
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10.31 |
|
Strategic Partnership Agreement between Avalon GloboCare Corp. and Weill Cornell Medical College of Cornell University dated August 6, 2018 (incorporated by reference to Exhibit 10.31 of the Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on August 7, 2018). | |
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10.32 |
|
Equity Joint Venture Agreement by and between Avactis Biosciences, Inc., a wholly-owned subsidiary of Avalon GloboCare Corp., and Arbele Limited for the establishment of AVAR (China) BioTherapeutics Ltd. dated October 23, 2018 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 29, 2018). | |
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10.33 |
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Letter Agreement by and between Avalon GloboCare Corp. and David Jin dated January 3, 2019 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 4, 2019). | |
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10.34 |
|
Letter Agreement by and between Avalon GloboCare Corp. and Luisa Ingargiola dated January 3, 2019 (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 4, 2019). | |
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10.35 |
|
Letter Agreement by and between Avalon (Shanghai) Healthcare Technology Co. Ltd. and Meng Li dated January 3, 2019 (incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 4, 2019). | |
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10.36 |
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Promissory Note issued to Daniel Lu dated Mach 18, 2019 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 22, 2019). | |
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| |
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10.37 |
|
Director Agreement by and between Avalon GloboCare Corp. and Meng Li dated April 5, 2019 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 8, 2019). | |
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10.38 |
|
Director Agreement by and between Avalon GloboCare Corp. and Yue Charles Li dated April 5, 2019 (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 8, 2019). | |
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| |
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10.39 |
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Form of Securities Purchase Agreement dated April 25, 2019 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on April 26, 2019). | |
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| |
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10.40 |
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Revolving Line of Credit Agreement dated as of August 29, 2019 between Avalon GloboCare Corp. and Wenzhao Daniel Lu dated August 29, 2019 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on September 3, 2019). | |
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10.41 |
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Form of Warrant Redemption and Cancellation Agreement (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on October 21, 2019). | |
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| |
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10.42 |
|
Letter Agreement by and between Avalon GloboCare Corp. and David Jin dated February 20, 2020 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on February 24, 2020). | |
34
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10.43 |
|
Letter Agreement by and between Avalon GloboCare Corp. and Meng Li dated February 20, 2020 (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on February 24, 2020). | |
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| |
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10.44 |
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Letter Agreement by and between Avalon GloboCare Corp. and Luisa Ingargiola dated February 20, 2020 (incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on February 24, 2020). | |
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| |
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10.45 |
|
Debt Settlement Agreement and Release between Avalon GloboCare Corp. and Wenzhao Daniel Lu (incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on December 22, 2021). | |
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10.46 |
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Corporate Research Agreement between Avalon GloboCare Corp. and the University of Pittsburgh of the Commonwealth System of Higher Education dated July 8, 2021 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 14, 2021). | |
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10.47 |
|
Form of Securities Purchase Agreement dated March 28, 2022 (incorporated by reference to Exhibit 10.47 of the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2022). | |
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| |
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10.48 |
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Form of Convertible Note - March 2022 (incorporated by reference to Exhibit 10.48 of the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 30, 2022). | |
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| |
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10.49 |
|
Loan Extension and Modification Agreement between Avalon GloboCare Corp. and Wenzhao Lu dated March 28, 2022 (incorporated by reference to Exhibit 10.49 of the Form 10-K filed with the Securities and Exchange Commission on March 30, 2022). | |
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| |
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10.50 |
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Consulting Agreement, dated February 9, 2023, by and between Laboratory Services MSO, LLC and Sarah Cox (incorporated by reference to Exhibit 10.50 to the registrants Annual Report on Form 10-K filed on April 15, 2024). | |
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| |
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10.51 |
|
Form of Warrant - March 2022 (incorporated by reference to Exhibit 10.3 of the Form 8-K filed with the Securities and Exchange Commission on April 29, 2022). | |
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10.52 |
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Amendment No. 1 to the Equity Joint Venture Agreement entered between Avalon GloboCare Corp., Avactis Biosciences Inc., Arbele Limited and Arbele Biotherapeutics Limited dated April 6, 2022 (incorporated by reference to Exhibit 10.53 of the Form 10-Q filed with the Securities and Exchange Commission on May 11, 2022). | |
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| |
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10.53 |
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Letter Agreement between Avalon GloboCare Corp. and Fsunshine Trading PTE. Ltd. dated June 8, 2022 (incorporated by reference to Exhibit 10.4 of the Form 8-K filed with the Securities and Exchange Commission on June 8, 2022). | |
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| |
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10.54 |
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Debt Settlement Agreement and Release between Avalon GloboCare Corp. and Wenzhao Daniel Lu dated July 25, 2022 (incorporated by reference to Exhibit 10.2 of the Form 8-K filed with the Securities and Exchange Commission on July 27, 2022). | |
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| |
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10.55 |
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Conversion Agreement between Avalon GloboCare Corp. and Fsunshine Trading PTE. Ltd. Dated July 25, 2022 (incorporated by reference to Exhibit 10.3 of the Form 8-K filed with the Securities and Exchange Commission on July 27, 2022). | |
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| |
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10.56 |
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Form of Balloon Promissory Note issued to S&P Principal LLC (incorporated by reference to Exhibit 10.1 of the Form 8-K filed with the Securities and Exchange Commission on September 8, 2022). | |
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| |
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10.57 |
|
Form of Mortgage and Security Agreement (incorporated by reference to Exhibit 10.2 of the Form 8-K filed with the Securities and Exchange Commission on September 8, 2022). | |
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10.58 |
|
Form of Guaranty (incorporated by reference to Exhibit 10.3 of the Form 8-K filed with the Securities and Exchange Commission on September 8, 2022). | |
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| |
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10.59 |
|
Form of Securities Purchase Agreement for the purchase of Series A Convertible Preferred Stock (incorporated by reference to Exhibit 10.1 of the Form 8-K filed with the Securities and Exchange Commission on November 8, 2022). | |
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| |
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10.60 |
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Director Agreement by and Between Avalon GloboCare Corp. and Lourdes Felix dated January 9, 2023 (incorporated by reference to Exhibit 10.1 of the Registrants Current Report on Form 8-K filed with the SEC on January 11, 2023). | |
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10.61 |
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Second Amended and Restated Limited Company Agreement, dated February 9, 2023, by and among Laboratory Services MSO, LLC, SCBC Holdings LLC, the Zoe Family Trust, Bryan Cox, Sarah Cox and the members named therein (incorporated by reference to Exhibit 10.1 of the Registrants Current Report on Form 8-K filed on February 13, 2023) . | |
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10.62 |
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Securities Purchase Agreement, dated May 23, 2023, between Avalon GloboCare Corp. and Mast Hill Fund, L.P (incorporated by reference to Exhibit 10.1 of the Registrants Current Report on Form 8-K filed with the SEC on May 26, 2023) . | |
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10.63 |
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Security Agreement, dated May 23, 2023, by and among Avalon GloboCare Corp., Avalon Healthcare System Inc., Avalon Laboratory Services, Inc., Avalon RT 9 Properties, LLC, Avactis Biosciences, Inc., Laboratory Services MSO, LLC, Genexosome Technologies Inc., International Exosome Association LLC and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.2 of the Registrants Current Report on Form 8-K filed with the SEC on May 26, 2023). | |
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| |
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10.64 |
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Senior Secured Promissory Note, dated May 23, 2023, between Avalon Globocare Corp. and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.3 of the Registrants Current Report on Form 8-K filed with the SEC on May 26, 2023). | |
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10.65 |
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First Warrant, dated May 23, 2023, by and between Avalon GloboCare Corp. and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.4 of the Registrants Current Report on Form 8-K filed with the SEC on May 26, 2023). | |
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10.66 |
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Second Warrant, dated May 23, 2023, by and between Avalon GloboCare Corp. and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.5 of the Registrants Current Report on Form 8-K filed with the SEC on May 26, 2023). | |
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| |
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10.67 |
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Form of Balloon Mortgage Note (incorporated by reference to Exhibit 10.6 of the Registrants Current Report on Form 8-K filed with the SEC on May 26, 2023). | |
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10.68 |
|
Form of Second Mortgage and Security Agreement (incorporated by reference to Exhibit 10.7 of the Registrants Current Report on Form 8-K filed with the SEC on May 26, 2023). | |
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| |
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10.69 |
|
Form of Guaranty (incorporated by reference to Exhibit 10.8 of the Registrants Current Report on Form 8-K filed with the SEC on May 26, 2023). | |
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| |
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10.70 |
|
Form of Hazardous Material Guaranty and Indemnification Agreement (incorporated by reference to Exhibit 10.9 of the Registrants Current Report on Form 8-K filed with the SEC on May 26, 2023). | |
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| |
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10.71 |
|
Sales Agreement, dated June 16, 2023, by and between Avalon GloboCare Corp. and Roth Capital Partners, LLC. (incorporated by reference to Exhibit 1.1 of the Registrants Current Report on Form 8-K filed with the SEC on June 16, 2023). | |
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10.72 |
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Securities Purchase Agreement, dated July 6, 2023, by and between Avalon Globocare Corp. and Firstfire Global Opportunities, LLC. (incorporated by reference to Exhibit 10.1 of the Registrants Current Report on Form 8-K filed with the SEC on July 10, 2023). | |
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| |
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10.73 |
|
Security Agreement, dated July 6, 2023, by and among Avalon GloboCare Corp., Avalon Healthcare System Inc., Avalon Laboratory Services, Inc., Avalon RT 9 Properties, LLC, Avactis Biosciences, Inc., Laboratory Services MSO, LLC, Genexosome Technologies Inc., International Exosome Association LLC and Firstfire Global Opportunities, LLC. (incorporated by reference to Exhibit 10.2 of the Registrants Current Report on Form 8-K filed with the SEC on July 10, 2023). | |
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| |
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10.74 |
|
Senior Secured Promissory Note, dated July 6, 2023, by and between Avalon GloboCare Corp. and Firstfire Global Opportunities, LLC. (incorporated by reference to Exhibit 10.3 of the Registrants Current Report on Form 8-K filed with the SEC on July 10, 2023). | |
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| |
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10.75 |
|
First Warrant dated July 6, 2023, by and between Avalon GloboCare Corp. and Firstfire Global Opportunities, LLC. (incorporated by reference to Exhibit 10.4 of the Registrants Current Report on Form 8-K filed with the SEC on July 10, 2023). | |
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| |
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10.76 |
|
Second Warrant, dated July 6, 2023, by and between Avalon Globocare Corp. and Firstfire Global Opportunities, LLC. (incorporated by reference to Exhibit 10.5 of the Registrants Current Report on Form 8-K filed with the SEC on July 10, 2023). | |
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| |
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10.77 |
|
Securities Purchase Agreement, dated October 9, 2023, between Avalon Globocare Corp. and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.1 of the Registrants Current Report on Form 8-K filed with the SEC on October 13, 2023). | |
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10.78 |
|
Security Agreement, dated October 9, 2023, among Avalon Globocare Corp., Avalon Healthcare System Inc., Avalon Laboratory Services, Inc., Avalon RT 9 Properties, LLC, Avactis Biosciences, Inc., Laboratory Services MSO, LLC, Genexosome Technologies Inc., International Exosome Association LLC and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.2 of the Registrants Current Report on Form 8-K filed with the SEC on October 13, 2023). | |
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| |
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10.79 |
|
Senior Secured Promissory Note, dated October 9, 2023, between Avalon Globocare Corp. and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.3 of the Registrants Current Report on Form 8-K filed with the SEC on October 13, 2023). | |
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| |
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10.80 |
|
First Warrant, dated October 9, 2023, between Avalon Globocare Corp. and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.4 of the Registrants Current Report on Form 8-K filed with the SEC on October 13, 2023). | |
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| |
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10.81 |
|
Second Warrant, dated October 9, 2023, between Avalon Globocare Corp. and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.5 of the Registrants Current Report on Form 8-K filed with the SEC on October 13, 2023). | |
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| |
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10.82 |
|
Securities Purchase Agreement, dated October 9, 2023, between Avalon Globocare Corp. and Firstfire Global Opportunities Fund, LLC (incorporated by reference to Exhibit 10.6 of the Registrants Current Report on Form 8-K filed with the SEC on October 13, 2023). | |
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| |
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10.83 |
|
Security Agreement, dated October 9, 2023, among Avalon Globocare Corp., Avalon Healthcare System Inc., Avalon Laboratory Services, Inc., Avalon RT 9 Properties, LLC, Avactis Biosciences, Inc., Laboratory Services MSO, LLC, Genexosome Technologies Inc., International Exosome Association LLC and Firstfire Global Opportunities Fund, LLC (incorporated by reference to Exhibit 10.7 of the Registrants Current Report on Form 8-K filed with the SEC on October 13, 2023). | |
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10.84 |
|
Senior Secured Promissory Note, dated October 9, 2023, between Avalon Globocare Corp. and Firstfire Global Opportunities Fund, LLC (incorporated by reference to Exhibit 10.8 of the Registrants Current Report on Form 8-K filed with the SEC on October 13, 2023). | |
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10.85 |
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First Warrant, dated October 9, 2023, between Avalon Globocare Corp. and Firstfire Global Opportunities Fund, LLC (incorporated by reference to Exhibit 10.9 of the Registrants Current Report on Form 8-K filed with the SEC on October 13, 2023). | |
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10.86 |
|
Second Warrant, dated October 9, 2023, between Avalon Globocare Corp. and Firstfire Global Opportunities Fund, LLC (incorporated by reference to Exhibit 10.10 of the Registrants Current Report on Form 8-K filed with the SEC on October 13, 2023). | |
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10.87 |
|
Mortgage and Security Agreement, dated October 9, 2023, between Avalon Globocare Corp., Mast Hill Fund, L.P and Firstfire Global Opportunities Fund, LLC (incorporated by reference to Exhibit 10.11 of the Registrants Current Report on Form 8-K filed with the SEC on October 13, 2023). | |
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| |
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10.88 |
|
Membership Interest Purchase Agreement, dated November 17, 2023, between Avalon Globocare Corp. and Wenzhao Lu (incorporated by reference to Exhibit 10.1 of the Registrants Current Report on Form 8-K filed with the SEC on November 22, 2023). | |
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10.89 |
|
Mortgage and Security Agreement, dated March 27, 2024, between Avalon Globocare Corp. and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.1 of the Registrants Current Report on Form 8-K filed with the SEC on March 27, 2024). | |
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| |
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10.90 |
|
Mortgage and Security Agreement, dated March 27, 2024, between Avalon Globocare Corp. and Firstfire Global Opportunities Fund, LLC (incorporated by reference to Exhibit 10.2 of the Registrants Current Report on Form 8-K filed with the SEC on March 27, 2024). | |
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10.91 |
|
Senior Secured Convertible Promissory Note, dated March 7, 2024, between Avalon GloboCare Corp. and Mast Hill Fund, LP (incorporated by reference to Exhibit 10.4 of the Registrants Quarterly Report on Form 10-Q filed with the SEC on May 31, 2024). | |
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| |
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10.92 |
|
Security Agreement, dated March 7, 2024, between Avalon GloboCare Corp. and Mast Hill Fund, LP.* (incorporated by reference to Exhibit 10.5 of the Registrants Quarterly Report on Form 10-Q filed with the SEC on May 31, 2024). | |
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| |
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10.93 |
|
Warrant, dated March 7, 2024, between Avalon GloboCare Corp. and Mast Hill Fund, LP.* (incorporated by reference to Exhibit 10.6 of the Registrants Quarterly Report on Form 10-Q filed with the SEC on May 31, 2024). | |
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| |
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10.94 |
|
Securities Purchase Agreement, dated June 5, 2024, between Avalon Globocare Corp. and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K filed with the SEC on June 5, 2024). | |
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| |
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10.95 |
|
Security Agreement, dated June 5, 2024, among Avalon Globocare Corp., Avalon Healthcare System Inc., Avalon Laboratory Services, Inc., Avalon RT 9 Properties, LLC, Avactis Biosciences, Inc., Genexosome Technologies Inc., International Exosome Association LLC and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.2 to the Registrants Current Report on Form 8-K filed with the SEC on June 5, 2024). | |
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| |
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10.96 |
|
Senior Secured Promissory Note, dated June 5, 2024, between Avalon Globocare Corp. and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.3 to the Registrants Current Report on Form 8-K filed with the SEC on June 5, 2024). | |
38
|
10.97 |
|
First Warrant, dated June 5, 2024, between Avalon Globocare Corp. and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.4 to the Registrants Current Report on Form 8-K filed with the SEC on June 5, 2024). | |
|
|
|
| |
|
10.98 |
|
Second Warrant, dated June 5, 2024, between Avalon Globocare Corp. and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.5 to the Registrants Current Report on Form 8-K filed with the SEC on June 5, 2024). | |
|
|
|
| |
|
10.99 |
|
Mortgage and Security Agreement, dated June 5, 2024, between Avalon Globocare Corp. and Mast Hill Fund, L.P. (incorporated by reference to Exhibit 10.6 to the Registrants Current Report on Form 8-K filed with the SEC on June 5, 2024). | |
|
|
|
| |
|
10.100 |
|
Consent, Acknowledgement, and Waiver Agreement, between the Company and Holder, dated as of December 15, 2024 (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the SEC on December 19, 2024). | |
|
|
|
| |
|
10.101 |
|
Common Stock Purchase Warrant, between the Company and Holder, dated as of December 15, 2024 (incorporated by reference to Exhibit 10.2 to the registrants Current Report on Form 8-K filed with the SEC on December 19, 2024). | |
|
|
|
| |
|
10.102 |
|
Securities Purchase Agreement, between the Company and Holder, dated as of December 19, 2024 (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the SEC on December 26, 2024). | |
|
|
|
| |
|
10.103 |
|
Redemption and Abandonment Agreement, dated February 26, 2025, by and among Avalon GloboCare Corp., Avalon Laboratory Services, Inc., Laboratory Services MSO, LLC, SCBC Holdings LLC, the Zoe Family Trust, Bryan Cox and Sarah Cox (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the SEC on February 27, 2025). | |
|
|
|
| |
|
10.104 |
|
Form of Avalon Voting and Support Agreement (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the SEC on March 10, 2025). | |
|
|
|
| |
|
10.105 |
|
Form of YOOV Voting and Support Agreement (incorporated by reference to Exhibit 10.2 to the registrants Current Report on Form 8-K filed with the SEC on March 10, 2025). | |
|
|
|
| |
|
10.106 |
|
Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.3 to the registrants Current Report on Form 8-K filed with the SEC on March 10, 2025). | |
|
|
|
| |
|
10.107 |
|
Securities Purchase Agreement, between the Company and Investor, dated as of June 4, 2025 (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the SEC on June 4, 2025) | |
|
|
|
| |
|
10.108 |
|
Waiver, between the Company and Holder dated as of Mary 29, 2025 (incorporated by reference to Exhibit 10.2 to the registrants Current Report on Form 8-K filed with the SEC on June 4, 2025) | |
|
|
|
| |
|
10.109 |
|
Definitive Agreement by and between the Company, Q&A, and Qi Diagnostics dated June 23, 2025 (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the SEC on June 26, 2025) | |
|
|
|
| |
|
10.110 |
|
Securities Purchase Agreement by and between the Company and Investor, dated as of July 14, 2025 (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the SEC on July 18, 2025) | |
39
|
10.111 |
|
Registration Rights Agreement by and between the Company and Investor, dated as of July 14, 2025 (incorporated by reference to Exhibit 10.2 to the registrants Current Report on Form 8-K filed with the SEC on July 18, 2025) | |
|
|
|
| |
|
10.112 |
|
Securities Purchase Agreement by and between the Company and Investor, dated as of July 21, 2025 (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the SEC on July 23, 2025) | |
|
|
|
| |
|
10.113 |
|
Waiver by and between the Company and Investor, dated as of July 28, 2025 (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the SEC on July 29, 2025) | |
|
|
|
| |
|
10.114 |
|
Securities Purchase Agreement, between the Company and Allen O Cage Jr., dated as of December 11, 2025 (incorporated by reference to Exhibit 10.2 to the registrants Current Report on Form 8-K filed with the SEC on December 15, 2025) | |
|
|
|
| |
|
10.115 |
|
Amendment to Securities Purchase Agreement and Unsecured Bridge Note dated December 14, 2025, between the Company and Allen O Cage Jr. (incorporated by reference to Exhibit 10.3 to the registrants Current Report on Form 8-K filed with the SEC on December 15, 2025) | |
|
|
|
| |
|
10.116 |
|
Amendment No. 1 dated December 14, 2025 by and among Avalon Globocare Corp., Avalon Quantum AI, LLC and RPM Interactive, Inc (incorporated by reference to Exhibit 10.4 to the registrants Current Report on Form 8-K filed with the SEC on December 15, 2025) | |
|
|
|
| |
|
10.117 |
|
Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the SEC on February 18, 2026) | |
|
|
|
| |
|
10.118 |
|
Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the SEC on February 25, 2026) | |
|
|
|
| |
|
10.119 |
|
Ingargiola Combined Company Executive Retention Agreement (incorporated by reference to Exhibit 10.111 to the registrants Registration Statement on Form S-4 filed with the SEC on June 9, 2025) | |
|
|
|
| |
|
10.120 |
|
Wong Combined Company Executive Retention Agreement (incorporated by reference to Exhibit 10.112 to the registrants Registration Statement on Form S-4 filed with the SEC on June 9, 2025) | |
|
|
|
| |
|
10.121 |
|
Mark Wong Combined Company Executive Retention Agreement (incorporated by reference to Exhibit 10.113 to the registrants Registration Statement on Form S-4 filed with the SEC on June 9, 2025) | |
|
|
|
| |
|
10.122 |
|
Mutual Termination and Release Agreement, dated as of January 21, 2026, by and among Avalon Globocare Corp., Nexus MergerSub Limited and YOOV Group Holding Limited (incorporated by reference to Exhibit 10.1 to the registrants Current Report on Form 8-K filed with the SEC on January 22, 2026) | |
|
|
|
| |
|
10.123#* |
|
Business Loan and Security Agreement dated as of March 26, 2026 | |
|
19.1 |
|
Insider Trading Policy. (incorporated by reference to Exhibit 19.1 to the Registrants Annual Report on Form 10-K filed with the SEC on March 31, 2025) | |
|
|
|
| |
|
21.1* |
|
List of Subsidiaries | |
40
|
23.1* |
|
Consent of Independent Registered Public Accounting Firm. | |
|
|
|
| |
|
31.1* |
|
Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
|
|
|
| |
|
31.2* |
|
Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
|
|
|
| |
|
32.1** |
|
Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
|
|
|
| |
|
97.1 |
|
Avalon GloboCare Corp. Compensation Recovery Policy (incorporated by reference to Exhibit 97.1 to the registrants Annual Report on Form 10-K filed with the SEC on April 15, 2024). | |
|
101.INS* |
|
Inline XBRL Instance Document. | |
|
|
|
| |
|
101.SCH* |
|
Inline XBRL Taxonomy Extension Schema Document. | |
|
|
|
| |
|
101.CAL* |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
|
|
|
| |
|
101.DEF* |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
|
|
|
| |
|
101.LAB* |
|
Inline XBRL Taxonomy Extension Label Linkbase Document. | |
|
|
|
| |
|
101.PRE* |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
|
|
|
| |
|
104* |
|
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). | |
|
|
* |
Filed herewith. | |
|
|
** |
Furnished herewith. | |
|
|
Management contract or compensatory plan or arrangement. | |
|
+ |
The schedules (and similar attachments) to this exhibit have been omitted from this filing pursuant to Item 601(b)(10) of Regulation S-K. The Company agrees to furnish a supplemental copy of any omitted schedule (or similar attachment) to the Securities and Exchange Commission upon request. | |
**ITEM 16. FORM 10-K SUMMARY**
None.
41
****
**SIGNATURES**
Pursuant to the requirements of Section 13 or
15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
|
|
AVALON GLOBOCARE CORP. | |
|
|
|
| |
|
Dated: March 30, 2026 |
By: |
/s/ Meng Li | |
|
|
Name: |
Meng
Li | |
|
|
Title: |
Interim Chief Executive Officer and President
(Principal Executive Officer) | |
|
|
|
| |
|
Dated: March 30, 2026 |
By: |
/s/ Luisa Ingargiola | |
|
|
Name: |
Luisa Ingargiola | |
|
|
Title: |
Chief Financial Officer
(Principal Financial and Accounting Officer) | |
**POWER OF ATTORNEY**
****
KNOW ALL PERSONS BY THESE PRESENTS, that each
individual whose signature appears below constitutes and appoints Meng Li and Luisa Ingargiola, and each of them individually, his or
her true and lawful attorney-in-fact, with full power of substitution and re-substitution for him or her and in his or her name, place
and stead, in any and all capacities to sign any and all amendments to the Annual Report on Form 10-K and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all
that said attorney-in-fact or his substitute may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities
Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
|
Signature |
|
Title |
|
Date |
|
|
|
|
|
|
|
|
|
/s/ Meng Li |
|
Interim Chief Executive Officer |
|
March 30, 2026 |
|
|
Meng Li |
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
|
|
|
|
/s/ Luisa Ingargiola |
|
Chief Financial Officer |
|
March 30, 2026 |
|
|
Luisa Ingargiola |
|
(Principal Financial and Accounting Officer) |
|
|
|
|
|
|
|
|
|
|
|
/s/ Wenzhao Lu |
|
Chairman of the Board of Directors |
|
March 30, 2026 |
|
|
Wenzhao Lu |
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Steven A. Sanders |
|
Director |
|
March 30, 2026 |
|
|
Steven A. Sanders |
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Lourdes Felix |
|
Director |
|
March 30, 2026 |
|
|
Lourdes Felix |
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Michael Mathews |
|
Director |
|
March 30, 2026 |
|
|
Michael Mathews |
|
|
|
|
|
42
****
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2025 and 2024
CONTENTS
| Report of Independent Registered Public Accounting Firm (PCAOB No. 2738) | | F-2 | |
| | | | |
| Consolidated Financial Statements: | | | |
| | | | |
| Consolidated Balance Sheets - As of December 31, 2025 and 2024 | | F-3 | |
| | | | |
| Consolidated Statements of Operations and Comprehensive Loss - For the Years Ended December 31, 2025 and 2024 | | F-4 | |
| | | | |
| Consolidated Statements of Changes in Equity - For the Years Ended December 31, 2025 and 2024 | | F-5 | |
| | | |
| Consolidated Statements of Cash Flows For the Years Ended December 31, 2025 and 2024 | | F-6 | |
| | | |
| Notes to Consolidated Financial Statements | | F-7 | |
F-1
*
**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM**
To the Board of Directors and
Stockholders of Avalon GloboCare Corp.
****
**Opinion on the Financial Statements**
We have audited the accompanying consolidated
balance sheets of Avalon GloboCare Corp. (the Company) as of December 31, 2025 and 2024, and the related consolidated statements of operations
and comprehensive loss, changes in equity, and cash flows for each of the years in the two-year period ended December 31, 2025, and the
related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all
material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash
flows for each of the years in the two-year period ended December 31, 2025, in conformity with accounting principles generally accepted
in the United States of America.
****
**Going Concern**
The accompanying financial statements have been
prepared assuming the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has yet
to achieve profitable operations, has negative cash flows from operating activities, and is dependent upon future issuances of equity
or other financings to fund ongoing operations all of which raises substantial doubt about its ability to continue as a going concern.
Managements plans regarding these matters are also described in Note 2. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
****
**Basis for Opinion**
These financial statements are the responsibility
of the Companys management. Our responsibility is to express an opinion on the Companys financial statements based on our
audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required
to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations
of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the
standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding
of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Companys
internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess
the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond
to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating
the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
****
**Critical Audit Matters**
The critical audit matter communicated below is
a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the
audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the
financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions
on the critical audit matter or on the accounts or disclosures to which it relates.
****
**Goodwill and Intangible Assets**
As discussed in the notes to the financial statements,
the Company completed a business combination during the year, which required the assets and liabilities assumed to be measured at fair
value on the date of the acquisition. The acquisition resulted in the capitalization of goodwill and intangible assets.
Auditing managements valuation of the initial
values of goodwill and intangible assets involves significant judgements and estimates to determine the proper value.
To evaluate the appropriateness of the valuation
of the goodwill and intangible assets, we evaluated managements significant judgments and estimates to determine that the goodwill
and intangible assets are properly valued.
/s/ M&K CPAS, PLLC
We have served as the Companys auditor
since 2024.
The Woodlands, TX
March 30, 2026
F-2
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
|
| |
December 31, | | |
|
| |
2025 | | |
2024 | | |
|
ASSETS | |
| | |
| | |
|
| |
| | |
| | |
|
CURRENT ASSETS: | |
| | |
| | |
|
Cash | |
$ | 109,091 | | |
$ | 2,658,182 | | |
|
Receivable from sale of equity method investment | |
| 748,000 | | |
| - | | |
|
Prepaid expense and other current assets | |
| 282,170 | | |
| 255,084 | | |
|
Current assets of discontinued operations | |
| 356,616 | | |
| 323,232 | | |
|
Total Current Assets | |
| 1,495,877 | | |
| 3,236,498 | | |
|
| |
| | | |
| | | |
|
NON-CURRENT ASSETS: | |
| | | |
| | | |
|
Operating lease right-of-use assets, net | |
| - | | |
| 4,709 | | |
|
Property and equipment, net | |
| 727 | | |
| 1,298 | | |
|
Intangible assets, net | |
| 2,158,167 | | |
| - | | |
|
Goodwill | |
| 12,808,197 | | |
| - | | |
|
Equity method investments, net | |
| - | | |
| 10,636,544 | | |
|
Non-current assets of discontinued operations | |
| 6,937,769 | | |
| 7,106,129 | | |
|
Total Non-current Assets | |
| 21,904,860 | | |
| 17,748,680 | | |
|
Total Assets | |
$ | 23,400,737 | | |
$ | 20,985,178 | | |
|
| |
| | | |
| | | |
|
LIABILITIES AND EQUITY | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
CURRENT LIABILITIES: | |
| | | |
| | | |
|
Accrued professional fees | |
$ | 1,832,606 | | |
$ | 611,462 | | |
|
Accrued research and development fees | |
| 153,772 | | |
| 153,772 | | |
|
Accrued payroll liability and compensation | |
| 1,072,553 | | |
| 501,258 | | |
|
Accrued litigation settlement | |
| 363,450 | | |
| 373,450 | | |
|
Accrued liabilities and other payables | |
| 281,063 | | |
| 228,800 | | |
|
Accrued liabilities and other payables - related parties | |
| 100,000 | | |
| 732,916 | | |
|
Operating lease obligation | |
| 6,000 | | |
| 10,709 | | |
|
Advance from pending sale of noncontrolling interest - related party | |
| 3,158,078 | | |
| 3,108,106 | | |
|
Derivative liability | |
| 34,156 | | |
| 127,545 | | |
|
Stock subscription liability | |
| 150,000 | | |
| - | | |
|
Bridge loan payable, net | |
| 197,341 | | |
| - | | |
|
Convertible note payable, net | |
| 737,018 | | |
| 2,113,773 | | |
|
Current liabilities of discontinued operations | |
| 6,061,077 | | |
| 5,920,764 | | |
|
| |
| | | |
| | | |
|
Total Current Liabilities | |
| 14,147,114 | | |
| 13,882,555 | | |
|
| |
| | | |
| | | |
|
NON-CURRENT LIABILITIES: | |
| | | |
| | | |
|
Non-current liabilities of discontinued operations | |
| 23,515 | | |
| - | | |
|
Total Non-current Liabilities | |
| 23,515 | | |
| - | | |
|
Total Liabilities | |
| 14,170,629 | | |
| 13,882,555 | | |
|
| |
| | | |
| | | |
|
Commitments and Contingencies (Note 22) | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
EQUITY: | |
| | | |
| | | |
|
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; | |
| | | |
| | | |
|
Series A Convertible Preferred Stock, 0 and 9,000 shares issued and outstanding at December 31, 2025 and 2024, respectively | |
| - | | |
| 9,000,000 | | |
|
Series B Convertible Preferred Stock, 0 and 11,000 shares issued and outstanding at December 31, 2025 and 2024, respectively | |
| - | | |
| 11,000,000 | | |
|
Series C Convertible Preferred Stock, 3,800 and 3,500 shares issued and outstanding at December 31, 2025 and 2024, respectively; Liquidation preference $3.8 million at December 31, 2025 | |
| 3,790,000 | | |
| 3,500,000 | | |
|
Series D Convertible Preferred Stock, 5,000 and 0 shares issued and outstanding at December 31, 2025 and 2024, respectively; Liquidation preference $5 million at December 31, 2025 | |
| 8,837,527 | | |
| - | | |
|
Series E Convertible Preferred Stock, 19,500 and 0 shares issued and outstanding at December 31, 2025 and 2024, respectively; Liquidation preference $19.5 million at December 31, 2025 | |
| 14,916,753 | | |
| - | | |
|
Common stock, $0.0001 par value; 100,000,000 shares authorized; 4,857,476 shares issued and 4,854,009 shares outstanding at December 31, 2025; 1,445,979 shares issued and 1,442,512 shares outstanding at December 31, 2024 | |
| 486 | | |
| 145 | | |
|
Additional paid-in capital | |
| 88,376,767 | | |
| 72,023,525 | | |
|
Less: common stock held in treasury, at cost; 3,467 shares at December 31, 2025 and 2024 | |
| (522,500 | ) | |
| (522,500 | ) | |
|
Accumulated deficit | |
| (105,934,101 | ) | |
| (87,673,125 | ) | |
|
Statutory reserve | |
| 6,578 | | |
| 6,578 | | |
|
Accumulated other comprehensive loss | |
| (241,402 | ) | |
| (232,000 | ) | |
|
Total Avalon GloboCare Corp. stockholders' equity | |
| 9,230,108 | | |
| 7,102,623 | | |
|
Noncontrolling interest | |
| - | | |
| - | | |
|
Total Equity | |
| 9,230,108 | | |
| 7,102,623 | | |
|
Total Liabilities and Equity | |
$ | 23,400,737 | | |
$ | 20,985,178 | | |
See accompanying notes to the consolidated financial statements.
F-3
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
|
| |
For the Years Ended | | |
|
| |
December 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
| | |
| | |
|
INCOME (LOSS) FROM EQUITY METHOD INVESTMENT - LAB SERVICES MSO | |
$ | 392,677 | | |
$ | (846,588 | ) | |
|
| |
| | | |
| | | |
|
OTHER OPERATING EXPENSES: | |
| | | |
| | | |
|
Advertising and marketing expenses | |
| 843,497 | | |
| 237,671 | | |
|
Professional fees | |
| 5,254,207 | | |
| 1,590,268 | | |
|
Compensation and related benefits | |
| 1,101,574 | | |
| 1,308,854 | | |
|
Other general and administrative expenses | |
| 784,758 | | |
| 857,869 | | |
|
Total Other Operating Expenses | |
| 7,984,036 | | |
| 3,994,662 | | |
|
| |
| | | |
| | | |
|
LOSS FROM OPERATIONS | |
| (7,591,359 | ) | |
| (4,841,250 | ) | |
|
| |
| | | |
| | | |
|
OTHER (EXPENSE) INCOME | |
| | | |
| | | |
|
Interest expense - amortization of debt discount and debt issuance costs | |
| (1,136,412 | ) | |
| (1,291,814 | ) | |
|
Interest expense - other | |
| (320,282 | ) | |
| (325,486 | ) | |
|
Interest expense - related party | |
| - | | |
| (42,445 | ) | |
|
Debt modification charge | |
| - | | |
| (838,794 | ) | |
|
Change in fair value of derivative liability | |
| 538,213 | | |
| 374,365 | | |
|
Loss on extinguishment of debt | |
| (9,076,587 | ) | |
| - | | |
|
Other income (expense) | |
| 67,554 | | |
| (74,180 | ) | |
|
Total Other Expense, net | |
| (9,927,514 | ) | |
| (2,198,354 | ) | |
|
| |
| | | |
| | | |
|
LOSS BEFORE INCOME TAXES | |
| (17,518,873 | ) | |
| (7,039,604 | ) | |
|
| |
| | | |
| | | |
|
INCOME TAXES | |
| - | | |
| - | | |
|
| |
| | | |
| | | |
|
NET LOSS FROM CONTINUING OPERATIONS | |
| (17,518,873 | ) | |
| (7,039,604 | ) | |
|
| |
| | | |
| | | |
|
NET LOSS FROM DISCONTINUED OPERATIONS | |
| (742,103 | ) | |
| (863,790 | ) | |
|
| |
| | | |
| | | |
|
NET LOSS | |
$ | (18,260,976 | ) | |
$ | (7,903,394 | ) | |
|
| |
| | | |
| | | |
|
LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST | |
| - | | |
| - | | |
|
| |
| | | |
| | | |
|
NET LOSS AFTER NONCONTROLLING INTEREST | |
| (18,260,976 | ) | |
| (7,903,394 | ) | |
|
| |
| | | |
| | | |
|
DEEMED CONTRIBUTION ON EXCHANGE OF EQUITY INSTRUMENTS | |
| 162,473 | | |
| - | | |
|
| |
| | | |
| | | |
|
NET LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS | |
$ | (18,098,503 | ) | |
$ | (7,903,394 | ) | |
|
| |
| | | |
| | | |
|
NET LOSS PER COMMON SHARE ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS: | |
| | | |
| | | |
|
Basic and diluted, continuing operations | |
$ | (5.41 | ) | |
$ | (7.52 | ) | |
|
Basic and diluted, discontinued operations | |
| (0.23 | ) | |
| (0.92 | ) | |
|
Basic and diluted | |
$ | (5.64 | ) | |
$ | (8.44 | ) | |
|
| |
| | | |
| | | |
|
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | |
| | | |
| | | |
|
Basic and diluted | |
| 3,210,779 | | |
| 936,614 | | |
|
| |
| | | |
| | | |
|
COMPREHENSIVE LOSS: | |
| | | |
| | | |
|
NET LOSS | |
$ | (18,260,976 | ) | |
$ | (7,903,394 | ) | |
|
OTHER COMPREHENSIVE LOSS FROM CONTINUED OPERATIONS | |
| | | |
| | | |
|
Unrealized foreign currency translation loss | |
| (9,402 | ) | |
| (273 | ) | |
|
COMPREHENSIVE LOSS | |
| (18,270,378 | ) | |
| (7,903,667 | ) | |
|
LESS: COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST | |
| - | | |
| - | | |
|
COMPREHENSIVE LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS | |
$ | (18,270,378 | ) | |
$ | (7,903,667 | ) | |
See accompanying notes to the consolidated financial statements.
F-4
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
For the Years Ended December 31, 2025 and 2024
|
| |
Avalon GloboCare Corp. Stockholders' Equity | | |
| | |
| | |
|
| |
Series A Preferred Stock | | |
Series B Preferred Stock | | |
Series C Preferred Stock | | |
Series D Preferred Stock | | |
Series E Preferred Stock | | |
Common Stock | | |
| | |
Treasury Stock | | |
| | |
| | |
Accumulated | | |
| | |
| | |
|
| |
Number | | |
| | |
Number | | |
| | |
Number | | |
| | |
Number | | |
| | |
Number | | |
| | |
Number | | |
| | |
Additional | | |
Number | | |
| | |
| | |
| | |
Other | | |
| | |
| | |
|
| |
of | | |
| | |
of | | |
| | |
of | | |
| | |
of | | |
| | |
of | | |
| | |
of | | |
| | |
Paid-in | | |
of | | |
| | |
Accumulated | | |
Statutory | | |
Comprehensive | | |
Noncontrolling | | |
Total | | |
|
| |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
Shares | | |
Amount | | |
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 | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 33,800 | | |
| 3 | | |
| 320,543 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 320,546 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Sale of common stock, net | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 281,843 | | |
| 28 | | |
| 2,544,283 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,544,311 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Issuance of common stock upon cashless exercise of stock warrants | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 42,381 | | |
| 4 | | |
| (4 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Issuance of common stock for services | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 145,153 | | |
| 15 | | |
| 530,335 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 530,350 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Reclassification of derivative liability to equity | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,354 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,354 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Sale of Series C Convertible Preferred Stock | |
| - | | |
| - | | |
| - | | |
| - | | |
| 3,500 | | |
| 3,500,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 3,500,000 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Issuance of pre-funded warrants | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 688,794 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 688,794 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Stock-based compensation | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 51,159 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 51,159 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Shares issued for adjustments for 1:15 reverse split | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 206,033 | | |
| 21 | | |
| (21 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Foreign currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (273 | ) | |
| - | | |
| (273 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Net loss for the year | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (7,903,394 | ) | |
| - | | |
| - | | |
| - | | |
| (7,903,394 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Balance, December 31, 2024 | |
| 9,000 | | |
| 9,000,000 | | |
| 11,000 | | |
| 11,000,000 | | |
| 3,500 | | |
| 3,500,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,445,979 | | |
| 145 | | |
| 72,023,525 | | |
| (3,467 | ) | |
| (522,500 | ) | |
| (87,673,125 | ) | |
| 6,578 | | |
| (232,000 | ) | |
| - | | |
| 7,102,623 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Issuance of common stock upon cashless exercise of stock warrants | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 429,181 | | |
| 43 | | |
| (43 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Issuance of common stock for services | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 606,494 | | |
| 61 | | |
| 1,880,725 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 1,880,786 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Reclassification of derivative liability to equity | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 176,529 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 176,529 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Series D Convertible Preferred Stock issued in exchange of Series A Convertible Preferred Stock | |
| (9,000 | ) | |
| (9,000,000 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| 5,000 | | |
| 8,837,527 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 162,473 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Series B Convertible Preferred Stock extinguished related to sale of equity method investment | |
| - | | |
| - | | |
| (11,000 | ) | |
| (11,000,000 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,348,695 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (8,651,305 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Stock-based compensation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (13,409 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (13,409 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Conversion of convertible note payable and accrued interest into common stock | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,244,622 | | |
| 224 | | |
| 2,244,398 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 2,244,622 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Loss on extinguishment of debt recognized | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 9,076,587 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 9,076,587 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Sale of Series C Convertible Preferred Stock, net | |
| - | | |
| - | | |
| - | | |
| - | | |
| 300 | | |
| 290,000 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 290,000 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Series E Convertible Preferred Stock issued for acquisition | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 19,500 | | |
| 14,916,753 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 14,916,753 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Sale of common stock and warrants, net | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 121,200 | | |
| 12 | | |
| 450,488 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 450,500 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Issuance of common stock as convertible note payable commitment fee | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 10,000 | | |
| 1 | | |
| 26,799 | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| 26,800 | | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Foreign currency translation adjustment | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (9,402 | ) | |
| - | | |
| (9,402 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Net loss for the year | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (18,260,976 | ) | |
| - | | |
| - | | |
| - | | |
| (18,260,976 | ) | |
|
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
|
Balance, December 31, 2025 | |
| - | | |
$ | - | | |
| - | | |
$ | - | | |
| 3,800 | | |
$ | 3,790,000 | | |
| 5,000 | | |
$ | 8,837,527 | | |
$ | 19,500 | | |
$ | 14,916,753 | | |
| 4,857,476 | | |
$ | 486 | | |
$ | 88,376,767 | | |
| (3,467 | ) | |
$ | (522,500 | ) | |
$ | (105,934,101 | ) | |
$ | 6,578 | | |
$ | (241,402 | ) | |
$ | - | | |
$ | 9,230,108 | | |
See accompanying notes to the consolidated financial statements.
F-5
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
| |
For the Years Ended | | |
|
| |
December 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
| | |
| | |
|
CASH FLOWS FROM OPERATING ACTIVITIES: | |
| | |
| | |
|
Net loss from continuing operations | |
$ | (17,518,873 | ) | |
$ | (7,039,604 | ) | |
|
Adjustments to reconcile net loss to net cash used in
operating activities: | |
| | | |
| | | |
|
Depreciation and amortization of intangible assets | |
| 94,443 | | |
| 611 | | |
|
Amortization of operating lease right-of-use asset | |
| 64,388 | | |
| 122,553 | | |
|
Stock-based compensation and service expense | |
| 1,816,462 | | |
| 521,509 | | |
|
(Income) loss from equity method investment | |
| (392,677 | ) | |
| 846,588 | | |
|
Distribution of earnings from equity method investment | |
| - | | |
| 611,888 | | |
|
Amortization of debt issuance costs and debt discount | |
| 1,136,412 | | |
| 1,291,814 | | |
|
Change in fair market value of derivative liability | |
| (538,213 | ) | |
| (374,365 | ) | |
|
Impairment of laboratory equipment | |
| - | | |
| 111,033 | | |
|
Debt modification charge | |
| - | | |
| 688,794 | | |
|
Loss on extinguishment of debt | |
| 9,076,587 | | |
| - | | |
|
Changes in operating assets and liabilities: | |
| | | |
| | | |
|
Security deposit | |
| 17,491 | | |
| - | | |
|
Prepaid expense and other assets | |
| (22,299 | ) | |
| (106,999 | ) | |
|
Accrued liabilities and other payables | |
| 1,750,047 | | |
| (1,205,676 | ) | |
|
Accrued liabilities and other payables - related parties | |
| - | | |
| (14,051 | ) | |
|
Operating lease obligation | |
| (64,388 | ) | |
| (122,553 | ) | |
|
| |
| | | |
| | | |
|
NET CASH USED IN OPERATING ACTIVITIES FROM CONTINUING OPERATIONS | |
| (4,580,620 | ) | |
| (4,668,458 | ) | |
|
| |
| | | |
| | | |
|
CASH FLOWS FROM INVESTING ACTIVITIES: | |
| | | |
| | | |
|
Payment for equity interest purchase | |
| - | | |
| (100,000 | ) | |
|
Cash acquired on acquisition | |
| 14,026 | | |
| - | | |
|
Proceeds from sale of equity method investment | |
| 1,069,000 | | |
| - | | |
|
| |
| | | |
| | | |
|
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES FROM CONTINUING OPERATIONS | |
| 1,083,026 | | |
| (100,000 | ) | |
|
| |
| | | |
| | | |
|
CASH FLOWS FROM FINANCING ACTIVITIES | |
| | | |
| | | |
|
Proceeds from issuance of convertible debt and warrants | |
| - | | |
| 3,367,750 | | |
|
Proceeds from issuance of convertible debt | |
| 200,000 | | |
| - | | |
|
Payments of convertible debt issuance costs | |
| - | | |
| (282,700 | ) | |
|
Repayments of convertible debt | |
| - | | |
| (3,388,222 | ) | |
|
Repayments of loan payable - related party | |
| - | | |
| (400,000 | ) | |
|
Proceeds from stock subscription liability | |
| 150,000 | | |
| - | | |
|
Advance from pending sale of noncontrolling interest in subsidiary | |
| 49,972 | | |
| 2,122,392 | | |
|
Proceeds from issuance of convertible preferred stock | |
| 300,000 | | |
| 3,500,000 | | |
|
Payments of convertible preferred stock issuance costs | |
| (10,000 | ) | |
| - | | |
|
Proceeds from issuance of bridge loan | |
| 300,000 | | |
| - | | |
|
Proceeds from issuance of common stock and warrants | |
| 475,500 | | |
| - | | |
|
Payments of offering costs | |
| (64,652 | ) | |
| - | | |
|
Proceeds from equity offering | |
| - | | |
| 2,857,852 | | |
|
Disbursements for equity offering costs | |
| - | | |
| (138,405 | ) | |
|
| |
| | | |
| | | |
|
NET CASH PROVIDED BY FINANCING ACTIVITIES FROM CONTINUING OPERATIONS | |
| 1,400,820 | | |
| 7,638,667 | | |
|
| |
| | | |
| | | |
|
DISCONTINUED OPERATIONS | |
| | | |
| | | |
|
| |
| | | |
| | | |
|
Net cash used in operating activities from discontinued operations | |
| (407,434 | ) | |
| (289,965 | ) | |
|
| |
| | | |
| | | |
|
Net cash used in investing activities from discontinued operations | |
| (35,865 | ) | |
| - | | |
|
| |
| | | |
| | | |
|
NET CASH FLOWS USED IN DISCONTINUED OPERATIONS | |
| (443,299 | ) | |
| (289,965 | ) | |
|
| |
| | | |
| | | |
|
EFFECT OF EXCHANGE RATE ON CASH - CONTINUING OPERATIONS | |
| (9,018 | ) | |
| 1,447 | | |
|
| |
| | | |
| | | |
|
NET (DECREASE) INCREASE IN CASH | |
| (2,549,091 | ) | |
| 2,581,691 | | |
|
| |
| | | |
| | | |
|
CASH - beginning of year | |
| 2,658,182 | | |
| 76,491 | | |
|
| |
| | | |
| | | |
|
CASH - end of year | |
$ | 109,091 | | |
$ | 2,658,182 | | |
|
| |
| | | |
| | | |
|
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |
| | | |
| | | |
|
Cash paid for: | |
| | | |
| | | |
|
Interest | |
$ | 916,643 | | |
$ | 1,088,512 | | |
|
| |
| | | |
| | | |
|
NON-CASH INVESTING AND FINANCING ACTIVITIES: | |
| | | |
| | | |
|
Common stock issued for future services | |
$ | 8,530 | | |
$ | - | | |
|
Common stock issued for accrued liabilities | |
$ | 42,385 | | |
$ | 60,000 | | |
|
Receivable related to sale of equity method investment | |
$ | 1,745,000 | | |
$ | - | | |
|
Related party payable extinguished upon sale of equity method investment | |
$ | 632,916 | | |
$ | - | | |
|
Series B Convertible Preferred Stock extinguished related to sale of equity method investment | |
$ | 11,000,000 | | |
$ | - | | |
|
Series D Convertible Preferred Stock issued in exchange of Series A Convertible Preferred Stock | |
$ | 9,000,000 | | |
$ | - | | |
|
Warrants issued as convertible note payable finder's fee | |
$ | - | | |
$ | 40,900 | | |
|
Warrants issued with convertible note payable recorded as debt discount | |
$ | - | | |
$ | 438,568 | | |
|
Common stock issued as convertible note payable commitment fee | |
$ | 26,800 | | |
$ | 320,546 | | |
|
Equity method investment payable paid by a related party | |
$ | - | | |
$ | 566,667 | | |
|
Reclassification of deferred offering costs | |
$ | - | | |
$ | 175,136 | | |
|
Settlement of derivative liability | |
$ | 176,529 | | |
$ | 2,354 | | |
|
Issuance of common stock upon cashless exercise of stock warrants | |
$ | 43 | | |
$ | 4 | | |
|
Initial ROU asset and lease liability | |
$ | 127,486 | | |
$ | - | | |
|
Conversion of convertible note payable and accrued interest into common stock | |
$ | 2,244,622 | | |
$ | - | | |
|
Deferred financing costs in accrued liabilities | |
$ | 45,000 | | |
$ | - | | |
|
Legal fees recorded to receivable from sale of equity method investment | |
$ | 50,000 | | |
$ | - | | |
|
Reclassification of related party loan payable and accrued expenses to advance from related party | |
$ | - | | |
$ | 500,000 | | |
|
Shares issued for adjustments for 1:15 reverse split | |
$ | - | | |
$ | 21 | | |
|
Bridge loan issuance costs in accrued liabilities | |
$ | 18,846 | | |
$ | - | | |
|
Common stock issued as convertible note payable commitment fee included in accrued liabilities | |
$ | 138,000 | | |
$ | - | | |
See accompanying notes to the consolidated financial statements.
F-6
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO 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 technology-focused company developing
and acquiring innovative artificial intelligence platforms. Through its AI-driven subsidiary, the Company is advancing next-generation
AI systems, including automated video generation, enterprise documentation, and workflow automation solutions. The Company is also expanding
its intellectual property portfolio in cellular therapy and generative AI publishing and software. In addition, the Company is marketing
the KetoAir breathalyzer device, which is registered with the U.S. Food and Drug Administration as a Class I medical device, and
plans to pursue additional diagnostic applications for the technology. In addition, the Company owned and operated commercial real estate
at its headquarters in Freehold, NJ through February 2026.
On May 18, 2015, Avalon Healthcare System, Inc.
(AHS) was incorporated under the laws of the State of Delaware. AHS owns100% 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 Peoples Republic of China (PRC). Avalon Shanghai was incorporated on April 29, 2016, and was engaged in medical
related consulting services for customers. Due to the winding down of the medical related consulting services in 2022, the Company decided
to cease all operations of Avalon Shanghai and no longer has any material revenues or expenses in Avalon Shanghai. As a result, Avalon
Shanghai is no longer an operating entity.
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 Companys world-wide headquarters for all corporate administration andoperations.
In addition, the property generates rental income. Avalon RT 9 owns this office building. Avalon RT 9s business consists of the
ownership and operation of the income-producing real estate property in New Jersey. As of December 31, 2025, the occupancy rate of the
building is98.5%. On February 18, 2026, the Company sold 100% of Avalon RT 9 to Wenzhao Lu, the Companys chairman of the
Board of Directors.
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 purchased40%
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. During the first quarter of 2025, to preserve cash, the Company entered into discussions
with Lab Services MSO for the potential redemption of our investment and on February 26, 2025, Lab Services MSO redeemed the40%
equity interest in Lab Services MSO held by Avalon Lab. Accordingly, beginning in February 2025, we no longer offer laboratory services.
On May 1, 2024, the Company formed a wholly owned
subsidiary, Q&A Distribution LLC (Q&A Distribution), a Texas company. Q&A Distribution is engaged in distribution
of KetoAir device.
On February 21, 2025, the Company formed a wholly
owned subsidiary, Nexus MergerSub Limited (Nexus), a British Virgin Islands (BIV) company. There was no activity
for the subsidiary since its incorporation through December 31, 2025.
On December 5, 2025, the Company formed a wholly
owned subsidiary, Avalon Quantum AI, LLC (Avalon Quantum AI), a Nevada company.
On December 12, 2025, the Company acquired RPM
Interactive, Inc., a Nevada corporation (RPM), in accordance with the terms of the Agreement and Plan of Merger, dated December
12, 2025, as amended by Amendment No. 1 dated December 14, 2025 (as amended, the Merger Agreement), by and among the Company,
Avalon Quantum AI, LLC, a Nevada limited liability company and a wholly owned subsidiary of the Company (the Merger Sub),
and RPM. Pursuant to the Merger Agreement, RPM merged with and into the Merger Sub, pursuant to which the Merger Sub was the surviving
entity and became a wholly owned subsidiary of the Company (the Merger).
As
a result of the above Merger transaction, effective December 12, 2025, Avalon Quantum AI is advancing next-generation AI systems, including
automated video generation, enterprise documentation, and workflow automation solutions.
F-7
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 1 ORGANIZATION AND NATURE OF
OPERATIONS (continued)**
Details of the Companys subsidiaries which
are included in these consolidated financial statements as of December 31, 2025 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 ALBT | | Holding company for payroll and other expenses | |
| | | | | | | | |
| Avalon RT 9 Properties LLC (Avalon RT 9) | | New Jersey
February 7, 2017 | | 100% held by ALBT | | Owned and operated an income-producing real property and held and managed the corporate headquarters through February 2026 | |
| | | | | | | | |
| Avalon (Shanghai) Healthcare Technology Co., Ltd. (Avalon Shanghai) | | PRC
April 29, 2016 | | 100% held by AHS | | Is not considered an operating entity | |
| Genexosome Technologies Inc. (Genexosome) | | Nevada
July 31, 2017 | | 60% held by ALBT | | No current activities to report, dormant | |
| Avalon Laboratory Services, Inc. (Avalon Lab) | | Delaware
October 14, 2022 | | 100% held by ALBT | | No current activities to report, dormant | |
| Q&A Distribution LLC (Q&A Distribution) | | Texas
May 1, 2024 | | 100% held by ALBT | | Distributes KetoAir device | |
| Nexus MergerSub Limited (Nexus) | | BVI
February 21, 2025 | | 100% held by ALBT | | No current activities to report | |
| Avalon Quantum AI, LLC (Avalon Quantum AI) | | Nevada
December 5, 2025 | | 100% held by ALBT | | Advanced Agentic AI systems, including automated video generation and workflow automation solutions." | |
**NOTE
2 BASIS OF PRESENTATION AND GOING CONCERN CONDITION**
**Basis of Presentation**
The accompanying consolidated financial statements
and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S.
GAAP) and with the rules and regulations of the U.S. Securities and Exchange Commission for financial information.
The Companys consolidated financial statements
include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated
in consolidation.
As of December 31, 2025, the Company determined
that certain assets that have been disposed of in February 2026 met the criteria for discontinued operations presentation. For all periods
presented, the operating results associated with the assets disposed of have been reclassified into net loss from discontinued operations
in the Consolidated Statements of Operations and Comprehensive Loss. The associated assets and liabilities have been reflected as current
and long-term assets and liabilities of discontinued operations in the Consolidated Balance Sheets, and the cash flows from the Companys
discontinued operations are presented in the Consolidated Statements of Cash Flows for all periods presented.
Certain prior period balances related to the Company's
reportable segments and discontinued operations have been reclassified to conform to the current presentation in the financial statements
and accompanying notes. The notes to the Consolidated Financial Statements are presented on a continuing operations basis unless otherwise
noted. Refer to Note 7 Discontinued Operations and Disposals for additional information on the Company's discontinued operations.
F-8
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
2 BASIS OF PRESENTATION AND GOING CONCERN CONDITION (continued)**
****
**Going Concern**
These consolidated financial statements have been
prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets
and the satisfaction of liabilities in the normal course of business.
As reflected in the accompanying consolidated
financial statements, the Company had a working capital deficit of approximately $12,651,000at December 31, 2025 and had incurred
recurring net losses from continuing operations and generated negative cash flow from operating activities of continuing operations of
approximately $17,519,000and $4,581,000for the year ended December 31, 2025, respectively.
The Company has a limited operating history and
its continued growth is dependent upon the continuation of generating revenue for selling of Keto Air, generating revenue from advanced
Agentic AI systems, including automated video generation and workflow automation, 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 Companys
ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Companys
ability to raise additional capital, implement its business plan, and generate significant revenue. There are no assurances that the Company
will be successful in its efforts to generate significant revenue, maintain sufficient cash balance or report profitable operations or
to continue as a going concern. The Company plans on raising capital through the sale of equity to implement its business plan. However,
there is no assurance these plans will be realized and that any additional financings will be available to the Company on satisfactory
terms and conditions, if any.
The accompanying consolidated financial statementsdo
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 consolidated financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Changes in these estimates and assumptions may have a material impact on the consolidated financial statements
and accompanying notes. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that
the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which
management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly,
the actual results could differ significantly from those estimates.
Significant estimates during the years ended December
31, 2025 and 2024 include the useful life of intangible assets, the assumptions used in assessing impairment of long-term assets,the
allowance for credit loss, the valuation of deferred tax assets and the associated valuation allowances, the valuation of stock-based
compensation, the valuation of Series D convertible preferred stock (Series D Preferred Stock), the fair value of the consideration
given in the purchase of RPM, the fair value of assets acquired and liabilities assumed in acquisition, and the assumptions used to determine
fair value of warrants and embedded conversion features of convertible note payable.
**Cash and Cash Equivalents**
At December 31, 2025 and 2024, the Companys
cash balances by geographic area were as follows:
|
Country: | |
December 31, 2025 | | |
December 31, 2024 | | |
|
United States | |
$ | 108,599 | | |
| 99.5 | % | |
$ | 2,646,395 | | |
| 99.6 | % | |
|
China | |
| 492 | | |
| 0.5 | % | |
| 11,787 | | |
| 0.4 | % | |
|
Total cash | |
$ | 109,091 | | |
| 100.0 | % | |
$ | 2,658,182 | | |
| 100.0 | % | |
For purposes of the consolidated statements of
cash flows, the Company considers all highly liquid instruments with a maturity of three months or less when purchased and money market
accounts to be cash equivalents. The Company had no cash equivalents at December 31, 2025 and 2024.
F-9
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)**
****
**Fair Value of Financial Instruments and
Fair Value Measurements**
*
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
entitys own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best
available information. | |
The fair value of the Companys assets and
liabilities, which qualify as financial instruments under ASC Topic 820, Fair Value Measurement, approximates the carrying
amounts represented in the accompanying consolidated financial statements, primarily due to their short-term nature.
**Assets
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 basis. These assets and liabilities
include derivative liability.
*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 years ended December 31, 2025 and 2024:
|
| |
Significant
Unobservable
Inputs
(Level 3) | | |
|
Balance of derivative liability as of January 1, 2024 | |
$ | 24,796 | | |
|
Initial fair value of derivative liability attributable to warrants issuance with March and June 2024 fund raises | |
| 479,468 | | |
|
Reclassification of additional paid-in capital upon conversion | |
| (2,354 | ) | |
|
Gain from change in the fair value of derivative liability | |
| (374,365 | ) | |
|
Balance of derivative liability as of December 31, 2024 | |
| 127,545 | | |
|
Initial fair value of derivative liability attributable to Second Warrant issuance with June 2024 fund raise (See Note 11) | |
| 621,353 | | |
|
Gain from change in the fair value of derivative liability | |
| (538,213 | ) | |
|
Reclassification of additional paid-in capital upon conversion | |
| (176,529 | ) | |
|
Balance of derivative liability as of December 31, 2025 | |
$ | 34,156 | | |
**Assets
and liabilities measured at fair value on a nonrecurring basis.**Certain assets and liabilities are measured at fair value
on a nonrecurring basis. These assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value
adjustments in certain circumstances. These assets and liabilities can include equipment held for sale and equity method investment that
are written down to fair value when they are impaired.
*Laboratory
equipment.*The Company conducted an impairment assessment on its laboratory equipment based on the guidelines established in Financial
Accounting Standards Board (FASB) ASC Topic 360 to determine the estimated fair market value of its laboratory equipment
as of December 31, 2024. Upon completion of its 2024 impairment analysis, the Company determined that the carrying value exceeded the
fair market value of laboratory equipment. The fair market value of laboratory equipment is a level 3 valuation. The Company recorded
an impairment charge of $111,033 for the year ended December 31, 2024, which was included in other general and administrative expenses
on the accompanying consolidated statements of operations and comprehensive loss. There is no comparative impairment for the year ended
December 31, 2025 since the laboratory equipment was fully impaired at December 31, 2024.
F-10
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 3 SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES (continued)**
**Fair Value of Financial
Instruments and Fair Value Measurements (continued)**
**
*Equity
method investment in**Laboratory Services MSO, LLC*The factors used to determine
fair value are subject to managements judgment and expertise. These assumptions represent Level 3 inputs. Impairment of equity
method investment in Laboratory Services MSO, LLC for the year ended December 31, 2024 was $259,579, which have been included in loss
from equity method investment Lab Services MSO on the accompanying consolidated statements of operations and comprehensive loss.
ASC
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
instruments.
**Credit Risk and Uncertainties**
The Company maintains aportion of its cash
on deposits with bank and financial institution within the U.S. that at times may exceed federally-insured limits of $250,000. The Company
manages this credit risk by concentrating its cash balances in high quality financial institutions and by periodically evaluating the
credit quality of the primary financial institutions holding such deposits. The Company has not experienced any losses in such bank accounts
and believes it is not exposed to any risks on its cash in bank accounts. At December 31, 2025, there were no balances in excess of the
federally-insured limits.
**Deferred Offering Costs**
****
Deferred offering costs consist of legal, accounting
and other costs that are directly related to the Companys open market sale equity financing and will be charged to stockholders
equity upon completion of the equity offering. As of December 31, 2025 and 2024, deferred offering costs amounted to $84,652 and $0, respectively,
which were included in prepaid expense and other current assets.
****
**Property and Equipment**
**
Property and equipment are carried at cost less
accumulated depreciation, and are depreciated on a straight-line basis over the estimated useful lives of the assets. The cost of repairs
and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of,
the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the period
of disposition. The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances
reflect the fact that their recorded value may not be recoverable.
**Intangible Assets**
Intangible assets consist of goodwill and developed
technology and trade name. Goodwill represents the excess of the purchase price paid over the fair value of net assets acquired in the
business acquisition incurred on December 12, 2025. Goodwill is not amortized, but is tested for impairment at December 31, 2025. Developed
technology and trade name are being amortized on a straight-line method over the estimated useful life of 1 year.
****
**Investment in Unconsolidated
Companies**
The Company uses the equity method of accounting
for its investment in, and earning or loss of, investees that it does not control but over which it does exert significant 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.
The Company considers whether the fair value of
its equity method investment has declined below its carrying value whenever adverse events or changes in circumstances indicate that recorded
value may not be recoverable. If the Company considers any decline to be other than temporary (based on various factors, including historical
financial results and the overall health of the investee), then a write-down would be recorded to estimated fair value. Impairment of
equity method investment amounted to $259,579 for the year ended December 31, 2024. See Note 9 for discussion of equity method investments.
The Company classifies distributions received
from equity method investments using the cumulative earnings approach. Distributions received are considered returns on the investment
and classified as cash inflows from operating activities. If, however, the investors 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.
F-11
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)**
****
**Impairment of Long-lived Assets**
In accordance with ASC Topic 360, the Company
reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may
not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future
cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the assets
estimated fair value and its book value.
For the
year ended December 31, 2024, the Company incurred impairment charges in operations of $111,033on its laboratory equipment. The
valuation of the laboratory equipment, and the amount of the impairment charge, were based on impairment assessment conducted on the equipment
at December 31, 2024.
**Business Acquisition**
The Company accounts for business acquisition
in accordance with ASC No. 805,Business Combinations. The assets acquired and liabilities assumed from the acquired business are
recorded at fair value, with the residual of the purchase price recorded as goodwill. The result of operations of the acquired business
is included in the Companys operating result from the date of acquisition.
****
**Receivable from Sale of Equity Method Investment**
****
During the first quarter of 2025, to preserve
cash, the Company entered into discussions with Lab Services MSO for the potential redemption of our investment and on February 26, 2025,
the Company and Lab Services MSO entered into a Redemption and Abandonment Agreement (the Redemption Agreement), whereby
Lab Services MSO redeemed the40% equity interest in Lab Services MSO held by the Company for cash and the surrender of its Series
B convertible preferred stock (Series B Preferred Stock) having a carrying value of $11,000,000. The aggregate cash amount
to the Company for the redemption was $1,745,000, to be paid as follows: one payment of $95,000at the closing of the redemption
and, beginning in March 2025, monthly payments of $75,000until December 2026. In addition, pursuant to the terms of the Redemption
Agreement, all shares of the Companys Series B Preferred Stock previously issued to SCBC Holdings LLC as partial consideration
for the equity interests of Lab Services MSO, were permanently surrendered and relinquished to the Company for no additional consideration.
The difference of $2,348,695between the carrying value of the extinguished Series B Preferred Stock, the aggregate cash amount to
the Company for the redemption, net of the payables due to Lab Services MSO of $632,916, totaling $13,377,916, and the carrying value
of the equity method investment of $11,029,221was accounted for as an increase to additional paid-in capital (See Note 16 - Series
B Convertible Preferred Stock Extinguished Related to Sale of Equity Method Investment). Accordingly, beginning in February 2025, the
Company no longer offers laboratory services.
Receivable from sale of equity method investment
is presented net ofreserve for credit loss. The Company maintains a reserve for credit loss for estimated loss. The Company reviews
the receivable from sale of equity method investment on a periodic basis and makes general and specific reserve when there is doubt as
to the collectability of the balance. In the evaluation of Lab Services MSOs receivable, the Company considered the age of the
balance, its historical payment history and current economic trends. After unsuccessful collection efforts during the period, management
has decided to write off the receivable. As a result, for the three months ended June 30, 2025, a receivable in the amount of $1,650,000was
written off. At June 30, 2025, the Company established a reserve for credit loss in the amount of $1,650,000.
On or about July 22, 2025, the Company filed a
lawsuit in the Court of Chancery of the State of Delaware against Laboratory Services MSO, LLC and certain affiliates. The Company has
asserted a variety of claims, including breach of contract, arising out of its prior transactions with the defendants, including the Redemption
and Abandonment Agreement, dated as of February 26, 2025.The Company and Laboratory Services MSO, LLC entered into a Confidential
Settlement Agreement and Mutual Release dated August 26, 2025 whereby Laboratory Services MSO, LLC agreed to pay the Company in the aggregate
of $1,722,000($50,000of which is for the Companys attorneys fees and $22,000of which is interest attributable
to the 7ththrough 12thmonthly payments), of which $600,000was paid on August 29, 2025 and $1,122,000to
be paid on or before the first business day of each month, beginning September 2025 and ending August 2026, in monthly installments of
$93,500. The parties provided a mutual release, as well. The case was dismissed in August 2025. As a result, for the three months ended
September 30, 2025, the Company recorded a credit loss recovery of $1,650,000to reinstate the receivable which was written-off in
the second quarter of 2025. As of December 31, 2025, the reserve for credit loss amounted to $0.
F-12
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)**
****
**Assets Held for Sale**
****
Assets held for sale represent property, equipment,
and improvement less accumulated depreciation as well as any other assets that are held for sale in conjunction with the sale of a business.
The Company records assets held for sale in accordance with ASC 360 at the lower of carrying value or fair value less costs to sell. Fair
value is the amount obtainable from the sale of the asset in an arms length transaction. The reclassification takes place when
the assets are available for immediate sale and the sale is highly probable. These conditions are usually met from the date on which a
letter of intent or agreement to sell is ready for signing.
**Discontinued Operations**
A component of an entity is identified as operations
and cash flows that can be clearly distinguished, operationally and financially, from the rest of the entity. Under ASC 205-20, Presentation
of Financial Statements - Discontinued Operations (ASC 205-20), a discontinued operation is a component of an entity
that either has been disposed of, or is classified as held for sale and represents a strategic shift that has or will have a major effect
on the entitys operations and financial results, or a newly acquired business or nonprofit activity that upon acquisition is classified
as held for sale. Discontinued operations are presented separately from continuing operations in the consolidated statements of operations
and the consolidated statements of cash flows (See Note 7). For long-lived assets or disposals groups that are classified as held for
sale but do not meet the criteria for discontinued operations, the assets and liabilities are presented separately on the balance sheet
of the initial period in which it is classified as held for sale.
****
**Stock Subscription Liability**
****
On June 4, 2025, the Company entered into a subscription
agreement with an investor, whereby141,643shares of common stock of the Company were subscribed for at $3.53per share.
As of December 31, 2025, the Company received proceeds of $150,000. As of December 31, 2025, these shares have not yet been issued and
the proceeds of $150,000were recorded as a share subscription liability until such time as the common shares are issued.
****
**Office Lease**
When a lease contains rent holidays,
the Company records rental expense on a straight-line basis over the term of the lease. The Company begins recording rent expense on the
lease possession date.
**Advertising and Marketing Costs**
All costs related to advertising and marketing
are expensed as incurred. For the years ended December 31, 2025 and 2024, advertising and marketing costs amounted to $843,497and
$237,671, respectively.
**Stock-based Compensation**
The Company
accounts for its stock-based compensation awards in accordance with Accounting Standards Codification (ASC) Topic 718, CompensationStock
Compensation (ASC 718). ASC 718 requires all stock-based payments to employees and non-employees including grants of stock
options, to be recognized as expense in the statements of operations based on their grant date fair values. The Company estimates the
grant date fair value of each option award using the Black-Scholes option-pricing model.
The Company
periodically issues common stock and common stock options to consultants for various services. Costs of these transactions are measured
at the fair value of the service received or the fair value of the equity instruments issued, whichever is more reliably measurable. The
value of the common stock is measured at the earlier of (i) the date at which a firm commitment for performance by the counterparty to
earn the equity instruments is reached or (ii) the date at which the counterpartys performance is complete.
F-13
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)**
****
**Debt
Modifications and Extinguishments**
****
When the
Company modifies or extinguishes debt, it first evaluates whether the modification qualifies as a troubled debt restructuring (TDR) under
ASC Topic 470-60, which requires debt modifications to be evaluated to determine if (1) the borrower is experiencing financial difficulty,
and (2) the lender grants the borrower a concession. If a TDR is determined not to have occurred, the Company evaluates the modification
in accordance with ASC Topic 470-50-40, which requires modification to debt instruments to be evaluated to assess whether debt modification
or debt extinguishment accounting is applicable. This evaluation includes analyzing whether there are significant and consequential changes
to the economic substance of the note. If the change is deemed insignificant then the change is considered a debt modification, whereas
if the change is substantial the change is reflected as a debt extinguishment.
If debt
extinguishment guidance applies, the previous debt principal amount is removed, the previously capitalized debt issuance costs are expensed,
the value of instruments exchanged are recorded, including cash, new debt, warrants and common stock, and a gain or loss on extinguishment
of debt is recorded. If debt modification guidance applies, no gain or loss is recorded and the effective interest rate of the debt is
updated based on the carrying value of the debt and the revised future cash flows. Any previously capitalized debt issuance costs in a
debt modification are amortized as interest expense over the term of the new debt instrument.
****
**Income Taxes**
The Company
is governed by the income tax laws of China and the United States. The Company accounts for income taxes using the asset/liability method
prescribed by ASC 740, Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the
difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the
period in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if, based
on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized.
The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.
The Company
follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 Income Taxes. Using that
guidance, the benefit for tax positions taken can only be recognized in the financial statements when it is more likely than not the position
will be sustained upon examination by the tax authorities. As of December 31, 2025 and 2024, the Company had no significant uncertain
tax positions which would require either recognition of a liability or disclosure in the financial statements. For United States entities,
tax year that remains subject to examination is the years ended December 31, 2025, 2024, 2023 and 2022. For China entities, income tax
returns for the tax years ended December 31, 2021 through December 31, 2025 remain open for statutory examination by PRC tax authorities.
The Company recognizes interest and penalties related to significant uncertain income tax positions in income tax expense. However, no
such interest and penalties were recorded as of December 31, 2025 and 2024.
****
**Foreign Currency Translation**
The reporting
currency of the Company is the U.S. dollar. The functional currency of the parent company, AHS, Avalon Lab, and Q&A Distribution is
the U.S. dollar and the functional currency of Avalon Shanghai is the Chinese Renminbi (RMB). For Avalon Shanghai whose
functional currency is the RMB, result of operations and cash flows are translated at average exchange rates during the period, assets
and liabilities are translated at the unified exchange rate at the end of the period, and equity is translated at historical exchange
rates. As a result, amounts relating to assets and liabilities reported on the statements of cash flows may not necessarily agree with
the changes in the corresponding balances on the balance sheets. Translation adjustments resulting from the process of translating the
local currency financial statements into U.S. dollars are included in determining comprehensive income/loss. Transactions denominated
in foreign currencies are translated into the functional currency at the exchange rates prevailing on the transaction dates. Assets and
liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the balance
sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency
other than the functional currency are included in the results of operations as incurred. All of the Companys revenue transactions
are transacted in the functional currency of the operating subsidiaries. The Company does not enter into any material transaction in foreign
currencies. Transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of
the Company.
Asset and
liability accounts at December 31, 2025 and 2024 were translated at6.9964RMB and7.2980 RMB to $1.00, respectively, which
were the exchange rates on the balance sheet dates. Equity accounts were stated at their historical rates. The average translation rates
applied to the statements of operations for the years ended December 31, 2025 and 2024 were7.1889RMB and7.1889 RMB to
$1.00, respectively. Cash flows from the Companys operations are calculated based upon the local currencies using the average translation
rate.
F-14
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)**
****
**Per Share Data**
ASC Topic 260 Earnings per Share,
requires presentation of both basic and diluted earnings per share (EPS) with a reconciliation of the numerator and denominator
of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPSreflects
the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then shared in the earnings of the entity.
Basic 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. The Company had $162,473in deemed contribution during the year
ended December 31, 2025, which increases the numerator in the net loss per share calculation. For the years ended December 31, 2025 and
2024, potentially dilutive common shares consisted 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 calculation of basic and diluted net loss
per common share attributable to the Company common shareholders includes504,300of the pre-funded warrants that remained outstanding
as of December 31, 2025.
The following tablesummarizes the securities
that were excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive:
|
| |
Years Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Options to purchase common stock | |
| 41,169 | | |
| 52,479 | | |
|
Warrants to purchase common stock | |
| 95,746 | | |
| 182,996 | | |
|
Series A convertible preferred stock (*) | |
| - | | |
| 60,000 | | |
|
Series B convertible preferred stock (**) | |
| - | | |
| 194,004 | | |
|
Series C convertible preferred stock (***) | |
| 1,576,763 | | |
| 1,452,282 | | |
|
Series D convertible preferred stock (****) | |
| 2,074,689 | | |
| - | | |
|
Series E convertible preferred stock (*****) | |
| 13,000,000 | | |
| - | | |
|
Convertible notes and related accrued interest (******) | |
| 788,283 | | |
| 227,269 | | |
|
Potentially dilutive securities | |
| 17,576,650 | | |
| 2,169,030 | | |
|
(*) | Assumed the Series A convertible preferred stock was converted
into shares of common stock of the Company at a conversion price of $150.00 per share. |
|
|
(**) | Assumed the Series
B convertible preferred stock was converted into shares of common stock of the Company at a conversion price of $56.70 per share. |
|
|
(***) | Assumed the Series
C convertible preferred stock was converted into shares of common stock of the Company at a conversion price of $2.41 per share. |
|
|
(****) | Assumed the Series
D convertible preferred stock was converted into shares of common stock of the Company at a conversion price of $2.41 per share. |
|
|
(*****) | Assumed the Series
E convertible preferred stock was converted into shares of common stock of the Company at a conversion price of $1.50 per share. |
|
|
(******) | Assumed the convertible
notes were converted into shares of common stock of the Company at a conversion price of $1.00 per share for the years ended December
31, 2025. Assumed the convertible notes were converted into shares of common stock of the Company at a conversion price of $11.25 per
share for the year ended December 31, 2024. |
|
F-15
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)**
****
**Comprehensive Loss**
Comprehensive loss is comprised of net loss and
all changes to the statements of equity, except those due to investments by stockholders, changes in paid-in capital and distributions
to stockholders. For the Company, comprehensive loss for the years ended December 31, 2025 and 2024 consisted of net loss and unrealized
loss from foreign currency translation adjustment.
****
**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.
****
**Noncontrolling Interest**
****
As of December 31, 2025, Dr. Yu Zhou, former director
and former Co-Chief Executive Officer of Genexosome, who owns40% of the equity interests of Genexosome, which is not under the Companys
control. Since the fourth quarter of 2019, the non-controlling interest has remained inactive.
**Segment Reporting**
The segment reporting structure uses the Companys
management reporting structure as its foundation to reflect how the Company manages the businesses internally and was mainly organized
by services. During the year ended December 31, 2025, the Company was organized into two services-oriented strategic business units: laboratory
testing services (which ended on the redemption date, February 26, 2025) which were led by our strategic business unit managers
and AI generated publishing services (which commenced on the acquisition date, December 12, 2025). During the year ended December 31,
2024, the Company was organized into one services-oriented strategic business units: laboratory testing services which were led
by our strategic business unit managers. Operating segments are defined as components of an enterprise for which separate financial information
is available and evaluated regularly by the chief operating decision maker (CODM) in deciding how to make operating decisions,
allocate resources and assess performance.
On February 9, 2023, the Company purchased40%
of Lab Services MSO. During the first quarter of 2025, to preserve cash, the Company entered into discussions with Lab Services MSO for
the potential redemption of Avalon Labs investment and on February 26, 2025, Lab Services MSO redeemed the40% equity interest
in Lab Services MSO held by Avalon Lab. Commencing from the purchase date, February 9, 2023, through the redemption date, February 26,
2025, the Company was active in the management of Lab Services MSO.Beginning in February 2025, we no longer offer laboratory services.
The Companys ChiefExecutive Officer
is its CODM. The Company reports operational data to its CODM at the segment level, which he uses to evaluate performance and allocate
resources based on income/loss from equity method investment Lab Services MSO and AI generated publishing operating income. The
Company only hasonesegment now.
****
On February 18, 2026,
the Company and Wenzhao Lu, the Companys chairman of the Board of Directors, entered into an Amended and Restated Membership Interest
Purchase Agreement, pursuant to which the Company sold to Mr. Lu 100% of the membership interests of Avalon RT 9. The Company determined
that the assets and operations that had been disposed of met the criteria for discontinued operations presentation. For all periods presented,
the operating results associated with the assets disposed of have been reclassified into net loss from discontinued operations in the
Consolidated Statements of Operations and Comprehensive Loss. The associated assets and liabilities have been reflected as current and
long-term assets and liabilities of discontinued operations in the Consolidated Balance Sheets, and the cash flows from the Companys
discontinued operations are presented in the Consolidated Statements of Cash Flows for all periods presented.
****
**Fiscal Year End**
The
Company has adopted a fiscal year end of December 31st.
****
F-16
****
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
****
**NOTE 3 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES (continued)**
****
**Reverse Stock Split**
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 consolidated financial statements to shares, share prices, exercise prices, and
other per share information in all periods have been adjusted, on a retroactive basis, to reflect the reverse stock split.
**Recent Accounting
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 Entitys Own Equity (Subtopic 815-40), to simplify accounting for certain financial instruments. ASU 2020-06
eliminated the then-current models that required separation of beneficial conversion and cash conversion features from convertible instruments
and simplified the derivative scope exception guidance pertaining to equity classification of contracts in an entitys own equity.
ASU 2020-06 also introduced additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in
an entitys own equity. ASU 2020-06 amended the diluted earnings per share guidance, including the requirement to use the if-converted
method for all convertible instruments. ASU 2020-06 was 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 Companys
consolidated financial statements and related disclosures.
In November 2023, the FASB issued ASU 2023-07,
Segment Reporting (Topic 280). The amendments in this update improve reportable segment disclosure requirements, primarily through enhanced
disclosures about significant segment expenses. ASU 2023-07 became effective for the Companys annual period beginning on January
1, 2024 and interim periods beginning after January 1, 2025. The Company adopted this guidance in the fourth quarter of 2024. The Companys
results of operations, cash flows, and financial condition were not impacted by the adoption of this ASU.
In December 2023, the FASB issued ASU 2023-09,
Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This guidance was intended to enhance the transparency and decision-usefulness
of income tax disclosures. The amendments in ASU 2023-09 addressed investor requests for enhanced income tax information primarily through
changes to disclosure regarding rate reconciliation and income taxes paid both in the U.S. and in foreign jurisdictions. ASU 2023-09 was
effective for fiscal years beginning after December 15, 2024 on a prospective basis, with the option to apply the standard retrospectively.
Early adoption was permitted. The adoption of ASU 2023-09 did not have a material effect on the Companys consolidated financial
statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03,
Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement
Expenses. In January 2025, the FASB issued ASU No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation
Disclosures (Subtopic 220-40), Clarifying the Effective Date. ASU 2024-03 requires public companies to disclose, in interim and reporting
periods, additional information about certain expenses in the financial statements. ASU 2024-03, as clarified by ASU 2025-01, is effective
for public entities for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.
Early adoption is permitted and is effective on either a prospective basis or retrospective basis. The Company is currently evaluating
the impact that the updated standard will have on the Companys disclosures within the consolidated financial statements.
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 ACQUISITION**
****
The Company accounts
for acquisition using the acquisition method of accounting, whereby the results of operations are included in the financial statements
from the date of acquisition. The purchase price is allocated to the acquired assets and assumed liabilities based on their estimated
fair values at the date of acquisition, and any excess is allocated to goodwill.
Effective
December 12, 2025, pursuant to the Agreement and Plan of Merger as discussed in Note 1, the Company acquired 100% of RPM by issuance of
19,500 its Series E Convertible Preferred Stock which has a fair value of $14,916,753 based on a third party valuation report in connection
with this acquisition.
F-17
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 4 ACQUISITION (continued)**
In
according to the acquisition, RPMs assets and liabilities were recorded at their fair values as of the effective date, December
12, 2025, and the results of operations of RPM are consolidated with results of operations of the Company, starting on December 12, 2025.
The
purchase price exceeded the fair value of net assets acquired by $12,808,197. The Company allocated the $12,808,197 excess to goodwill.
The results of operations of RPM are included in the consolidated results of operations of the Company from the effective date of December
12, 2025 to December 31, 2025. For the period from the effective date of December 12, 2025 to December 31, 2025, revenue and net loss
included in the consolidated statements of operations from RPM amounted to $0 and $94,453, respectively.
In
connection with the combination, for the year ended December 31, 2025, the Company incurred acquisition related costs of $75,000 which,
pursuant to ASC 805, are expensed and included in professional fees on the accompanying consolidated statements of operations.
The following summarizes total consideration
transferred to the RPM stockholders under the acquisition as well as the fair value of the assets acquired and liabilities assumed under
the acquisition:
|
Assets acquired: | |
| | |
|
Cash | |
$ | 14,026 | | |
|
Intangible assets | |
| 2,252,000 | | |
|
Goodwill | |
| 12,808,197 | | |
|
Total assets | |
| 15,074,223 | | |
|
Liabilities assumed: | |
| | | |
|
Accounts payable and accrued liabilities | |
| 157,470 | | |
|
Total liabilities | |
| 157,470 | | |
|
Purchase price | |
$ | 14,916,753 | | |
Net assets were valued at their respective carrying
amounts, which the Company believes approximate their current fair values at the acquisition date. Goodwill represents the excess of the
purchase price over the fair value of the net assets acquired.
On December 31, 2025, the Company assessed goodwill
for any impairment and concluded that there were not indicators of impairment as of December 31, 2025.
The
following unaudited pro forma consolidated results of operations have been prepared as if the acquisition of RPM had occurred as of the
beginning of the following periods:
|
| |
Years Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Net revenues | |
$ | - | | |
$ | - | | |
|
Net loss | |
$ | 18,919,867 | | |
$ | 9,979,986 | | |
|
Net loss attributable to Avalon GloboCare Corp. | |
$ | 18,919,867 | | |
$ | 9,979,986 | | |
|
Net loss per share | |
$ | 5.89 | | |
$ | 10.66 | | |
Pro
forma data does not purport to be indicative of the results that would have been obtained had these events actually occurred at the beginning
of the periods presented and is not intended to be a projection of future results.
F-18
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 5 PREPAID EXPENSE
AND OTHER CURRENT ASSETS**
At December 31, 2025 and 2024, prepaid expense
and other current assets consisted of the following:
|
| |
December 31,
2025 | | |
December 31,
2024 | | |
|
Prepaid professional fees | |
$ | 67,139 | | |
$ | 33,665 | | |
|
Prepaid directors and officers liability insurance premium | |
| 10,932 | | |
| 9,741 | | |
|
Deferred offering costs | |
| 84,652 | | |
| - | | |
|
Security deposit | |
| 443 | | |
| 17,654 | | |
|
Due from broker | |
| 81 | | |
| 32,885 | | |
|
Finished goods | |
| 74,841 | | |
| 92,230 | | |
|
Recoverable value-added tax | |
| 10,863 | | |
| 9,245 | | |
|
Others | |
| 33,219 | | |
| 59,664 | | |
|
Total | |
$ | 282,170 | | |
$ | 255,084 | | |
**NOTE 6 PROPERTY AND EQUIPMENT**
At December 31, 2025
and 2024, property and equipment consisted of the following:
| | | Useful Life | | December 31,
2025 | | | December 31,
2024 | | |
| Office equipment and furniture | | 3 Years | | $ | 10,045 | | | $ | 9,630 | | |
| Less: accumulated depreciation | | | | | (9,318 | ) | | | (8,332 | ) | |
| | | | | $ | 727 | | | $ | 1,298 | | |
For the years ended December
31, 2025 and 2024, depreciation expense of property and equipment amounted to $610 and $611, respectively, which was included in other
operating expenses.
****
**NOTE
7 DISCONTINUED OPERATIONS AND DISPOSALS**
In accordance with ASC
205-20 Presentation of Financial Statements: Discontinued Operations, a disposal of a component of an entity or a group of components
of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have)
a major impact on an entitys operations and financial results when the components of an entity meet the criteria in ASC paragraph
205-20-45-10. In the period in which the component meets the held for sale or discontinued operations criteria the major current assets,
non-current assets, current liabilities and non-current liabilities shall be reported as a component of total assets and liabilities separate
from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income
taxes (benefit), shall be reported as components of net income (loss) separate from the income (loss) of continuing operations.
On February 18, 2026,
the Company and Wenzhao Lu, the Companys chairman of the Board of Directors, entered into an Amended and Restated Membership Interest
Purchase Agreement (the Amended MIPA), pursuant to which the Company sold to Mr. Lu 100% of the membership interests of
Avalon RT 9 for approximately $9,000,000.
The subsidiary comprises
our real property operations segment. As a result of the planned disposition of the subsidiary, the real property operations segment meets
the held for sale criteria of ASC 205-20. Accordingly, the historical results of operations of the real property operations segment have
been reflected as discontinued operations in our consolidated financial statement for all periods prior to the Amended MIPA on February
18, 2026.
F-19
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
7 DISCONTINUED OPERATIONS AND DISPOSALS (continued)**
Details of the net loss
from discontinued operations were as follows for the years ended December 31:
|
| |
2025 | | |
2024 | | |
|
REAL PROPERTY RENTAL REVENUE | |
$ | 1,410,259 | | |
$ | 1,333,403 | | |
|
REAL PROPERTY OPERATING EXPENSES | |
| (1,050,599 | ) | |
| (1,065,574 | ) | |
|
REAL PROPERTY OPERATING INCOME | |
| 359,660 | | |
| 267,829 | | |
|
OTHER OPERATING EXPENSES: | |
| | | |
| | | |
|
Professional fees | |
| 184,544 | | |
| 231,837 | | |
|
Compensation and related benefits | |
| 121,395 | | |
| 122,474 | | |
|
Total Other Operating Expenses | |
| 305,939 | | |
| 354,311 | | |
|
INCOME (LOSS) FROM OPERATIONS | |
| 53,721 | | |
| (86,482 | ) | |
|
OTHER (EXPENSE) INCOME | |
| | | |
| | | |
|
Interest expense - amortization of debt discount and debt issuance costs | |
| (84,553 | ) | |
| (119,228 | ) | |
|
Interest expense - other | |
| (711,291 | ) | |
| (658,000 | ) | |
|
Other income (expense) | |
| 20 | | |
| (80 | ) | |
|
Total Other Expense, net | |
| (795,824 | ) | |
| (777,308 | ) | |
|
LOSS BEFORE INCOME TAXES | |
| (742,103 | ) | |
| (863,790 | ) | |
|
INCOME TAXES | |
| - | | |
| - | | |
|
NET LOSS | |
$ | (742,103 | ) | |
$ | (863,790 | ) | |
The following table summarizes
the assets and liabilities of the discontinued operations as of December 31:
|
| |
2025 | | |
2024 | | |
|
ASSETS | |
| | |
| | |
|
CURRENT ASSETS | |
| | |
| | |
|
Cash | |
$ | 258,999 | | |
$ | 198,127 | | |
|
Rent receivable | |
| 84,898 | | |
| 80,829 | | |
|
Prepaid expense and other current assets | |
| 12,719 | | |
| 44,276 | | |
|
Total Current Assets | |
| 356,616 | | |
| 323,232 | | |
|
NON-CURRENT ASSETS: | |
| | | |
| | | |
|
Property and equipment, net | |
| 3,478 | | |
| 11,614 | | |
|
Investment in real estate, net | |
| 6,925,768 | | |
| 7,022,721 | | |
|
Deferred leasing costs and other non-current assets | |
| 8,523 | | |
| 71,794 | | |
|
Total Non-current Assets | |
| 6,937,769 | | |
| 7,106,129 | | |
|
Total Assets | |
$ | 7,294,385 | | |
$ | 7,429,361 | | |
|
LIABILITIES | |
| | | |
| | | |
|
CURRENT LIABILITIES: | |
| | | |
| | | |
|
Accrued liabilities and other payables | |
$ | 261,077 | | |
$ | 205,317 | | |
|
Note payable, net | |
| 5,800,000 | | |
| 5,715,447 | | |
|
Total Current Liabilities | |
| 6,061,077 | | |
| 5,920,764 | | |
|
NON-CURRENT LIABILITIES: | |
| | | |
| | | |
|
Deferred rental income | |
| 23,515 | | |
| - | | |
|
Total Non-current Liabilities | |
| 23,515 | | |
| - | | |
|
Total Liabilities | |
$ | 6,084,592 | | |
$ | 5,920,764 | | |
The above tables exclude
intercompany payables that are eliminated within our consolidated balance sheets.
F-20
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 8 INTANGIBLE ASSETS**
Intangible assets consist of the valuation of
identifiable intangible assets acquired (See Note 4), representing developed technology and trade name. The Company uses its best estimates
and assumptions as part of the purchase price allocation process to accurately value the identifiable intangible assets at the acquisition
date. The straight-line method of amortization represents the Companys best estimate of the distribution of the economic value
of the identifiable intangible assets.
In addition, in connection with the acquisition
of RPM (See Note 4), the purchase price exceeded the fair value of net assets acquired by $12,808,197. The Company allocated the $12,808,197
excess to goodwill. Goodwill is not amortized, but is tested for impairment at December 31, 2025. On December 31, 2025, the Company assessed
its goodwill for any impairment and concluded that there were not indicators of impairment as of December 31, 2025.
At December 31, 2025, intangible assets consisted
of the following:
| | | Useful Life | | December 31,
2025 | | |
| Developed technology | | 1 Year | | $ | 2,230,000 | | |
| Trade name | | 1 Year | | | 22,000 | | |
| Goodwill | | | | | 12,808,197 | | |
| | | | | | 15,060,197 | | |
| Less: accumulated amortization | | | | | (93,833 | ) | |
| | | | | $ | 14,966,364 | | |
For the year ended December 31, 2025, amortization
expense amounted to $93,833, which represented amortization from December 12, 2025 (the date of acquisition) to December 31, 2025. There
was no comparable amortization prior to the date of acquisition.
Amortization of intangible assets attributable to future periods is
as follows:
|
For the Year Ending December 31: | |
Amortization Amount | | |
|
2026 | |
$ | 2,158,167 | | |
|
2027 and thereafter | |
| - | | |
|
| |
$ | 2,158,167 | | |
****
**NOTE 9 EQUITY
METHOD INVESTMENTS**
****
As of December 31, 2025 and 2024, the equity method
investments, net, amounted to$0and $10,636,544, respectively.
On February 9, 2023, 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 LabServices 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) $9,000,000in cash, (ii) $11,000,000pursuant to the issuance of11,000shares of the Companys
Series B Preferred Stock, stated value $1,000(the Series B Stated Value), which approximated the fair value, and (iii)
a $666,667cash payment on February 9, 2024. The Series B Preferred Stock was convertible into shares of the Companys 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 of194,004shares
of the Companys common stock, which were subject to a lock-up period and restrictions on sale.
During the first quarter of 2025, to preserve
cash, the Company entered into discussions with Lab Services MSO for the potential redemption of theCompanys investment and
on February 26, 2025, the Company and Lab Services MSO entered into a Redemption and Abandonment Agreement, whereby Lab Services MSO redeemed
the40% equity interest in Lab Services MSO held by the Company (See Note 3 - Receivable from Sale of Equity Method Investment).
F-21
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 9 EQUITY
METHOD INVESTMENTS (continued)**
Lab Services MSO, through its subsidiaries, was
engaged in providing laboratory testing services. During the period from February 9, 2023 (date of investment) through February 26, 2025
(date of sale), Avalon Lab and an unrelated company, had an ownership interest in Lab Services MSO of40% and60%, respectively.Beginning
in February 2025, we no longer offer laboratory services.
In accordance with ASC
810, the Company determinedthat Lab Services MSO did not qualify as a variable interest entity, nor did 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 Companys share of the purchased-date fair
values of the investees identifiable net assets over the cost of the investment (if any). At February 9, 2023 (date of investment),
the excess of the Companys share of the fair values of the investees identifiable net assets over the cost of the investment
was approximately $19,460,000which was attributable to intangible assets and goodwill. Thereafter, the investment was adjusted for
the post purchase change in the Companys share of the investees net assets and any impairment loss relating to the investment.
Intangible assets consisted
of the valuation of identifiable intangible assets acquired, representing trade names and customers relationships, which were being amortized
on a straight-line method over the estimated useful life of15years. The straight-line method of amortization represents the
Companys best estimate of the distribution of the economic value of the identifiable intangible assets. For the period from January
1, 2025 through February 26, 2025 (date of sale) and for the year ended December 31, 2024, amortization expense of these intangible assets
amounted to $111,156and $666,932, respectively, which was included in income (loss) from equity method investment Lab Services
MSO in the accompanying 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.
In 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 impairment loss of $259,579 related to
the equity method investment for the year ended December 31, 2024, which was included in loss from equity method investment Lab
Services MSO in the accompanying consolidated statements of operations and comprehensive loss.
For the period from January 1, 2025 through February
26, 2025 (date of sale) and for the year ended December 31, 2024, the Companys share of Lab Services MSOs net income was
$503,833and $79,923, respectively, which was included in income (loss) from equity method investment Lab Services MSO in
the accompanying consolidated statements of operations and comprehensive loss.
The Company classifies
distributions received from its investment on Lab Services MSO using the cumulative earnings approach. Distributions received are considered
returns on the investment and classified as cash inflows from operating activities. For the period from January 1, 2025 through February
26, 2025 (date of sale) and for the year ended December 31, 2024, distribution of earnings from the Companys investment on Lab
Services MSO amounted to $0and $611,888, respectively.
****
In the years ended December
31, 2025 and 2024, activity recorded for the Companys equity method investment in Lab Services MSO is summarized in the following
table:
|
Equity investment carrying amount at January 1, 2024 | |
$ | 12,095,020 | | |
|
Lab Services MSOs net income attributable to the Company | |
| 79,923 | | |
|
Intangible assets amortization amount | |
| (666,932 | ) | |
|
Distribution of earnings from equity investment | |
| (611,888 | ) | |
|
Impairment of goodwill | |
| (259,579 | ) | |
|
Equity investment carrying amount at December 31, 2024 | |
| 10,636,544 | | |
|
Lab Services MSOs net income attributable to the Company | |
| 503,833 | | |
|
Intangible assets amortization amount | |
| (111,156 | ) | |
|
Sale of equity investment | |
| (11,029,221 | ) | |
|
Equity investment carrying amount at December 31, 2025 | |
$ | - | | |
F-22
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 9 EQUITY
METHOD INVESTMENTS (continued)**
As of December 31, 2024, the Companys carrying
value of the identified intangible assets and goodwill which are included in the equity investment carrying amount was $8,725,712and
$0, respectively. The tables below present the summarized financial information, as provided to the Company by the investee, for the unconsolidated
company:
|
| |
For the
Period from
January 1,
2025
through
February 26,
2025
(Date of Sale) | | |
For the year
Ended December 31,
2024 | | |
|
Net revenue | |
$ | 4,241,732 | | |
$ | 13,558,711 | | |
|
Gross profit | |
| 2,155,760 | | |
| 3,534,503 | | |
|
Income (loss) from operation | |
| 1,513,000 | | |
| (265,754 | ) | |
|
Net income | |
| 1,259,582 | | |
| 199,808 | | |
**NOTE 10 ACCRUED LIABILITIES
AND OTHER PAYABLES**
****
At December 31, 2025
and 2024, accrued liabilities and other payables consisted of the following:
|
| |
December 31,
2025 | | |
December 31,
2024 | | |
|
Accrued loan commitment fee | |
$ | 138,000 | | |
$ | - | | |
|
Accrued business expense reimbursement | |
| 12,423 | | |
| 34,781 | | |
|
Interest payable | |
| 42,333 | | |
| - | | |
|
Taxes payable | |
| 53,456 | | |
| 176,316 | | |
|
Others | |
| 34,851 | | |
| 17,703 | | |
|
Total | |
$ | 281,063 | | |
$ | 228,800 | | |
****
**NOTE 11 CONVERTIBLE NOTE PAYABLE**
*May 2023 Convertible
Note*
**
On May 23, 2023, the
Company entered into securities purchase agreements with Mast Hill Fund, L.P. (Mast Hill) for the issuance of13.0%
senior secured promissory notes in the aggregate principal amount of $1,500,000(collectively, the May 2023 Convertible Note)
convertible into shares of the Companys common stock, as well as the issuance of5,000shares of common stock as a commitment
fee and warrants for the purchase of15,366shares 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 Companys 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 $67.50per
share unless the Company failed to make an amortization payment when due, in which case the conversion price would be the lower of $67.50or
the trading price of the shares, subject to a floor of $22.50.
**
Mast Hill acquired the
May 2023 Convertible Note with principal amount of $1,500,000and paid the purchase price of $1,425,000after an original issue
discount of $75,000. On May 23, 2023, the Company issued (i) a warrant to purchase8,333shares of common stock with an exercise
price of $67.50exercisable until the five-year anniversary of May 23, 2023 (First Warrant), (ii) a warrant to purchase7,033shares
of common stock with an exercise price of $48.00exercisable 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)5,000shares
of common stock as a commitment fee for the purchase of the May 2023 Convertible Note, which were earned in full as of May 23, 2023. On
May 23, 2023, the Company delivered such duly executed May 2023 Convertible Note, warrants and common stock to Mast Hill against delivery
of such purchase price.
The Company 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 December 31, 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 of667warrants
as a finders fee) which was capitalized and was amortized into interest expense over the term of the May 2023 Convertible Note.
F-23
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 11 CONVERTIBLE NOTE PAYABLE
(continued)**
*May 2023 Convertible
Note (continued)*
Based upon the Companys
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
finders fee met the definition of a derivative liability, as the Company cannot avoid a net cash settlement under certain circumstances.
Accordingly, the fair value of the9,000warrants with an exercise price of $67.50exercisable until the five-year anniversary
of May 23, 2023 was classified as derivative liability on May 23, 2023. The fair values of the9,000warrants with an exercise
price of $67.50exercisable 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 $29.40, volatility of88.80%, risk-free rate of3.76%, annual
dividend yield of0% and expected life of5years.
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 therelative fair valuesof
the debt instrument without the warrants and of the warrants themselves at time of issuance. The portion of the proceeds allocated to
the warrants are accounted for as derivative liability. The remainder of the proceeds are allocated to the debt instrument portion of
the transaction.
The Company recorded
a total debt discount of $349,654related to the original issue discount, common shares issued and warrants issued to Mast Hill,
which was amortized over the term of the May 2023 Convertible Note.
*July2023 Convertible
Note*
On July 6, 2023, the
Company entered into securities purchase agreements with FirstFire Global Opportunities Fund, LLC (FirstFire) for the issuance
of13.0% senior secured promissory notes in the aggregate principal amount of $500,000(collectively, the July 2023 Convertible
Note) convertible into shares of the Companys common stock, as well as the issuance of1,667shares of common
stock as a commitment fee and warrants for the purchase of5,122shares 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 Companys 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 $67.50per share unless the Company failed to make an amortization payment when due, in which case the conversion
price would be the lower of $67.50or the trading price of the shares, subject to a floor of $22.50.
FirstFire acquired the
July 2023 Convertible Note with principal amount of $500,000and paid the purchase price of $475,000after an original issue
discount of $25,000. On July 6, 2023, the Company issued (i) a warrant to purchase2,778shares of common stock with an exercise
price of $67.50exercisable until the five-year anniversary of July 6, 2023 (First Warrant), (ii) a warrant to purchase2,344shares
of common stock with an exercise price of $48.00exercisable 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)1,667shares
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 December 31, 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 of222warrants
as a finders fee), which was capitalized and was amortized into interest expense over the term of the July 2023 Convertible Note.
Based upon the Companys
analysis of the criteria contained in ASC 815, the Company determined that all the warrants issued to Firstfire and a third party as a
finders fee meet the definition of a derivative liability, as the Company cannot avoid a net cash settlement under certain circumstances.
Accordingly, the fair value of the3,000warrants with an exercise price of $67.50exercisable until the five-year anniversary
of July 6, 2023 was classified as a derivative liability on July 6, 2023. The fair values of the3,000warrants with an exercise
price of $67.50exercisable 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 $21.30, volatility of88.52%, risk-free rate of4.37%, annual
dividend yield of0% and expected life of5years.
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 therelative
fair valuesof the debt instrument without the warrants and of the warrants themselves at time of issuance.
F-24
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 11 CONVERTIBLE NOTE PAYABLE
(continued)**
*July2023 Convertible
Note (continued)*
The portion of the proceeds
allocated to the warrants are accounted for as derivative liability. The remainder of the proceeds are allocated to the debt instrument
portion of the transaction.
The Company recorded a total debt discount of
$89,191related to the original issue discount, common shares issued and warrants issued to Firstfire, which was amortized over the
term of the July 2023 Convertible Note.
*October2023
Convertible Note*
On October 9, 2023, the
Company entered into securities purchase agreements with Mast Hill and FirstFire for the issuance of13.0% senior secured promissory
notes in the aggregate principal amount of $700,000(collectively, the October 2023 Convertible Note) convertible into
shares of the Companys common stock, as well as the issuance of4,666shares of common stock as a commitment fee and
warrants for the purchase of12,834shares 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 Companys 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 $22.50per share unless the Company failed to make an amortization payment when due, in which case the conversion price
would be the lower of $22.50or 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 $350,000and paid the purchase price of $332,500after an original issue
discount of $17,500. On October 9, 2023, the Company issued (i) a warrant to purchase3,500shares of common stock with an exercise
price of $37.50exercisable until the five-year anniversary of October 9, 2023 (First Warrant), (ii) a warrant to purchase2,917shares
of common stock with an exercise price of $27.00exercisable 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)2,333shares of common stock as a commitment fee for the purchase of the October 2023 Convertible Note, which were earned
in full as of October 9, 2023. On October 9, 2023, the Company delivered such duly executed October 2023 Convertible Note, warrants and
common stock to Mast Hill against delivery of such purchase price.
The Company 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 December 31, 2024, the October 2023 Convertible Note was repaid in full.
FirstFireacquired
the October 2023 Convertible Note with principal amount of $350,000and paid the purchase price of $332,500after an original
issue discount of $17,500. On October 9, 2023, the Company issued (i) a warrant to purchase3,500shares of common stock with
an exercise price of $37.50exercisable until the five-year anniversary of October 9, 2023 (First Warrant), (ii) a
warrant to purchase2,917shares of common stock with an exercise price of $27.00exercisable 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)2,333shares 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 December 31, 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 of560warrants as a
finders fee), which was capitalized and was amortized into interest expense over the term of the October 2023 Convertible Note.
Based upon the Companys 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 finders
fee meet the definition of a derivative liability, as the Company cannot avoid a net cash settlement under certain circumstances. Accordingly,
the fair value of the7,560warrants with an exercise price of $37.50exercisable until the five-year anniversary of October
9, 2023 was classified as a derivative liability on October 9, 2023. The fair values of the7,560warrants with an exercise
price of $37.50exercisable 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 $11.55, volatility of89.70%, risk-free rate of4.75%,
annual dividend yield of0% and expected life of5years.
F-25
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 11 CONVERTIBLE NOTE PAYABLE
(continued)**
*October2023
Convertible Note (continued)*
In accordance with ASC 470-20-25-2, proceeds from
the sale of a debt instrument with stock purchase warrants are allocated to the two elements based on therelative fair valuesof
the debt instrument without the warrants and of the warrants themselves at time of issuance. The portion of the proceeds allocated to
the warrants are accounted for as derivative liability. The remainder of the proceeds are allocated to the debt instrument portion of
the transaction.
The Company recorded a total debt discount of
$128,748related to the original issue discount, common shares issued and warrants issued to Mast Hill and Firstfire, which was amortized
over the term of the October 2023 Convertible Note.
****
*March 2024 Convertible
Note*
**
On March 7, 2024, the
Company entered into securities purchase agreements with Mast Hill for the issuance of13.0% senior secured promissory notes in the
aggregate principal amount of $700,000(collectively, the March 2024 Convertible Note) convertible into shares of the
Companys common stock, as well as the issuance of7,000shares of common stock as a commitment fee and warrants for the
purchase of16,827shares 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 Companys 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 $15.00per share unless
the Company failed to make an amortization payment when due, in which case the conversion price would be the lower of $15.00or 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 $700,000and paid the purchase price of $665,000after an original issue
discount of $35,000. On March 7, 2024, the Company issued (i) a warrant to purchase8,750shares of common stock with an exercise
price of $30.00exercisable until the five-year anniversary of March 7, 2024 (First Warrant), (ii) a warrant to purchase8,077shares
of common stock with an exercise price of $19.50exercisable 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)7,000shares
of common stock as a commitment fee for the purchase of the March 2024 Convertible Note, which were earned in full as of March 7, 2024.
On March 7, 2024, the Company delivered such duly executed March 2024 Convertible Note, warrants and common stock to Mast Hill against
delivery of such purchase price.
The Company 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 December 31, 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 $74,379(including the issuance of700warrants as a finders
fee) which was capitalized and was amortized into interest expense over the term of the March 2024 Convertible Note.
Based upon the Companys 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 finders
fee met the definition of a derivative liability, as the Company cannot avoid a net cash settlement under certain circumstances. Accordingly,
the fair value of the9,450warrants with an exercise price of $30.00exercisable until the five-year anniversary of March
7, 2024 was classified as derivative liability on March 7, 2024. The fair values of the9,450warrants with an exercise price
of $30.00exercisable 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 of85.24%, risk-free rate of4.07%, annual
dividend yield of0% and expected life of5years.
In accordance with ASC 470-20-25-2, proceeds from
the sale of a debt instrument with stock purchase warrants are allocated to the two elements based on the relative fair values of the
debt instrument without the warrants and of the warrants themselves at time of issuance. The portion of the proceeds allocated to the
warrants are accounted for as derivative liability. The remainder of the proceeds are allocated to the debt instrument portion of the
transaction.
The Company recorded a total debt discount of
$97,374related to the original issue discount, common shares issued and warrants issued to Mast Hill, which was amortized over the
term of the March 2024 Convertible Note.
F-26
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 11 CONVERTIBLE NOTE PAYABLE
(continued)**
*June 2024 Convertible
Note*
**
On
June 5, 2024, the Company entered into securities purchase agreements with Mast Hill for the issuance of13.0%
senior secured promissory notes in the aggregate principal amount of $2,845,000(collectively,
the June 2024 Convertible Note) convertible into shares of the Companys common stock, as well as the issuance of26,800shares
of common stock as a commitment fee and warrants for the purchase of146,667shares
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
Companys 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 $11.25per
share unless the Company fails to make an amortization payment when due, in which case the conversion price shall be the lesser of $11.25or
the market price (as defined in the June 2024 Convertible Note).
Mast Hill acquired the
June 2024 Convertible Note with principal amount of $2,845,000and paid the purchase price of $2,702,750after an original issue
discount of $142,250. On June 5, 2024, the Company issued (i) a warrant to purchase66,667shares of common stock with an exercise
price of $9.75exercisable until June 5, 2029 (First Warrant), (ii) a warrant to purchase80,000shares of
common stock with an exercise price of $7.50exercisable until June 5, 2029 (Second Warrant), and (iii)26,800shares
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.
As of March 31, 2025, the Second Warrant was not fair valued since the Company believed the Second Warrant would be cancelled and extinguished
against payment of the June 2024 Convertible Note on June 5, 2025. On June 5, 2024, the Company delivered such duly executed June 2024
Convertible Note, warrants and common stock to Mast Hill against delivery of the purchase price.
The Company received
net cash amount of $881,210from the June 2024 Convertible Note financing after using the proceeds to pay off all previously issued
convertible notes of $1,661,540, and to pay finders fee of $120,000and lenders costs of $40,000related to this
financing.
The Company was 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: | | Payment Amount: | |
| December 5, 2024 | | $284,500 plus accrued interest through December 5, 2024 | |
| January 5, 2025 | | $284,500 plus accrued interest through January 5, 2025 | |
| February 5, 2025 | | $379,336 plus accrued interest through February 5, 2025 | |
| March 5, 2025 | | $474,167 plus accrued interest through March 5, 2025 | |
| April 5, 2025 | | $474,167 plus accrued interest through April 5, 2025 | |
| May 5, 2025 | | $569,000 plus accrued interest through May 5, 2025 | |
| 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 of5,333warrants as a finders
fee)which was capitalized and had been amortized into interest expense over the term of the June 2024 Convertible Note.
Based upon the Companys
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
finders fee meet the definition of a derivative liability, as the Company cannot avoid a net cash settlement under certain circumstances.
On March 31, 2025 and June 5, 2024, management determined the probability of failing to make an amortization payment when due to be remote
and as such the fair value of the80,000warrants with an exercise price of $7.50exercisable untilJune 5, 2029,
which warrant shall be cancelled and extinguished against payment of the June 2024 Convertible Note, had been estimated to be zero. Accordingly,
the fair value of the72,000warrants with an exercise price of $9.75exercisable until June 5, 2029 was classified as
derivative liability on June 5, 2024. The fair values of the72,000warrants with an exercise price of $9.75exercisable
until June 5, 2029 issued on June 5, 2024 were computed using the Black-Scholes option-pricing model with the following assumptions: stock
price of $10.39, volatility of85.72%, risk-free rate of4.31%, annual dividend yield of0% and expected life of5years.
F-27
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 11 CONVERTIBLE NOTE PAYABLE
(continued)**
*June 2024 Convertible
Note (continued)*
In accordance with ASC
470-20-25-2, proceeds from the sale of a debt instrument with stock purchase warrants are allocated to the two elements based on the relative
fair values of the debt instrument without the warrants and of the warrants themselves at time of issuance. The portion of the proceeds
allocated to the warrants are accounted for as derivative liability. The remainder of the proceeds are allocated to the debt instrument
portion of the transaction.
In accordance with ASC
480-10-25-14, the Company determined that the conversion provisions contain an embedded derivative feature and the Company valued the
derivative feature separately, recording debt discount and derivative liability in accordance with the provisions of the convertible debt
(See Note 12). However, on June 5, 2024 and December 14, 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 had been estimated to be zero.On December
15, 2024, Mast Hill waived all amortization payments required to be made under the June 2024 Convertible Note. On June 5, 2025, the Second
Warrant was not cancelled and was retained by Mast Hill. Accordingly, the initial fair value of the Second Warrant of $621,353was
classified as derivative liability on June 5, 2025 and recorded as interest expense amortization of debt discount.
The Company recorded a total debt discount of
$1,460,343related to the original issuediscount, common shares issued and warrants issued to Mast Hill, which had been amortized
over the term of the June 2024 Convertible Note.
On December 15, 2024,
the Company and Mast Hill entered into that certain consent, acknowledgement, and waiver agreement, pursuant to which Mast Hill waived
all amortization payments required to be made under the June 2024 Convertible Note, the Company paid a waiver fee of $150,000to
Mast Hill, and the Company issued to Mast Hill a common stock purchase warrant for the purchase of up to150,000shares of the
Companys common stock (Pre-Funded Warrants). The Pre-Funded Warrants are immediately exercisable at issuance and
until the Pre-Funded Warrants are exercised in full and have an exercise price of $0.01per share. The Pre-Funded Warrants were classified
as a component of permanent equity on the accompanying consolidated balance sheets as they are freestanding financial instruments that
are immediately exercisable, do not embody an obligation for the Company to repurchase its own shares and permit the holder to receive
a fixed number of shares of common stock upon exercise. All of the shares underlying the Pre-Funded Warrants have been included in the
weighted-average number of shares of common stock used to calculate net loss per share, basic and diluted, attributable to the Companys
common stockholders because the shares may be issued for little or no consideration, are fully vested and are exercisable after the original
issuance date of the Pre-Funded Warrants. Based on the Companys assess, this arrangement was accounted for as a modification of
debt and, as such, $838,794related to the waiver fee and Pre-Fund Warrants issued to Mast Hill were expensed.
On May 29, 2025, the Company andMast Hill
entered into that certain waiver (the Waiver), pursuant to which Mast Hill will retain all related dilutive issuance rights
under Section 1.6(e) of the June 2024 Convertible Note, provided that any adjustment under Section 1.6(e) of the June 2024 Convertible
Note shall be subject to a per share floor price equal to $1.00. The Company recorded a loss on extinguishment of debt of $9,076,587as
a result of the Waiver, representing the value of common stock will be issued upon conversion in excess of the common stock issuable under
the original terms of the June 2024 Convertible Note.
During the period from June 1, 2025 through December
31, 2025, Mast Hill converted its June 2024 Convertible Note in the principal amount of $2,010,827 into2,010,827shares of
common stock of the Company at a per share price of $1.00.
*July 2025 Convertible Note*
On July 3, 2025,the Company issued twoconvertible
promissory notes (July 2025 Convertible Note) to two accredited investors on identical terms. The July 2025 Convertible
Note has a principal amount of $200,000, bears a one-time interest charge of $60,000, and matures nine months from the date of issuance.
Pursuant to the terms of the July 2025 Convertible
Note, beginning six months after the issue date, the two investors may convert the outstanding principal and accrued interest into shares
of the Companys common stock at a fixed conversion price of $1.00per share, subject to certain adjustments as provided for
in the July 2025 Convertible Note for stock splits, dividends, combinations, or reclassifications.The Company may prepay the July
2025 Convertible Note at any time without penalty.
As consideration for thetwo investors
purchase of the July 2025 Convertible Note, the Company issued5,000shares of restricted common stock to each investor as a
commitment fee. The Company recorded a total debt discount of $26,800related to the common stock issued to the two investors, which
will be amortized over the term of the July 2025 Convertible Note (See Note 16 - Common Shares Issued as Convertible Note Payable Commitment
Fee).
F-28
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 11 CONVERTIBLE NOTE PAYABLE
(continued)**
*July 2025 Convertible Note (continued)*
The convertible notes payable as of December 31,
2025 and 2024 was as follows:
|
| |
December 31,
2025 | | |
December 31,
2024 | | |
|
Principal amount | |
$ | 745,950 | | |
$ | 2,556,777 | | |
|
Less: unamortized debt issuance costs | |
| - | | |
| (93,425 | ) | |
|
Less: unamortized debt discount | |
| (8,932 | ) | |
| (349,579 | ) | |
|
Convertible note payable, net | |
$ | 737,018 | | |
$ | 2,113,773 | | |
In subsequent period,
Mast Hill convertedits June 2024 Convertible Note in the principal amount of $545,949into545,949shares of common
stock of the Company at a per share price of $1.00(See Note 23 - Common Shares Issued for Debt Conversion).
For the years ended December
31, 2025 and 2024, amortization of debt discount and debt issuance costs related to convertible note payable amounted to $1,082,226(including
the initial fair value of the Second Warrant of $621,353) and $1,291,814, respectively, which have been included in interest expense
amortization of debt discount and debt issuance costs on the accompanying consolidated statements of operations and comprehensive loss.
For the years ended December
31, 2025 and 2024, interest expense related to convertible note payable amounted to $320,282and $325,486, respectively, which have
been included in interest expense other on the accompanying consolidated statements of operations and comprehensive loss.
**NOTE 12 DERIVATIVE LIABILITY**
As stated in Note 11, 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 Companys 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 December 14, 2024, management determined
the probability of failing to make an amortization payment when due was remote and as such the fair value of the embedded conversion feature
had been estimated to be zero. On December 15, 2024, Mast Hill waived all amortization payments required to be made under the June 2024
Convertible Note.
On May 23, 2023, the Company issued9,000warrants
with an exercise price of $67.50exercisable until May 23, 2028 to Mast Hill and a third party as a finders 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 the9,000warrants was classified as a derivative liability on May 23, 2023. On
December 31, 2024, the estimated fair value of the 9,000 warrants was $3,714. The estimated fair value of the warrants was computed as
of December 31, 2024 using Black-Scholes option-pricing model, with the following assumptions: stock price of $3.26, volatility of 97.00%,
risk-free rate of 4.27%, annual dividend yield of 0% and expected life of 3.4 years. In March 2025,8,333warrants held by Mast
Hill were cashless exercised. On December 31, 2025, the estimated fair value of the rest of667warrants was $11. The estimated
fair value of the warrants was computed as of December 31, 2025 using Black-Scholes option-pricing model, with the following assumptions:
stock price of $1.20, volatility of99.55%, risk-free rate of3.47%, annual dividend yield of0% and expected life of2.4years.
On July 6, 2023, the Company issued3,000warrants
with an exercise price of $67.50exercisable until July 6, 2028 to FirstFire and a third party as a finders 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 the3,000warrants was classified as a derivative liability on July 6, 2023. On
November 18, 2024,2,778warrants held by FirstFire were cashless exercised. On December 31, 2024, the estimated fair value
of therest of222warrants was $94. The estimated fair value of the warrants was computed as of December 31, 2024 using
Black-Scholes option-pricing model, with the following assumptions: stock price of $3.26, volatility of95.85%, risk-free rate of4.27%,
annual dividend yield of0% and expected life of3.5years. On December 31, 2025, the estimated fair value of the 222 warrants
was $4. The estimated fair value of the warrants was computed as of December 31, 2025 using Black-Scholes option-pricing model, with the
following assumptions: stock price of $1.20, volatility of 98.29%, risk-free rate of 3.55%, annual dividend yield of 0% and expected life
of 2.5 years.
F-29
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 12 DERIVATIVE LIABILITY
(continued)**
On October 9, 2023, the Company issued7,560warrants
with an exercise price of $37.50exercisable until October 9, 2028 to Mast Hill and FirstFire and a third party as a finders
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 the7,560warrants was classified as a derivative liability
on October 9, 2023. On November 18, 2024,3,500warrants held by FirstFire were cashless exercised. On December 31, 2024, the
estimated fair value of therest of4,060warrants was $2,880. The estimated fair value of the warrants was computed as
of December 31, 2024 using Black-Scholes option-pricing model, with the following assumptions: stock price of $3.26, volatility of93.90%,
risk-free rate of4.27%, annual dividend yield of0% and expected life of3.8years. On March 26, 2025,3,500warrants
held by Mast Hill were cashless exercised. On December 31, 2025, the estimated fair value of the rest of560warrants was $30.
The estimated fair value of the warrants was computed as of December 31, 2025 using Black-Scholes option-pricing model, with the following
assumptions: stock price of $1.20, volatility of96.27%, risk-free rate of3.55%, annual dividend yield of0% and expected
life of2.8years.
On March 7, 2024, the Company issued9,450warrants
with an exercise price of $30.00exercisable until March 7, 2029 to Mast Hill and a third party as a finders 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 the9,450warrants was classified as a derivative liability on March 7, 2024.
On December 31, 2024, the estimated fair value of the9,450warrants was $8,191. The estimated fair value of the warrants was
computed as of December 31, 2024 using Black-Scholes option-pricing model, with the following assumptions: stock price of $3.26, volatility
of90.43%, risk-free rate of4.38%, annual dividend yield of0% and expected life of4.2years. On April 3, 2025,8,750warrants
held by Mast Hill were cashless exercised. On December 31, 2025, the estimated fair value of the700warrants was $82. The estimated
fair value of the warrants was computed as of December 31, 2025 using Black-Scholes option-pricing model, with the following assumptions:
stock price of $1.20, volatility of98.70%, risk-free rate of3.55%, annual dividend yield of0% and expected life of3.2years.
On June
5, 2024, the Company issued152,000warrants to Mast Hill and a third party as
a finders fee (See Note 11). 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. On December 31, 2024 and June 5, 2024, Management
determined the probability of failing to make an amortization payment when due to be remote and as such the fair value of the80,000warrants
with an exercise price of $7.50exercisable until June 5, 2029, has been estimated to
be zero. Accordingly, the fair value of the72,000warrants with an exercise price
of $9.75exercisable until June 5, 2029 was classified as a derivative liability on
June 5, 2024. On December 31, 2024, the estimated fair value of the72,000warrants
with an exercise price of $9.75exercisable until June 5, 2029 as derivative liability
was $112,666. The estimated fair value of the warrants was computed as of December 31, 2024
using Black-Scholes option-pricing model, with the following assumptions: stock price of $3.26,
volatility of88.64%, risk-free rate of4.38%,
annual dividend yield of0% and expected life of4.4years.
In April 2025,66,667warrants held by Mast Hill were cashless exercised. On December 31, 2025, the estimated fair value
of the5,333warrants with an exercise price of $9.75exercisable until June 5, 2029 was $1,854. The estimated fair value
of the warrants was computed as of December 31, 2025 using Black-Scholes option-pricing model, with the following assumptions: stock price
of $1.20, volatility of101.69%, risk-free rate of3.55%, annual dividend yield of0% and expected life of3.4years.
On June 5, 2025, the Second Warrant was not cancelled and was retained by Mast Hill. Accordingly, the initial fair value of the Second
Warrant of $621,353was classified as derivative liability on June 5, 2025 and recorded as interest expense amortization
of debt discount.On December 31, 2025, the estimated fair value of the80,000warrants with an exercise price of $7.50exercisable
until June 5, 2029 was $32,175. The estimated fair value of the warrants was computed as of December 31, 2025 using Black-Scholes option-pricing
model, with the following assumptions: stock price of $1.20, volatility of101.69%, risk-free rate of3.55%, annual dividend
yield of0% and expected life of3.4years.
Increases
or decreases in fair value of the derivative liability are included as a component of total other (expenses) income in the accompanying
consolidated statements of operations and comprehensive loss. The changes to the derivative liability resulted in a decrease of $538,213and
$374,365 in the derivative liability and the corresponding increase in other income as a
gain for the years ended December 31, 2025 and 2024, respectively.
F-30
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 13 BRIDGE LOAN PAYABLE,
NET**
On
December 11, 2025, the Company entered into a securities purchase agreement (the Purchase Agreement) with Allen O Cage Jr.,
an individual, pursuant to which the Company issued an unsecured bridge note with a maturity date of April 15, 2026, in the principal
sum of $375,000. The bridge note carries an original issue discount of $75,000. Accordingly, on December 11, 2025, Allen paid the purchase
price of $300,000 to the Company for the bridge note. This bridge note shall not bear interest. The Company is required to make the following
payments in cash to Allen under the bridge note: (i) $125,000 on February 15, 2026, (ii) $125,000 on March 15, 2026, and (iii) $125,000
on April 15, 2026. Upon the occurrence of an event of default under the bridge note, Allen may convert the bridge note into the Companys
common stock at a conversion price equal to 50% of the volume weighted average price of the Companys common stock during the five
(5) trading day period prior to the respective conversion date (the Conversion Price), subject to adjustment as provided
in the bridge note as well as beneficial ownership limitations. The Conversion Price may not be lower than the floor price, which is equal
to 80% of the Minimum Price (as such term is defined by the rules and regulations of the Nasdaq Stock Market LLC, Rule 5635(d)(1)(A))
measured from the effective date of the Purchase Agreement, or such lower amount as permitted, from time to time, by the Nasdaq Stock
Market, subject to downward adjustments for share splits, share dividends, share combinations, recapitalizations or other similar events
(for the avoidance of doubt, share splits, share dividends, share combinations, recapitalizations or other similar events shall not cause
an adjustment to increase the floor price). The Company agreed to issue 100,000 shares of its common stock as a commitment fee to Allen
pursuant to the Purchase Agreement. The Purchase Agreement contains customary representations, warranties, and covenants of the Company.
The issuance of such 100,000 shares as well as any conversion of the bridge note into shares of the Companys common stock is subject
to the prior shareholder approval of the Company as is required by the applicable rules and regulations of the Nasdaq Stock Market (or
any successor entity).
On February 15, 2026,
the Company entered into Amendment (the Note Amendment) to unsecured bridge note. The Note Amendment extended the time periods
under the bridge note for the first payment deadline, the second payment deadline and third payment deadline as follows: (i) the first
payment deadline under this Note Amendment is extended to March 16, 2026 from February 15, 2026; the second payment deadline under the
Note Amendment is extended to April 15, 2026 from March 15, 2026 and (iii) the third payment deadline under the Note Amendment is extended
to May 15, 2026 from April 15, 2026.
In connection with the issuance of the bridge
note, the Company incurred debt issuance costs of $18,846which is capitalized and will be amortized into interest expense over the
term of the bridge note.
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 bridge note. However, management determined
the probability of occurrence of an event of default under the bridge note to be remote and as such the fair value of the embedded conversion
feature has been estimated to be zero.
The Company recorded
a total debt discount of $213,000 related to the original issue discount and common shares which the Company agreed to issue as a commitment
fee to Allen, which will be amortized over the term of the bridge note.
The
bridge loan payable as of December 31, 2025 was as follows:
|
| |
December 31,
2025 | | |
|
Principal amount | |
$ | 375,000 | | |
|
Less: unamortized debt issuance costs | |
| (14,441 | ) | |
|
Less: unamortized debt discount | |
| (163,218 | ) | |
|
Convertible note payable, net | |
$ | 197,341 | | |
For the year ended December
31, 2025, amortization of debt discount and debt issuance costs related to the bridge note amounted to $54,186, 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.
F-31
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 14 RELATED PARTY TRANSACTIONS**
**Services
Provided by Related Party**
****
From time to time, WilbertTauzin, a former
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 $60,794and $63,644for the years ended December 31, 2025 and 2024, respectively,
which have been included in professional fees on the accompanying consolidated statements of operations and comprehensive loss. As of
December 31, 2025 and 2024, the accrued and unpaid services charge related to this directors son amounted to $6,835and$15,000,
respectively, which have been included in accrued professional fees on the accompanying consolidated balance sheets.
**Accrued Liabilities and Other Payables
Related Parties**
****
In 2017, the Company acquired Genexosomes
subsidiary, which was dissolved in 2022, for a cash payment of $450,000. As of both December 31, 2025 and 2024, the unpaid acquisition
consideration of $100,000, was payable to Dr. Yu Zhou, former director and former co-chief executive officer and40% owner of Genexosome,
and has been included in accrued liabilities and other payables related parties on the accompanying 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 $566,667for equity method investment payable on
behalf of the Companyin 2024. During the first quarter of 2025, to preserve cash, the Company entered into discussions with Lab
Services MSO for the potential redemption of our investment and on February 26, 2025, the Company and Lab Services MSO entered into a
Redemption and Abandonment Agreement, whereby Lab Services MSO redeemed the40% equity interest in Lab Services MSO held by the Company
for cash and the surrender of its Series B Preferred Stock having a carrying value of $11,000,000. The aggregate cash amount to the Company
for the redemption was $1,745,000. In addition, pursuant to the terms of the Redemption Agreement, all shares of the Companys Series
B Preferred Stock previously issued to SCBC Holdings LLC as partial consideration for the equity interests of Laboratory Services MSO,
were permanently surrendered and relinquished to the Company for no additional consideration. The difference of $2,348,695between
the carrying value of the extinguished Series B Preferred Stock, the aggregate cash amount to the Company for the redemption, net of payables
due to Lab Services MSO of $632,916, totaling $13,377,916, and the carrying value of the equity method investment of $11,029,221was
accounted for as an increase to additional paid-in capital (See Note 16 - Series B Convertible Preferred Stock Extinguished Related to
Sale of Equity Method Investment). As of December 31, 2025 and 2024, the balance due to Lab Services MSO amounted to$0and
$632,916, respectively, which has been included in accrued liabilities and other payables related parties on the accompanying
consolidated balance sheets.
**Borrowings from Related Party**
****
*Line of Credit*
On August 29, 2019, the Company entered into a
Line of Credit Agreement (the Line of Credit Agreement) providing the Company with a $20million line of credit (the
Line of Credit) from Mr. Lu, the Companys chairman of the Board of Directors. The Line of Credit allowed the Company
to request loans thereunder and to use the proceeds of such loans for working capital and operating expense purposes until the facility
matured onDecember 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 of5% 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 occurs, Mr. Lu may declare all outstanding
loans under the Line of Credit to be due and payable immediately.
In the year ended December 31, 2024, activity
recorded for the Line of Credit is summarized in the following table:
|
Outstanding principal under the Line of Credit at January 1, 2024 | |
$ | 850,000 | | |
|
Repayment of Line of Credit | |
| (400,000 | ) | |
|
Reclassification of Line of Credit to advance from related party | |
| (450,000 | ) | |
|
Outstanding principal under the Line of Credit at December 31, 2024 | |
$ | - | | |
For the year ended December 31, 2024, the interest
expense related to related party borrowing amounted to $42,445 and has been reflected as interest expense related party on the
accompanying consolidated statements of operations and comprehensive loss.
**Membership Interest
Purchase Agreement**
On November 17, 2023, the Company entered into
a Membership Interest Purchase Agreement with Mr. Lu, the Companys chairman of the Board of Directors, pursuant to which (i) Mr.
Lu will acquire from the Company30% 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 additional70% 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 Mr. Lu and the Company at such time that
Mr. Lu desires to exercise the Option.
F-32
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 14 RELATED PARTY TRANSACTIONS
(continued)**
****
**Membership Interest Purchase Agreement (continued)**
****
On February 18, 2026, the Company and Mr. Lu entered
into an Amended and Restated Membership Interest Purchase Agreement (the Amended MIPA), pursuant to which the Company sold
to Mr. Lu 100% of the membership interests of Avalon RT9 for (i) $3,158,078 and (ii) the satisfaction, in full, of an approximately $5,900,000
balance due on an existing mortgage financing. This represents a total amended aggregated purchase price of approximately $9,000,000 (See
Note 23 - Amended and Restated Membership Interest Purchase Agreement).
The Company received $3,158,078and $3,108,106from
Mr. Lu as of December 31, 2025 and 2024, respectively, which was recorded as advance from pending sale of noncontrolling interest
related party on the accompanying consolidated balance sheets.
**Series D Convertible Preferred Stock Issued
in Exchange ofSeries A Convertible Preferred Stock**
****
On January 9, 2025, the Company entered into an
exchange agreement with Wenzhao Lu, the Companys chairman of the Board of Directors, pursuant to which Mr. Lu exchanged9,000shares
of Series A Preferred Stock of the Company, having a carrying value of $9,000,000, for5,000shares of Series D Preferred Stock
of the Company. The Company determined that the exchange of the Series A Preferred Stock for the Series D Preferred Stock resulted in
the extinguishment of the Series A Preferred Stock. As a result, the difference between the carrying amount of the Series A Preferred
Stock and the fair value of the Series D Preferred Stock of $162,473was recognized as a deemed contribution in the year ended December
31, 2025 that increased additional paid-in capital and income available to common shareholders in calculating earnings per share (See
Note 16 - Series D Convertible Preferred Stock Issued in Exchange of Series A Convertible Preferred Stock).
**NOTE 15 INCOME
TAXES**
The Company
is governed by the Income Tax Law of the PRC and the U.S. Internal Revenue Code of 1986, as amended. Under the Income Tax Laws of PRC,
Chinese companies are generally subject to an income tax at an effective rate of25% on income reported in the statutory financial
statements after appropriate tax adjustments. The Company has a cumulative deficit from its foreign subsidiary of $3,485,177as of
December 31, 2025, which is included in the consolidated accumulated deficit.
The Companys
loss before income taxes includes the following components:
|
| |
Years Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
United States loss before income taxes | |
$ | 18,175,072 | | |
$ | 7,639,148 | | |
|
China loss before income taxes | |
| 85,904 | | |
| 264,246 | | |
|
Total loss before income taxes | |
$ | 18,260,976 | | |
$ | 7,903,394 | | |
Components of income taxes expense (benefit) consisted
of the following:
****
|
| |
Years Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Current: | |
| | |
| | |
|
U.S. federal | |
$ | - | | |
$ | - | | |
|
U.S. state and local | |
| - | | |
| - | | |
|
China | |
| - | | |
| - | | |
|
Total current income taxes expense | |
$ | - | | |
$ | - | | |
|
Deferred: | |
| | | |
| | | |
|
U.S. federal | |
$ | (3,585,262 | ) | |
$ | (4,874 | ) | |
|
U.S. state and local | |
| (1,213,867 | ) | |
| (1,650 | ) | |
|
China | |
| 77,641 | | |
| 93,437 | | |
|
Total deferred income taxes (benefit) | |
$ | (4,721,488 | ) | |
$ | 86,913 | | |
|
Change in valuation allowance | |
| 4,721,488 | | |
| (86,913 | ) | |
|
Total income taxes expense | |
$ | - | | |
$ | - | | |
F-33
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 15 INCOME TAXES (continued)**
The table below summarizes the differences between
the U.S. statutory rate and the Companys effective tax rate for the years ended December 31, 2025 and 2024:
|
| |
Years Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
U.S. federal rate | |
| 21.0 | % | |
| 21.0 | % | |
|
U.S. state rate | |
| 7.1 | % | |
| 6.4 | % | |
|
Permanent difference | |
| (4.2 | )% | |
| (1.3 | )% | |
|
Non-US rate differential | |
| 0.0 | % | |
| 0.1 | % | |
|
True ups | |
| 1.9 | % | |
| (27.3 | )% | |
|
U.S. valuation allowance | |
| (25.9 | )% | |
| 1.1 | % | |
|
Total provision for income taxes | |
| 0.0 | % | |
| 0.0 | % | |
For the years ended December 31, 2025 and 2024,
the Company did not incur any income taxes expense since it did not generate any taxable income in those periods. The Companys
foreign entity did not pay any income taxes during the years ended December 31, 2025 and 2024.
The Companys components of deferred
taxes as of December 31, 2025 and 2024 were as follows:
|
| |
December 31,
2025 | | |
December 31,
2024 | | |
|
Deferred tax assets | |
| | |
| | |
|
Stock-based compensation | |
$ | 1,410,079 | | |
$ | 1,598,257 | | |
|
Disallowed business interest deduction | |
| - | | |
| - | | |
|
Research and development expense | |
| 81,638 | | |
| 106,783 | | |
|
Accrued directors compensation | |
| 102,166 | | |
| 104,977 | | |
|
Accrued settlement | |
| 301,047 | | |
| 140,904 | | |
|
Partnership investment | |
| - | | |
| 2,167,965 | | |
|
Lease liability | |
| 1,687 | | |
| 1,687 | | |
|
Capital loss limitation | |
| 1,846,243 | | |
| 149,394 | | |
|
Net operating loss carryforward | |
| 22,942,772 | | |
| 17,648,077 | | |
|
Total deferred tax assets, gross | |
| 26,685,632 | | |
| 21,918,044 | | |
|
Valuation allowance | |
| (26,506,126 | ) | |
| (21,784,638 | ) | |
|
Total deferred tax assets, net | |
$ | 179,506 | | |
$ | 133,406 | | |
|
Deferred tax liabilities | |
| | | |
| | | |
|
Fixed assets and intangible assets book/tax basis difference | |
$ | (179,506 | ) | |
$ | (133,406 | ) | |
|
Right-of-use assets | |
| - | | |
| - | | |
|
Total deferred tax liabilities | |
$ | (179,506 | ) | |
$ | (133,406 | ) | |
|
Net deferred tax assets | |
$ | - | | |
$ | - | | |
As of December
31, 2025 and 2024, the Companys both federal and state net operating loss carryforwards amounted to $80,038,036and $60,926,204,
respectively. As of December 31, 2025, the Company has $77,550,482of U.S. federal net operating loss carryovers that have no expiration
date, and $2,487,555of the federal net operating loss and state net operating loss carry-forwards begin to expire in 2035.
As of December 31, 2025, the Company had net operating
loss carryforwards in China of $1,776,321that begin to expire in 2026.
Additionally,
as of December 31, 2025, $61,847of the future utilization of the net operating loss carryforward to offset future taxable income
is subject to special tax rules which may limit their usage under IRS Section 382 (Change of Ownership) and possibly the Separate Return
Limitation Year (SRLY) rules.
A full valuation allowance has been provided against
the Companys deferred tax assets at December 31, 2025 as the Company believes it is more likely than not that sufficient taxable
income will not be generated to realize these temporary differences.
The Company
has been notified and assessed an IRS Section 6038 penalty of$10,000for failure to file a foreign entity tax disclosure. The
Company has appealed the penalty and awaits the Internal Revenue Services review of the appeal. There is no assurance such appeal
will be successful.
The Company
has not been audited by any jurisdiction since its inception. The Company is open for audit by the U.S. Internal Revenue Service and U.S.
state tax jurisdictions from 2022 to 2025, and open for audit by the Chinese Ministry of Finance from 2021 to 2025.
There were
no material uncertain tax positions as of December 31, 2025 and 2024. The Company recognizes interest and penalties related to unrecognized
tax benefits as income tax expense, if any. The Company does not have any significant uncertain tax positions or events leading to uncertainty
in a tax position.
F-34
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 16 EQUITY**
The Company is authorized
to issue an aggregate of100,000,000 shares of common stock and10,000,000shares of blank check preferred
stock.
**Series A Convertible
Preferred Stock**
****
The Company designated up to15,000shares
of its previously undesignated preferred stock as Series A Preferred Stock. Each share of Series A Preferred Stock has a par value of
$0.0001per share and a stated value equal to $1,000.
The shares of Series A Preferred Stock have identical
terms and include the terms as set forth below.
*Dividends.*Holders of Series A Preferred
Stock (each, a Series A Holder and collectively, the Series A Holders) are entitled to receive, and the Company
shall pay, dividends on shares of Series A Preferred Stock equal (on an as-if-converted-to-common-stock basis, disregarding for such purpose
any conversion limitations set forth in the Series A Certificate of Designations) to and in the same form as dividends actually paid on
shares of the Companys common stock when, as and if such dividends are paid on shares of the common stock. No other dividends shall
be paid on shares of Series A Preferred Stock. The Company will not pay any dividends on its common stock unless the Company simultaneously
complies with the terms set forth in the Series A Certificate of Designations.
*Liquidation.*Upon any dissolution,
liquidation or winding-up of the Company, whether voluntary or involuntary (a Liquidation), the Series A Holders will be
entitled to receive out of the assets available for distribution to the stockholders, (i) after and subject to the payment in full of
all amounts required to be distributed to the holders of another class or series of stock of the Company ranking on liquidation prior
and in preference to the Series A Preferred Stock, (ii) ratably with any class or series of stock ranking on liquidation on parity with
the Series A Preferred Stock and (iii) in preference and priority to the holders of the shares of the Companys common stock, an
amount equal to100% of the Series A Stated Value, and no more, in proportion to the full and preferential amount that all shares
of the Series A Preferred Stock are entitled to receive. The Company shall mail written notice of any Liquidation not less than twenty
(20) days prior to the payment date stated therein, to each Series A Holder.
*Conversion.*Each share of Series A
Preferred Stock shall be convertible, at any time and from time to time from and after the later of (i) the date of the stockholder approval
as described above, in accordance with the Nasdaq Stock Market Listing Rules, and (ii) the nine (9) month anniversary of the Closing (the
Initial Conversion Date), at the option of the Series A Holder, into that number of shares of common stock (subject to the
limitations set forth in Series A Certificate of Designations, determined by dividing the Stated Value of such share of Series A Preferred
Stock by the conversion price (as defined below)). The Series A Holders may effect conversions by providing the Company with the form
of conversion notice attached as Annex A to the Series A Certificate of Designations. The Series A Holders may convert such shares into
shares of the Companys common stock at a conversion price per share equal to the greater of (i) one hundred fifty dollars ($150.0)
and (ii) ninety percent (90%) of the closing price of the Companys common stock on Nasdaq on the day prior to receipt of a conversion
notice, subject to adjustment for stock splits and similar matters. In addition, following the Initial Conversion Date, each Series A
Holder agrees that it shall not be entitled to in any calendar month, sell a number of Series A conversion shares into the open market
in an amount exceeding more than ten percent (10%) of the number of Series A conversion shares issuable upon conversion of the Series
A Preferred Stock then held by such Series A Holder.
**
*Conversion Price Adjustment:*
*Stock Dividends and Stock Splits.*If
the Company, at any time while the Series A Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a distribution
or distributions payable in shares of common stock on shares of common stock or any other common stock equivalents (which, for avoidance
of doubt, shall not include any shares of common stock issued by the Company upon conversion of, or payment of a dividend on, the Series
A Preferred Stock), (ii) subdivides outstanding shares of common stock into a larger number of shares, (iii) combines (including by way
of a reverse stock split) outstanding shares of common stock into a smaller number of shares, or (iv) issues, in the event of a reclassification
of shares of the common stock, any shares of capital stock of the Company, then the conversion price of the Series A Preferred Stock shall
be multiplied by a fraction of which the numerator shall be the number of shares of common stock (excluding any treasury shares of the
Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of common stock outstanding
immediately after such event. Any of the foregoing adjustments shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the
case of a subdivision, combination or re-classification.
F-35
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 16 EQUITY
(continued)**
**Series A Convertible
Preferred Stock (continued)**
*Fundamental Transaction.*If, at any
time while the Series A Preferred Stock is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Company with or into another individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other
entity of any kind (a Person), (ii) the Company (and all of its subsidiaries, taken as a whole), directly or indirectly,
effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets in one
or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company
or another Person) is completed pursuant to which holders of the Companys common stock are permitted to sell, tender or exchange
their shares for other securities, cash or property and has been accepted by the holders of fifty percent (50%) or more of the outstanding
common stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization
or recapitalization of the common stock or any compulsory share exchange pursuant to which the common stock is effectively converted into
or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related transactions consummates
a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than fifty percent (50%) of the outstanding
shares of common stock (not including any shares of common stock held by the other Person or other Persons making or party to, or associated
or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination) (each a
Fundamental Transaction), then, the Series A Holder shall have the right to receive, for each conversion share that would
have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation
set forth in the Series A Certificate of Designations on the conversion of the Series A Preferred Stock), the number of shares of common
stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and/or any additional consideration
(the Alternate Consideration) receivable as a result of such Fundamental Transaction by a holder of the number of shares
of common stock for which the Series A Preferred Stock is convertible immediately prior to such Fundamental Transaction (without regard
to the limitations set forth in the Series A Certificate of Designations on the conversion of the Series A Preferred Stock). For purposes
of any such conversion, the determination of the conversion price shall be appropriately adjusted to apply to such Alternate Consideration
based on the amount of Alternate Consideration issuable in respect ofoneshare of common stock in such Fundamental Transaction,
and the Company shall apportion the conversion price among the Alternate Consideration in a reasonable manner reflecting the relative
value of any different components of the Alternate Consideration. If holders of common stock are given any choice as to the securities,
cash or property to be received in a Fundamental Transaction, then the Series A Holder shall be given the same choice as to the Alternate
Consideration it receives upon such Fundamental Transaction.
*Voting Rights.*The Series A Holders
will have no voting rights, except as otherwise required by the Delaware General Corporation Law. Notwithstanding the foregoing, as long
as any shares of Series A Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the holders of a majority
of the then outstanding shares of Series A Preferred Stock, voting as a separate class, (a) alter or change adversely the powers, preferences
or rights given to the Series A Preferred Stock in the Series A Certificate of Designations, (b) increase the number of authorized shares
of Series A Preferred Stock, (c) authorize or issue an additional class or series of capital stock that ranks senior to the Series A Preferred
Stock with respect to the distribution of assets on liquidation or (d) enter into any agreement with respect to any of the foregoing.
*Fractional Shares.*No fractional shares
or scrip representing fractional shares shall be issued upon the conversion of the Series A Preferred Stock. As to any fraction of a share
of Company common stock which a Series A Holder would otherwise be entitled to upon such conversion, the Company will, at its election,
either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the conversion price
or round up to the next whole share. Notwithstanding the foregoing, nothing shall prevent any Series A Holder from converting fractional
shares of Series A Preferred Stock.
As of December 31, 2024,9,000shares
of Series A Preferred Stock were issued and outstanding. On January 9, 2025, the Company entered into an exchangeagreement with
Wenzhao Lu, the Companys chairman of the Board of Directors, pursuant to which Mr. Lu exchanged9,000shares of Series
A Preferred Stock of the Company for5,000shares of Series D Preferred Stock of the Company (See Note 16 - Series D Convertible
Preferred Stock Issued in Exchange of Series A Convertible Preferred Stock). As of December 31, 2025, there werenoshares of
Series A Preferred Stock remain outstanding.
**Series B Convertible
Preferred Stock**
****
The Company designated
up to15,000shares of its previously undesignated preferred stock as Series B Preferred Stock. Each share of Series B Preferred
Stock has a par value of $0.0001per share and a stated value equal to $1,000.
****
F-36
****
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
****
**NOTE 16 EQUITY
(continued)**
****
**Series B Convertible
Preferred Stock (continued)**
The shares of Series B Preferred Stock have identical
terms and include the terms as set forth below.
*Dividends.*The holders of Series B
Preferred Stock (each, a Series B Holder and collectively, the Series B Holders) shall be entitled to receive,
and the Company shall pay, dividends on shares of Series B Preferred Stock equal (on an as-if-converted-to-common-stock basis, disregarding
for such purpose any conversion limitations set forth in the Series B Certificate of Designations) to and in the same form as dividends
actually paid on shares of the Companys common stock when, as and if such dividends are paid on shares of the common stock. No
other dividends shall be paid on shares of Series B Preferred Stock. The Company will not pay any dividends on its common stock unless
the Company simultaneously complies with the terms set forth in the Series B Certificate of Designations.
*Rank.*The Series B Preferred Stock
will rank subordinate to the shares of the Companys Series A Preferred Stock.
*Liquidation.*Upon any Liquidation,
the Series B Holders will be entitled to receive out of the assets available for distribution to stockholders, (i) after and subject to
the payment in full of all amounts required to be distributed to the holders of another class or series of stock of the Company ranking
on liquidation prior and in preference to the Series B Preferred Stock, including the Series A Preferred Stock, (ii) ratably with any
class or series of stock ranking on liquidation on parity with the Series B Preferred Stock and (iii) in preference and priority to the
holders of the shares of common stock, an amount equal to one hundred percent (100%) of the Series B Stated Value and no more, in proportion
to the full and preferential amount that all shares of the Series B Preferred Stock are entitled to receive. The Company shall mail written
notice of any such Liquidation not less than twenty (20) days prior to the payment date stated therein, to each Series B Holder.
*Conversion.*Each share of Series B
Preferred Stock shall be convertible, at any time and from time to time from and after the later of (i) the date of the stockholder approval
and (ii) February 9, 2024 (the Lock Up Period), at the option of the Series B Holder thereof, into that number of shares
of common stock (subject to the limitations set forth in Series B Certificate of Designations determined by dividing the Series B Stated
Value of such share of Series B Preferred Stock by the conversion price of the Series B Preferred Stock). Series B Holders may effectuate
conversions by providing the Company with the form of conversion notice attached as Annex A to the Series B Certificate of Designations.
The Series B Preferred Stock will be convertible into shares of the Companys common stock at a conversion price per share equal
to $56.70, subject to the adjustments set forth in the Series B Certificate of Designations. Notwithstanding the foregoing or the transactions
contemplated by the Amended MIPA, until the consummation of the Lock Up Period, the Series B Holders shall not, directly or indirectly,
sell, transfer or otherwise dispose of any Series B Preferred Stock issued upon conversion of the Series B conversion shares or pursuant
to the Equity Earnout Payment (the Restricted Securities) without Companys prior written consent; provided, however,
the Series B Holders may sell, transfer or otherwise dispose of Restricted Securities to an Affiliate, as defined in the Amended MIPA,
of a Series B Holder without Companys prior written consent; provided, further, that such Series B Holder provide prompt written
notice to Company of such transfer, including the name and contact information of the Affiliate transferee, and such Affiliate transferee
agrees in writing to be bound by the terms of the transaction documents contemplated by the Amended MIPA to which the Series B Holder
is a party (which agreement shall also be provided to Company with such notice). After the expiration of the Lock Up Period, the Series
B Holder agrees that it and any of its Affiliate transferees shall not be entitled to in any calendar month, sell a number of shares of
Company common stock into the open market in an amount exceeding more than ten percent (10%) of the total number of shares of Company
common stock issuable upon conversion of the Company common stock then held by the Seller and its Affiliates.
*Conversion Price Adjustment:*
*Stock Dividends and Stock Splits.*If
the Company, at any time while the Series B Preferred Stock is outstanding: (i) pays a stock dividend or otherwise makes a distribution
or distributions payable in shares of common stock on shares of common stock or any other common stock equivalents (which, for avoidance
of doubt, shall not include any shares of common stock issued by the Company upon conversion of, or payment of a dividend on, the Series
B Preferred Stock), (ii) subdivides outstanding shares of common stock into a larger number of shares, (iii) combines (including by way
of a reverse stock split) outstanding shares of common stock into a smaller number of shares, or (iv) issues, in the event of a reclassification
of shares of the common stock, any shares of capital stock of the Company, then the conversion price of the Series B Preferred Stock shall
be multiplied by a fraction of which the numerator shall be the number of shares of common stock (excluding any treasury shares of the
Company) outstanding immediately before such event, and of which the denominator shall be the number of shares of common stock outstanding
immediately after such event. Any of the foregoing adjustments shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the
case of a subdivision, combination or re-classification.
****
F-37
****
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
****
**NOTE 16 EQUITY
(continued)**
****
**Series B Convertible
Preferred Stock (continued)**
*Fundamental Transaction.*If, at any
time while the Series B Preferred Stock is outstanding, (i) the Company, directly or indirectly, in one or more related transactions effects
any merger or consolidation of the Company with or into another Person, (ii) the Company (and all of its subsidiaries, taken as a whole),
directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which holders of the Companys common stock are permitted
to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders of fifty percent
(50%) or more of the outstanding common stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any
reclassification, reorganization or recapitalization of the common stock or any compulsory share exchange pursuant to which the common
stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in
one or more related transactions consummates a Fundamental Transaction, then, at the closing of such Fundamental Transaction, without
any action on the part of the Series B Holder, the Series B Holder shall have the right to receive, for each conversion share that would
have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation
in the Series B Certificate of Designations on the conversion of the Series B Preferred Stock), the number of shares of common stock of
the successor or acquiring corporation or of the Company, if it is the surviving corporation, and/or any Alternate Consideration receivable
as a result of such Fundamental Transaction by a holder of the number of shares of common stock for which the Series B Preferred Stock
is convertible immediately prior to such Fundamental Transaction (without regard to the limitations set forth in the Series B Certificate
of Designations on the conversion of the Series B Preferred Stock). For purposes of any such conversion, the determination of the conversion
price of the Series B Preferred Stock shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of
Alternate Consideration issuable in respect of one share of common stock in such Fundamental Transaction, and the Company shall apportion
the conversion price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components
of the Alternate Consideration. If holders of common stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Series B Holder shall be given the same choice as to the Alternate Consideration it receives upon
such Fundamental Transaction.
*Voting Rights*. The Series B Holders will
have no voting rights, except as otherwise required by the Delaware General Corporation Law. Notwithstanding the foregoing, in addition,
as long as any shares of Series B Preferred Stock are outstanding, the Company shall not, without the affirmative vote of the holders
of a majority of the then outstanding shares of the Series B Preferred Stock, voting as a separate class, (a) alter or change adversely
the powers, preferences or rights given to the Series B Preferred Stock in the Series B Certificate of Designations, (b) increase the
number of authorized shares of Series B Preferred Stock, (c) except with respect to the Series A Preferred Stock, authorize or issue an
additional class or series of capital stock that ranks senior to the Series B Preferred Stock with respect to the distribution of assets
on liquidation or (d) enter into any agreement with respect to any of the foregoing.
*Fractional Shares.*No fractional shares
or scrip representing fractional shares shall be issued upon the conversion of the Series B Preferred Stock. As to any fraction of a share
which a Series B Holder would otherwise be entitled to upon such conversion, the Company shall at its election, either pay a cash adjustment
in respect of such final fraction in an amount equal to such fraction multiplied by the conversion price or round up to the next whole
share. Notwithstanding the foregoing, nothing shall prevent any Series B Holder from converting fractional shares of Series B Preferred
Stock.
As of December 31, 2024,11,000shares
of Series B Preferred Stock were issued and outstanding. During the first quarter of 2025, to preserve cash, the Company entered into
discussions with Lab Services MSO for the potential redemption of our investment and on February 26, 2025, the Company and Lab Services
MSO entered into a Redemption and Abandonment Agreement, whereby Lab Services MSO redeemed the40% equity interest in Lab Services
MSO held by the Company for cash and the surrender of its Series B Preferred Stock having a carrying value of $11,000,000. Pursuant to
the terms of the Redemption Agreement, all shares of the Companys Series B PreferredStock previously issued to SCBC Holdings
LLC as partial consideration for the equity interests of Lab Services MSO, were permanently surrendered and relinquished to the Company
for no additional consideration (See Note 16 - Series B Convertible Preferred Stock Extinguished Related to Sale of Equity Method Investment).
As of December 31, 2025, there were no shares of Series B Preferred Stock remain outstanding.
****
**Series C Convertible
Preferred Stock**
****
On December 13, 2024,
the Company filed a certificate of designations of preferences, rights, and limitations of Series C Preferred Stock (the Series
C Certificate of Designations) with the Department of State, Division of Corporations, of the State of Delaware, which provides
for the designation of10,000shares of Series C Preferred Stock of the Company, par value $0.0001per share. Each share
of Series C Preferred Stock has a stated value of $1,000.
F-38
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 16 EQUITY
(continued)**
**Series C Convertible
Preferred Stock (continued)**
The Series C Preferred Stock shall rank (i) senior
to the Companys common stock and any other class or series of capital stock of the Company created hereafter, the terms of which
specifically provide that such class or series shall rank junior to the Series C Preferred Stock, (ii) pari passu with any class or series
of capital stock of the Company created hereafter specifically ranking, by its terms, on par with the Series C Preferred Stock, (iii)
pari passu with Series B Preferred Stock of the Company with respect to its rights, preferences and restrictions, and (iv) subordinate
to the Series A Preferred Stock of the Company.
Holders of the Series C Preferred Stock shall
be entitled to receive, and the Company shall pay, dividends on shares of Series C Preferred Stock equal (on an as-if-converted-to-common-stock
basis, disregarding for such purpose any conversion limitations hereunder) to and in the same form as dividends actually paid on shares
of the common stock when, as and if such dividends are paid on shares of the common stock.
Holders of the Series C Preferred Stock have no
voting power except as otherwise required by the Delaware General Corporation Law.
Upon any liquidation, dissolution or winding-up
of the Company, whether voluntary or involuntary (a Liquidation), the holders of the Series C Preferred Stock shall be entitled
to receive out of the assets available for distribution to stockholders, (i) after and subject to the payment in full of all amounts required
to be distributed to the holders of another class or series of stock of the Company ranking on liquidation prior and in preference to
the Series C Preferred Stock, including the Series A Preferred Stock, (ii) ratably with any class or series of stock ranking on liquidation
on parity with the Series C Preferred Stock and (iii) in preference and priority to the holders of the shares of common stock, an amount
equal to100% of the Stated Value of the Series C Preferred Stock, in proportion to the full and preferential amount that all shares
of the Series C Preferred Stock are entitled to receive.
Each share of Series C Preferred Stock shall be
convertible into common stock (the Series C Conversion Shares) at a conversion per share equal to $2.41, at the option of
the holder, at any time after the later of (i) the date of the shareholder approval of the issuance of the Series C Conversion Shares
pursuant to the rules of the Nasdaq Stock Market and (ii) the one year anniversary of the date of the first issuance of any shares of
the Series C Preferred Stock. In addition, the holder shall not have the right to convert any portion of the Series C Preferred Stock
if, after giving effect to the conversion, such holder (together with its affiliates) would beneficially own in excess of19.99%
of the number of shares of the common stock outstanding immediately after giving effect to the issuance of the respective Series C Conversion
Shares. On May 29, 2025, the Company filed a certificate of amendment to the Series C Certificate of Designations, pursuant to which the
beneficial ownership limitation of19.99% was amended to4.99%.
As of December 31, 2025 and 2024,3,800and3,500shares
of Series C Preferred Stock were issued and outstanding, respectively.
**Series D Convertible Preferred Stock**
****
On January 6, 2025, the Company filed a certificateof
designations of preferences, rights, and limitations of Series D Preferred Stock (the Series D Certificate of Designations)
with the Department of State, Division of Corporations, of the State of Delaware, which provides for the designation of5,000shares
of Series D Preferred Stock of the Company, par value $0.0001per share, upon the terms and conditions as set forth in the Series
D Certificate of Designations. Each share of Series D Preferred Stock has a stated value of $1,000.
The Series D Preferred Stock shall rank (i) senior
to the Companys common stock and any other class or series of capital stock of the Company created hereafter, the terms of which
specifically provide that such class or series shall rank junior to the Series D Preferred Stock, (ii) pari passu with any class or series
of capital stock of the Company created hereafter specifically ranking, by its terms, on par with the Series D Preferred Stock, (iii)
pari passu with the Series B Preferred Stock of the Company with respect to its rights, preferences and restrictions, and (iv) pari passu
with the Series C Preferred Stock of the Company.
Holders of the Series D Preferred Stock have no
voting power except as otherwise required by the Delaware General Corporation Law.
Upon any liquidation, dissolution or winding-up
of the Company, whether voluntary or involuntary (a Liquidation), the holders of the Series D Preferred Stock shall be entitled
to receive out of the assets available for distribution to stockholders, (i) after and subject to the payment in full of all amounts required
to be distributed to the holders of another class or series of stock of the Company ranking on liquidation prior and in preference to
the Series D Preferred Stock, including the Series A Preferred Stock, (ii) ratably with any class or series of stock ranking on liquidation
on parity with the Series D Preferred Stock and (iii) in preference and priority to the holders of the shares of common stock, an amount
equal to100% of the Stated Value of the Series D Preferred Stock, in proportion to the full and preferential amount that all shares
of the Series D Preferred Stock are entitled to receive.
F-39
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 16 EQUITY
(continued)**
**Series D Convertible Preferred Stock (continued)**
Each share of Series D Preferred Stock shall be
convertible into common stock (the Series D Conversion Shares) at a conversion per share equal to $2.41, at the option of
the holder, at any time after the Company has obtained shareholder approval for the issuance of the Series D Conversion Shares pursuant
to the rules of the Nasdaq Stock Market. In addition, the holder shall not have the right to convert any portion of the Series D Preferred
Stock if, after giving effect to the conversion, such holder (together with its affiliates) would beneficially own in excess of4.99%
of the number of shares of the common stock outstanding immediately after giving effect to the issuance of the respective Series D Conversion
Shares.
As of December 31, 2025,5,000shares
of Series D Preferred Stock were issued and outstanding.
**Series E Convertible Preferred Stock**
****
On December
12, 2025, the Company filed a certificate of designations of preferences, rights, and limitations of Series E Non-Voting Convertible Preferred
Stock (the Series E Certificate of Designations) with the Department of State, Division of Corporations, of the State of
Delaware, which provides for the designation of 19,500 shares of Series E Preferred Stock of the Company, par value $0.0001 per share,
upon the terms and conditions as set forth in the Series E Certificate of Designations. Each share of Series E Preferred Stock has a Stated
Value of $1,000.
The Series
E Preferred Stock shall rank (i) senior to the Companys Common Stock and any other class or series of capital stock of the Company
created hereafter, the terms of which specifically provide that such class or series shall rank junior to the Series E Preferred Stock,
(ii)*pari passu*with any class or series of capital stock of the Company
created hereafter specifically ranking, by its terms, on par with the Series E Preferred Stock, (iii)*pari passu*with
Series C Convertible Preferred Stock of the Company with respect to its rights, preferences and restrictions, and (iv)*pari
passu*the Series D Convertible Preferred Stock of the Company.
Holders of the Series E Preferred Stock shall
be entitled to receive, and the Company shall pay, dividends on shares of Series E Preferred Stock equal (on an as-if-converted-to-Common-Stock
basis, disregarding for such purpose any conversion limitations hereunder) to and in the same form as dividends actually paid on shares
of the Common Stock when, as and if such dividends are paid on shares of the Common Stock.
Holders
of the Series E Preferred Stock have no voting power except as otherwise required by the Delaware General Corporation Law. Notwithstanding
the foregoing, in addition, as long as any shares of Series E Preferred Stock are outstanding, the Corporation shall not, without the
affirmative vote of the Holders of a majority of the then outstanding shares of the Series E Preferred Stock, voting as a separate class,
(a) alter or change adversely the powers, preferences or rights given to the Series E Preferred Stock in this Certificate of Designation,
(b) increase the number of authorized shares of Series E Preferred Stock, (c) authorize or issue an additional class or series of capital
stock that ranks senior to the Series E Preferred Stock with respect to the distribution of assets on liquidation, or (d) enter into any
agreement with respect to any of the foregoing.
Upon any liquidation, dissolution or winding-up
of the Company, whether voluntary or involuntary (a Liquidation), the holders of the Series E Preferred Stock shall be entitled
to receive out of the assets available for distribution to stockholders, (i) after and subject to the payment in full of all amounts required
to be distributed to the holders of another class or series of stock of the Company ranking on liquidation prior and in preference to
the Series E Preferred Stock, including the Series A Preferred Stock, (ii) ratably with any class or series of stock ranking on liquidation
on parity with the Series E Preferred Stock and (iii) in preference and priority to the holders of the shares of Common Stock, an amount
equal to the greater of (i) 100% of the Stated Value of the Series E Preferred Stock, in proportion to the full and preferential amount
that all shares of the Series E Preferred Stock are entitled to receive or (ii) such amount per share as would have been payable had all
shares of Series E Preferred Stock been converted into Common Stock (without regard to any limitations on conversion set forth herein
or otherwise) pursuant to Section 6 immediately prior to such Liquidation.
Each share of Series E Preferred Stock shall be
convertible into Common Stock (the Conversion Shares), at any time from and after May 12, 2026, or such earlier time as
consented to by the Company in writing at the option of the Holder thereof, into that number of shares of Common Stock (subject to certain
limitations, determined by dividing the Stated Value of such share of Series E Preferred Stock by the Conversion Price of $1.50. In addition,
the holder shall not have the right to convert any portion of the Series E Preferred Stock if, after giving effect to the conversion,
such holder (together with its affiliates) would beneficially own in excess 4.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of Series E Preferred Stock held by
the applicable holder.
F-40
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 16 EQUITY
(continued)**
****
**Series E Convertible Preferred Stock (continued)**
In addition, the Company shall not issue any shares
of Common Stock upon conversion of the Series E Preferred Stock or otherwise pursuant to the terms of the Series E Certificate of Designation
if the issuance of such shares of Common Stock would exceed the aggregate number of shares of Common Stock which the Company may issue
upon exercise or conversion (as the case may be) of the Series E Preferred Stock without breaching the Companys obligations under
the rules and regulations the listing rules of the Companys Principal Market (the maximum number of shares of Common Stock which
may be issued without violating such rules and regulations, the Exchange Cap), except that such limitation shall not apply
in the event that the Company (A) obtains the approval of its stockholders as required by the applicable rules and regulations of the
Principal Market for issuances of shares of Common Stock in excess of such amount (the Stockholder Approval Date) or (B)
obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory
to the Required Holders (as defined in the Series E Certificate of Designation).
On December 12, 2025, the Company issued19,500shares
of its Series E Convertible Preferred Stock as consideration for the purchase of100% of equity interest of RPM. The Series E Preferred
Stock is convertible into shares of the Companys common stock at a conversion price per share equal to $1.50, subject to certain
conditions which include, among others, limiting the number of shares of Series E Preferred Stock that can convert if such conversion
would exceed the aggregate number of shares of Common Stock which the Company may issue upon such conversion without breaching the Companys
obligations under the NASDAQ listing rules and regulations (See Note 4).
The Company evaluated the features of the Series
E Convertible Preferred Stock under ASC 480, and classified them as permanent equity because the Series E Convertible Preferred Stock
is not mandatorily or contingently redeemable at the stockholders option and the liquidation preference that exists does not fall
within the guidance of SEC Accounting Series Release No. 268 *Presentation in Financial Statements of Redeemable
Preferred Stocks*(ASR 268).
As of December 31, 2025,19,500shares
of Series D Preferred Stock were issued and outstanding.
****
**Series D Convertible Preferred Stock Issued
in Exchange ofSeries A Convertible Preferred Stock**
****
On January 9, 2025, the Company entered into an
exchange agreement with Wenzhao Lu, the Companys chairman of the Board of Directors, pursuant to which Mr. Lu exchanged9,000shares
of Series A Preferred Stock of the Company, having a carrying value of $9,000,000, for5,000shares of Series D Preferred Stock
of the Company. The Company determined that the exchange of the Series A Preferred Stock for the Series D Preferred Stock resulted in
the extinguishment of the Series A Preferred Stock. As a result, the difference between the carrying amount of the Series A Preferred
Stock and the fair value of the Series D Preferred Stock of $162,473was recognized as a deemed contribution in the year ended December
31, 2025 that increased additional paid-in capital and income available to common shareholders in calculating earnings per share.
Each share of Series D Preferred Stock is convertible
into common stock of the Company (the Series D Conversion Shares) at a conversion per share equal to $2.41, which approximated
the market price at the date of transaction, at the option of the holder, at any time after the Company has obtained shareholder approval
for the issuance of the Series D Conversion Shares pursuant to the rules of the Nasdaq Stock Market.
The Company evaluated the features of the Series
D Preferred Stock under ASC 480, and classified them as permanent equity because the Series D Preferred Stock is not mandatorily or contingently
redeemable at the stockholders option and the liquidation preference that exists does not fall within the guidance of SEC Accounting
Series Release No. 268 *Presentation in Financial Statements of Redeemable Preferred Stocks*(ASR
268).
F-41
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 16 EQUITY
(continued)**
****
**Series B Convertible Preferred StockExtinguished
Related to Sale of Equity Method Investment**
****
During the first quarter of 2025, to preserve
cash, the Company entered into discussions with Lab Services MSO for the potential redemption of our investment and on February 26, 2025,
the Company and Lab Services MSO entered into a Redemption and Abandonment Agreement, whereby Lab Services MSO redeemed the40% equity
interest in Lab Services MSO held by the Company for cash and the surrender of its Series B Preferred Stock having a carrying value of
$11,000,000. The aggregate cash amount to the Company for the redemption was $1,745,000. In addition, pursuant to the terms of the Redemption
Agreement, all shares of the Companys Series B Preferred Stock previously issued to SCBC Holdings LLC as partial consideration
for the equity interests of Laboratory Services MSO, were permanently surrendered and relinquished to the Company for no additional consideration.
The difference of $2,348,695between the carrying value of the extinguished Series B preferred stock, the aggregate cash amount to
the Company for the redemption, net of payables due to Lab Services MSO of $632,916, totaling $13,377,916, and the carrying value of the
equity method investment of $11,029,221was accounted for as an increase to additional paid-in capital.
****
**Series C Convertible Preferred Stock Sold for
Cash**
****
During the year ended
December 31, 2024, the Company sold an aggregate of3,500shares of Series C Convertible Preferred stock and received proceeds
of $3,500,000. Each share of Series C Convertible Preferred Stock is convertible into common stock of the Company (the Conversion
Shares) at a conversion per share equal to $2.41, which approximated the market price at the date of transaction, at the option
of the holder, at any time after the later of (i) the date of the shareholder approval of the issuance of the Conversion Shares pursuant
to the rules of the Nasdaq Stock Market (the Shareholder Approval) and (ii) the one year anniversary of the date of the
first issuance of any shares of the Series C Convertible Preferred Stock.
In July 2025, theCompany sold300shares
of Series C Convertible Preferred Stock and received net proceeds of $290,000after deducting offering expenses of $10,000. Each
share of Series C Convertible Preferred Stock is convertible into common stock of the Company (the Conversion Shares) at
a conversion per share equal to $2.41, which approximated the market price at the date of transaction. The Company is not required to
issue any of the Companys common stock upon conversion of the Series C Convertible Preferred Stock until the shareholder approval
for such issuance is obtained by the Company.
The Company evaluated the features of the Series
C Convertible Preferred Stock under ASC 480, and classified them as permanent equity because the Series C Convertible Preferred Stock
is not mandatorily or contingently redeemable at the stockholders option and the liquidation preference that exists does not fall
within the guidance of SEC Accounting Series Release No. 268 *Presentation in Financial Statements of Redeemable
Preferred Stocks*(ASR 268).
**Common Shares Issued as Convertible Note Payable
Commitment Fee**
****
During the year ended
December 31, 2024, the Company issued a total of33,800shares 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.
In July 2025, the Company
issueda total of10,000shares of its common stock as commitment fee for the purchase of July 2025 Convertible Note. These
shares were valued at $26,800, the fair market value on the grant date using the reported closing share price on the date of grant, and
the Company recorded it as debt discount (See Note 11 -*July 2025 Convertible Note*).
****
**Common Shares Sold
for Cash**
In June 2023, the Company entered into a sales
agreement (the Sales Agreement) with Roth Capital Partners, LLC (Roth) under which the Company may offer and
sell from time to time shares of its common stock having an aggregate offering price of up to $3.5million. During the year ended
December 31, 2024, Roth sold an aggregate of281,843shares of common stock at an average price of $10.14per share to
investors and the Company recorded net proceeds of $2,544,311, net of commission and other offering costs of $313,541.
F-42
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 16 EQUITY
(continued)**
****
**Common Shares and Warrants Sold for Cash**
On July 14, 2025, the Company entered into that
certain securities purchase agreement (the Securities Purchase Agreement), with an accredited investor, Brown Stone Capital
Ltd. (the BrownStone), pursuant to which the Company agreed to issue and sell to Brown Stone, upon the terms and conditions
set forth in the Securities Purchase Agreement,121,200shares of the Companys common stock and pre-funded warrants to
purchase354,300shares of the Companys common stock, in exchange for $475,500. The total number of shares of the Companys
common stock issuable pursuant to the pre-funded warrants is354,300shares. The closing of the transaction occurred on July
17, 2025, which is when the Company received net proceeds of $450,500after deducting offering expenses of $25,000.
The fair value of the pre-fundedwarrants
was $832,576and was based on the Black-Scholes pricing model. Input assumptions used were as follows: stock price per share of $2.35,
a risk-free interest rate of4.01%; expected volatility of91.10%; expected life of5years; and expected dividend
yield of0%. $354,297of the total gross proceeds was allocated to the warrants based on the relative fair value allocation
method, which has been reflected in shareholders equity. The warrants were classified in shareholders equity as the number
of shares were fixed and determinable, and no other provisions precluded equity treatment. $121,203of the total gross proceeds was
allocated as the value of common shares.
The direct costs related to the issuance of the
common shares and pre-funded warrants were $25,000. These direct costs were recorded as an offset against gross proceeds with $18,628being
recorded in additional paid-in capital and $6,372being recorded in common shares on a relative fair value basis.
**Common Shares Issued for Services**
During the year ended December 31, 2024, the Company
issued a total of145,153shares of its common stock for services rendered. These shares were valued at $530,350, 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 $470,350for the year ended December 31, 2024 and reduced accrued liabilities of $60,000.
****
During the year ended December 31, 2025, the Company
issued a total of606,494shares of its common stock for services rendered and to be rendered. These shares were valued at $1,880,786,
the fair market values on the grant dates using the reported closing share prices on the dates of grant, and the Company recorded stock-based
compensation expense of $1,829,871for the year ended December 31, 2025 and reduced accrued liabilities of $42,385and recorded
prepaid expense of $8,530as of December 31, 2025 which will be amortized over the rest of corresponding service periods.
**Common Shares Issued
for Warrant Exercise**
****
On November 18, 2024,
pursuant to the terms of related warrant agreements, the Company issued 42,381 shares of its common stock upon cashless exercise of warrants.
In March and April 2025, pursuant to the terms
of related warrant agreements, the Company issued an aggregate of429,181shares of its common stock upon cashless exercise
of warrants.
**Common Shares Issued
for Adjustment for 1:15 Reverse Split**
The Company issued206,033shares
of its common stock, resulting from the rounding up of the fractional shares at the one-for-fifteen reverse stock split effected on October
28, 2024.
****
**Pre-Funded Warrants
Issued for Debt Modification**
****
On December 15, 2024,
the Company issued to Mast Hill a common stock purchase warrant for the purchase of up to150,000shares of the Companys
common stock. The Pre-Funded Warrants are immediately exercisable at issuance and until the Pre-Funded Warrants are exercised in full
and have an exercise price of $0.01per share. The Pre-Funded Warrants were classified as a component of permanent equity as they
are freestanding financial instrument that is immediately exercisable, does not embody an obligation for the Company to repurchase its
own shares and permit the holder to receive a fixed number of shares of common stock upon exercise.
F-43
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 16 EQUITY
(continued)**
****
**Common Shares Issued for Debt Conversion**
****
On May 29, 2025, the Company and the June 2024
Convertible Note holder entered into that certain waiver, pursuant to which, during the period from June 1, 2025 through December 31,
2025, the investor converted its June 2024 Convertible Note in the principal amount of $2,010,827and unpaid interest of $233,795into2,244,622shares
of common stock of the Company at a per share price of $1.00(See Note 11).
**Options**
The following table summarizes
the shares of the Companys common stock issuable upon exercise of options outstanding at December 31, 2025:
| Options Outstanding | | Options Exercisable | | |
| Range of Exercise Price | | Number Outstanding at
December 31,
2025 | | | Weighted Average Remaining Contractual Life (Years) | | | Weighted Average Exercise Price | | | Number Exercisable at
December 31,
2025 | | | Weighted Average Exercise Price | | |
| $ | 2.93 31.20 | | | 15,419 | | | | 2.82 | | | $ | 6.49 | | | | 15,419 | | | $ | 6.49 | | |
| $ | 48.75 123.00 | | | 18,117 | | | | 1.23 | | | $ | 79.87 | | | | 18,117 | | | $ | 79.87 | | |
| $ | 154.50 228.00 | | | 7,633 | | | | 4.00 | | | $ | 225.72 | | | | 7,633 | | | $ | 225.72 | | |
| $ | 2.93 228.00 | | | 41,169 | | | | 2.34 | | | $ | 79.43 | | | | 41,169 | | | $ | 79.43 | | |
Stock option activity
for the years ended December 31, 2025 and 2024 was as follows:
|
| |
Number of Options | | |
Weighted Average Exercise Price | | |
|
Outstanding at January 1, 2024 | |
| 56,880 | | |
$ | 149.03 | | |
|
Granted | |
| 10,265 | | |
$ | 4.13 | | |
|
Expired | |
| (14,666 | ) | |
$ | (275.14 | ) | |
|
Outstanding at December 31, 2024 | |
| 52,479 | | |
$ | 85.45 | | |
|
Granted | |
| 2,665 | | |
$ | 3.26 | | |
|
Expired / cancelled / forfeited | |
| (13,975 | ) | |
$ | (87.50 | ) | |
|
Outstanding at December 31, 2025 | |
| 41,169 | | |
$ | 79.43 | | |
|
Options exercisable at December 31, 2025 | |
| 41,169 | | |
$ | 79.43 | | |
The aggregate intrinsic value of both stock options
outstanding and stock options exercisable at December 31, 2025 was $0.
The fair values of options granted during the
year ended December 31, 2025 were estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:
volatility of105.10%, risk-free rate of4.29%, annual dividend yield of0%, and expected life of3.00years.
The aggregate fair value of the options granted during the year ended December 31, 2025 was $6,115.
The fair values of options granted during the
year ended December 31, 2024 were estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:
volatility of83.10% -96.36%, risk-free rate of3.47% -4.79%, annual dividend yield of0%, and expected life
of3.00-5.00years. The aggregate fair value of the options granted during the year ended December 31, 2024 was
$28,694.
For the years ended December 31, 2025 and 2024,
stock-based compensation expense (adjustment) associated with stock options granted amounted to $(13,409) and $51,159, of which, $14,829and
$19,878, respectively, was recorded as compensation and related benefits, and $(28,238) and $31,281 was recorded as professional fees,
respectively.
F-44
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 16 EQUITY
(continued)**
**Options (continued)**
A summary of the status of the Companys
nonvested stock options granted as of December 31, 2025 and changes during the years ended December 31, 2025 and 2024 is presented below:
|
| |
Number of Options | | |
Weighted Average Exercise Price | | |
|
Nonvested at January 1, 2024 | |
| 5,311 | | |
$ | 23.55 | | |
|
Granted | |
| 10,265 | | |
$ | 4.13 | | |
|
Vested | |
| (9,633 | ) | |
$ | (10.31 | ) | |
|
Nonvested at December 31, 2024 | |
| 5,943 | | |
$ | 11.54 | | |
|
Granted | |
| 2,665 | | |
$ | 3.26 | | |
|
Cancelled | |
| (1,853 | ) | |
$ | (27.40 | ) | |
|
Vested | |
| (6,755 | ) | |
$ | (3.92 | ) | |
|
Nonvested at December 31, 2025 | |
| - | | |
$ | - | | |
**Warrants (Except Pre-Funded Warrants)**
The following table summarizes the shares of the
Companys common stock issuable upon exercise of warrants outstanding at December 31, 2025:
| Warrants Outstanding | | Warrants Exercisable | | |
| Range of Exercise Price | | Number Outstanding at
December 31,
2025 | | | Weighted Average Remaining Contractual Life (Years) | | | Weighted Average Exercise Price | | | Number
Exercisable
at December 31,
2025 | | | Weighted
Average
Exercise Price | | |
| $ | 7.50 37.50 | | | 86,593 | | | | 3.42 | | | $ | 8.01 | | | | 86,593 | | | $ | 8.01 | | |
| $ | 67.50 | | | 889 | | | | 2.42 | | | $ | 67.50 | | | | 889 | | | $ | 67.50 | | |
| $ | 187.50 | | | 8,264 | | | | 1.30 | | | $ | 187.50 | | | | 8,264 | | | $ | 187.50 | | |
| $ | 7.50 187.50 | | | 95,746 | | | | 3.23 | | | $ | 24.06 | | | | 95,746 | | | $ | 24.06 | | |
Stock warrant activity
for the years ended December 31, 2025 and 2024 was as follows:
|
| |
Number of
Warrants | | |
Weighted Average Exercise Price | | |
|
Outstanding at January 1, 2024 | |
| 43,035 | | |
$ | 75.53 | | |
|
Issued | |
| 169,527 | | |
$ | 10.28 | | |
|
Cancelled (*) | |
| (23,288 | ) | |
$ | (32.85 | ) | |
|
Exercised | |
| (6,278 | ) | |
$ | (50.77 | ) | |
|
Outstanding at December 31, 2024 | |
| 182,996 | | |
$ | 21.37 | | |
|
Exercised | |
| (87,250 | ) | |
$ | (18.41 | ) | |
|
Outstanding and exercisable at December 31, 2025 | |
| 95,746 | | |
$ | 24.06 | | |
|
* | Second Warrant, which was issued on May 23, 2023, July 6,
2023, October 9, 2023, and March 7, 2024, was cancelled in June 2024. Second Warrant, which was issued on June 5, 2024, is still outstanding
as of December 31, 2025 and 2024. |
|
The aggregate intrinsic value of both stock warrants
outstanding and stock warrants exercisable at December 31, 2025 was $0.
F-45
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 16 EQUITY
(continued)**
**Warrants (Except Pre-Funded Warrants) (continued)**
*Warrants Issued in
March 2024*
**
In connection with the
issuance of March 2024 Convertible Note (See Note 11), 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 never fair
valued and 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 finders fee.
Based upon the Companys
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
finders fee meet the definition of a derivative liability, as the Company cannot avoid a net cash settlement under certain circumstances.
The fair value of the9,450warrants with an exercise price of $30.00exercisable until the five-year anniversary of March
7, 2024 was classified as a derivative liability on March 7, 2024. The fair values of the9,450warrants with an exercise price
of $30.00exercisable 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 of85.24%, risk-free rate of4.07%, annual
dividend yield of0% and expected life of5years.
The warrants with an
exercise price of $30.00exercisable until the five-year anniversary of March 7, 2024 issued to Mast Hill to purchase8,750shares
of the Companys common stock were treated as a discount on the convertible note payable and were valued at $20,374and were
amortized over the term of the March 2024 Convertible Note.
The warrants with an
exercise price of $30.00exercisable until the five-year anniversary of March 7, 2024 issued to a third party as a finders
fee to purchase700shares of the Companys common stock were treated as convertible debt issuance costs and were valued
at $1,679and were amortized over the term of the March 2024 Convertible Note.
*Warrants Issued in
June 2024*
**
In connection with the issuance of June 2024 Convertible
Note (See Note 11), 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 June 5, 2024 to a third party
as a finders fee.
Based upon the Companys 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 finders
fee meet the definition of a derivative liability, as the Company cannot avoid a net cash settlement under certain circumstances. On March
31, 2025 and June 5, 2024, management determined the probability of failing to make an amortization payment when due to be remote and
as such the fair value of the80,000warrants with an exercise price of $7.50exercisable 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 the72,000warrants with an exercise price of $9.75exercisable until the five-year
anniversary of June 5, 2024 was classified as a derivative liability on June 5, 2024. The fair values of the72,000warrants
with an exercise price of $9.75exercisable until the five-year anniversary of June5, 2024 issued on June 5, 2024 were computed
using the Black-Scholes option-pricing model with the following assumptions: stock price of $10.39, volatility of85.72%, risk-free
rate of4.31%, annual dividend yield of0% and expected life of5years.
The warrants with an exercise price of $9.75exercisable
until the five-year anniversary of June 5, 2024 issued to Mast Hill to purchase66,667shares of the Companys common
stock were treated as a discount on the convertible note payable and were valued at $418,194and were amortized over the term of
the June 2024 Convertible Note.
The warrants with an exercise price of $9.75exercisable
until the five-year anniversary of June 5, 2024 issued to a third party as a finders fee to purchase5,333shares of
the Companys common stock were treated as convertible debt issuance costs and were valued at $39,221and were amortized over
the term of the June 2024 Convertible Note.
F-46
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 16 EQUITY
(continued)**
**Warrants (Except Pre-Funded Warrants) (continued)**
*Warrants Cancelled
in June 2024*
**
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 cancelled23,288warrants since these convertible notes were fully extinguished.
*Warrants Exercised*
On November 18, 2024,6,278warrants
were cashless exercised.
**
In March and April 2025, 87,250 warrants were
cashless exercised.
A
summary of the status of the Companys nonvested stock warrants issued as of December 31, 2025 and changes during the years ended
December 31, 2025 and 2024 was presented below:
|
| |
Number of Warrants | | |
Weighted Average Exercise Price | | |
|
Nonvested at January 1, 2024 | |
| 15,211 | | |
$ | 39.90 | | |
|
Issued | |
| 169,527 | | |
$ | 10.28 | | |
|
Cancelled | |
| (23,288 | ) | |
$ | (32.85 | ) | |
|
Vested | |
| (81,450 | ) | |
$ | (12.10 | ) | |
|
Nonvested at December 31, 2024 | |
| 80,000 | | |
$ | 7.50 | | |
|
Vested | |
| (80,000 | ) | |
$ | (7.50 | ) | |
|
Nonvested at December 31, 2025 | |
| - | | |
$ | - | | |
****
**Pre-Funded Warrants**
****
The
number of pre-funded warrantsoutstanding as ofDecember 31, 2025 is as follows:
|
Description | |
Number Outstanding | | |
Weighted Average Exercise Price | | |
|
Pre-funded warrants issued in December 2024 | |
| 150,000 | | |
$ | 0.01 | | |
|
Pre-funded warrants issued in July 2025 | |
| 354,300 | | |
$ | 0.0001 | | |
|
Outstanding at December 31, 2025 | |
| 504,300 | | |
$ | 0.0030 | | |
A
summary ofpre-funded warrantactivity during the years ended December 31, 2025 and 2024 is as follows:
|
| |
Number of Pre-Funded Warrants | | |
Weighted Average Exercise Price | | |
|
Outstanding at January 1, 2024 | |
| - | | |
$ | - | | |
|
Pre-funded warrants issued | |
| 150,000 | | |
$ | 0.01 | | |
|
Outstanding at December 31, 2024 | |
| 150,000 | | |
$ | 0.01 | | |
|
Pre-funded warrants issued | |
| 354,300 | | |
$ | 0.0001 | | |
|
Outstanding at December 31, 2025 | |
| 504,300 | | |
$ | 0.0030 | | |
****
F-47
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 17 - STATUTORY
RESERVE AND RESTRICTED NET ASSETS**
The Companys 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.
The 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 least10% of the after-tax net income determined in accordance with PRC GAAP until the reserve
is equal to50% of the entitys 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 didnot make
any appropriation to statutory reserve for Avalon Shanghai during the years ended December 31, 2025 and 2024 as it incurred net loss in
the periods. As of both December 31, 2025 and 2024, the restricted amount as determined pursuant to PRC statutory laws totaled $6,578.
Relevant PRC laws and regulations restrict the
Companys PRC subsidiary, Avalon Shanghai, from transferring a portion of its net assets, equivalent to its statutory reserve and
its share capital, to the Companys shareholders in the form of loans, advances or cash dividends. Only PRC entitys accumulated
profit may be distributed as dividend to the Companys shareholders without the consent of a third party. As of both December 31,
2025 and 2024, total restricted net assets amounted to $1,206,578.
**NOTE 18 NONCONTROLLING
INTEREST**
As of December
31, 2025, Dr. Yu Zhou, former director and former co-chief executive officer of Genexosome, who owns40% of the equity interests
of Genexosome, which is not under the Companys control. During the years ended December 31, 2025 and 2024, the Company did not
allocate any net loss to the noncontrolling interest holder due to its inability to satisfy these deficits.
**NOTE 19 CONDENSED
FINANCIAL INFORMATION OF THE PARENT COMPANY**
Pursuant to the requirements of Rule 12-04(a),
5-04(c) and 4-08(e)(3) of Regulation S-X, the condensed financial information of the parent company shall be filed when the restricted
net assets of consolidated subsidiary exceed25% 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 Companys 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 teston 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 Companys PRC subsidiary did not exceed25% of the consolidated net assets of the Company, therefore,
the condensed financial statements for the parent company have not been required.
**NOTE 20 -CONCENTRATIONS**
****
**Suppliers**
No supplier
accounted for10% or more of the Companys purchase during the years ended December
31, 2025 and 2024.
****
**NOTE
21 SEGMENT INFORMATION**
The segment reporting structure uses the Companys
management reporting structure as its foundation to reflect how the Company manages the businesses internally.
On December 12, 2025, the Company purchased 100%
of RPM. During the year ended December 31, 2025, the management reporting structure was composed of two strategic business units, mainly
organized by services, led by the Companys Chief Executive Officer, who is its CODM. Using the accounting guidance on segment reporting,
the Company determined that its two operating segments were aligned with its two reportable segments corresponding to its strategic business
units.
During the year ended December 31, 2024, the management
reporting structure was composed of one strategic business unit, mainly organized by services, led by the CompanysChief Executive
Officer, who is its CODM. Using the accounting guidance on segment reporting, the Company determined that itsoneoperating
segment was aligned with itsonereportable segment corresponding to its strategic business unit.
F-48
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE
21 SEGMENT INFORMATION (continued)**
On February 9, 2023, the Company purchased40%
of Lab Services MSO. During the first quarter of 2025, to preserve cash, the Company entered into discussions with Lab Services MSO for
the potential redemption of our investment and on February 26, 2025, the Company and Lab Services MSO entered into a Redemption and Abandonment
Agreement, whereby Lab Services MSO redeemed the40% equity interest in Lab Services MSO held by the Company. Beginning in February
2025, the Company no longer offers laboratory services. During the year ended December 31, 2025, the Company operated intworeportable
business segments: (1) the AI generated polishing segment (which commenced on December 12, 2025), and (2) laboratory testing services
segment (which ended on February 26, 2025) since Lab Services MSOs operating results were regularly reviewed by the Companys
chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance. During the
year ended December 31, 2024, the Company operated inonereportable business segment: laboratory testing services segment since
Lab Services MSOs operating results were regularly reviewed by the Companys chief operating decision maker to make decisions
about resources to be allocated to the segment and assess its performance. The Company regularly reviewed the operating results and performance
of Lab Services MSO, which was the Companys equity method investee.
The accounting policies for thesegments
are the same as those described in Note 3. Our reportable segments are aligned principally around the differences in services. Income
from equity method investment Lab Services MSO is calculated by subtracting amortization of intangible assets acquired from acquisition
from the Companys share of Lab Services MSOs net income; and AI generated publishing income is calculated by subtracting
AI generated publishing cost of revenue and AI generated publishing operating expenses from AI generated publishing revenue. The assets
and certain expenses related to corporate activities are not allocated to the segments.
Discontinued operations are not included in the
applicable reportable segments.
Information with respect to these reportable business
segments for the years ended December 31, 2025 and 2024 was as follows:
|
| |
Year Ended December 31, 2025 | | |
|
| |
Lab | | |
AI | | |
| | |
| | |
|
| |
Services | | |
Generated | | |
Corporate / | | |
| | |
|
| |
MSO | | |
Polishing | | |
Other | | |
Total | | |
|
Income from equity method investment - Lab Services MSO | |
$ | 392,677 | | |
$ | - | | |
$ | - | | |
$ | 392,677 | | |
|
Other operating expenses | |
| - | | |
| (94,553 | ) | |
| (7,889,483 | ) | |
| (7,984,036 | ) | |
|
Other (expense) income: | |
| | | |
| | | |
| | | |
| | | |
|
Interest expense | |
| - | | |
| - | | |
| (1,456,694 | ) | |
| (1,456,694 | ) | |
|
Loss on extinguishment of debt | |
| - | | |
| - | | |
| (9,076,587 | ) | |
| (9,076,587 | ) | |
|
Other income | |
| - | | |
| 100 | | |
| 605,667 | | |
| 605,767 | | |
|
Net income (loss) | |
$ | 392,677 | | |
$ | (94,453 | ) | |
$ | (17,817,097 | ) | |
$ | (17,518,873 | ) | |
****
|
| |
Year Ended December 31, 2024 | | |
|
| |
Lab | | |
| | |
| | |
|
| |
Services | | |
Corporate / | | |
| | |
|
| |
MSO | | |
Other | | |
Total | | |
|
Loss from equity method investment - Lab Services MSO | |
$ | (846,588 | ) | |
$ | - | | |
$ | (846,588 | ) | |
|
Other operating expenses | |
| - | | |
| (3,994,662 | ) | |
| (3,994,662 | ) | |
|
Other expense: | |
| | | |
| | | |
| | | |
|
Interest expense | |
| - | | |
| (1,659,745 | ) | |
| (1,659,745 | ) | |
|
Other expense | |
| - | | |
| (538,609 | ) | |
| (538,609 | ) | |
|
Net loss | |
$ | (846,588 | ) | |
$ | (6,193,016 | ) | |
$ | (7,039,604 | ) | |
****
|
Identifiable long-lived tangible assets at December 31, 2025 and 2024 | |
December 31,
2025 | | |
December 31,
2024 | | |
|
Corporate/Other | |
$ | 727 | | |
$ | 1,298 | | |
|
Identifiable long-lived tangible assets at December 31, 2025 and 2024 | |
December 31,
2025 | | |
December 31,
2024 | | |
|
China | |
$ | 727 | | |
$ | 1,298 | | |
****
F-49
****
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
****
**NOTE 22 COMMITMENTS
AND CONTINGENCIES**
****
**Litigation**
****
From time to time, the Company is subject to ordinary
routine litigation incidental to its normal business operations. The Company is not currently a party to, and its property is not subject
to, any material legal proceedings, except as set forth below.
****
On October 28, 2019, Research Institute at Nationwide
Childrens Hospital (Research Institute) filed a Complaint in the United States District Court for the Southern District
of Ohio Eastern Division against Dr. Zhou, Li Chen, the Company and Genexosome with various claims against the Company and Genexosome
including misappropriation of trade secrets in violation of the Defend Trade Secrets Act of 2016 and violation of Ohio Uniform Trade Secrets
Act. The Company, Genexosome and the Research Institute entered into a Settlement Agreement dated June 7, 2022 (the Settlement
Date) whereby the Company agreed to pay the Research Institute $450,000on each of the sixty-day, one year andtwo-year
anniversaries of the Settlement Date. In addition, the Company agreed to pay the Research Institute30% of the Companys initial
pre-tax profit of $3,333,333,20% of the Companys second pre-tax profit of $3,333,333and10% of the Companys
third pre-tax profit of $3,333,333. The parties provided a mutual release as well. As of December 31, 2025 and 2024, the accrued litigation
settlement amounted to $363,450and $373,450, respectively.
****
**Operating
Leases Commitment**
The Company is a party to leases for office space.
These lease agreements expire through December 2026. Rent expense under all operating leases amounted to approximately $97,000and
$127,000for the years ended December 31, 2025 and 2024, respectively. Supplemental cash flow informationrelated to leases
for the years ended December 31, 2025 and 2024 is as follows:
|
| |
Years Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Cash paid for amounts included in the measurement of lease liabilities: | |
| | |
| | |
|
Operating cash flows paid for operating lease | |
$ | 81,650 | | |
$ | 125,076 | | |
|
Right-of-use assets obtained in exchange for lease obligation: | |
| | | |
| | | |
|
Operating lease | |
$ | 127,486 | | |
$ | - | | |
The following table summarizes the maturity of lease liabilities under
operating lease as of December 31, 2025:
|
For the Year Ending December 31: | |
Operating Lease | | |
|
2026 | |
$ | 6,000 | | |
|
2027 and thereafter | |
| - | | |
|
Total lease payments | |
| 6,000 | | |
|
Amount of lease payments representing interest | |
| - | | |
|
Total present value of operating lease liabilities | |
$ | 6,000 | | |
****
**NOTE 23 SUBSEQUENT
EVENTS**
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.
**Common Shares Issued for Debt Conversion**
****
During the period from January 1, 2026 through
March 17, 2026, an investor converted its convertible note in the principal amount of $545,949and unpaid interest of $5,525into551,474
shares of common stockof the Company at a per share price of $1.00.
**Common Shares Issued for Pre-Funded Warrants
Exercise**
In January 2026, the Company issued an aggregate
of354,257shares of its common stock upon cashless exercise of pre-funded warrants.
**Common Shares Issued for Services**
****
During the period from January 1, 2026 through
March 17, 2026, the Company issued a total of505,000shares of its common stock for services rendered and to be rendered. These
shares were valued at $522,800, the fair market values on the grant dates using the reported closing share prices on the dates of grant.
**Common Shares Issued for Warrant Exercise**
In February 2026, pursuant to the terms of related
warrant agreements, the Company issued an aggregate of1,268,672shares of its common stock upon cashless exercise of warrants.
****
F-50
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
**NOTE 23 SUBSEQUENT EVENTS (continued)**
**Securities Purchase
Agreements**
****
On February 11, 2026,
the Company entered into a securities purchase agreement with an accredited investor pursuant to which the Company issued to the investor
a promissory note in the principal amount of $233,910, (inclusive of a $26,910 original issuance discount) for gross proceeds of $207,000.
On February 19, 2026, the Company entered
into a securities purchase agreement with an accredited investor pursuant to which the Company issued to the investor a promissory note
in the principal amount of $233,910 (inclusive of a $26,910 original issuance discount) for gross proceeds of $207,000.
On February 26, 2026, the Company entered into
securities purchase agreements with certain institutional investors for the issuance and sale in a private placement of (i) 490,197 shares
of the Companys common stock at a purchase price of $0.51 per share; (ii) pre-funded warrants at a purchase price of 0.5099 per
pre-funded warrant to purchase up to an aggregate of 5,882,353 shares of the Companys common stock; (iii) Series A-1 warrants to
purchase up to 6,372,550 shares of the Companys common stock; and (iv) Series A-2 warrants to purchase up to 6,372,550 shares of
the Companys common stock.
**Amendment to Unsecured Bridge Note**
On February 15, 2026, the Company entered into
Amendment #2 (the Note Amendment) to unsecured bridge note dated December 11, 2025 in the original principal amount of $375,000.
The Note Amendment extended the time periods under the bridge note for the first payment deadline, the second payment deadline and third
payment deadline as follows: (i) the first payment deadline under this Note Amendment is extended to March 16, 2026 from February 15,
2026; the second payment deadline under the Note Amendment is extended to April 15, 2026 from March 15, 2026 and (iii) the third payment
deadline under the Note Amendment is extended to May 15, 2026 from April 15, 2026.
****
**Amended and Restated Membership Interest Purchase
Agreement**
****
As previously reported, on November 17, 2023,
the Company entered into a Membership Interest Purchase Agreement (the MIPA) with Wenzhao Lu, the Chairman of the Companys
Board of Directors, pursuant to which (i) Mr. Lu acquired from the Company 30% of the total outstanding membership interests of Avalon
RT 9 for a cash purchase price of $3 million (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 million.
On February 18, 2026, the Company and Mr. Lu entered
into an Amended and Restated Membership Interest Purchase Agreement (the Amended MIPA), pursuant to which the Company sold
to Mr. Lu 100% of the membership interests of Avalon RT 9 for (i) approximately $3.1 million, and (ii) the satisfaction, in full, of an
approximately $5.9 million balance due on an existing mortgage financing. This represents a total amended aggregated purchase price of
approximately $9 million.
**Directors Resignation and Appointment**
On February 24, 2026,
each of William B. Stilley, III, Wilbert J. Tauzin II and Tevi Troy informed the Company that they will be resigning from the Companys
Board of Directors (the Board) as well as the Companys Board committees on which they respectively served effective
as of February 24, 2026. Messrs. Stilleys, Tauzins and Troys resignations were not the result of any disagreement
with the Company, any matter related to the Companys operations, policies or practices, the Companys management or the Board.
On February 24, 2026,
the Board appointed (i) Lourdes Felix as a member and Chair of the audit committee and member of the compensation committee; (ii) Michael
Mathews as a member of the audit committee, the compensation committee and the nominating and corporate governance committee and Chair
of the nominating and corporate governance committee; and (ii) Steven Sanders as lead independent director and Chair of the compensation
committee. All of the foregoing appointments are effective as of February 24, 2026.
F-51