ITEM 7. MANAGEMENT’S
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 “Management’s
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 KetoAirTM 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.
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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 financial statements
do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification
of liabilities that may result should we be unable to continue as a going concern.
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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 MSO’s 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 MSO’s 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 MSO’s lower
revenues and net incomes than anticipated and the decline in our stock price and market capitalization.
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Other Operating Expenses
For
the years ended December 31, 2025 and 2024, other operating expenses consisted of the following:
Years Ended December 31,
Directors’ and officers’ liability insurance premium 139,816 212,898
Impairment of laboratory equipment - 111,033
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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.
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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.
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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:
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
Working capital deficit:
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.
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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,
Net cash flows used in discontinued operations (443,299 ) (289,965 )
Effect of exchange rate on cash (9,018 ) 1,447
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 MSO’s
lower revenues and net incomes than anticipated and the decline in our stock price and market capitalization, distribution of earnings
from equity method investment of approximately $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
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.
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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 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.
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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.
Management’s 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 management’s 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.
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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 management’s 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
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
29
30
4.20* Confessed Judgement Secured Promissory Note dated March 26, 2026
31
32
33
34
35
36
37
38
39
10.123#* Business Loan and Security Agreement dated as of March 26, 2026
21.1* List of Subsidiaries
40
23.1* Consent of Independent Registered Public Accounting Firm.
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.
* Filed herewith.
** Furnished herewith.
† Management contract or compensatory plan or arrangement.
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
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
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.
Management’s 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 Company’s management. Our responsibility is to express an opinion on the Company’s 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 Company’s
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 management’s 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 management’s 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 Company’s auditor
since 2024.
The Woodlands, TX
March 30, 2026
F-2
AVALON GLOBOCARE CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
ASSETS
CURRENT ASSETS:
Receivable from sale of equity method investment 748,000 -
NON-CURRENT ASSETS:
Operating lease right-of-use assets, net - 4,709
Property and equipment, net 727 1,298
Equity method investments, net - 10,636,544