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, 2024
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission file number: 001-38728
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Freehold, New Jersey 07728
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number: (732)780-4400
Securities registered pursuant to Section 12(b)
of the Act:
Title of each Class: Trading Symbol Name of Each Exchange
Common Stock, $0.0001 par value 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 management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. Yes ☐ No ☒
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 registrant’s
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 28, 2024, the last business day of the registrant’s
most recently completed second fiscal quarter, the market value of our common stock held by non-affiliates was approximately $2,757,095.
The number of shares of our common stock, $0.0001
par value per share, outstanding as of March 31, 2025, was 1,651,667.
Documents incorporated by reference: NONE
TABLE OF CONTENTS
Page
PART I
Item 1. Business 1
Item 1A. Risk Factors 13
Item 1B. Unresolved Staff Comments 39
Item 1C. Cybersecurity 39
Item 2. Properties 40
Item 3. Legal Proceedings 40
Item 4. Mine Safety Disclosures 40
PART II
Item 6. [Reserved] 41
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 51
Item 8. Financial Statements and Supplementary Data 51
Item 9A. Controls and Procedures 51
Item 9B. Other Information 52
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 52
PART III
Item 10. Directors, Executive Officers and Corporate Governance 53
Item 11. Executive Compensation 61
Item 14. Principal Accounting Fees and Services 69
PART IV
Signatures 81
i
Cautionary Statement
Regarding Forward-Looking Statements
Certain statements in
this Annual Report on Form 10-K for the year ended December 31, 2024 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 Company’s fiscal year ended December 31.
On October 28, 2024, the Company effectuated a reverse stock split
of the Company’s common stock at a ratio of 1-for-15 (the “Reverse Stock Split”). All amounts and values presented in
this Annual Report on Form 10-K have been retroactively adjusted to reflect the Reverse Stock Split for all periods presented, unless
otherwise indicated.
ii
PART I
ITEM 1. BUSINESS
We are a commercial-stage
company dedicated to developing and delivering precision diagnostic consumer products. We are currently marketing the Keto Air breathalyzer
device and plan to develop additional diagnostic uses of the breathalyzer technology. We also provided laboratory services in 2024 and
2023, offering a broad portfolio of diagnostic tests, including drug testing, toxicology, and a broad array of test services, from general
bloodwork to anatomic pathology, and urine toxicology. We completed an acquisition of a 40% membership interest in Laboratory Services
MSO, LLC (“Lab Services MSO”), which closed in February 2023. During 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.
In 2024, we
initiated sales of our first diagnostic consumer product, Keto Air, a device that tests ketosis levels.
We had the following areas of focus in 2024 and 2023:
Laboratory Acquisitions
We had embarked on a laboratory rollup strategy focused on forming joint ventures and acquiring laboratories that were accretive to our
commercial strategy. As a first step, in February 2023, we acquired a 40% membership interest in Lab Services MSO. Among other things,
Lab Services MSO provides toxicology and wellness testing services, a broad portfolio of diagnostic tests, and a broad array of test services.
During 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.
Research and Development
We are focused on bringing forward intellectual property through joint
patent filings 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 to show binding affinity to the respective cytokines. We currently
are focused on bringing forward the intellectual property associated with this program through joint patent submissions, new research
and development has been suspended.
Product Commercialization
We have begun the commercialization
and development of a versatile breathalyzer system.
We were granted
exclusive 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 device 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 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.
1
Other Areas
In order to preserve
cash and focus on our core laboratory rollup strategy and product commercialization, we have currently suspended all research and development
efforts related to cellular therapy in order to redirect our funding efforts to our core business strategies outlined above.
China Operations
Due to the winding down of the medical related consulting services
segment, in November 2022, we decided to cease all operations in the People’s Republic of China (the “PRC”) with the
exception of a small administrative office, in Beijing. We do not expect nor do we plan
that we will further operate in the PRC or generate revenue from PRC operations for the foreseeable future.
The accompanying consolidated financial statements
reflect the activities of the Company and each of the following entities:
2
Sales and Marketing
We launched sales of the KetoAir in the U.S. in
2024. We have retained a marketing expert to assist us to bring this product to market through social media, influencer promotion and
our website. We launched this product at the 2024 “KetoCon” convention which took place May 31, 2024 in Austin Texas.
Markets
Laboratory Services
During 2024 and 2023 and until February 2025,
through our membership interest in Lab Services MSO, we were focused on delivering high quality services related to toxicology and wellness
testing. The panels that we tested for were thyroid panel, comprehensive metabolic panel, kidney profile, liver function tests, and other
individual tests.
We offered our laboratory services in California,
Texas and Arizona. During 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.
Breathalyzer System (KetoAir)
Our current area of focus for the launch of the
KetoAir is within the U.S. We are focused on the population within the U.S. that is using the Keto Diet approach to weight loss and diabetic
management.
Avalon RT 9 Properties, LLC
We own commercial property located in Freehold,
New Jersey. This property serves as our corporate headquarters and contains several commercial tenants that generate revenue through rental
income.
Strategic Development
In late 2024, we launched an initiative seeking
transformational merger candidates. The Company determined that it had limited access to cash and it was in the best interest of shareholders
to seek a strategic merger.
Intellectual Property
Our goal is to obtain, maintain and enforce
patent rights for our products, formulations, processes, methods of use and other proprietary technologies, preserve our trade
secrets, and operate without infringing on the proprietary rights of other parties, both in the United States and abroad. Our policy
is to actively seek to obtain, where appropriate, the broadest intellectual property protection possible for our current product
candidates and any future product candidates, proprietary information and proprietary technology through a combination of
contractual arrangements and patents, both in the United States and abroad. Even patent protection, however, may not always afford
us with complete protection against competitors who seek to circumvent our patents. If we fail to adequately protect or enforce our
intellectual property rights or secure rights to patents of others, the value of our intellectual property rights would diminish. To
this end, we require all of our employees, consultants, advisors and other contractors to enter into confidentiality agreements that
prohibit the disclosure and use of confidential information and, where applicable, require disclosure and assignment to us of the
ideas, developments, discoveries and inventions relevant to our technologies and important to our business.
3
Competition
General
Many of our existing and potential future competitors
have significantly greater financial resources and expertise in operations, research and development, manufacturing, obtaining marketing
approvals and marketing approved products than we do. Mergers and acquisitions may result in even more resources being concentrated among
a smaller number of our competitors. Smaller, or early stage, companies may also prove to be significant competitors, particularly through
collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified
scientific and management personnel, as well as in acquiring technologies complementary to, or necessary for, our programs.
We expect that our ability to compete effectively
will depend upon our ability to:
● attract and retain key personnel; and
Failure to do one or more of these activities
could have an adverse effect on our business, financial condition or results of operations.
4
Avalon RT 9 Properties, LLC
We own commercial property located in Freehold,
New Jersey. This property serves as our corporate headquarters and contains several commercial tenants that generate revenue through rental
income. The property is located on a major highway and is one of the largest buildings in the surrounding areas. It is centrally located
and maintains high occupancy. There are other commercial properties in the vicinity that offer similar amenities. However, premier executive
offices are limited and as such, we expect to continue to maintain high occupancy in the near term.
Employees
As of March 31, 2025, we employed five employees,
four of which are full time employees. None of our employees is represented by a collective bargaining arrangement.
Government Regulation
Overview
The healthcare industry in the U.S. is highly
regulated and subject to changing political, legislative, regulatory, and other influences. Further, the healthcare industry is currently
undergoing rapid change. We are uncertain how, when or in what context these new changes will be adopted or implemented. These new regulations
could create unexpected liabilities for us, could cause us or our members to incur additional costs and could restrict our or our clients’
operations. Many of the laws are complex and their application to us, our clients, or the specific services and relationships we have
with our members are not always clear. Our failure to anticipate accurately the application of these laws and regulations, or our other
failure to comply, could create liability for us, result in adverse publicity, and otherwise negatively affect our business.
Holding Foreign Companies Accountable Act
Compliance
The Holding Foreign Companies Accountable Act,
or the HFCA Act, was enacted on December 18, 2020. According to the HFCA Act, if the SEC determines that Avalon has filed audit reports
issued by a registered public accounting firm that has not been subject to inspection by the PCAOB for three consecutive years beginning
in 2021, the SEC will prohibit Avalon’s securities from being traded on a national securities exchange or in the over-the-counter
trading market in the United States.
On December 16, 2021, the PCAOB issued a Determination
Report which reported that the PCAOB is unable to inspect or investigate completely registered public accounting firms headquartered in:
(1) mainland China of the People’s Republic of China, because of a position taken by one or more authorities in mainland China;
and (2) Hong Kong, a Special Administrative Region of the PRC, because of a position taken by one or more authorities in Hong Kong.
Avalon’s auditor is M&K CPAS PLLC (M&K”), based
in Texas. M&K is registered with the PCAOB and is subject to laws in the United States pursuant to which the PCAOB conducts regular
inspections to assess their compliance with the applicable professional standards. Since M&K is located in the United States, the
PCAOB has been able to conduct inspections of M&K. In addition, M&K is not among the PCAOB registered public accounting firms
registered in mainland China or Hong Kong that are subject to PCAOB’s determination on December 16, 2021.
5
Other Healthcare Fraud and Abuse Laws
In the U.S., our activities are potentially subject
to regulation by various federal, state and local authorities in addition to the FDA, including but not limited to, the Centers for Medicare
and Medicaid Services, or CMS, other divisions of the U.S. Department of Health and Human Services (such as the Office of Inspector General
and the Health Resources and Service Administration), the U.S. Department of Justice, or the DOJ, and individual U.S. Attorney offices
within the DOJ, and state and local governments. For example, sales, marketing and scientific/educational grant programs may have to comply
with the anti-fraud and abuse provisions of the Social Security Act, the false claims laws, the privacy and security provisions of the
Health Insurance Portability and Accountability Act, or HIPAA, and similar state laws, each as amended, as applicable.
The federal Anti-Kickback Statute prohibits, among
other things, any person or entity from knowingly and willfully offering, paying, soliciting or receiving any remuneration, directly or
indirectly, overtly or covertly, in cash or in kind, to induce or in return for purchasing, leasing, ordering or arranging for the purchase,
lease or order of any item or service reimbursable, in whole or in part, under Medicare, Medicaid or other federal healthcare programs.
The term remuneration has been interpreted broadly to include anything of value. The Anti-Kickback Statute has been interpreted to apply
to arrangements between therapeutic product manufacturers on one hand and prescribers, purchasers, and formulary managers on the other.
There are a number of statutory exceptions and regulatory safe harbors protecting some common activities from prosecution. The exceptions
and safe harbors are drawn narrowly and practices that involve remuneration that may be alleged to be intended to induce prescribing,
purchasing or recommending may be subject to scrutiny if they do not qualify for an exception or safe harbor. Failure to meet all of the
requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the
Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review
of all of its facts and circumstances. Additionally, the intent standard under the Anti-Kickback Statute was amended by the ACA to a stricter
standard such that a person or entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order
to have committed a violation. In addition, the ACA codified case law that a claim including items or services resulting from a violation
of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act, or FCA.
The federal false claims and civil monetary penalty
laws, including the FCA, which imposes significant penalties and can be enforced by private citizens through civil qui tam actions, prohibit
any person or entity from, among other things, knowingly presenting, or causing to be presented, a false or fraudulent claim for payment
to, or approval by, the federal healthcare programs, including Medicare and Medicaid, or knowingly making, using, or causing to be made
or used a false record or statement material to a false or fraudulent claim to the federal government. A claim includes “any request
or demand” for money or property presented to the U.S. government. For instance, historically, pharmaceutical and other healthcare
companies have been prosecuted under these laws for allegedly providing free product to customers with the expectation that the customers
would bill federal programs for the product. Other companies have been prosecuted for causing false claims to be submitted because of
the companies’ marketing of the product for unapproved, off-label, and thus generally non-reimbursable, uses.
HIPAA created additional federal criminal statutes
that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud or to obtain, by means
of false or fraudulent pretenses, representations or promises, any money or property owned by, or under the control or custody of, any
healthcare benefit program, including private third-party payors, willfully obstructing a criminal investigation of a healthcare offense,
and knowingly and willfully falsifying, concealing or covering up by trick, scheme or device, a material fact or making any materially
false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. Like
the Anti-Kickback Statute, the ACA amended the intent standard for certain healthcare fraud statutes under HIPAA such that a person or
entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.
Many states have similar, and typically more prohibitive,
fraud and abuse statutes or regulations that apply to items and services reimbursed under Medicaid and other state programs, or, in several
states, apply regardless of the payor. Additionally, to the extent that our product candidates may in the future be sold in a foreign
country, we may be subject to similar foreign laws.
6
We may be subject to data privacy and security
regulations by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information
Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, imposes requirements relating to the privacy,
security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s privacy and
security standards directly applicable to business associates, independent contractors, or agents of covered entities that receive or
obtain protected health information in connection with providing a service on behalf of a covered entity. HITECH also created four new
tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and
gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce HIPAA and seek
attorneys’ fees and costs associated with pursuing federal civil actions. In addition, many state laws govern the privacy and security
of health information in specified circumstances, many of which differ from each other in significant ways, are often not pre-empted by
HIPAA, and may have a more prohibitive effect than HIPAA, thus complicating compliance efforts.
We expect our product, after approval, may be
eligible for coverage under Medicare, the federal health care program that provides health care benefits to the aged and disabled, and
covers outpatient services and supplies, including certain pharmaceutical products, that are medically necessary to treat a beneficiary’s
health condition. In addition, the product may be covered and reimbursed under other government programs, such as Medicaid and the 340B
Drug Pricing Program. The Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national
rebate agreement with the Secretary of the Department of Health and Human Services as a condition for states to receive federal matching
funds for the manufacturer’s outpatient drugs furnished to Medicaid patients. Under the 340B Drug Pricing Program, the manufacturer
must extend discounts to entities that participate in the program. As part of the requirements to participate in certain government programs,
many pharmaceutical manufacturers must calculate and report certain price reporting metrics to the government, such as average manufacturer
price, or AMP, and best price. Penalties may apply in some cases when such metrics are not submitted accurately and timely.
Additionally, the federal Physician Payments Sunshine
Act, or the Sunshine Act, within the ACA, and its implementing regulations, require that certain manufacturers of drugs, devices, biological
and medical supplies for which payment is available under Medicare, Medicaid or the Children’s Health Insurance Program (with certain
exceptions) report annually to CMS information related to certain payments or other transfers of value made or distributed to physicians
and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physicians and teaching hospitals
and to report annually certain ownership and investment interests held by physicians and their immediate family members. Failure to report
accurately could result in penalties. In addition, many states also govern the reporting of payments or other transfers of value, many
of which differ from each other in significant ways, are often not pre-empted, and may have a more prohibitive effect than the Sunshine
Act, thus further complicating compliance efforts.
New Legislation and Regulations
From time to time, legislation is drafted, introduced
and passed in Congress that could significantly change the statutory provisions governing the testing, approval, manufacturing and marketing
of products regulated by the FDA. In addition to new legislation, FDA regulations and policies are often revised or interpreted by the
agency in ways that may significantly affect our business and our products. It is impossible to predict whether further legislative changes
will be enacted or whether FDA regulations, guidance, policies or interpretations will be changed or what the effect of such changes,
if any, may be.
Recent Developments
Mortgage and Security
Agreement
On March 27, 2024, the Company entered into a Mortgage and Security
Agreement (the “Mast Hill Mortgage”) with Mast Hill Fund L.P. (“Mast Hill”) to secure the payment performance
and obligation under certain follow-up financing agreements described below.
In March 2024, the Company entered into follow-up financing agreements
with Mast Hill, which included the issuance of 13% senior secured promissory notes totaling $700,000 convertible into common stock, as
well as the issuance of up to 7,000 shares of common stock as a commitment fee, and warrants for the purchase of up to 8,750 shares of
common stock at an initial price per share of $30.00, and common share purchase warrants for the purchase of up to 8,077 shares of common
stock at an initial price per share of $19.50, with a total purchase price of $665,000 (the “2024 Financing Agreements”).
These agreements were made under the same terms and conditions of the prior rounds of convertible note financing in October 2023 and May
2023 (the “2023 Financing Agreements”).
On March 27, 2024, the Company also entered into a Mortgage and Security
Agreement (the “Firstfire Mortgage”) with Firstfire Global Opportunities Fund, LLC (“Firstfire”) to secure the
payment performance and obligation under the 2023 Financing Agreements.
7
Convertible Note
Financing and Mortgage and Security Agreement
On June 5, 2024, the Company entered into securities purchase agreements
(the “Securities Purchase Agreements”) with Mast Hill for the issuance of 13% senior secured promissory notes in the
aggregate principal amount of $2,845,000 (collectively, the “Notes”) convertible into shares of the Company’s common
stock, as well as the issuance of up to 26,800 shares of common stock as a commitment fee and warrants for the purchase of up to 146,667
shares of common stock (the “Convertible Note Financing”). The Company and its subsidiaries entered into those certain security
agreements (the “Security Agreements”), creating a security interest in certain property of the Company and its subsidiaries
to secure the prompt payment, performance and discharge in full of all of the Company’s obligations under the Notes. The transaction
closed on June 5, 2024.
Mast Hill acquired the Notes with principal amount of $2,845,000
and paid the purchase price of $2,702,750 after an original issue discount of $142,250, with a conversion price of $11.25, subject to
adjustment as provided in Notes. Also on June 5, 2024, the Company issued (i) a warrant to purchase 66,667 shares of common stock with
an exercise price of $9.75 exercisable until June 5, 2029 (the “First Warrant”), (ii) a warrant to purchase 80,000 shares
of common stock with an exercise price of $7.50 exercisable until June 5, 2029, which warrant shall be cancelled and extinguished against
payment of the Notes (the “Second Warrant” and collectively with the First Warrant, the “Warrants”), and (iii)
26,800 shares of common stock to Mast Hill as additional consideration for the purchase of the Note ( the “Commitment Shares”),
which were earned in full as of June 5, 2024. On the closing date, the Company delivered such duly executed Notes, warrants and common
stock to Mast Hill against delivery of such purchase price.
The Company used the
proceeds from the Convertible Note Financing to pay off all previously issued convertible notes to Mast Hill and Firstfire.
On June 5, 2024, the Company also entered into a Mortgage and Security
Agreement (the “Mortgage”) with Mast Hill to secure the payment, performance, and obligations under the above-mentioned Convertible
Note Financing. As of June 5, 2024, the Company was indebted to Mast Hill in the combined principal sum of $2,845,000.
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 Note, the Company paid a waiver fee of $150,000 to Mast Hill, and the Company
issued to Mast Hill a common stock purchase warrant for the purchase of up to 150,000 shares of the Company’s common stock.
At-the-Market
Offering
In June 2023, the Company entered
into a sales agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (“Roth”) under which the Company
could offer and sell from time to time shares of its common stock having an aggregate offering price of up to $3.5 million. From
July 1, 2023 to August 16, 2024, we sold an aggregate of 312,285 shares of our common stock at an average price of $11.19 per share to
investors pursuant to the Sales Agreement, and received net cash proceeds of $3,388,251, net of cash paid for Roth’s commissions
and other fees of $104,992.
Reverse Stock Split & Decrease in Authorized
Shares
On October 23, 2024,
the Company filed a certificate of amendment (the “Amendment”) to its Certificate of Incorporation with the Secretary of State
of the State of Delaware to effectuate a reverse stock split of the Company’s common stock at a ratio of 1-for-15 (the “Reverse
Stock Split”), as well as the decrease in the number of shares of common stock authorized for issuance from 490,000,000 to 100,000,000.
The Amendment became effective at 5:00 p.m. ET on October 25, 2024.
8
Series C Convertible Preferred Stock
On December 13, 2024,
the Company filed a certificate of designations of preferences, rights, and limitations of Series C Convertible Preferred Stock (the “Series
C Certificate of Designations”) with the State of Delaware which provides for the designation of 10,000 shares of Series C preferred
stock of the Company, par value $0.0001 per share, upon the terms and conditions as set forth in the Series C Certificate of Designations.
Each share of Series C Preferred Stock has a stated value of $1,000 (the “Stated Value”).
The Series C Preferred
Stock shall rank (i) senior to the Company’s common stock (the “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 Convertible Preferred Stock of the Company (the “Series
B Preferred Stock”) with respect to its rights, preferences and restrictions, and (iv) subordinate to the Series A Convertible Preferred
Stock of the Company (the “Series A Preferred Stock”).
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 to 100% 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 “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 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 of 19.99% of the
number of shares of the common stock outstanding immediately after giving effect to the issuance of the respective Conversion Shares.
York Sun Securities
Purchase Agreement
On December 19, 2024,
the Company entered into that certain securities purchase agreement (the “Securities Purchase Agreement”), with an accredited
investor, York Sun Investment Holding Limited (the “Investor”), pursuant to which the Company agreed to issue and sell to
the Investor, upon the terms and conditions set forth in the Securities Purchase Agreement, up to 7,000 shares of Series C Convertible
Preferred Stock for up to an aggregate of $7,000,000 (the “Purchase Price”), which is equal to $1,000 per share. The first
closing occurred on December 24, 2024, with respect to the Investor’s purchase of 3,500 shares of Series C Convertible Preferred
Stock in exchange for $3,500,000.
The Investor shall also
have a right of first refusal during the period beginning on the date of the Securities Purchase Agreement and continuing until such shareholder
approval is obtained, on all issuances of convertible preferred stock of the Company, excluding agreements that are in place prior to
the date of the Securities Purchase Agreement and issuances of new classes of convertible preferred stock in exchange for existing classes
of convertible preferred stock. Additionally, the Investor has the right, pursuant to the Securities Purchase Agreement to appoint one
member to, or to replace one member of, the Company’s board of directors, subject to all applicable Nasdaq rules.
The Investor’s
purchase of the remaining 3,500 shares of Series C Convertible Preferred Stock under the Securities Purchase Agreement in exchange for
an additional $3,500,000 is required to occur within 120 calendar days of the date of the Securities Purchase Agreement, subject to the
satisfaction of customary closing conditions.
9
Series D Convertible Preferred Stock
On January 6, 2025, the
Company filed a certificate of designations of preferences, rights, and limitations of Series D Convertible 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 of 5,000 shares of Series D Preferred Stock of the Company, par value $0.0001 per 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 “Stated
Value”).
The Series D Preferred
Stock shall rank (i) senior to the Company’s 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 Convertible Preferred Stock of the Company (the “Series B Preferred Stock”)
with respect to its rights, preferences and restrictions, and (iv) pari passu with the Series C Convertible Preferred Stock of the Company
(the “Series C Preferred Stock”).
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 to 100% 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.
Each share of Series
D Preferred Stock shall be convertible into common stock (the “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 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
of 4.99% of the number of shares of the common stock outstanding immediately after giving effect to the issuance of the respective Conversion
Shares.
Wenzhao Lu Exchange Agreement
On January
9, 2025, the Company entered into an exchange agreement with Wenzhao Lu, the Chairman of the Board of Directors of the Company, pursuant
to which Mr. Lu exchanged 9,000 shares of Series A Preferred Stock of the Company for 5,000 shares of Series D Preferred Stock of the
Company pursuant to an exemption from registration under Section 3(a)(9) of the Securities Act of 1933, as amended (the “Exchange”).
Upon consummation of the Exchange, there were no shares of Series A Preferred Stock of the Company outstanding.
Redemption Agreement
During 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, Avalon Lab, Laboratory Services MSO, and the other parties signatory thereto, entered into a Redemption and Abandonment Agreement
(the “Redemption Agreement”), whereby Laboratory Services MSO redeemed the 40% equity interest in Laboratory Services MSO
held by Avalon Lab for cash and the surrender of its Series B Convertible Preferred Stock having a carrying value of $11,000,000 (the
“Redemption”). The aggregate cash amount to Avalon Lab for the Redemption was $1,745,000, to be paid as follows: one payment
of $95,000 at the closing of the Redemption and, beginning in March 2025, monthly payments of $75,000 until December 2026. In addition,
pursuant to the terms of the Redemption Agreement, all shares of Avalon’s Series B Convertible 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 Avalon for no additional consideration. As a result of the Redemption, beginning in February 2025, we no longer offer laboratory services.
10
Agreement and Plan
of Merger
On March 7, 2025, the
Company, Nexus MergerSub Limited, a wholly owned subsidiary of the Company (“Merger Sub”), and YOOV Group Holding Limited
(“YOOV”) entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which Merger Sub will
merge with and into YOOV, with YOOV surviving the merger and becoming a direct, wholly owned subsidiary of the Company (the “Merger”).
The Merger is expected to be completed in the third quarter of 2025, subject to customary closing conditions.
Subject to the terms
and conditions of the Merger Agreement, immediately prior to the effective time of the Merger (the “Effective Time”), each
then-outstanding share of YOOV preferred shares, par value $0.10 per share, will either automatically be converted into shares of YOOV
ordinary shares, par value $0.10 per share (the “YOOV Ordinary Shares”) or canceled and cease to exist in accordance with
their terms. At the Effective Time, each then-outstanding YOOV Ordinary Share (other than any shares held in treasury and Dissenting Shares
(as defined in the Merger Agreement)) will be automatically converted into a number of shares of the Company’s common stock equal
to the Exchange Ratio. The “Exchange Ratio” will be the ratio (rounded to four decimal places), determined as follows: if
the closing price of the Company’s common stock on Nasdaq on the second trading day immediately preceding the Effective Time is
(x) less than or equal to $5.00, the Exchange Ratio shall be 60,000,000 divided by the Company Outstanding Shares (as defined in the Merger
Agreement); or (y) greater than $5.00, the Exchange Ratio shall be 54,000,000 divided by the Company Outstanding Shares.
Pursuant to the terms
of the Merger Agreement, (i) each then-outstanding share of the Company’s common stock will remain issued and outstanding after
the Effective Time and (ii) each then-outstanding option to purchase Company common stock, whether or not vested, will remain issued and
outstanding after the Effective Time. The then-outstanding shares of Series C Convertible Preferred Stock and Series D Convertible Preferred
Stock will remain outstanding in accordance with their terms. Additionally, at the Effective Time, the Company’s name will be changed
to “YOOV, Inc.”
In connection with the
Merger, the Company will seek approval of its stockholders to, among other things, (i) approve the issuance of the shares of the Company’s
common stock to be issued to YOOV shareholders in connection with the Merger pursuant to the rules of Nasdaq and (ii) amend the Company’s
certificate of incorporation to effect a reverse stock split of the Company’s common stock to the extent the Company and YOOV mutually
agree implementing such reverse stock split is necessary to meet Nasdaq’s listing requirements (collectively, the “Avalon
Stockholder Matters”).
Each of the Company
and YOOV have made customary representations, warranties and covenants in the Merger Agreement, including, among other things,
covenants relating to (i) obtaining the requisite approval of its respective stockholders, (ii) non-solicitation or facilitation of
any Takeover Proposal or Superior Proposal (as each is defined in the Merger Agreement), (iii) the conduct of its respective
business during the period between the signing of the Merger Agreement and the closing of the Merger, and (iv) the Company filing
with the SEC and causing to become effective a registration statement on Form S-4 (the “Registration Statement”) to
register the shares of the Company’s common stock to be issued in connection with the Merger.
Consummation of the Merger
is subject to certain closing conditions, including, among other things, (i) approval of the Avalon Stockholder Matters by the requisite
stockholders of the Company, (ii) adoption and approval of the Merger Agreement, and the transactions contemplated thereby, by the requisite
YOOV shareholders, (iii) the effectiveness of the Registration Statement and (iv) the listing of the Company’s common stock issuable
in connection with the Merger on Nasdaq. Each party’s obligation to consummate the Merger is also subject to other specified customary
conditions, including regarding the accuracy of the representations and warranties of the other party, subject to the applicable materiality
standard, and the performance in all material respects by the other party of its obligations under the Merger Agreement required to be
performed on or prior to the Effective Time.
The Merger Agreement
contains certain termination rights for both the Company and YOOV, including the right to terminate the Merger Agreement at any time before
the Effective Time, whether before or after the Avalon Stockholder Matters have been approved, by mutual written consent of the parties.
In addition, the Merger Agreement may be terminated at any time by either party if the Merger is not consummated on or before March 7,
2026 (the “End Date”), provided that the End Date may be extended by either party for up to 60 days in the event that the
SEC has not declared effective the Registration Statement by the date which is 60 days prior to the End Date. Upon termination of the
Merger Agreement under specified circumstances, the Company may be required to pay YOOV a termination fee of $1.0 million; however, YOOV
is not required to pay the Company a termination fee.
At the Effective Time,
the Company’s board of directors (the “Avalon Board”) is expected to consist of seven members, five of whom will be
designated by YOOV and two of whom will be designated by the Company, as provided in the Merger Agreement.
11
Voting and Support
Agreements
Concurrently with the
execution of the Merger Agreement, (i) the officers, directors and certain shareholders of YOOV (solely in their respective capacities
as YOOV shareholders) have entered into voting and support agreements with the Company and YOOV, pursuant to which such YOOV shareholders
agree, among other things to, (a) not transfer their capital stock of YOOV, subject to certain limited exceptions and (b) vote all of
their shares of capital stock of YOOV in favor of the adoption and approval of the Merger Agreement and the transactions contemplated
thereby and against, among other things, any Takeover Proposals (the “YOOV Voting Agreement”) and (ii) the officers, directors
and certain stockholders of the Company (solely in their respective capacities as the Company stockholders) have entered into voting and
support agreements with the Company and YOOV, pursuant to which such Company stockholders agree, among other things to, (a) not transfer
their capital stock of the Company, subject to certain limited exceptions and (b) vote all of their shares of Company capital stock in
favor of, among other things, the Avalon Stockholder Matters and against, among other things, any Takeover Proposals (the “Avalon
Voting Agreement”).
Lock-Up Agreements
Concurrently with the
execution of the Merger Agreement, certain directors, officers and stockholders of each of the Company and YOOV have entered into lock-up
agreements (the “Lock-Up Agreement”), pursuant to which, subject to specified exceptions, they have agreed not to transfer
their shares of the Company’s common stock during the 180-day period following the Effective Time.
Certificates of Elimination
On March 7, 2025, the
Company filed a Certificate of Elimination relating to each of the Series A Preferred Stock and the Series B Preferred Stock (the “Eliminations
of Designation”) with the Secretary of State of the State of Delaware, thereby terminating the designations of the Series A Preferred
Stock and the Series B Preferred Stock. The Eliminations of Designation were effective upon filing and eliminated from the Company’s
Amended and Restated Certificate of Incorporation all matters set forth in the previously-filed Certificates of Designations with respect
to the previously designated Series A Preferred Stock and Series B Preferred Stock.
Bylaws Amendment