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Item 1. Financial Statements

2025-11-14 compared with 2025-08-14 · 1195 added, 1078 removed, 875 unchanged (72% of the section changed)

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CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

CURRENT ASSETS:

Rent receivable

Receivable from sale of equity method investment

Prepaid expense and other current assets

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10,000,000 shares authorized;

Series A Convertible Preferred Stock, 0 and 9,000 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively

Series B Convertible Preferred Stock, 0 and 11,000 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively

Series C Convertible Preferred Stock, 3,500 shares issued and outstanding at June 30, 2025 and December 31, 2024;

liquidation preference $ 3.5 million at June 30, 2025

Series D Convertible Preferred Stock, 5,000 and 0 shares issued and outstanding at June 30, 2025 and December 31, 2024, respectively;

liquidation preference $ 5 million at June 30, 2025

Series A Convertible Preferred Stock, 0 and 9,000 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively

Series B Convertible Preferred Stock, 0 and 11,000 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively

Series C Convertible Preferred Stock, 3,800 and 3,500 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively;Liquidation preference $ 3.8 million at September 30, 2025

Series D Convertible Preferred Stock, 5,000 and 0 shares issued and outstanding at September 30, 2025 and December 31, 2024, respectively;

Liquidation preference $ 5 million at September 30, 2025

Common stock, $ 0.0001 par value;

100,000,000 shares authorized;

2,352,551 shares issued and 2,349,084 shares outstanding at June 30, 2025;

4,100,576 shares issued and 4,097,109 shares outstanding at September 30, 2025;

1,445,979 shares issued and 1,442,512 shares outstanding at December 31, 2024

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common stock held in treasury, at cost;

3,467 shares at June 30, 2025 and December 31, 2024

3,467 shares at September 30, 2025 and December 31, 2024

Accumulated deficit

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Total Liabilities and (Deficit) Equity

See accompanying notes to the condensed consolidated financial

See accompanying notes to

the condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

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For the Three Months Ended

For the Six Months Ended

For the Nine Months Ended

September 30,

REAL PROPERTY RENTAL REVENUE

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Compensation and related benefits

Credit loss expense

Credit loss recovery

( 1,650,000 )

Other general and administrative expenses

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( 3,617,386 )

( 2,347,425 )

OTHER (EXPENSE) INCOME

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( 1,155,310 )

( 1,115,433 )

Interest expense - other

3 unchanged sentences

( 9,076,587 )

Other income (expense)

2 unchanged sentences

( 1,561,353 )

( 1,152,114 )

LOSS BEFORE INCOME TAXES

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$ ( 5,178,739 )

$ ( 3,499,539 )

NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

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( 5,178,739 )

( 3,499,539 )

DEEMED CONTRIBUTION ON EXCHANGE OF EQUITY INSTRUMENTS

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$ ( 5,178,739 )

OTHER COMPREHENSIVE INCOME (LOSS)

Unrealized foreign currency translation gain (loss)

OTHER COMPREHENSIVE INCOME

Unrealized foreign currency translation gain

COMPREHENSIVE LOSS

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( 5,175,910 )

( 3,499,753 )

COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

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$ ( 5,175,910 )

See accompanying notes to

the condensed consolidated financial statements.

See accompanying notes

to the condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN (DEFICIT) EQUITY

For the Three and Six Months Ended June 30, 2025

For the Three and Nine Months Ended September 30, 2025

Avalon GloboCare Corp.

Stockholders’ (Deficit) Equity

Series A Preferred

Series B Preferred

Series C Preferred

Series D Preferred

Preferred Stock

Treasury Stock

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( 7,112,273 )

Sale of Series C Convertible Preferred Stock, net

Sale of common stock and warrants, net

Issuance of common stock for services

Stock-based compensation

Conversion of convertible note payable and accrued interest into common stock

Issuance of common stock as convertible note payable commitment fee

Foreign currency translation adjustment

Net loss for the three months ended September 30, 2025

Balance, September 30, 2025

$ ( 522,500 )

$ ( 103,868,102 )

See accompanying notes to the condensed consolidated financial statements.

$ ( 231,346 )

$ ( 4,493,019 )

See accompanying notes to

the condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three and Six Months Ended June 30, 2024

For the Three and Nine Months Ended September 30, 2024

Avalon GloboCare Corp.

Stockholders’ Equity

Series A Preferred

Series B Preferred

Preferred Stock

Treasury Stock

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( 83,269,270 )

Sale of common stock, net

To correct beneficial conversion feature related to convertible note payable

Issuance of common stock for services

Stock-based compensation

Shares issued for adjustments for 1:15 reverse split

Foreign currency translation adjustment

Net loss for the three months ended September 30, 2024

( 1,679,200 )

Balance, September 30, 2024

$ ( 522,500 )

$ ( 84,948,470 )

$ ( 228,898 )

See accompanying notes to the condensed consolidated financial statements.

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended

For the Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

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Adjustments to reconcile net loss to net cash used in operating activities:

Credit loss provision

Change in straight-line rent receivable

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Accrued liabilities and other payables

( 1,176,402 )

Accrued liabilities and other payables - related parties

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Payment for equity interest purchase

Improvement of commercial real estate

Proceeds from sale of equity method investment

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Proceeds from issuance of convertible debt and warrants

Proceeds from issuance of convertible debt

Payments of convertible debt issuance costs

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Advance from pending sale of noncontrolling interest in subsidiary

Proceeds from issuance of convertible preferred stock

Payments of convertible preferred stock issuance costs

Proceeds from issuance of common stock and warrants

Payments of offering costs

Proceeds from equity offering

Disbursements for equity offering costs

NET CASH PROVIDED BY FINANCING ACTIVITIES

EFFECT OF EXCHANGE RATE ON CASH

NET DECREASE IN CASH

NET (DECREASE) INCREASE IN CASH

( 2,522,378 )

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Common stock issued as convertible note payable commitment fee

Beneficial conversion feature related to convertible note payable

Convertible debts issuance costs in accrued liabilities

Equity method investment payable paid by a related party

Reclassification of deferred offering costs

Settlement of derivative liability

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Deferred financing costs in accrued liabilities

See accompanying notes to

the condensed consolidated financial statements.

Legal fees recorded to receivable from sale of equity method investment

See accompanying notes to the condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

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or “ALBT”) was incorporated under the laws of the State of Delaware on July 28, 2014.

The Company is a developer of precision diagnostic

consumer products and the advancement of intellectual property in cellular therapy.

The Company is currently marketing the KetoAir™

breathalyzer device, which is owned and manufactured by Qi Diagnostics Limited, and plans to develop additional diagnostic uses of the

breathalyzer technology.

The KetoAir TM is registered with the U.S.

Company is a developer of precision diagnostic consumer products and the advancement of intellectual property in cellular therapy.

Company is currently marketing the KetoAir™ breathalyzer device, which is owned and manufactured by Qi Diagnostics Limited, and

plans to develop additional diagnostic uses of the breathalyzer technology.

The KetoAir TM is registered with the

Food and Drug Administration as a Class I medical device.

The Company also continues to focus on advancing its intellectual property portfolio through existing patent applications.

In addition, we own and operate commercial real estate at our headquarters in Freehold, NJ.

The Company also continues to focus on advancing its intellectual property

portfolio through existing patent applications.

In addition, the Company owns and operates commercial real estate at its headquarters

in Freehold, NJ.

On May 18, 2015, Avalon Healthcare System, Inc.

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Avalon RT 9’s business consists of the ownership and operation of the income-producing real estate property in New Jersey.

As of June 30, 2025, the occupancy rate of the building is 96.2 %.

As of September 30, 2025, the occupancy rate of the building is 98.5 %.

July 18, 2018, the Company formed a wholly owned subsidiary , Avactis Biosciences Inc.

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interest in Lab Services MSO held by Avalon Lab.

May 1, 2024, the Company formed a wholly owned subsidiary, Q&A Distribution LLC (“Q&A Distribution”), a Texas company.

Q&A Distribution is engaged in distribution of KetoAir device.

February 21, 2025, the Company formed a wholly owned subsidiary, Nexus MergerSub Limited

(“Nexus”), a British Virgin Islands (“BIV”) company.

There was no activity for the subsidiary since its incorporation

through June 30, 2025.

Accordingly, beginning in February 2025, we no longer offer laboratory services.

On May 1, 2024, the

Company formed a wholly owned subsidiary, Q&A Distribution LLC (“Q&A Distribution”), a Texas company.

Q&A Distribution

is engaged in distribution of KetoAir device.

On February 21, 2025,

the Company formed a wholly owned subsidiary, Nexus MergerSub Limited (“Nexus”), a British Virgin Islands (“BIV”)

There was no activity for the subsidiary since its incorporation through September 30, 2025.

AVALON GLOBOCARE CORP.

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Details of the Company’s subsidiaries which

are included in these condensed consolidated financial statements as of June 30, 2025 are as follows:

Name of Subsidiary Place and Date of Incorporation Percentage of Ownership Principal Activities

are included in these condensed consolidated financial statements as of September 30, 2025 are as follows:

Name of Subsidiary Place and Date of Incorporation Percentage of

Ownership Principal Activities

Avalon Healthcare System, Inc.

(“AHS”) Delaware May 18, 2015 100 % held by ALBT Holding company for payroll and other expenses

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

(“AHS”) Delaware

May 18, 2015 100 % held by ALBT Holding company for payroll and other expenses

Avalon RT 9 Properties LLC (“Avalon RT 9”) New Jersey

February 7, 2017 100 % held by ALBT Owns and operates an income-producing real property and holds and manages the corporate headquarters

Avalon (Shanghai) Healthcare Technology Co., Ltd.

(“Avalon Shanghai”) PRC April 29, 2016 100 % held by AHS Not considered an operating entity

(“Avalon Shanghai”) PRC

April 29, 2016 100 % held by AHS Not considered an operating entity

Genexosome Technologies Inc.

(“Genexosome”) Nevada July 31, 2017 60 % held by ALBT No current activities to report;

(“Genexosome”) Nevada

July 31, 2017 60 % held by ALBT No current activities to report;

Avactis Biosciences Inc.

(“Avactis”) Nevada July 18, 2018 60 % held by ALBT Dormant;

(“Avactis”) Nevada

July 18, 2018 60 % held by ALBT Dormant;

in process of being dissolved

Avactis Nanjing Biosciences Ltd.

(“Avactis Nanjing”) PRC May 8, 2020 100 % held by Avactis Dormant;

(“Avactis Nanjing”) PRC

May 8, 2020 100 % held by Avactis Dormant;

in process of being dissolved

Avalon Laboratory Services, Inc.

(“Avalon Lab”) Delaware October 14, 2022 100 % held by ALBT No current activities to report;

Q&A Distribution LLC (“Q&A Distribution”) Texas May 1, 2024 100 % held by ALBT Distributes KetoAir device

Nexus MergerSub Limited (“Nexus”) BVI February 21, 2025 100 % held by ALBT No current activities to report

2 – BASIS OF PRESENTATION AND GOING CONCERN CONDITION

(“Avalon Lab”) Delaware

October 14, 2022 100 % held by ALBT No current activities to report;

Q&A Distribution LLC (“Q&A Distribution”) Texas

May 1, 2024 100 % held by ALBT Distributes KetoAir device

Nexus MergerSub Limited (“Nexus”) BVI

February 21, 2025 100 % held by ALBT No current activities to report

NOTE 2 – BASIS OF PRESENTATION

AND GOING CONCERN CONDITION

Basis of Presentation

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results that may be reported for the entire year.

The accompanying condensed consolidated financial statements have been prepared in accordance

with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and do not include all information and

footnotes necessary for a complete presentation of financial statements in conformity with accounting principles generally accepted in

the United States (“U.S.

The Company’s condensed consolidated financial statements include the accounts of the

Company and its subsidiaries.

The accompanying condensed consolidated financial statements have been prepared in

accordance with the rules and regulations of the Securities and Exchange Commission (the “SEC”) and do not include all information

and footnotes necessary for a complete presentation of financial statements in conformity with accounting principles generally accepted

in the United States (“U.S.

The Company’s condensed consolidated financial statements include the accounts

of the Company and its subsidiaries.

All significant intercompany accounts and transactions have been eliminated in consolidation.

Certain information and footnote disclosures normally

included in the annual consolidated financial statements prepared in accordance with U.S.

Certain information and footnote disclosures

normally included in the annual consolidated financial statements prepared in accordance with U.S.

GAAP have been condensed or omitted.

These condensed

consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and

notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March

These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial

statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with

the SEC on March 31, 2025.

AVALON GLOBOCARE CORP.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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

NOTE 2 – BASIS OF PRESENTATION

AND GOING CONCERN CONDITION (continued)

Going Concern

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the realization of assets and the satisfaction of liabilities in the normal course of business.

As reflected in the accompanying

condensed consolidated financial statements, the Company had a working capital deficit of approximately $ 14,132,000 at June 30, 2025 and

had incurred recurring net losses and generated negative cash flow from operating activities of approximately $ 15,941,000 and $ 3,028,000

for the six months ended June 30, 2025, respectively.

As reflected in the

accompanying condensed consolidated financial statements, the Company had a working capital deficit of approximately $ 11,515,000 at September

30, 2025 and had incurred recurring net losses and generated negative cash flow from operating activities of approximately $ 16,195,000

and $ 4,389,000 for the nine months ended September 30, 2025, respectively.

The Company has a limited

operating history and its continued growth is dependent upon the continuation of generating rental revenue from its income-producing real

estate property in New Jersey, generating revenue for selling of Keto Air, and obtaining additional financing to fund future obligations

operating history and its continued growth is dependent upon the continuation of generating rental revenue from its income-producing

real estate property in New Jersey, generating revenue for selling of Keto Air, and obtaining additional financing to fund future obligations

and pay liabilities arising from normal business operations.

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ability to raise additional capital, implement its business plan, and generate significant revenue.

There are no assurances that the Company

will be successful in its efforts to generate significant revenue, maintain sufficient cash balance or report profitable operations or

to continue as a going concern.

There are no assurances that the

Company will be successful in its efforts to generate significant revenue, maintain sufficient cash balance or report profitable operations

or to continue as a going concern.

The Company plans on raising capital through the sale of equity to implement its business plan.

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Use of Estimates

The preparation

of condensed consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that

affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial

statements and the reported amounts of revenues and expenses during the reporting period.

Changes in these estimates and assumptions may

have a material impact on the condensed 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 during the three and six months ended June 30, 2025 and 2024 include the useful life of investment in real estate and 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”), and the assumptions used to determine

fair value of warrants and embedded conversion features of convertible note payable .

The preparation of condensed consolidated financial

statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the reported amounts of assets

and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts

of revenues and expenses during the reporting period.

Changes in these estimates and assumptions may have a material impact on the condensed

consolidated financial statements and accompanying notes.

Making estimates requires management to exercise significant judgment.

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.

estimates during the three and nine months ended September 30, 2025 and 2024 include the useful life of investment in real estate and

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”), and the assumptions used to determine fair value of warrants and

embedded conversion features of convertible note payable .

Cash and Cash Equivalents

September 30, 2025 and December 31, 2024, the Company’s cash balances by geographic area were as follows:

September 30,

United States

For purposes of the

condensed consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months

or less when purchased and money market accounts to be cash equivalents.

The Company had no cash equivalents at September 30, 2025 and

December 31, 2024.

AVALON GLOBOCARE CORP.

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Fair Value of Financial Instruments and Fair Value Measurements

The Company adopted the

guidance of the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”)

The Company adopted

the guidance of the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”)

820 for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes

a fair value hierarchy to classify the inputs used in measuring fair value as follows:

● Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available

at the measurement date.

● Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted

prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable,

and inputs derived from or corroborated by observable market data.

● Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what

assumptions the market participants would use in pricing the asset or liability based on the best available information.

value of the Company’s assets and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,”

approximates the carrying amounts represented in the accompanying condensed consolidated financial statements, primarily due to their

short-term nature.

1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities

available at the measurement date.

2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets,

quoted prices for identical or similar assets and liabilities in markets that are not active,

inputs other than quoted prices that are observable, and inputs derived from or corroborated

by observable market data.

3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions

on what assumptions the market participants would use in pricing the asset or liability based

on the best available information.

The fair value of the Company’s assets

and liabilities, which qualify as financial instruments under ASC Topic 820, “Fair Value Measurement,” approximates the carrying

amounts represented in the accompanying condensed consolidated financial statements, primarily due to their short-term nature.

and liabilities measured at fair value on a recurring basis.

assets and liabilities are measured at fair value on a recurring basis.

These assets and liabilities are measured at fair value on an

ongoing basis.

These assets and liabilities include derivative liability.

Derivative liability is carried at fair value and measured on an ongoing

The table below reflects the activity of derivative liability measured at fair value for the six months ended June 30, 2025:

Significant Unobservable Inputs

Certain assets and liabilities are measured

at fair value on a recurring basis.

These assets and liabilities are measured at fair value on an ongoing basis.

These assets and liabilities

include derivative liability.

Derivative liability is carried at fair value and measured on an ongoing basis.

The table below reflects the

activity of derivative liability measured at fair value for the nine months ended September 30, 2025:

Balance of derivative liability as of January 1, 2025

Initial fair value of derivative liability attributable

to Second Warrant (as hereinafter defined) issuance with June 2024 fund raise (see Note 6)

Initial fair value of derivative liability attributable to Second Warrant issuance with June 2024 fund raise (see Note 6)

Gain from change in the fair value of derivative liability

Reclassification of additional paid-in capital upon conversion

Balance of derivative liability as of June 30, 2025

Balance of derivative liability as of September 30, 2025

825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities

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be reported in earnings at each subsequent reporting date.

The Company did not elect to apply the fair value option to

any outstanding instruments.

Cash and Cash Equivalents

June 30, 2025 and December 31 , 2024, the Company’s cash balances by geographic area were as follows:

United States

For purposes of the condensed

consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less when

purchased and money market accounts to be cash equivalents.

The Company had no cash equivalents at June 30, 2025 and December 31, 2024.

The Company did not elect to apply the fair value option to any outstanding

Credit Risk and Uncertainties

Company maintains a portion of its cash on deposits with bank and financial institution within the U.S.

that at times may exceed

federally-insured limits of $ 250,000 .

The Company manages this credit risk by concentrating its cash balances in high quality financial

institutions and by periodically evaluating the credit quality of the primary financial institutions holding such deposits.

has not experienced any losses in such bank accounts and believes it is not exposed to any risks on its cash in bank accounts.

30, 2025, there were no balances in excess of the federally-insured limits.

The Company’s concentrations of credit

risk with respect to its rent receivable is limited due to short-term payment terms.

The Company also performs ongoing credit evaluations

of its tenants to help further reduce credit risk.

AVALON GLOBOCARE CORP.

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ACCOUNTING POLICIES (continued)

Credit Risk and Uncertainties

Company maintains a portion of its cash on deposits with bank and financial institution within

that at times may exceed federally-insured limits of $ 250,000 .

The Company manages this credit risk by concentrating its cash

balances in high quality financial institutions and by periodically evaluating the credit quality of the primary financial institutions

holding such deposits.

The Company has not experienced any losses in such bank accounts and believes it is not exposed to any risks on

its cash in bank accounts.

At June 30, 2025, there were no balances in excess of the federally-insured limits.

The Company’s

concentrations of credit risk with respect to its rent receivable is limited due to short-term payment terms.

The Company also performs

ongoing credit evaluations of its tenants to help further reduce credit risk.

Investment in Unconsolidated

uses the equity method of accounting for its investment in, and earning or loss of, investees that it does not control but over which

it does exert significant influence.

The Company applies the equity method by initially recording these investments at cost, as equity

method investments, subsequently adjusted for equity in earnings and cash distributions.

Company considers whether the fair value of its equity method investment has declined below its carrying value whenever adverse events

or changes in circumstances indicate that recorded value may not be recoverable.

If the Company considers any decline to be other than

temporary (based on various factors, including historical financial results and the overall health of the investee), then a write-down

would be recorded to estimated fair value.

See Note 5 for discussion of equity method investment.

classifies distributions received from equity method investments using the cumulative earnings approach.

Distributions received are considered

returns on the investment and classified as cash inflows from operating activities.

If, however, the investor’s cumulative distributions

received, less distributions received in prior periods determined to be returns of investment, exceeds cumulative equity in earnings recognized,

the excess is considered a return of investment and is classified as cash inflows from investing activities.

The Company uses the equity method of accounting

for its investment in, and earning or loss of, investees that it does not control but over which it does exert significant influence.

The Company applies the equity method by initially recording these investments at cost, as equity method investments, subsequently adjusted

for equity in earnings and cash distributions.

The Company considers whether the fair value

of its equity method investment has declined below its carrying value whenever adverse events or changes in circumstances indicate that

recorded value may not be recoverable.

If the Company considers any decline to be other than temporary (based on various factors, including

historical financial results and the overall health of the investee), then a write-down would be recorded to estimated fair value.

Note 5 for discussion of equity method investment.

The Company classifies distributions received

from equity method investments using the cumulative earnings approach.

Distributions received are considered returns on the investment

and classified as cash inflows from operating activities.

If, however, the investor’s cumulative distributions received, less distributions

received in prior periods determined to be returns of investment, exceeds cumulative equity in earnings recognized, the excess is considered

a return of investment and is classified as cash inflows from investing activities.

Receivable from Sale of Equity Method Investment

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the Company and Lab Services MSO entered into a Redemption and Abandonment Agreement (the “Redemption Agreement”), whereby

Lab Services MSO redeemed the 40 % equity interest in Lab Services MSO held by the Company for cash and the surrender of its Series B convertible

preferred stock (“Series B Preferred Stock”) having a carrying value of $ 11,000,000 .

The aggregate cash amount to the Company

for the redemption was $ 1,745,000 , to be paid as follows:

one payment of $ 95,000 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 the

Company’s Series B Preferred Stock previously issued to SCBC Holdings LLC as partial consideration for the equity interests of Laboratory

Services MSO, were permanently surrendered and relinquished to the Company for no additional consideration.

The difference of $ 2,348,695

between the carrying value of the extinguished Series B Preferred Stock, the aggregate cash amount to the Company for the redemption,

net of the payables due to Lab Services MSO of $ 632,916 , totaling $ 13,377,916 , and the carrying value of the equity method investment

of $ 11,029,221 was accounted for as an increase to additional paid-in capital (See Note 10 - Series B Convertible Preferred Stock Extinguished

Related to Sale of Equity Method Investment).

Accordingly, beginning in February 2025, the Company no longer offers laboratory services.

Receivable from sale of equity method

investment is presented net of reserve for credit loss.

The Company maintains a reserve for credit loss for estimated loss.

Company reviews the receivable from sale of equity method investment on a periodic basis and makes general and specific reserve when

there is doubt as to the collectability of the balance.

In the evaluation of Lab Services MSO’s receivable, the Company

considered the age of the balance, its historical payment history and current economic trends.

After unsuccessful collection efforts

during the period, management has decided to write off the receivable.

As a result, for the three months ended June 30, 2025, a

receivable in the amount of $ 1,650,000 was written off.

At June 30, 2025, the Company established a reserve for credit loss in the

amount of $ 1,650,000 .

Lab Services MSO redeemed the 40 % equity interest in Lab Services MSO held by the Company for cash and the surrender of its Series B

convertible preferred stock (“Series B Preferred Stock”) having a carrying value of $ 11,000,000 .

The aggregate cash amount

to the Company for the redemption was $ 1,745,000 , to be paid as follows:

one payment of $ 95,000 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 the Company’s Series B Preferred Stock previously issued to SCBC Holdings LLC as partial consideration for the equity

interests of Lab Services MSO, were permanently surrendered and relinquished to the Company for no additional consideration.

The difference

of $ 2,348,695 between the carrying value of the extinguished Series B Preferred Stock, the aggregate cash amount to the Company for the

redemption, net of the payables due to Lab Services MSO of $ 632,916 , totaling $ 13,377,916 , and the carrying value of the equity method

investment of $ 11,029,221 was accounted for as an increase to additional paid-in capital (See Note 10 - Series B Convertible Preferred

Stock Extinguished Related to Sale of Equity Method Investment).

Accordingly, beginning in February 2025, the Company no longer offers

laboratory services.

from sale of equity method investment is presented net of reserve for credit loss.

The Company maintains a reserve for credit

loss for estimated loss.

The Company reviews the receivable from sale of equity method investment on a periodic basis and makes general

and specific reserve when there is doubt as to the collectability of the balance.

In the evaluation of Lab Services MSO’s receivable,

the Company considered the age of the balance, its historical payment history and current economic trends.

After unsuccessful collection

efforts during the period, management has decided to write off the receivable.

As a result, for the three months ended June 30, 2025,

a receivable in the amount of $ 1,650,000 was written off.

At June 30, 2025, the Company established a reserve for credit loss in

the amount of $ 1,650,000 .

On or about July 22, 2025, the Company

filed a lawsuit in the Court of Chancery of the State of Delaware against Laboratory Services MSO, LLC and certain affiliates.

has asserted a variety of claims, including breach of contract, arising out of its prior transactions with the defendants, including the

Redemption and Abandonment Agreement, dated as of February 26, 2025.

The Company and Laboratory Services MSO, LLC entered into

a Confidential Settlement Agreement and Mutual Release dated August 26, 2025 whereby Laboratory Services MSO, LLC agreed to pay the Company

in the aggregate of $ 1,722,000 ($ 50,000 of which is for the Company’s attorneys’ fees and $ 22,000 of which is interest attributable

to the 7 th through 12 th monthly payments), of which $ 600,000 was paid on August 29, 2025 and $ 1,122,000 to be paid

on or before the first business day of each month, beginning September 2025 and ending August 2026, in monthly installments of $ 93,500 .

The parties provided a mutual release, as well.

The case was dismissed in August 2025.

As a result, for the three months ended

September 30, 2025, the Company recorded a credit loss recovery of $ 1,650,000 to reinstate the receivable which was written-off in the

second quarter of 2025.

As of September 30, 2025, the reserve for credit loss amounted to $ 0 .

AVALON GLOBOCARE CORP.

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Basic EPS excludes dilution.

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue

common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings

of the entity.

loss per share is computed by dividing net loss available to common stockholders by the weighted average number of shares of common stock

outstanding during the period.

Diluted net loss per share is computed by dividing net loss by the weighted average number of shares of

common stock, common stock equivalents and potentially dilutive securities outstanding during each period.

The Company had $ 162,473 in

deemed contribution during the six months ended June 30, 2025, which increases the numerator in the net loss per share calculation.

the three and six months ended June 30, 2025 and 2024, potentially dilutive common shares consisted of the common shares issuable upon

the conversion of convertible preferred stock and convertible notes (using the if-converted method) and exercise of common stock options

and warrants (using the treasury stock method).

Common stock equivalents are not included in the calculation of diluted net loss per share

if their effect would be anti-dilutive.

In a period in which the Company has a net loss, all potentially dilutive securities are excluded

from the computation of diluted shares outstanding as they would have had an anti-dilutive impact.

The calculation

of basic and diluted net loss per common share attributable to the Company common shareholders includes 150,000 of the pre-funded warrants

that remained outstanding as of June 30, 2025.

following table summarizes the securities that were excluded from the diluted per share calculation

because the effect of including these potential shares was antidilutive:

Diluted EPS reflects the potential dilution that could occur if securities or other contracts to

issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the

earnings of the entity.

Basic net loss per share is computed by dividing

net loss available to common stockholders by the weighted average number of shares of common stock outstanding during the period.

net loss per share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents

and potentially dilutive securities outstanding during each period.

The Company had $ 162,473 in deemed contribution during the nine months

ended September 30, 2025, which increases the numerator in the net loss per share calculation.

For the three and nine months ended September

30, 2025 and 2024, potentially dilutive common shares consisted of the common shares issuable upon the conversion of convertible preferred

stock and convertible notes (using the if-converted method) and exercise of common stock options and warrants (using the treasury stock

Common stock equivalents are not included in the calculation of diluted net loss per share if their effect would be anti-dilutive.

In a period in which the Company has a net loss, all potentially dilutive securities are excluded from the computation of diluted shares

outstanding as they would have had an anti-dilutive impact.

calculation of basic and diluted net loss per common share attributable to the Company common shareholders includes 504,300 of

the pre-funded warrants that remained outstanding as of September 30, 2025.

following table summarizes the securities that were excluded from the diluted per share calculation because the effect of including

these potential shares was antidilutive:

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Options to purchase common stock

8 unchanged sentences

A Preferred Stock”) was converted into shares of common stock of the Company at a conversion price of $ 150.00 per share.

(**) Assumed the Series

B convertible preferred stock was converted into shares of common stock of the Company at a conversion price of $ 56.70 per share.

(***) Assumed the Series

C convertible preferred stock (“Series C Preferred Stock”) was converted into shares of common stock of the Company at a

conversion price of $ 2.41 per share.

(****) Assumed the Series

D convertible preferred stock was converted into shares of common stock of the Company at a conversion price of $ 2.41 per share.

(**) Assumed the Series B convertible preferred stock was converted

into shares of common stock of the Company at a conversion price of $ 56.70 per share.

(***) Assumed the Series C convertible preferred stock (“Series

C Preferred Stock”) was converted into shares of common stock of the Company at a conversion price of $ 2.41 per share.

(****) Assumed the Series D convertible preferred stock was converted

into shares of common stock of the Company at a conversion price of $ 2.41 per share.

(*****) Assumed

the convertible notes were converted into shares of common stock of the Company at a conversion price of $ 1.00 per share for the three

and six months ended June 30, 2025.

Assumed the convertible notes were converted into shares of common stock of the Company at a conversion

price of $ 67.50 and $ 22.50 and $ 15.00 and $ 11.25 per share for the three and six months

ended June 30, 2024.

the convertible notes were converted into shares of common stock of the Company at a conversion price of $ 1.00 per share for the

three and nine months ended September 30, 2025.

Assumed the convertible notes were converted into shares of common stock of the Company

at a conversion price of $ 67.50 and $ 22.50 and $ 15.00 and $ 11.25 per share for the three and nine months ended September 30, 2024.

AVALON GLOBOCARE CORP.

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Stock Subscription Liability

On June 4, 2025, the Company entered into a

subscription agreement with an investor, whereby 141,643 shares of common stock of the Company were subscribed for at $ 3.53 per

As of June 30, 2025, the Company received proceeds of $ 150,000 .

As of June 30, 2025, these shares have not yet been issued and the proceeds of $ 150,000 were recorded as a share subscription liability until such time as the common shares are issued.

On June 4, 2025, the Company entered into a subscription

agreement with an investor, whereby 141,643 shares of common stock of the Company were subscribed for at $ 3.53 per share.

As of September

30, 2025, the Company received proceeds of $ 150,000 .

As of September 30, 2025, these shares have not yet been issued and the proceeds

of $ 150,000 were recorded as a share subscription liability until such time as the common shares are issued.

Real Property Rental Revenue

has determined that ASC 606 does not apply to rental contracts, which are within the scope of other revenue recognition accounting standards.

Rental income

from operating leases is recognized on a straight-line basis under the guidance of ASC 842.

Lease payments under tenant leases are recognized

on a straight-line basis over the term of the related leases.

The cumulative difference between lease revenue recognized under the straight-line

method and contractual lease payments are included in rent receivable on the condensed consolidated balance sheets.

Company has determined that ASC 606 does not apply to rental contracts, which are within the scope of other revenue recognition

accounting standards.

Rental income from operating leases is recognized

on a straight-line basis under the guidance of ASC 842.

Lease payments under tenant leases are recognized on a straight-line basis over

the term of the related leases.

The cumulative difference between lease revenue recognized under the straight-line method and contractual

lease payments are included in rent receivable on the condensed consolidated balance sheets.

Commitments and Contingencies

In the normal

course of business, the Company is subject to contingencies, such as legal proceedings and claims arising out of its business, that cover

a wide range of matters.

Liabilities for such contingencies are recorded when it is probable that a liability has been incurred and the

amount of the assessment can be reasonably estimated.

In the normal course of business, the Company

is subject to contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters.

for such contingencies are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably

Segment Reporting

reporting structure uses the Company’s management reporting structure as its foundation to reflect how the Company manages the businesses

internally and was mainly organized by services.

During the three months ended June 30, 2025, the Company was organized into one services-oriented

strategic business unit:

The segment reporting structure uses the Company’s

management reporting structure as its foundation to reflect how the Company manages the businesses internally and was mainly organized

During the three months ended September 30, 2025, the Company was organized into one services-oriented strategic business

real property rental services — which is led by our strategic business unit manager.

During the six months

ended June 30, 2025, the Company was organized into two services-oriented strategic business units:

real property rental services and

laboratory testing services (which ended on the redemption date, February 26, 2025) — which are led by our strategic business unit

During the three and six months ended June 30, 2024, the Company was organized into two services-oriented strategic business

During the nine months ended September

30, 2025, the Company was organized into two services-oriented strategic business units:

real property rental services and laboratory

testing services (which ended on the redemption date, February 26, 2025) — which were led by our strategic business unit managers.

During the three and nine months ended September 30, 2024, the Company was organized into two services-oriented strategic business units:

real property rental services and laboratory testing services — which were led by our strategic business unit managers.

segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the

chief operating decision maker (“CODM”) in deciding how to make operating decisions, allocate resources and assess performance.

9, 2023, the Company purchased 40 % of Lab Services MSO.

During the first quarter of 2025, to preserve cash, the Company entered into discussions

with Lab Services MSO for the potential redemption of Avalon Lab’s investment and on February 26, 2025, Lab Services MSO redeemed

the 40 % equity interest in Lab Services MSO held by Avalon Lab.

Commencing from the purchase date, February 9, 2023, through the redemption

date, February 26, 2025, the Company was active in the management of Lab Services MSO.

segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by

the chief operating decision maker (“CODM”) in deciding how to make operating decisions, allocate resources and assess performance.

February 9, 2023, the Company purchased 40 % of Lab Services MSO.

During the first quarter of 2025, to preserve cash, the Company entered

into discussions with Lab Services MSO for the potential redemption of Avalon Lab’s investment and on February 26, 2025, Lab Services

MSO redeemed the 40 % equity interest in Lab Services MSO held by Avalon Lab.

Commencing from the purchase date, February 9, 2023, through

the redemption date, February 26, 2025, the Company was active in the management of Lab Services MSO.

Beginning in February 2025,

we no longer offer laboratory services.

Company’s President and Chief Executive Officer is its CODM.

The Company reports operational

data to its CODM at the segment level, which he uses to evaluate performance and allocate resources based on real property operating income

and loss/income from equity method investment – Lab Services MSO.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

The Company reports operational data to its CODM at the segment

level, which he uses to evaluate performance and allocate resources based on real property operating income and loss/income from equity

method investment – Lab Services MSO.

The Company only has one segment now.

Reverse Stock Split

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split of its outstanding shares of common stock on October 28, 2024.

The reverse stock split did not change the par value of common stock.

The reverse split did not change the par value of common stock.

All references in these condensed consolidated financial statements to shares, share prices, exercise prices, and other per share information

in all periods have been adjusted, on a retroactive basis, to reflect the reverse stock split.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

Recent Accounting Standards

2020, the FASB issued Accounting Standards Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic

470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40), to simplify accounting for certain

financial instruments.

ASU 2020-06 eliminated the then-current models that required separation of beneficial conversion and cash conversion

features from convertible instruments and simplified the derivative scope exception guidance pertaining to equity classification of contracts

In August 2020, the FASB issued Accounting Standards

Update (“ASU”) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging

— Contracts in Entity’s Own Equity (Subtopic 815-40), to simplify accounting for certain financial instruments.

eliminated the then-current models that required separation of beneficial conversion and cash conversion features from convertible instruments

and simplified the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity.

ASU 2020-06 also introduced additional disclosures for convertible debt and freestanding instruments that are indexed to and settled

in an entity’s own equity.

ASU 2020-06 also introduced additional disclosures for convertible debt and freestanding instruments

that are indexed to and settled in an entity’s own equity.

ASU 2020-06 amended the diluted earnings per share guidance, including

the requirement to use the if-converted method for all convertible instruments.

ASU 2020-06 was effective for fiscal years beginning after

December 15, 2023, including interim periods within those fiscal years, with early adoption permitted.

The adoption of ASU 2020-06 did

not have a material effect on the Company’s condensed consolidated financial statements and related disclosures.

November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280).

The amendments in this update improve reportable segment disclosure

requirements, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 became effective for the Company’s

annual period beginning on January 1, 2024 and interim periods beginning after January 1, 2025.

The Company adopted this guidance in the

fourth quarter of 2024.

The Company’s results of operations, cash flows, and financial condition were not impacted by the adoption

ASU 2020-06 amended the diluted earnings per share guidance, including the requirement to use the if-converted

method for all convertible instruments.

ASU 2020-06 was effective for fiscal years beginning after December 15, 2023, including interim

periods within those fiscal years, with early adoption permitted.

The adoption of ASU 2020-06 did not have a material effect on the Company’s

condensed consolidated financial statements and related disclosures.

In November 2023, the

FASB issued ASU 2023-07, Segment Reporting (Topic 280).

The amendments in this update improve reportable segment disclosure requirements,

primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 became effective for the Company’s annual

period beginning on January 1, 2024 and interim periods beginning after January 1, 2025.

The Company adopted this guidance in the fourth

quarter of 2024.

The Company’s results of operations, cash flows, and financial condition were not impacted by the adoption of

In December 2023, the

1 unchanged sentence

Improvements to Income Tax Disclosures.

This guidance was intended to enhance the transparency

and decision-usefulness of income tax disclosures.

The amendments in ASU 2023-09 addressed investor requests for enhanced income tax information

primarily through changes to disclosure regarding rate reconciliation and income taxes paid both in the U.S.

and in foreign jurisdictions.

ASU 2023-09 was effective for fiscal years beginning after December 15, 2024 on a prospective basis, with the option to apply the standard

retrospectively.

This guidance was intended to enhance the

transparency and decision-usefulness of income tax disclosures.

The amendments in ASU 2023-09 addressed investor requests for enhanced

income tax information primarily through changes to disclosure regarding rate reconciliation and income taxes paid both in the U.S.

in foreign jurisdictions.

ASU 2023-09 was effective for fiscal years beginning after December 15, 2024 on a prospective basis, with the

option to apply the standard retrospectively.

Early adoption was permitted.

The adoption of ASU 2023-09 did not have a material effect on the Company’s condensed

consolidated financial statements and related disclosures.

The adoption of ASU 2023-09 did not have a material effect

on the Company’s condensed consolidated financial statements and related disclosures.

In November 2024, the

8 unchanged sentences

ASU 2024-03, as clarified by ASU 2025-01,

is effective for public entities for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December

is effective for public entities for annual periods beginning after December 15, 2026, and interim reporting periods beginning after

December 15, 2027.

Early adoption is permitted and is effective on either a prospective basis or retrospective basis.

The Company is currently

evaluating the impact that the updated standard will have on the Company’s disclosures within the condensed consolidated financial

Other accounting

standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material

impact on the condensed consolidated financial statements upon adoption.

The Company does not discuss recent pronouncements that are not

anticipated to have an impact on or are unrelated to its condensed consolidated financial condition, results of operations, cash flows

or disclosures.

The Company is

currently evaluating the impact that the updated standard will have on the Company’s disclosures within the condensed consolidated

financial statements.

Other accounting standards that have been issued

or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the condensed consolidated

financial statements upon adoption.

The Company does not discuss recent pronouncements that are not anticipated to have an impact on

or are unrelated to its condensed consolidated financial condition, results of operations, cash flows or disclosures.

AVALON GLOBOCARE CORP.

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AND OTHER CURRENT ASSETS

June 30, 2025 and December 31, 2024, prepaid expense and other current assets consisted of the following:

September 30, 2025 and December 31, 2024, prepaid expense and other current assets consisted of the following:

September 30,

Prepaid professional fees

8 unchanged sentences

NOTE 5 – EQUITY METHOD INVESTMENT

As of June 30, 2025 and December 31, 2024, the

equity method investments, net, amounted to $0 and $ 10,636,544 , respectively.

As of September 30, 2025 and December 31, 2024,

the equity method investments, net, amounted to $0 and $ 10,636,544 , respectively.

February 9, 2023, the Company entered into and closed an Amended and Restated Membership Interest Purchase Agreement (the “Amended

11 unchanged sentences

of 194,004 shares of the Company’s common stock, which were subject to a lock-up period and restrictions on sale.

the first quarter of 2025, to preserve cash, the Company entered into discussions with Lab Services MSO for the potential redemption of

the Company’s investment and on February 26, 2025, the Company and Lab Services MSO entered into a Redemption and Abandonment

the first quarter of 2025, to preserve cash, the Company entered into discussions with Lab Services MSO for the potential redemption

of the Company’s investment and on February 26, 2025, the Company 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 the Company (See Note 3 - Receivable

from Sale of Equity Method Investment).

Lab Services MSO, through

its subsidiaries, was engaged in providing laboratory testing services.

During the period from February 9, 2023 (date of investment) through

February 26, 2025 (date of sale), Avalon Lab and an unrelated company, had an ownership interest in Lab Services MSO of 40 % and 60 %, respectively.

Services MSO, through its subsidiaries, was engaged in providing laboratory testing services.

During the period from February 9, 2023

(date of investment) through February 26, 2025 (date of sale), Avalon Lab and an unrelated company, had an ownership interest in Lab

Services MSO of 40 % and 60 %, respectively.

Beginning in February 2025, we no longer offer laboratory services.

accordance with ASC 810, the Company determined that Lab Services MSO did not qualify as a variable interest entity, nor did it

have a controlling financial interest over the legal entity.

However, the Company determined that it does have significant influence as

a result of its board representation.

Therefore, the Company treats the equity investment in the condensed consolidated financial statements

under the equity method.

Under the equity method, the investment is initially recorded at cost, adjusted for any excess of the Company’s

share of the purchased-date fair values of the investee’s identifiable net assets over the cost of the investment (if any).

9, 2023 (date of investment), the excess of the Company’s share of the fair values of the investee’s identifiable net assets

over the cost of the investment was approximately $ 19,460,000 which was attributable to intangible assets and goodwill.

Thereafter, the

investment was adjusted for the post purchase change in the Company’s share of the investee’s net assets and any impairment

loss relating to the investment.

However, the Company determined that it does have significant influence

as a result of its board representation.

Therefore, the Company treats the equity investment in the condensed consolidated financial

statements under the equity method.

Under the equity method, the investment is initially recorded at cost, adjusted for any excess of

the Company’s share of the purchased-date fair values of the investee’s identifiable net assets over the cost of the investment

At February 9, 2023 (date of investment), the excess of the Company’s share of the fair values of the investee’s

identifiable net assets over the cost of the investment was approximately $ 19,460,000 which was attributable to intangible assets and

Thereafter, the investment was adjusted for the post purchase change in the Company’s share of the investee’s net

assets and any impairment loss relating to the investment.

AVALON GLOBOCARE CORP.

7 unchanged sentences

best estimate of the distribution of the economic value of the identifiable intangible assets.

the three months ended June 30, 2024, amortization expense of these intangible assets amounted to $ 166,733 which was included in

loss from equity method investment — Lab Services MSO in the accompanying condensed consolidated statements of operations and comprehensive

For the period from January 1, 2025 through February 26, 2025 (date of sale) and for the six months ended June 30, 2024, amortization

expense of these intangible assets amounted to $ 111,156 and $ 333,466 , respectively, which was included in income (loss) from equity method

investment — Lab Services MSO in the accompanying condensed consolidated statements of operations and comprehensive loss.

Goodwill represents the

excess of the purchase price paid over the fair value of net assets acquired in the business acquisition of Lab Services MSO incurred

the three months ended September 30, 2024, amortization expense of these intangible assets amounted to $ 166,733 which was included

in loss from equity method investment — Lab Services MSO in the accompanying condensed consolidated statements of operations and

comprehensive loss.

For the period from January 1, 2025 through February 26, 2025 (date of sale) and for the nine months ended September

30, 2024, amortization expense of these intangible assets amounted to $ 111,156 and $ 500,199 , respectively, which was included in income

(loss) from equity method investment — Lab Services MSO in the accompanying condensed consolidated statements of operations and

comprehensive loss.

Goodwill represents

the excess of the purchase price paid over the fair value of net assets acquired in the business acquisition of Lab Services MSO incurred

on February 9, 2023.

1 unchanged sentence

in circumstances indicate that the asset might be impaired.

the three months ended June 30, 2024, the Company’s share of Lab Services MSO’s net loss was $ 162,604 , which was included

in loss from equity method investment — Lab Services MSO in the accompanying condensed consolidated statements of operations and

comprehensive loss.

the period from January 1, 2025 through February 26, 2025 (date of sale) and for the six months ended June 30, 2024, the Company’s

the three months ended September 30, 2024, the Company’s share of Lab Services MSO’s net loss was $ 21,597 , which was

included in loss from equity method investment — Lab Services MSO in the accompanying condensed consolidated statements of operations

and comprehensive loss.

the period from January 1, 2025 through February 26, 2025 (date of sale) and for the nine months ended September 30, 2024, the Company’s

share of Lab Services MSO’s net income was $ 503,833 and $ 90,001 , respectively, which was included in income (loss) from equity

method investment — Lab Services MSO in the accompanying condensed consolidated statements of operations and comprehensive loss .

The Company classifies

distributions received from its investment on Lab Services MSO using the cumulative earnings approach.

Distributions received are considered

returns on the investment and classified as cash inflows from operating activities.

For the three months ended June 30, 2024, distribution

of earnings from the Company’s investment on Lab Services MSO amounted to $ 312,465 .

For the period from January 1, 2025 through

February 26, 2025 (date of sale) and for the six months ended June 30, 2024, distribution of earnings from the Company’s investment

on Lab Services MSO amounted to $ 0 and $ 473,253 , respectively.

tables below present the summarized financial information, as provided to the Company by the investee, for the unconsolidated company :

Company classifies distributions received from its investment on Lab Services MSO using the cumulative earnings approach.

Distributions

received are considered returns on the investment and classified as cash inflows from operating activities.

For the three months ended

September 30, 2024, distribution of earnings from the Company’s investment on Lab Services MSO amounted to $ 138,635 .

the period from January 1, 2025 through February 26, 2025 (date of sale) and for the nine months ended September 30, 2024, distribution

of earnings from the Company’s investment on Lab Services MSO amounted to $ 0 and $ 611,888 , respectively.

table below presents the summarized financial information, as provided to the Company by the investee, for the unconsolidated company :

September 30,

(Date of Sale)

(Loss) income from operation

September 30,

Income (loss) from operation

Net (loss) income

6 – CONVERTIBLE NOTE PAYABLE

NOTE 6 – CONVERTIBLE NOTE

June 2024 Convertible Note

6 unchanged sentences

The Company and its subsidiaries have also entered

into a security agreement, creating a security interest in certain property of the Company and its subsidiaries to secure the prompt payment,

performance and discharge in full of all of the Company’s obligations under the June 2024 Convertible Note.

Principal amount and

interest under the June 2024 Convertible Note are convertible into shares of common stock of the Company at a conversion price of $ 11.25

per share unless the Company fails to make an amortization payment when due, in which case the conversion price shall be the lesser of

$ 11.25 or the market price (as defined in the June 2024 Convertible Note).

into a security agreement, creating a security interest in certain property of the Company and its subsidiaries to secure the prompt

payment, performance and discharge in full of all of the Company’s obligations under the June 2024 Convertible Note.

amount and interest under the June 2024 Convertible Note are convertible into shares of common stock of the Company at a conversion price

of $ 11.25 per share unless the Company fails to make an amortization payment when due, in which case the conversion price shall be the

lesser of $ 11.25 or the market price (as defined in the June 2024 Convertible Note).

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6 – CONVERTIBLE NOTE PAYABLE (continued)

NOTE 6 – CONVERTIBLE NOTE PAYABLE

June 2024 Convertible Note (continued)

7 unchanged sentences

As of March 31, 2025, the Second

Warrant was not fair valued since the Company believed the Second Warrant would be cancelled and extinguished against payment of the June

2024 Convertible Note on June 5, 2025.

Warrant was not fair valued since the Company believed the Second Warrant would be cancelled and extinguished against payment of the

June 2024 Convertible Note on June 5, 2025.

On June 5, 2024, the Company delivered such duly executed June 2024 Convertible Note, warrants

3 unchanged sentences

notes of $ 1,661,540 , and to pay finder’s fee of $ 120,000 and lender’s costs of $ 40,000 related to this financing.

The Company is obligated

The Company was obligated

to make amortization payments in cash to Mast Hill toward the repayment of the June 2024 Convertible Note, as provided in the following

8 unchanged sentences

connection with the issuance of the June 2024 Convertible Note, the Company incurred debt issuance costs of $ 224,221 (including the issuance

of 5,333 warrants as a finder’s fee) which was capitalized and had been amortized into

interest expense over the term of the June 2024 Convertible Note.

of 5,333 warrants as a finder’s fee) which was capitalized and had been amortized into interest expense over the term of

the June 2024 Convertible Note.

upon the Company’s analysis of the criteria contained in ASC 815, the Company determined that all the warrants issued to Mast Hill

6 unchanged sentences

5, 2029 was classified as derivative liability on June 5, 2024.

The fair values of the 72,000 warrants with an exercise price of

$ 9.75 exercisable until June 5, 2029 issued on June 5, 2024 were computed using the Black-Scholes option-pricing model with the following

stock price of $ 10.39 , volatility of 85.72 %, risk-free rate of 4.31 %, annual dividend yield of 0 % and expected

life of 5 years.

In accordance

with ASC 470-20-25-2, proceeds from the sale of a debt instrument with stock purchase warrants are allocated to the two elements based

on the relative fair values of the debt instrument without the warrants and of the warrants themselves at time of issuance.

of the proceeds allocated to the warrants are accounted for as derivative liability.

The remainder of the proceeds are allocated to the

debt instrument portion of the transaction.

The fair values of the 72,000 warrants with an exercise price

of $ 9.75 exercisable until June 5, 2029 issued on June 5, 2024 were computed using the Black-Scholes option-pricing model with the

following assumptions:

stock price of $ 10.39 , volatility of 85.72 %, risk-free rate of 4.31 %, annual dividend yield of 0 %

and expected life of 5 years.

In accordance with ASC 470-20-25-2, proceeds

from the sale of a debt instrument with stock purchase warrants are allocated to the two elements based on the relative fair values of

the debt instrument without the warrants and of the warrants themselves at time of issuance.

The portion of the proceeds allocated to

the warrants are accounted for as derivative liability.

The remainder of the proceeds are allocated to the debt instrument portion of

the transaction.

accordance with ASC 480-10-25-14, the Company determined that the conversion provisions contain an embedded derivative feature and the

Company valued the derivative feature separately, recording debt discount and derivative liability in accordance with the provisions of

the convertible debt (see Note 7).

However, on June 5, 2024 and December 14, 2024, management determined the probability of failing to

make an amortization payment when due to be remote and as such the fair value of the embedded conversion feature had been estimated to

On December 15, 2024, Mast Hill waived all amortization payments required to be

made under the June 2024 Convertible Note.

On June 5, 2025, the Second W arrant was not cancelled

and was retained by Mast Hill.

Accordingly, the initial fair value of the Second Warrant of $ 621,353 was classified as derivative liability

on June 5, 2025 and recorded as interest expense – amortization of debt discount.

Company valued the derivative feature separately, recording debt discount and derivative liability in accordance with the provisions

of the convertible debt (see Note 7).

However, on June 5, 2024 and December 14, 2024, management determined the probability of failing

to make an amortization payment when due to be remote and as such the fair value of the embedded conversion feature had been estimated

On December 15, 2024, Mast Hill waived all amortization payments required to be made under the June 2024 Convertible

On June 5, 2025, the Second Warrant was not cancelled and was retained by Mast Hill.

Accordingly, the initial fair value of the

Second Warrant of $ 621,353 was classified as derivative liability on June 5, 2025 and recorded as interest expense – amortization

of debt discount.

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

6 – CONVERTIBLE NOTE PAYABLE (continued)

NOTE 6 – CONVERTIBLE NOTE PAYABLE

June 2024 Convertible Note (continued)

Company recorded a total debt discount of $ 1,460,343 related to the original issue discount,

common shares issued and warrants issued to Mast Hill, which had been amortized over the term of the June 2024 Convertible Note.

Company recorded a total debt discount of $ 1,460,343 related to the original issue discount, common shares issued and warrants

issued to Mast Hill, which had been amortized over the term of the June 2024 Convertible Note.

December 15, 2024, the Company and Mast Hill entered into that certain consent, acknowledgement, and waiver agreement, pursuant to which

Mast Hill waived all amortization payments required to be made under the June 2024 Convertible Note ,

the Company paid a waiver fee of $ 150,000 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 (“Pre-Funded Warrants”).

The Pre-Funded Warrants are immediately

exercisable at issuance and until the Pre-Funded Warrants are exercised in full and have an exercise price of $ 0.01 per share.

The Pre-Funded

Warrants were classified as a component of permanent equity on the accompanying consolidated balance sheets as they are freestanding financial

instruments that are immediately exercisable, do not embody an obligation for the Company to repurchase its own shares and permit the

holder to receive a fixed number of shares of common stock upon exercise.

All of the shares underlying the Pre-Funded Warrants have been

included in the weighted-average number of shares of common stock used to calculate net loss per share, basic and diluted, attributable

to the Company’s common stockholders because the shares may be issued for little or no consideration, are fully vested and are exercisable

after the original issuance date of the Pre-Funded Warrants.

Based on the Company’s assess, this arrangement was accounted for as

a modification of debt and, as such, $ 838,794 related to the waiver fee and Pre-Fund Warrants issued to Mast Hill were expensed.

May 29, 2025, the Company and Mast Hill entered into that certain waiver (the “Waiver”),

pursuant to which Mast Hill will retain all related dilutive issuance rights under Section 1.6(e) of the June 2024 Convertible Note, provided

that any adjustment under Section 1.6(e) of the June 2024 Convertible Note shall be subject to a per share floor price equal to $ 1.00 .

The Company recorded a loss on extinguishment of debt of $ 9,076,587 as a result of the Waiver, representing the value of common stock

to be issued upon conversion in excess of the common stock issuable under the original terms of the June 2024 Convertible Note.

2025, Mast Hill converted its June 2024 Convertible Note in the principal amount of $ 120,402 into 120,402 shares of common stock of the

Company at a per share price of $ 1.00 .

convertible note payable as of June 30, 2025 and December 31, 2024 was as follows:

Mast Hill waived all amortization payments required to be made under the June 2024 Convertible 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 (“Pre-Funded Warrants”).

The Pre-Funded Warrants are immediately exercisable at issuance

and until the Pre-Funded Warrants are exercised in full and have an exercise price of $ 0.01 per share.

The Pre-Funded Warrants were classified

as a component of permanent equity on the accompanying consolidated balance sheets as they are freestanding financial instruments that

are immediately exercisable, do not embody an obligation for the Company to repurchase its own shares and permit the holder to receive

a fixed number of shares of common stock upon exercise.

All of the shares underlying the Pre-Funded Warrants have been included in the

weighted-average number of shares of common stock used to calculate net loss per share, basic and diluted, attributable to the Company’s

common stockholders because the shares may be issued for little or no consideration, are fully vested and are exercisable after the original

issuance date of the Pre-Funded Warrants.

Based on the Company’s assess, this arrangement was accounted for as a modification of

debt and, as such, $ 838,794 related to the waiver fee and Pre-Fund Warrants issued to Mast Hill were expensed.

May 29, 2025, the Company and Mast Hill entered into that certain waiver (the “Waiver”), pursuant to which Mast Hill

will retain all related dilutive issuance rights under Section 1.6(e) of the June 2024 Convertible Note, provided that any adjustment

under Section 1.6(e) of the June 2024 Convertible Note shall be subject to a per share floor price equal to $ 1.00 .

The Company recorded

a loss on extinguishment of debt of $ 9,076,587 as a result of the Waiver, representing the value of common stock will be issued upon

conversion in excess of the common stock issuable under the original terms of the June 2024 Convertible Note.

During the period from June 1, 2025 through September

30, 2025, Mast Hill converted its June 2024 Convertible Note in the principal amount of $ 1,378,993 into 1,378,993 shares of common stock

of the Company at a per share price of $ 1.00 .

July 2025 Convertible Note

July 3, 2025, the Company issued two convertible promissory notes (“July 2025 Convertible Note”) to two

accredited investors on identical terms.

The July 2025 Convertible Note has a principal amount of $ 200,000 , bears a one-time interest

charge of $ 60,000 , and matures nine months from the date of issuance.

to the terms of the July 2025 Convertible Note, beginning six months after the issue date, the two investors may convert the outstanding

principal and accrued interest into shares of the Company’s common stock at a fixed conversion price of $ 1.00 per share, subject

to certain adjustments as provided for in the July 2025 Convertible Note for stock splits, dividends, combinations, or reclassifications.

The Company may prepay the July 2025 Convertible Note at any time without penalty.

consideration for the two investors’ purchase of the July 2025 Convertible Note, the Company issued 5,000 shares of restricted

common stock to each investor as a commitment fee.

The Company recorded a total debt discount of $ 26,800 related to the common stock

issued to the two investors, which will be amortized over the term of the July 2025 Convertible Note (see Note 11 - Common Shares Issued

as Convertible Note Payable Commitment Fee).

The convertible notes

payable as of September 30, 2025 and December 31, 2024 was as follows:

September 30,

Principal amount

2 unchanged sentences

Convertible note payable, net

Subsequent to June 30, 2025,

Mast Hill converted its June 2024 Convertible Note in the principal amount of $1,015,052 into 1,015,052 shares of common stock of the

Company at a per share price of $ 1.00 (See Note 16 – Subsequent Events - Common Shares Issued for Debt Conversion).

three months ended June 30, 2025 and 2024, amortization of debt discount and debt issuance costs related to convertible note payable amounted

to $ 780,602 (including the initial fair value of the Second Warrant of $ 621,353 ) and $ 534,619 , respectively, which have been included

in interest expense — amortization of debt discount and debt issuance costs on the accompanying condensed consolidated statements

of operations and comprehensive loss.

For the six months ended June 30, 2025 and 2024, amortization of debt discount and debt issuance

costs related to convertible note payable amounted to $ 1,064,357 (including the initial fair value of the Second Warrant of $ 621,353 )

and $ 777,008 , respectively, which have been included in interest expense — amortization of debt discount and debt issuance costs

on the accompanying condensed consolidated statements of operations and comprehensive loss.

the three months ended June 30, 2025 and 2024, interest expense related to convertible note payable amounted to $ 82,755 and

$ 68,339 , respectively, which have been included in interest expense — other on the accompanying condensed consolidated statements

of operations and comprehensive loss.

For the six months ended June 30, 2025 and 2024, interest expense related to convertible note payable

amounted to $ 164,711 and $ 140,054 , respectively, which have been included in interest expense — other on the accompanying condensed

consolidated statements of operations and comprehensive loss.

subsequent period, Mast Hill converted its June 2024 Convertible Note in the principal amount of $ 146,930 into 146,930 shares of common

stock of the Company at a per share price of $ 1.00 (See Note 16 - Common Shares Issued for Debt Conversion).

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – CONVERTIBLE NOTE PAYABLE

July 2025 Convertible Note (continued)

For the three months ended September 30, 2025

and 2024, amortization of debt discount and debt issuance costs related to convertible note payable amounted to $ 8,934 and $ 249,004 ,

respectively, which have been included in interest expense — amortization of debt discount and debt issuance costs on the accompanying

condensed consolidated statements of operations and comprehensive loss.

For the nine months ended September 30, 2025 and 2024, amortization

of debt discount and debt issuance costs related to convertible note payable amounted to $ 1,073,291 (including the initial fair value

of the Second Warrant of $ 621,353 ) and $ 1,026,012 , respectively, which have been included in interest expense — amortization of

debt discount and debt issuance costs on the accompanying condensed consolidated statements of operations and comprehensive loss.

the three months ended September 30, 2025 and 2024, interest expense related to convertible note payable amounted to $ 71,569 and

$ 93,222 , respectively, which have been included in interest expense — other on the accompanying condensed consolidated statements

of operations and comprehensive loss.

For the nine months ended September 30, 2025 and 2024, interest expense related to convertible

note payable amounted to $ 236,280 and $ 233,276 , respectively, which have been included in interest expense — other on the

accompanying condensed consolidated statements of operations and comprehensive loss.

7 – DERIVATIVE LIABILITY

in Note 6, June 2024 Convertible Note, the Company determined that the convertible note payable contains an embedded derivative feature

in the form of a conversion provision which is adjustable based on future prices of the Company’s common stock.

In accordance with

ASC 815-10-25, each derivative feature is initially recorded at its fair value using the Black-Scholes option valuation method and then

re-value at each reporting date, with changes in the fair value reported in the statements of operations.

However, on June 5, 2024 and

December 14, 2024, management determined the probability of failing to make an amortization payment when due was remote and as such the

fair value of the embedded conversion feature had been estimated to be zero.

On December 15, 2024, Mast Hill waived all amortization payments

required to be made under the June 2024 Convertible Note.

2023, the Company issued 9,000 warrants with an exercise price of $ 67.50 exercisable until May 23, 2028 to Mast Hill and a third party

as a finder’s fee.

Upon evaluation, the warrants meet the definition of a derivative liability under ASC 815, as the Company cannot

avoid a net cash settlement under certain circumstances.

Accordingly, the fair value of the 9,000 warrants was classified as a derivative

liability on May 23, 2023.

In March 2025, 8,333 warrants held by Mast Hill were cashless exercised.

On June 30, 2025, the estimated fair

value of the rest of 667 warrants was $ 217 .

The estimated fair value of the warrants was computed as of June 30, 2025 using Black-Scholes

option-pricing model, with the following assumptions:

stock price of $ 2.78 , volatility of 107.08 %, risk-free rate of 3.68 %, annual dividend

yield of 0 % and expected life of 2.9 years.

6, 2023, the Company issued 222 warrants with an exercise price of $ 67.50 exercisable until July 6, 2028 to a third party as a finder’s

Upon evaluation, the warrants meet the definition of a derivative liability under ASC 815, as the Company cannot avoid a net cash

settlement under certain circumstances.

As stated in Note 6, June 2024 Convertible Note,

the Company determined that the convertible note payable contains an embedded derivative feature in the form of a conversion provision

which is adjustable based on future prices of the Company’s common stock.

In accordance with ASC 815-10-25, each derivative feature

is initially recorded at its fair value using the Black-Scholes option valuation method and then re-value at each reporting date, with

changes in the fair value reported in the statements of operations.

However, on June 5, 2024 and December 14, 2024, management determined

the probability of failing to make an amortization payment when due was remote and as such the fair value of the embedded conversion

feature had been estimated to be zero.

On December 15, 2024, Mast Hill waived all amortization payments required to be made under the

June 2024 Convertible Note.

On May 23, 2023, the Company issued 9,000 warrants

with an exercise price of $ 67.50 exercisable until May 23, 2028 to Mast Hill and a third party as a finder’s fee.

Upon evaluation,

the warrants meet the definition of a derivative liability under ASC 815, as the Company cannot avoid a net cash settlement under certain

circumstances.

Accordingly, the fair value of the 9,000 warrants was classified as a derivative liability on May 23, 2023.

In March 2025,

8,333 warrants held by Mast Hill were cashless exercised.

On September 30, 2025, the estimated fair value of the rest of 667 warrants

The estimated fair value of the warrants was computed as of September 30, 2025 using Black-Scholes option-pricing model, with

the following assumptions:

stock price of $ 2.38 , volatility of 100.45 %, risk-free rate of 3.61 %, annual dividend yield of 0 % and expected

life of 2.6 years.

On July 6, 2023, the Company issued 222 warrants

with an exercise price of $ 67.50 exercisable until July 6, 2028 to a third party as a finder’s fee.

Upon evaluation, the warrants

meet the definition of a derivative liability under ASC 815, as the Company cannot avoid a net cash settlement under certain circumstances.

Accordingly, the fair value of the 222 warrants was classified as a derivative liability on July 6, 2023.

On June 30, 2025, the estimated fair value of the 222 warrants was $ 78 .

The estimated fair value of the warrants was computed

as of June 30, 2025 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 2.78 , volatility of 106.70 %,

risk-free rate of 3.68 %, annual dividend yield of 0 % and expected life of 3.0 years.

On September 30, 2025, the

estimated fair value of the 222 warrants was $ 36 .

The estimated fair value of the warrants was computed as of September 30, 2025 using

Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 2.38 , volatility of 101.36 %, risk-free rate of 3.61 %,

annual dividend yield of 0 % and expected life of 2.8 years.

October 9, 2023, the Company issued 4,060 warrants with an exercise price of $ 37.50 exercisable until October 9,

5 unchanged sentences

On March 26, 2025, 3,500 warrants held by Mast Hill were cashless

On June 30, 2025, the estimated fair value of the rest of 560 warrants was $ 350 .

The estimated fair value of the

warrants was computed as of June 30, 2025 using Black-Scholes option-pricing model, with the following assumptions:

On September 30, 2025, the estimated fair value of the rest of 560 warrants was $ 231 .

The estimated fair value of

the warrants was computed as of September 30, 2025 using Black-Scholes option-pricing model, with the following assumptions:

of $ 2.38 , volatility of 105.88 %, risk-free rate of 3.61 %, annual dividend yield of 0 % and expected life of 3.0 years.

March 7, 2024, the Company issued 9,450 warrants with an exercise price of $ 30.00 exercisable until March 7, 2029

to Mast Hill and a third party as a finder’s fee.

Upon evaluation, the warrants meet the definition of a derivative liability under

FASB ASC 815, as the Company cannot avoid a net cash settlement under certain circumstances.

Accordingly, the fair value of the 9,450 warrants

was classified as a derivative liability on March 7, 2024.

On April 3, 2025, 8,750 warrants held by Mast Hill were cashless

On September 30, 2025, the estimated fair value of the 700 warrants was $ 401 .

The estimated fair value of the warrants

was computed as of September 30, 2025 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 2.38 ,

volatility of 104.38 %, risk-free rate of 3.61 %, annual dividend yield of 0 % and expected life of 3.4 years.

On March 7, 2024, the

Company issued 9,450 warrants with an exercise price of $ 30.00 exercisable until March 7, 2029 to Mast Hill and a third

party as a finder’s fee.

Upon evaluation, the warrants meet the definition of a derivative liability under FASB ASC 815, as the

Company cannot avoid a net cash settlement under certain circumstances.

Accordingly, the fair value of the 9,450 warrants was

classified as a derivative liability on March 7, 2024.

On April 3, 2025, 8,750 warrants held by Mast Hill were exercised on

a cashless basis.

On June 30, 2025, the estimated fair value of the 700 warrants was $ 526 .

The estimated fair value of the warrants

was computed as of June 30, 2025 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 2.78 , volatility

of 101.32 %, risk-free rate of 3.68 %, annual dividend yield of 0 % and expected life of 3.7 years .

June 5, 2024, the Company issued 152,000 warrants to Mast Hill and a third party as a finder’s fee (see Note 6).

Upon evaluation,

the warrants meet the definition of a derivative liability under ASC 815, as the Company cannot avoid a net cash settlement under certain

circumstances.

On March 31, 2025 and June 5, 2024, management determined the probability of failing to make an amortization payment when

due to be remote and as such the fair value of the Second Warrant had been estimated to be zero.

Accordingly, the fair value of the 72,000

warrants with an exercise price of $ 9.75 exercisable until June 5, 2029 was classified as derivative liability on June 5, 2024.

5, 2025, the Second Warrant was not cancelled and was retained by Mast Hill.

Accordingly, the initial fair value of the Second Warrant

of $ 621,353 was classified as derivative liability on June 5, 2025 and recorded as interest expense – amortization of debt discount.

In April 2025, 66,667 warrants held by Mast Hill were cashless exercised.

On June 30, 2025, the

estimated fair value of the 85,333 warrants was $ 124,382 .

The estimated fair value of the warrants was computed as of June 30, 2025 using

Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 2.78 , volatility of 99.37 %, risk-free rate of 3.68 %,

annual dividend yield of 0 % and expected life of 3.9 years.

AVALON GLOBOCARE CORP.

2 unchanged sentences

7 – DERIVATIVE LIABILITY (continued)

or decreases in fair value of the derivative liability are included as a component of total other (expenses) income in the accompanying

condensed consolidated statements of operations and comprehensive loss.

The changes to the derivative liability resulted in a decrease

of $ 561,176 and $ 180,337 in the derivative liability and the corresponding increase in other income as a gain for the three months

ended June 30, 2025 and 2024, respectively.

The changes to the derivative liability resulted in a decrease of $ 446,816 and

$ 211,549 in the derivative liability and the corresponding increase in other income as a gain for the six months ended June 30, 2025

On June 5, 2024, the

Company issued 152,000 warrants to Mast Hill and a third party as a finder’s fee (see Note 6).

Upon evaluation, the warrants meet

the definition of a derivative liability under ASC 815, as the Company cannot avoid a net cash settlement under certain circumstances.

On March 31, 2025 and June 5, 2024, management determined the probability of failing to make an amortization payment when due to be remote

and as such the fair value of the Second Warrant had been estimated to be zero.

Accordingly, the fair value of the 72,000 warrants with

an exercise price of $ 9.75 exercisable until June 5, 2029 was classified as derivative liability on June 5, 2024.

April 2025, 66,667 warrants held by Mast Hill were cashless exercised.

On September 30, 2025, the estimated fair value of the 5,333 warrants

with an exercise price of $ 9.75 exercisable until June 5, 2029 was $ 5,651 .

The estimated fair value of the warrants was computed as of

September 30, 2025 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 2.38 , volatility of 102.30 %,

risk-free rate of 3.61 %, annual dividend yield of 0 % and expected life of 3.7 years.

On June 5, 2025, the Second Warrant was not cancelled

and was retained by Mast Hill.

Accordingly, the initial fair value of the Second Warrant of $ 621,353 was classified as derivative liability

on June 5, 2025 and recorded as interest expense – amortization of debt discount.

On September 30, 2025, the estimated fair

value of the 80,000 warrants with an exercise price of $ 7.50 exercisable until June 5, 2029 was $ 94,015 .

The estimated fair value of

the warrants was computed as of September 30, 2025 using Black-Scholes option-pricing model, with the following assumptions:

of $ 2.38 , volatility of 102.30 %, risk-free rate of 3.61 %, annual dividend yield of 0 % and expected life of 3.7 years.

or decreases in fair value of the derivative liability are included as a component of total other expense, net, in the accompanying condensed

consolidated statements of operations and comprehensive loss.

The changes to the derivative liability resulted in a decrease of $ 25,130

and $ 169,209 in the derivative liability and the corresponding increase in other income as a gain for the three months ended September

30, 2025 and 2024, respectively.

The changes to the derivative liability resulted in a decrease of $ 471,946 and $ 380,758 in

the derivative liability and the corresponding increase in other income as a gain for the nine months ended September 30, 2025 and 2024,

respectively.

NOTE 8 – NOTE PAYABLE, NET

On September 1, 2022,

the Company issued a balloon promissory note in the form of a mortgage on its headquarters to a third party company in the principal amount

of $ 4,800,000 , which carries interest of 11.0 % per annum.

Interest is due in monthly payments of $ 44,000 beginning November 1, 2022 and

payable monthly thereafter until September 1, 2025 when the principal outstanding and all remaining interest is due.

The principal of

$ 4,800,000 can be extended for an additional 36 months, provided that the Company has not defaulted.

The Company may not prepay the principal

of $ 4,800,000 for a period of 12 months.

The principal of $ 4,800,000 is secured by a first mortgage on the Company’s real property

located at 4400 Route 9 South, Freehold, Monmouth County, New Jersey.

September 1, 2022, the Company issued a balloon promissory note in the form of a mortgage on its headquarters to a third-party company

in the principal amount of $ 4,800,000 , which carries interest of 11.0 % per annum.

Interest is due in monthly payments of $ 44,000 beginning

November 1, 2022 and payable monthly thereafter until September 1, 2025 when the principal outstanding and all remaining interest is

The principal of $ 4,800,000 can be extended for an additional 36 months, provided that the Company has not defaulted.

may not prepay the principal of $ 4,800,000 for a period of 12 months.

The principal of $ 4,800,000 is secured by a first mortgage

on the Company’s real property located at 4400 Route 9 South, Freehold, Monmouth County, New Jersey.

On October 1, 2025, the Company

entered into a Mortgage Modification and Extension Agreement extending the note term through January 1, 2026.

May 2023, the Company borrowed $ 1,000,000 from the same lender.

4 unchanged sentences

by a second-lien mortgage on certain real property and improvements located at 4400 Route 9 South, Freehold, Monmouth County, New Jersey.

note payable as of June 30, 2025 and December 31, 2024 was as follows:

October 1, 2025, the Company entered into a Mortgage Modification and Extension Agreement extending the note term through January 1,

note payable as of September 30, 2025 and December 31, 2024 was as follows :

September 30,

Principal amount

1 unchanged sentence

Note payable, net

both the three months ended June 30, 2025 and 2024, amortization of debt issuance costs related to note payable amounted to $ 29,807 ,

which have been included in interest expense — amortization of debt discount and debt issuance costs on the accompanying condensed

consolidated statements of operations and comprehensive loss.

both the six months ended June 30, 2025 and 2024, amortization of debt issuance costs related to note payable amounted to $ 59,614 ,

which have been included in interest expense — amortization of debt discount and debt issuance costs on the accompanying condensed

consolidated statements of operations and comprehensive loss.

both the three months ended June 30, 2025 and 2024, interest expense related to note payable amounted to $ 164,500 which have been

included in interest expense - other on the accompanying condensed consolidated statements of operations and comprehensive loss.

both the six months ended June 30, 2025 and 2024, interest expense related to note payable amounted to $ 329,000 which have been

included in interest expense - other on the accompanying condensed consolidated statements of operations and comprehensive loss.

NOTE 9 – RELATED PARTY TRANSACTIONS

Revenue from Related Party and Rent Receivable – Related Party

Company leases space of its commercial real property located in New Jersey to D.P.

Capital Investments LLC, which is controlled

by Wenzhao Lu, the Company’s chairman of the Board of Directors.

The term of the related party lease agreement is five years commencing

on May 1, 2021 and will expire on April 30, 2026.

For both the three months ended June 30, 2025 and 2024, the related party rental revenue

amounted to $ 12,600 and has been included in real property rental revenue on the accompanying condensed consolidated statements of

operations and comprehensive loss.

For both the six months ended June 30, 2025 and 2024, the related party rental revenue amounted to

$ 25,200 and has been included in real property rental revenue on the accompanying condensed consolidated statements of operations

and comprehensive loss.

the three months ended September 30, 2025 and 2024, amortization of debt issuance costs related to note payable amounted to $ 22,405 and

$ 29,807 , respectively, which have been included in interest expense — amortization of debt discount and debt issuance costs

on the accompanying condensed consolidated statements of operations and comprehensive loss.

the nine months ended September 30, 2025 and 2024, amortization of debt issuance costs related to note payable amounted to $ 82,019 and

$ 89,421 , respectively, which have been included in interest expense — amortization of debt discount and debt issuance costs

on the accompanying condensed consolidated statements of operations and comprehensive loss.

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – RELATED PARTY TRANSACTIONS (continued)

Provided by Related Party

NOTE 8 – NOTE PAYABLE, NET

both the three months ended September 30, 2025 and 2024, interest expense related to note payable amounted to $ 164,500 which have

been included in interest expense - other on the accompanying condensed consolidated statements of operations and comprehensive loss.

both the nine months ended September 30, 2025 and 2024, interest expense related to note payable amounted to $ 493,500 which have

been included in interest expense - other on the accompanying condensed consolidated statements of operations and comprehensive loss.

NOTE 9 – RELATED PARTY TRANSACTIONS

Rental Revenue from Related Party and Rent

Receivable – Related Party

The Company leases space of its commercial real

property located in New Jersey to D.P.

Capital Investments LLC, which is controlled by Wenzhao Lu, the Company’s chairman of the

Board of Directors.

The term of the related party lease agreement is five years commencing on May 1, 2021 and will expire on April 30,

For both the three months ended September 30, 2025 and 2024, the related party rental revenue amounted to $ 12,600 and has

been included in real property rental revenue on the accompanying condensed consolidated statements of operations and comprehensive loss.

For both the nine months ended September 30, 2025 and 2024, the related party rental revenue amounted to $ 37,800 and has been included

in real property rental revenue on the accompanying condensed consolidated statements of operations and comprehensive loss.

Services Provided by Related Party

time to time, Wilbert Tauzin, a director of the Company, and his son provide consulting services to the Company.

As compensation

for professional services provided, the Company recognized consulting expenses of $ 15,197 and $ 20,535 for the three months ended

June 30, 2025 and 2024, respectively, which have been included in professional fees on the accompanying condensed consolidated statements

of operations and comprehensive loss.

As compensation for professional services provided, the Company recognized consulting expenses of

$ 30,794 and $ 37,266 for the six months ended June 30, 2025 and 2024, respectively, which have been included in professional

fees on the accompanying condensed consolidated statements of operations and comprehensive loss.

of June 30, 2025 and December 31, 2024, the accrued and unpaid services charge related to this director’s son amounted to $ 2,733

for professional services provided, the Company recognized consulting expenses of $ 15,000 and $ 10,738 for the three months

ended September 30, 2025 and 2024, respectively, which have been included in professional fees on the accompanying condensed consolidated

statements of operations and comprehensive loss.

As compensation for professional services provided, the Company recognized consulting

expenses of $ 45,794 and $ 48,004 for the nine months ended September 30, 2025 and 2024, respectively, which have been included

in professional fees on the accompanying condensed consolidated statements of operations and comprehensive loss.

of September 30, 2025 and December 31, 2024, the accrued and unpaid services charge related to this director’s son amounted to

$ 2,733 and $ 15,000 , respectively, which have been included in accrued professional fees on the accompanying condensed consolidated

5 unchanged sentences

(“Beijing GenExosome”) for a cash payment of $ 450,000 .

As of both June 30, 2025 and December

As of both September 30, 2025 and December

31, 2024, the unpaid acquisition consideration of $ 100,000 , was payable to Dr.

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time to time, Lab Services MSO paid shared expense on behalf of the Company.

In addition, Lab Services MSO made a payment of $ 566,667 for

equity method investment payable on behalf of the Company in 2024.

During the first quarter of 2025, to preserve cash, the Company entered

into discussions with Lab Services MSO for the potential redemption of our investment and on February 26, 2025, the Company and Lab Services

MSO entered into a Redemption and Abandonment Agreement, whereby Lab Services MSO redeemed the 40 % equity interest in Lab Services

MSO held by the Company for cash and the surrender of its Series B Preferred Stock having a carrying value of $ 11,000,000 .

The aggregate

cash amount to the Company for the redemption was $ 1,745,000 , 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 the Company’s Series B Preferred Stock previously issued to SCBC Holdings LLC as partial consideration

for the equity interests of Laboratory Services MSO, were permanently surrendered and relinquished to the Company for no additional consideration.

The difference of $ 2,348,695 between the carrying value of the extinguished Series B Preferred Stock, the aggregate cash amount to

the Company for the redemption, net of payables due to Lab Services MSO of $ 632,916 , totaling $13, 377,916, and the carrying value

of the equity method investment of $ 11,029,221 was accounted for as an increase to additional paid-in capital (See Note 10 - Series

B Convertible Preferred Stock Extinguished Related to Sale of Equity Method Investment).

As of June 30, 2025 and December 31, 2024, the

balance due to Lab Services MSO amounted to $0 and $ 632,916 , respectively, which has been included in accrued liabilities and

other payables — related parties on the accompanying condensed consolidated balance sheets.

Membership Interest

Purchase Agreement

17, 2023, the Company entered into a Membership Interest Purchase Agreement with Mr.

Lu, the Company’s chairman of the Board of

Directors, pursuant to which (i) Mr.

Lu will acquire from the Company 30 % of the total outstanding membership interests of Avalon RT 9,

a wholly owned subsidiary of the Company, for a cash purchase price of $ 3,000,000 (the “Acquisition”), and (ii) for a period

of twelve months following the closing of the Acquisition, Mr.

Lu shall have the option to purchase from the Company up to an additional

70 % of the outstanding membership interests of Avalon RT 9 for a purchase price of up to $ 7,000,000 (the “Option”), subject

to the terms and conditions of a membership interest purchase agreement to be negotiated and entered into between Mr.

Lu and the Company

at such time that Mr.

Lu desires to exercise the Option.

Company received $ 3,258,078 and $ 3,108,106 from Mr.

Lu as of June 30, 2025 and December 31, 2024, respectively, which was recorded as

advance from pending sale of noncontrolling interest – related party on the accompanying

condensed consolidated balance sheets.

The Acquisition is expected to close in the fourth quarter of 2025.

In addition, Lab Services MSO made a payment of $ 566,667

for equity method investment payable on behalf of the Company in 2024.

During the first quarter of 2025, to preserve cash, the

Company entered into discussions with Lab Services MSO for the potential redemption of our investment and on February 26, 2025, the Company

and Lab Services MSO entered into a Redemption and Abandonment Agreement, whereby Lab Services MSO redeemed the 40 % equity interest in

Lab Services MSO held by the Company for cash and the surrender of its Series B Preferred Stock having a carrying value of $ 11,000,000 .

The aggregate cash amount to the Company for the redemption was $ 1,745,000 .

In addition, pursuant to the terms of the Redemption Agreement,

all shares of the Company’s Series B Preferred Stock previously issued to SCBC Holdings LLC as partial consideration for the equity

interests of Laboratory Services MSO, were permanently surrendered and relinquished to the Company for no additional consideration.

difference of $ 2,348,695 between the carrying value of the extinguished Series B Preferred Stock, the aggregate cash amount to the Company

for the redemption, net of payables due to Lab Services MSO of $ 632,916 , totaling $ 13,377,916 , and the carrying value of the equity method

investment of $ 11,029,221 was accounted for as an increase to additional paid-in capital (See Note 10 - Series B Convertible Preferred

Stock Extinguished Related to Sale of Equity Method Investment).

As of September 30, 2025 and December 31, 2024, the balance due to Lab

Services MSO amounted to $0 and $ 632,916 , respectively, which has been included in accrued liabilities and other payables — related

parties on the accompanying condensed consolidated balance sheets.

AVALON GLOBOCARE CORP.

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NOTE 9 – RELATED PARTY TRANSACTIONS (continued)

Membership Interest

Purchase Agreement

On November 17, 2023, the Company entered into

a Membership Interest Purchase Agreement with Mr.

Lu, the Company’s chairman of the Board of Directors, pursuant to which (i) Mr.

Lu will acquire from the Company 30 % of the total outstanding membership interests of Avalon RT 9, a wholly owned subsidiary of the Company,

for a cash purchase price of $ 3,000,000 (the “Acquisition”), and (ii) for a period of twelve months following the closing

of the Acquisition, Mr.

Lu shall have the option to purchase from the Company up to an additional 70 % of the outstanding membership interests

of Avalon RT 9 for a purchase price of up to $ 7,000,000 (the “Option”), subject to the terms and conditions of a membership

interest purchase agreement to be negotiated and entered into between Mr.

Lu and the Company at such time that Mr.

Lu desires to exercise

The Company received $ 3,158,078 and $ 3,108,106

Lu as of September 30, 2025 and December 31, 2024, respectively, which was recorded as advance from pending sale of noncontrolling

interest – related party on the accompanying condensed consolidated balance sheets.

The Acquisition is expected to close in the

first quarter of 2026.

D Convertible Preferred Stock Issued in Exchange of Series A Convertible Preferred Stock

January 9, 2025, the Company entered into an exchange agreement with Wenzhao Lu, the Company’s chairman of the Board

of Directors, pursuant to which Mr.

Lu exchanged 9,000 shares of Series A Preferred Stock of the Company, having a carrying

value of $ 9,000,000 , for 5,000 shares of Series D Preferred Stock of the Company.

The Company determined that the exchange

of the Series A Preferred Stock for the Series D Preferred Stock resulted in the extinguishment of the Series A Preferred Stock.

result, the difference between the carrying amount of the Series A Preferred Stock and the fair value of the Series D Preferred Stock

of $ 162,473 was recognized as a deemed contribution in the six months ended June 30, 2025 that increased additional paid-in capital

and income available to common shareholders in calculating earnings per share (See Note 10 - Series D Convertible Preferred Stock Issued

in Exchange of Series A Convertible Preferred Stock).

On January 9, 2025,

the Company entered into an exchange agreement with Wenzhao Lu, the Company’s chairman of the Board of Directors, pursuant to which

Lu exchanged 9,000 shares of Series A Preferred Stock of the Company, having a carrying value of $ 9,000,000 , for 5,000 shares of

Series D Preferred Stock of the Company.

The Company determined that the exchange of the Series A Preferred Stock for the Series D Preferred

Stock resulted in the extinguishment of the Series A Preferred Stock.

As a result, the difference between the carrying amount of the

Series A Preferred Stock and the fair value of the Series D Preferred Stock of $ 162,473 was recognized as a deemed contribution in the

nine months ended September 30, 2025 that increased additional paid-in capital and income available to common shareholders in calculating

earnings per share (See Note 10 - Series D Convertible Preferred Stock Issued in Exchange of Series A Convertible Preferred Stock).

NOTE 10 – EQUITY

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any dissolution, liquidation or winding-up of the Company, whether voluntary or involuntary (a “Liquidation”), the Series

A Holders will be entitled to receive out of the assets available for distribution to the stockholders, (i) after and subject to the payment

in full of all amounts required to be distributed to the holders of another class or series of stock of the Company ranking on liquidation

prior and in preference to the Series A Preferred Stock, (ii) ratably with any class or series of stock ranking on liquidation on parity

with the Series A Preferred Stock and (iii) in preference and priority to the holders of the shares of the Company’s common stock,

an amount equal to 100 % of the Series A Stated Value, and no more, in proportion to the full and preferential amount that all shares

of the Series A Preferred Stock are entitled to receive.

The Company shall mail written notice of any Liquidation not less than twenty

(20) days prior to the payment date stated therein, to each Series A Holder.

share of Series A Preferred Stock shall be convertible, at any time and from time to time from and after the later of (i) the date of

the stockholder approval as described above, in accordance with the Nasdaq Stock Market Listing Rules, and (ii) the nine (9)

month anniversary of the Closing (the “Initial Conversion Date”), at the option of the Series A Holder, into that number of

shares of common stock (subject to the limitations set forth in Series A Certificate of Designations, determined by dividing the Stated

Value of such share of Series A Preferred Stock by the conversion price (as defined below)).

The Series A Holders may effect conversions

by providing the Company with the form of conversion notice attached as Annex A to the Series A Certificate of Designations.

A Holders may convert such shares into shares of the Company’s common stock at a conversion price per share equal to the greater

of (i) one hundred fifty dollars ($ 150.0 ) and (ii) ninety percent ( 90 %) of the closing price of the Company’s common stock on Nasdaq

on the day prior to receipt of a conversion notice, subject to adjustment for stock splits and similar matters.

In addition, following

the Initial Conversion Date, each Series A Holder agrees that it shall not be entitled to in any calendar month, sell a number of Series

A conversion shares into the open market in an amount exceeding more than ten percent ( 10 %) of the number of Series A conversion shares

issuable upon conversion of the Series A Preferred Stock then held by such Series A Holder.

A Holders will be entitled to receive out of the assets available for distribution to the stockholders, (i) after and subject to the

payment in full of all amounts required to be distributed to the holders of another class or series of stock of the Company ranking on

liquidation prior and in preference to the Series A Preferred Stock, (ii) ratably with any class or series of stock ranking on liquidation

on parity with the Series A Preferred Stock and (iii) in preference and priority to the holders of the shares of the Company’s

common stock, an amount equal to 100 % of the Series A Stated Value, and no more, in proportion to the full and preferential amount that

all shares of the Series A Preferred Stock are entitled to receive.

The Company shall mail written notice of any Liquidation not less

than twenty (20) days prior to the payment date stated therein, to each Series A Holder.

AVALON GLOBOCARE CORP.

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Preferred Stock (continued)

share of Series A Preferred Stock shall be convertible, at any time and from time to time from and after the later of (i) the date of

the stockholder approval as described above, in accordance with the Nasdaq Stock Market Listing Rules, and (ii) the nine (9) month anniversary

of the Closing (the “Initial Conversion Date”), at the option of the Series A Holder, into that number of shares of common

stock (subject to the limitations set forth in Series A Certificate of Designations, determined by dividing the Stated Value of such

share of Series A Preferred Stock by the conversion price (as defined below)).

The Series A Holders may effect conversions by providing

the Company with the form of conversion notice attached as Annex A to the Series A Certificate of Designations.

The Series A Holders

may convert such shares into shares of the Company’s common stock at a conversion price per share equal to the greater of (i) one

hundred fifty dollars ($ 150.0 ) and (ii) ninety percent ( 90 %) of the closing price of the Company’s common stock on Nasdaq on the

day prior to receipt of a conversion notice, subject to adjustment for stock splits and similar matters.

In addition, following the Initial

Conversion Date, each Series A Holder agrees that it shall not be entitled to in any calendar month, sell a number of Series A conversion

shares into the open market in an amount exceeding more than ten percent ( 10 %) of the number of Series A conversion shares issuable upon

conversion of the Series A Preferred Stock then held by such Series A Holder.

Conversion Price Adjustment:

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If the Company, at any time while the Series A Preferred Stock is outstanding:

stock dividend or otherwise makes a distribution or distributions payable in shares of common stock on shares of common stock or any other

common stock equivalents (which, for avoidance of doubt, shall not include any shares of common stock issued by the Company upon conversion

of, or payment of a dividend on, the Series A Preferred Stock), (ii) subdivides outstanding shares of common stock into a larger number

of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of common stock into a smaller number of shares,

or (iv) issues, in the event of a reclassification of shares of the common stock, any shares of capital stock of the Company, then the

conversion price of the Series A Preferred Stock shall be multiplied by a fraction of which the numerator shall be the number of shares

of common stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator

shall be the number of shares of common stock outstanding immediately after such event.

Any of the foregoing adjustments shall become

effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and

shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

stock dividend or otherwise makes a distribution or distributions payable in shares of common stock on shares of common stock or any

other common stock equivalents (which, for avoidance of doubt, shall not include any shares of common stock issued by the Company upon

conversion of, or payment of a dividend on, the Series A Preferred Stock), (ii) subdivides outstanding shares of common stock into a

larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of common stock into a smaller

number of shares, or (iv) issues, in the event of a reclassification of shares of the common stock, any shares of capital stock of the

Company, then the conversion price of the Series A Preferred Stock shall be multiplied by a fraction of which the numerator shall be

the number of shares of common stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of

which the denominator shall be the number of shares of common stock outstanding immediately after such event.

Any of the foregoing adjustments

shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution

and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

If, at any time while the Series A Preferred Stock is outstanding, (i) the Company, directly or indirectly,

14 unchanged sentences

agreement or other business combination) (each a “Fundamental Transaction”), then, the Series A Holder shall have the right

to receive, for each conversion share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental

Transaction (without regard to any limitation set forth in the Series A Certificate of Designations on the conversion of the Series A

Preferred Stock), the number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving

corporation, and/or any additional consideration (the “Alternate Consideration”) receivable as a result of such Fundamental

Transaction by a holder of the number of shares of common stock for which the Series A Preferred Stock is convertible immediately prior

to such Fundamental Transaction (without regard to the limitations set forth in the Series A Certificate of Designations on the conversion

of the Series A Preferred Stock).

For purposes of any such conversion, the determination of the conversion price shall be appropriately

adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share

of common stock in such Fundamental Transaction, and the Company shall apportion the conversion price among the Alternate Consideration

in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.

If holders of common

stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Series A Holder

shall be given the same choice as to the Alternate Consideration it receives upon such Fundamental Transaction.

The Series A Holders will have no voting rights, except as otherwise required by the Delaware General Corporation

Notwithstanding the foregoing, as long as any shares of Series A Preferred Stock are outstanding, the Company shall not, without

the affirmative vote of the holders of a majority of the then outstanding shares of Series A Preferred Stock, voting as a separate class,

(a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock in the Series A Certificate of Designations,

(b) increase the number of authorized shares of Series A Preferred Stock, (c) authorize or issue an additional class or series of capital

stock that ranks senior to the Series A Preferred Stock with respect to the distribution of assets on liquidation or (d) enter into any

agreement with respect to any of the foregoing.

to receive, for each conversion share that would have been issuable upon such conversion immediately prior to the occurrence of such

Fundamental Transaction (without regard to any limitation set forth in the Series A Certificate of Designations on the conversion of

the Series A Preferred Stock), the number of shares of common stock of the successor or acquiring corporation or of the Company, if it

is the surviving corporation, and/or any additional consideration (the “Alternate Consideration”) receivable as a result

of such Fundamental Transaction by a holder of the number of shares of common stock for which the Series A Preferred Stock is convertible

immediately prior to such Fundamental Transaction (without regard to the limitations set forth in the Series A Certificate of Designations

on the conversion of the Series A Preferred Stock).

For purposes of any such conversion, the determination of the conversion price shall

be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect

of one share of common stock in such Fundamental Transaction, and the Company shall apportion the conversion price among the Alternate

Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.

AVALON GLOBOCARE CORP.

4 unchanged sentences

Preferred Stock (continued)

holders of common stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then

the Series A Holder shall be given the same choice as to the Alternate Consideration it receives upon such Fundamental Transaction .

The Series A Holders will have no voting rights, except as otherwise required by the Delaware General Corporation

Notwithstanding the foregoing, as long as any shares of Series A Preferred Stock are outstanding, the Company shall not, without

the affirmative vote of the holders of a majority of the then outstanding shares of Series A Preferred Stock, voting as a separate class,

(a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock in the Series A Certificate of

Designations, (b) increase the number of authorized shares of Series A Preferred Stock, (c) authorize or issue an additional class or

series of capital stock that ranks senior to the Series A Preferred Stock with respect to the distribution of assets on liquidation or

(d) enter into any agreement with respect to any of the foregoing.

No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Series

A Preferred Stock.

As to any fraction of a share of Company common stock which a Series A Holder would otherwise be entitled to upon such

conversion, the Company will, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such

fraction multiplied by the conversion price or round up to the next whole share.

Notwithstanding the foregoing, nothing shall prevent

any Series A Holder from converting fractional shares of Series A Preferred Stock.

As to any fraction of a share of Company common stock which a Series A Holder would otherwise be entitled to upon

such conversion, the Company will, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal

to such fraction multiplied by the conversion price or round up to the next whole share.

Notwithstanding the foregoing, nothing shall

prevent any Series A Holder from converting fractional shares of Series A Preferred Stock.

of December 31, 2024, 9,000 shares of Series A Preferred Stock were issued and outstanding.

On January 9, 2025, the Company

entered into an exchange agreement with Wenzhao Lu, the Company’s chairman of the Board of Directors, 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 (See Note 10 - Series

On January 9, 2025, the Company entered into

an exchange agreement with Wenzhao Lu, the Company’s chairman of the Board of Directors, pursuant to which Mr.

9,000 shares of Series A Preferred Stock of the Company for 5,000 shares of Series D Preferred Stock of the Company (See Note 10 - Series

D Convertible Preferred Stock Issued in Exchange of Series A Convertible Preferred Stock).

As of June 30, 2025, there were no shares of

Series A Preferred Stock remain outstanding.

As of September 30, 2025, there were no shares

of Series A Preferred Stock remain outstanding.

Series B Convertible

1 unchanged sentence

Company designated up to 15,000 shares of its previously undesignated preferred stock as Series B Preferred Stock.

share of Series B Preferred Stock has a par value of $ 0.0001 per share and a stated value equal to $ 1,000 .

Each share of Series

B Preferred Stock has a par value of $ 0.0001 per share and a stated value equal to $ 1,000 .

shares of Series B Preferred Stock have identical terms and include the terms as set forth below .

1 unchanged sentence

be entitled to receive, and the Company shall pay, dividends on shares of Series B Preferred Stock equal (on an as-if-converted-to-common-stock

basis, disregarding for such purpose any conversion limitations set forth in the Series B Certificate of Designations) to and in the same

form as dividends actually paid on shares of the Company’s common stock when, as and if such dividends are paid on shares of the

common stock.

basis, disregarding for such purpose any conversion limitations set forth in the Series B Certificate of Designations) to and in the

same form as dividends actually paid on shares of the Company’s common stock when, as and if such dividends are paid on shares

of the common stock.

No other dividends shall be paid on shares of Series B Preferred Stock.

The Company will not pay any dividends on its common

stock unless the Company simultaneously complies with the terms set forth in the Series B Certificate of Designations.

The Company will not pay any dividends on

its common stock unless the Company simultaneously complies with the terms set forth in the Series B Certificate of Designations.

Series B Preferred Stock will rank subordinate to the shares of the Company’s Series A Preferred Stock.

1 unchanged sentence

and subject to the payment in full of all amounts required to be distributed to the holders of another class or series of stock of the

Company ranking on liquidation prior and in preference to the Series B Preferred Stock, including the Series A Preferred Stock, (ii) ratably

with any class or series of stock ranking on liquidation on parity with the Series B Preferred Stock and (iii) in preference and priority

to the holders of the shares of common stock, an amount equal to one hundred percent ( 100 %) of the Series B Stated Value and no more,

in proportion to the full and preferential amount that all shares of the Series B Preferred Stock are entitled to receive.

shall mail written notice of any such Liquidation not less than twenty (20) days prior to the payment date stated therein, to each Series

share of Series B Preferred Stock shall be convertible, at any time and from time to time from and after the later of (i) the date of

the stockholder approval and (ii) February 9, 2024 (the “Lock Up Period”), at the option of the Series B Holder thereof, into

that number of shares of common stock (subject to the limitations set forth in Series B Certificate of Designations determined by dividing

the Series B Stated Value of such share of Series B Preferred Stock by the conversion price of the Series B Preferred Stock).

Holders may effectuate conversions by providing the Company with the form of conversion notice attached as Annex A to the Series B Certificate

of Designations.

The Series B Preferred Stock will be convertible into shares of the Company’s common stock at a conversion price

per share equal to $ 56.70 , subject to the adjustments set forth in the Series B Certificate of Designations.

Notwithstanding the foregoing

or the transactions contemplated by the Amended MIPA, until the consummation of the Lock Up Period, the Series B Holders shall not, directly

or indirectly, sell, transfer or otherwise dispose of any Series B Preferred Stock issued upon conversion of the Series B conversion shares

or pursuant to the Equity Earnout Payment (the “Restricted Securities”) without Company’s prior written consent;

however, the Series B Holders may sell, transfer or otherwise dispose of Restricted Securities to an Affiliate, as defined in the Amended

MIPA, of a Series B Holder without Company’s prior written consent;

provided, further, that such Series B Holder provide prompt

written notice to Company of such transfer, including the name and contact information of the Affiliate transferee, and such Affiliate

transferee agrees in writing to be bound by the terms of the transaction documents contemplated by the Amended MIPA to which the Series

B Holder is a party (which agreement shall also be provided to Company with such notice).

After the expiration of the Lock Up Period,

the Series B Holder agrees that it and any of its Affiliate transferees shall not be entitled to in any calendar month, sell a number

of shares of Company common stock into the open market in an amount exceeding more than ten percent ( 10 %) of the total number

of shares of Company common stock issuable upon conversion of the Company common stock then held by the Seller and its Affiliates.

Company ranking on liquidation prior and in preference to the Series B Preferred Stock, including the Series A Preferred Stock, (ii)

ratably with any class or series of stock ranking on liquidation on parity with the Series B Preferred Stock and (iii) in preference

and priority to the holders of the shares of common stock, an amount equal to one hundred percent ( 100 %) of the Series B Stated Value

and no more, in proportion to the full and preferential amount that all shares of the Series B Preferred Stock are entitled to receive.

The Company shall mail written notice of any such Liquidation not less than twenty (20) days prior to the payment date stated therein,

to each Series B Holder.

AVALON GLOBOCARE CORP.

4 unchanged sentences

Preferred Stock (continued)

share of Series B Preferred Stock shall be convertible, at any time and from time to time from and after the later of (i) the date of

the stockholder approval and (ii) February 9, 2024 (the “Lock Up Period”), at the option of the Series B Holder thereof,

into that number of shares of common stock (subject to the limitations set forth in Series B Certificate of Designations determined by

dividing the Series B Stated Value of such share of Series B Preferred Stock by the conversion price of the Series B Preferred Stock).

Series B Holders may effectuate conversions by providing the Company with the form of conversion notice attached as Annex A to the Series

B Certificate of Designations.

The Series B Preferred Stock will be convertible into shares of the Company’s common stock at a

conversion price per share equal to $ 56.70 , subject to the adjustments set forth in the Series B Certificate of Designations.

Notwithstanding

the foregoing or the transactions contemplated by the Amended MIPA, until the consummation of the Lock Up Period, the Series B Holders

shall not, directly or indirectly, sell, transfer or otherwise dispose of any Series B Preferred Stock issued upon conversion of the

Series B conversion shares or pursuant to the Equity Earnout Payment (the “Restricted Securities”) without Company’s

prior written consent;

provided, however, the Series B Holders may sell, transfer or otherwise dispose of Restricted Securities to an

Affiliate, as defined in the Amended MIPA, of a Series B Holder without Company’s prior written consent;

provided, further, that

such Series B Holder provide prompt written notice to Company of such transfer, including the name and contact information of the Affiliate

transferee, and such Affiliate transferee agrees in writing to be bound by the terms of the transaction documents contemplated by the

Amended MIPA to which the Series B Holder is a party (which agreement shall also be provided to Company with such notice).

expiration of the Lock Up Period, the Series B Holder agrees that it and any of its Affiliate transferees shall not be entitled to in

any calendar month, sell a number of shares of Company common stock into the open market in an amount exceeding more than ten percent

( 10 %) of the total number of shares of Company common stock issuable upon conversion of the Company common stock then held by the Seller

and its Affiliates.

Conversion Price Adjustment:

1 unchanged sentence

If the Company, at any time while the Series B Preferred Stock is outstanding:

stock dividend or otherwise makes a distribution or distributions payable in shares of common stock on shares of common stock or any other

common stock equivalents (which, for avoidance of doubt, shall not include any shares of common stock issued by the Company upon conversion

of, or payment of a dividend on, the Series B Preferred Stock), (ii) subdivides outstanding shares of common stock into a larger number

of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of common stock into a smaller number of shares,

or (iv) issues, in the event of a reclassification of shares of the common stock, any shares of capital stock of the Company, then the

conversion price of the Series B Preferred Stock shall be multiplied by a fraction of which the numerator shall be the number of shares

of common stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of which the denominator

shall be the number of shares of common stock outstanding immediately after such event.

Any of the foregoing adjustments shall become

effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and

shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

If, at any time while the Series B Preferred Stock is outstanding, (i) the Company, directly or indirectly,

in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company (and

all of its subsidiaries, taken as a whole), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance

or other disposition of all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect,

purchase offer, tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of the

Company’s common stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been

accepted by the holders of fifty percent ( 50 %) or more of the outstanding common stock, (iv) the Company, directly or indirectly, in one

or more related transactions effects any reclassification, reorganization or recapitalization of the common stock or any compulsory share

exchange pursuant to which the common stock is effectively converted into or exchanged for other securities, cash or property, or (v)

the Company, directly or indirectly, in one or more related transactions consummates a Fundamental Transaction, then, at the closing of

such Fundamental Transaction, without any action on the part of the Series B Holder, the Series B Holder shall have the right to receive,

for each conversion share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction

(without regard to any limitation in the Series B Certificate of Designations on the conversion of the Series B Preferred Stock), the

number of shares of common stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and/or

any Alternate Consideration receivable as a result of such Fundamental Transaction by a holder of the number of shares of common stock

for which the Series B Preferred Stock is convertible immediately prior to such Fundamental Transaction (without regard to the limitations

set forth in the Series B Certificate of Designations on the conversion of the Series B Preferred Stock).

For purposes of any such conversion,

the determination of the conversion price of the Series B Preferred Stock shall be appropriately adjusted to apply to such Alternate Consideration

based on the amount of Alternate Consideration issuable in respect of one share of common stock in such Fundamental Transaction, and the

Company shall apportion the conversion price among the Alternate Consideration in a reasonable manner reflecting the relative value of

any different components of the Alternate Consideration.

If holders of common stock are given any choice as to the securities, cash or

property to be received in a Fundamental Transaction, then the Series B Holder shall be given the same choice as to the Alternate Consideration

it receives upon such Fundamental Transaction..

The Series B Holders will have no voting rights, except as otherwise required by the Delaware General Corporation Law.

Notwithstanding the foregoing, in addition, as long as any shares of Series B Preferred Stock are outstanding, the Company shall not,

without the affirmative vote of the holders of a majority of the then outstanding shares of the Series B Preferred Stock, voting as a

separate class, (a) alter or change adversely the powers, preferences or rights given to the Series B Preferred Stock in the Series B

Certificate of Designations, (b) increase the number of authorized shares of Series B Preferred Stock, (c) except with respect to the

Series A Preferred Stock, authorize or issue an additional class or series of capital stock that ranks senior to the Series B Preferred

Stock with respect to the distribution of assets on liquidation or (d) enter into any agreement with respect to any of the foregoing.

No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Series

B Preferred Stock.

As to any fraction of a share which a Series B Holder would otherwise be entitled to upon such conversion, the Company

shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by

the conversion price or round up to the next whole share.

Notwithstanding the foregoing, nothing shall prevent any Series B Holder from

converting fractional shares of Series B Preferred Stock.

stock dividend or otherwise makes a distribution or distributions payable in shares of common stock on shares of common stock or any

other common stock equivalents (which, for avoidance of doubt, shall not include any shares of common stock issued by the Company upon

conversion of, or payment of a dividend on, the Series B Preferred Stock), (ii) subdivides outstanding shares of common stock into a

larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of common stock into a smaller

number of shares, or (iv) issues, in the event of a reclassification of shares of the common stock, any shares of capital stock of the

Company, then the conversion price of the Series B Preferred Stock shall be multiplied by a fraction of which the numerator shall be

the number of shares of common stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of

which the denominator shall be the number of shares of common stock outstanding immediately after such event.

Any of the foregoing adjustments

shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution

and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

If, at any time while the Series B Preferred Stock is outstanding, (i) the Company, directly or

indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii)

the Company (and all of its subsidiaries, taken as a whole), directly or indirectly, effects any sale, lease, license, assignment,

transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions,

(iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is

completed pursuant to which holders of the Company’s common stock are permitted to sell, tender or exchange their shares for

other securities, cash or property and has been accepted by the holders of fifty percent ( 50 %) or more of the outstanding common

stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or

recapitalization of the common stock or any compulsory share exchange pursuant to which the common stock is effectively converted

into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related

transactions consummates a Fundamental Transaction, then, at the closing of such Fundamental Transaction, without any action on the

part of the Series B Holder, the Series B Holder shall have the right to receive, for each conversion share that would have been

issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation

in the Series B Certificate of Designations on the conversion of the Series B Preferred Stock), the number of shares of common stock

of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and/or any Alternate Consideration

receivable as a result of such Fundamental Transaction by a holder of the number of shares of common stock for which the Series B

Preferred Stock is convertible immediately prior to such Fundamental Transaction (without regard to the limitations set forth in the

Series B Certificate of Designations on the conversion of the Series B Preferred Stock).

For purposes of any such conversion, the

determination of the conversion price of the Series B Preferred Stock shall be appropriately adjusted to apply to such Alternate

Consideration based on the amount of Alternate Consideration issuable in respect of one share of common stock in such Fundamental

Transaction, and the Company shall apportion the conversion price among the Alternate Consideration in a reasonable manner

reflecting the relative value of any different components of the Alternate Consideration.

If holders of common stock are given any

choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Series B Holder shall be given

the same choice as to the Alternate Consideration it receives upon such Fundamental Transaction.

AVALON GLOBOCARE CORP.

4 unchanged sentences

Preferred Stock (continued)

The Series B Holders will have no voting rights, except as otherwise required by the Delaware General Corporation

Notwithstanding the foregoing, in addition, as long as any shares of Series B Preferred Stock are outstanding, the Company shall

not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series B Preferred Stock, voting

as a separate class, (a) alter or change adversely the powers, preferences or rights given to the Series B Preferred Stock in the Series

B Certificate of Designations, (b) increase the number of authorized shares of Series B Preferred Stock, (c) except with respect to the

Series A Preferred Stock, authorize or issue an additional class or series of capital stock that ranks senior to the Series B Preferred

Stock with respect to the distribution of assets on liquidation or (d) enter into any agreement with respect to any of the foregoing.

No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Series

B Preferred Stock.

As to any fraction of a share which a Series B Holder would otherwise be entitled to upon such conversion, the Company

shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied

by the conversion price or round up to the next whole share.

Notwithstanding the foregoing, nothing shall prevent any Series B Holder

from converting fractional shares of Series B Preferred Stock.

of December 31, 2024, 11,000 shares of Series B Preferred Stock were issued and outstanding.

During the first quarter of 2025,

to preserve cash, the Company entered into discussions with Lab Services MSO for the potential redemption of our investment and

on February 26, 2025, the Company and Lab Services MSO entered into a Redemption and Abandonment Agreement, whereby Lab Services MSO redeemed

the 40 % equity interest in Lab Services MSO held by the Company for cash and the surrender of its Series B Preferred Stock having

a carrying value of $ 11,000,000 .

Pursuant to the terms of the Redemption Agreement, all shares of the Company’s Series B Preferred

Stock previously issued to SCBC Holdings LLC as partial consideration for the equity interests of Laboratory Services MSO, were permanently

surrendered and relinquished to the Company for no additional consideration (See Note 10 - Series B Convertible Preferred Stock Extinguished

Related to Sale of Equity Method Investment).

As of June 30, 2025, there were no shares of Series B Preferred Stock remain outstanding.

During the first quarter of 2025, to preserve

cash, the Company entered into discussions with Lab Services MSO for the potential redemption of our investment and on February 26, 2025,

the Company and Lab Services MSO entered into a Redemption and Abandonment Agreement, whereby Lab Services MSO redeemed the 40 % equity

interest in Lab Services MSO held by the Company for cash and the surrender of its Series B Preferred Stock having a carrying value of

$ 11,000,000 .

Pursuant to the terms of the Redemption Agreement, all shares of the Company’s Series B Preferred Stock previously

issued to SCBC Holdings LLC as partial consideration for the equity interests of Lab Services MSO, were permanently surrendered and relinquished

to the Company for no additional consideration (See Note 10 - Series B Convertible Preferred Stock Extinguished Related to Sale of Equity

Method Investment).

As of September 30, 2025, there were no shares of Series B Preferred Stock remain outstanding.

Series C Convertible

2 unchanged sentences

(the “Series C Certificate of Designations”) with the Department of State, Division of Corporations, of 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

Each share of Series C Preferred Stock has a stated value of $ 1,000 .

Series C 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 C Preferred

which provides for the designation of 10,000 shares of Series C Preferred Stock of the Company, par value $ 0.0001 per share.

of Series C Preferred Stock has a stated value of $ 1,000 .

Series C 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 C Preferred

Stock, (ii) pari passu with any class or series of capital stock of the Company created hereafter specifically ranking, by its terms,

2 unchanged sentences

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 .

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.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – EQUITY (continued)

Series C Convertible

Preferred Stock (continued)

Upon any liquidation,

4 unchanged sentences

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 .

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.

share of Series C Preferred Stock shall be convertible into common stock (the “Series C Conversion Shares”) at a conversion

per share equal to $ 2.41 , at the option of the holder, at any time after the later of (i) the date of the shareholder approval of the

issuance of the Series C Conversion Shares pursuant to the rules of the Nasdaq Stock Market and (ii) the one year anniversary of the date

of the first issuance of any shares of the Series C Preferred Stock.

In addition, the holder shall not have the right to convert any portion

of the Series C Preferred Stock if, after giving effect to the conversion, such holder (together with its affiliates) would beneficially

own in excess of 19.99 % of the number of shares of the common stock outstanding immediately after giving effect to the issuance of the

respective Series C Conversion Share s.

On May 29, 2025, the Company filed a certificate of

amendment to the Series C Certificate of Designations, pursuant to which the beneficial ownership limitation of 19.99 % was amended to

of both June 30, 2025 and December 31, 2024, 3,500 shares of Series C Preferred Stock were issued and outstanding .

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – EQUITY (continued)

issuance of the Series C Conversion Shares pursuant to the rules of the Nasdaq Stock Market and (ii) the one year anniversary of the

date of the first issuance of any shares of the Series C Preferred Stock.

In addition, the holder shall not have the right to convert

any portion of the Series C Preferred Stock if, after giving effect to the conversion, such holder (together with its affiliates) would

beneficially own in excess of 19.99 % of the number of shares of the common stock outstanding immediately after giving effect to the issuance

of the respective Series C Conversion Shares.

On May 29, 2025, the Company filed a certificate of amendment to the Series C Certificate

of Designations, pursuant to which the beneficial ownership limitation of 19.99 % was amended to 4.99 % .

As of September 30,

2025 and December 31, 2024, 3,800 and 3,500 shares of Series C Preferred Stock were issued and outstanding, respectively.

Series D Convertible

Preferred Stock

January 6, 2025, the Company filed a certificate of designations of preferences, rights, and limitations of Series D Preferred Stock (the

“Series D Certificate of Designations”) with the Department of State, Division of Corporations, of the State of Delaware,

which provides for the designation 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 .

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

January 6, 2025, the Company filed a certificate of designations of preferences, rights, and limitations of Series D Preferred

Stock (the “Series D Certificate of Designations”) with the Department of State, Division of Corporations, of the State of

Delaware, which provides for the designation 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 .

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,

9 unchanged sentences

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 .

share of Series D Preferred Stock shall be convertible into common stock (the “Series D Conversion Shares”) at a conversion

per share equal to $ 2.41 , at the option of the holder, at any time after the Company has obtained shareholder approval for the issuance

of the Series D Conversion Shares pursuant to the rules of the Nasdaq Stock Market.

In addition, the holder shall not have the right to

convert any portion of the Series D Preferred Stock if, after giving effect to the conversion, such holder (together with its affiliates)

would beneficially own in excess of 4.99 % of the number of shares of the common stock outstanding immediately after giving

effect to the issuance of the respective Series D Conversion Shares .

of June 30, 2025, 5,000 shares of Series D Preferred Stock were issued and outstanding .

D Convertible Preferred Stock Issued in Exchange of Series A Convertible Preferred Stock

January 9, 2025, the Company entered into an exchange agreement with Wenzhao Lu, the Company’s chairman of the Board of Directors,

pursuant to which Mr.

Lu exchanged 9,000 shares of Series A Preferred Stock of the Company, having a carrying value of

$ 9,000,000 , for 5,000 shares of Series D Preferred Stock of the Company.

The Company determined that the exchange of the Series

A Preferred Stock for the Series D Preferred Stock resulted in the extinguishment of the Series A Preferred Stock.

As a result, the difference

between the carrying amount of the Series A Preferred Stock and the fair value of the Series D Preferred Stock of $ 162,473 was recognized

as a deemed contribution in the six months ended June 30, 2025 that increased additional paid-in capital and income available to common

shareholders in calculating earnings per share .

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 is convertible into common stock of the Company (the “Series D Conversion Shares”) at a conversion per share

equal to $ 2.41 , which approximated the market price at the date of transaction, at the option of the holder, at any time after the Company

has obtained shareholder approval for the issuance of the Series D Conversion Shares pursuant to the rules of the Nasdaq Stock Market .

Company evaluated the features of the Series D Preferred Stock under ASC 480, and classified them as permanent equity because the Series

D Preferred Stock is not mandatorily or contingently redeemable at the stockholder’s option and the liquidation preference that

exists does not fall within the guidance of SEC Accounting Series Release No.

268 – Presentation in Financial Statements

of “Redeemable Preferred Stocks” (“ASR 268”) .

D Preferred Stock shall be convertible into common stock (the “Series D Conversion Shares”) at a conversion per share equal

to $ 2.41 , at the option of the holder, at any time after the Company has obtained shareholder approval for the issuance of the Series

D Conversion Shares pursuant to the rules of the Nasdaq Stock Market.

In addition, the holder shall not have the right to convert any

portion of the Series D Preferred Stock if, after giving effect to the conversion, such holder (together with its affiliates) would beneficially

own in excess of 4.99 % of the number of shares of the common stock outstanding immediately after giving effect to the issuance of the

respective Series D Conversion Shares.

As of September 30,

2025, 5,000 shares of Series D Preferred Stock were issued and outstanding.

AVALON GLOBOCARE CORP.

2 unchanged sentences

NOTE 10 – EQUITY (continued)

D Convertible Preferred Stock Issued in Exchange of Series A Convertible Preferred Stock

January 9, 2025, the Company entered into an exchange agreement with Wenzhao Lu, the Company’s chairman of the Board of Directors,

pursuant to which Mr.

Lu exchanged 9,000 shares of Series A Preferred Stock of the Company, having a carrying value of $ 9,000,000 , for

5,000 shares of Series D Preferred Stock of the Company.

The Company determined that the exchange of the Series A Preferred Stock for

the Series D Preferred Stock resulted in the extinguishment of the Series A Preferred Stock.

As a result, the difference between the

carrying amount of the Series A Preferred Stock and the fair value of the Series D Preferred Stock of $ 162,473 was recognized as a deemed

contribution in the nine months ended September 30, 2025 that increased additional paid-in capital and income available to common shareholders

in calculating earnings per share .

Each share of Series

D Preferred Stock is convertible into common stock of the Company (the “Series D Conversion Shares”) at a conversion per

share equal to $ 2.41 , which approximated the market price at the date of transaction, at the option of the holder, at any time after

the Company has obtained shareholder approval for the issuance of the Series D Conversion Shares pursuant to the rules of the Nasdaq

Stock Market.

The Company evaluated

the features of the Series D Preferred Stock under ASC 480, and classified them as permanent equity because the Series D Preferred Stock

is not mandatorily or contingently redeemable at the stockholder’s option and the liquidation preference that exists does not fall

within the guidance of SEC Accounting Series Release No.

268 – Presentation in Financial Statements of “Redeemable

Preferred Stocks” (“ASR 268”).

B Convertible Preferred Stock Extinguished Related to Sale of Equity Method Investment

the first quarter of 2025, to preserve cash, the Company entered into discussions with Lab Services MSO for the potential redemption of

our investment and on February 26, 2025, the Company and Lab Services MSO entered into a Redemption and Abandonment Agreement, whereby

Lab Services MSO redeemed the 40 % equity interest in Lab Services MSO held by the Company for cash and the surrender of its Series

B Preferred Stock having a carrying value of $ 11,000,000 .

During the first quarter

of 2025, to preserve cash, the Company entered into discussions with Lab Services MSO for the potential redemption of our investment

and on February 26, 2025, the Company and Lab Services MSO entered into a Redemption and Abandonment Agreement, whereby Lab Services

MSO redeemed the 40 % equity interest in Lab Services MSO held by the Company for cash and the surrender of its Series B Preferred Stock

having a carrying value of $ 11,000,000 .

The aggregate cash amount to the Company for the redemption was $ 1,745,000 .

$ 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 the Company’s

Series B Preferred Stock previously issued to SCBC Holdings LLC as partial consideration for the equity interests of Laboratory Services

MSO, were permanently surrendered and relinquished to the Company for no additional consideration.

The difference of $ 2,348,695 between

the carrying value of the extinguished Series B preferred stock, the aggregate cash amount to the Company for the redemption, net of payables

due to Lab Services MSO of $ 632,916 , totaling $ 13,377,916 , and the carrying value of the equity method investment of $ 11,029,221 was

accounted for as an increase to additional paid-in capital.

In addition, pursuant

to the terms of the Redemption Agreement, all shares of the Company’s Series B Preferred Stock previously issued to SCBC Holdings

LLC as partial consideration for the equity interests of Laboratory Services MSO, were permanently surrendered and relinquished to the

Company for no additional consideration.

The difference of $ 2,348,695 between the carrying value of the extinguished Series B preferred

stock, the aggregate cash amount to the Company for the redemption, net of payables due to Lab Services MSO of $ 632,916 , totaling $ 13,377,916 ,

and the carrying value of the equity method investment of $ 11,029,221 was accounted for as an increase to additional paid-in capital.

Series C Convertible

Preferred Stock Sold for Cash

July 2025, the Company sold 300 shares of Series C Convertible Preferred Stock and received net proceeds of $ 290,000 after

deducting offering expenses of $ 10,000 .

Each share of Series C Convertible Preferred Stock is convertible into common stock of the Company

(the “Conversion Shares”) at a conversion per share equal to $ 2.41 , which approximated the market price at the date of transaction.

The Company is not required to issue any of the Company’s common stock upon conversion of the Series C Convertible Preferred Stock

until the shareholder approval for such issuance is obtained by the Company.

The Company evaluated

the features of the Series C Convertible Preferred Stock under ASC 480, and classified them as permanent equity because the Series C

Convertible Preferred Stock is not mandatorily or contingently redeemable at the stockholder’s option and the liquidation preference

that exists does not fall within the guidance of SEC Accounting Series Release No.

268 – Presentation in Financial Statements

of “Redeemable Preferred Stocks” (“ASR 268”).

Common Shares Issued

the six months ended June 30, 2025, the Company issued a total of 192,278 shares of its common stock for services rendered

and to be rendered.

the nine months ended September 30, 2025, the Company issued a total of 506,494 shares of its common stock for services rendered and

to be rendered.

These shares were valued at $ 1,656,786 , the fair market values on the grant dates using the reported closing share prices

on the dates of grant, and the Company recorded stock-based compensation expense of $ 780,624 for the six months ended June 30,

2025 and reduced accrued liabilities of $ 42,385 and recorded prepaid expense of $ 34,423 as of June 30, 2025 which will be amortized

on the dates of grant, and the Company recorded stock-based compensation expense of $ 1,437,916 for the nine months ended September 30,

2025 and reduced accrued liabilities of $ 42,385 and recorded prepaid expense of $ 176,485 as of September 30, 2025 which will be amortized

over the rest of corresponding service periods .

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – EQUITY (continued)

Common Shares Issued for Warrant Exercise

March and April 2025, pursuant to the terms of related warrant agreements, the Company issued an aggregate of 429,181 shares

of its common stock upon cashless exercise of warrants.

March and April 2025, pursuant to the terms of related warrant agreements, the Company issued an aggregate of 429,181 shares of its common

stock upon cashless exercise of warrants .

Common Shares Issued for Debt Conversion

29, 2025, the Company and the June 2024 Convertible Note holder entered into that certain waiver, pursuant to which, in June 2025,

the investor converted its June 2024 Convertible Note in the principal amount of $ 120,402 and unpaid interest of $ 164,711 into

285,113 shares of common stock of the Company at a per share price of $ 1.00 (see Note 6).

following table summarizes the shares of the Company’s common stock issuable upon exercise of options outstanding at June

On May 29, 2025, the

Company and the June 2024 Convertible Note holder entered into that certain waiver, pursuant to which, during the period from June 1,

2025 through September 30, 2025, the investor converted its June 2024 Convertible Note in the principal amount of $ 1,378,993 and unpaid

interest of $ 208,729 into 1,587,722 shares of common stock of the Company at a per share price of $ 1.00 (see Note 6).

Common Shares Issued as Convertible Note Payable

Commitment Fee

July 2025, the Company issued a total of 10,000 shares of its common stock as commitment fee for the purchase of July

2025 Convertible Note.

These shares were valued at $ 26,800 , the fair market value on the grant date using the reported closing share

price on the date of grant, and the Company recorded it as debt discount (see Note 6 - July 2025 Convertible Note ).

Common Shares and

Warrants Sold for Cash

July 14, 2025, the Company entered into that certain securities purchase agreement (the “Securities Purchase Agreement”),

with an accredited investor, Brown Stone Capital Ltd.

(the “Brown Stone”), pursuant to which the Company agreed to

issue and sell to Brown Stone, upon the terms and conditions set forth in the Securities Purchase Agreement, 121,200 shares of the Company’s

common stock and pre-funded warrants to purchase 354,300 shares of the Company’s common stock, in exchange for $ 475,500 .

number of shares of the Company’s common stock issuable pursuant to the pre-funded warrants is 354,300 shares.

The closing of the

transaction occurred on July 17, 2025, which is when the Company received net proceeds of $ 450,500 after deducting offering expenses

of $ 25,000 .

fair value of the pre-funded warrants was $ 832,576 and was based on the Black-Scholes pricing model.

Input assumptions used were

stock price per share of $ 2.35 , a risk-free interest rate of 4.01 %;

expected volatility of 91.10 %;

expected life of 5 years;

and expected dividend yield of 0 %.

$ 354,297 of the total gross proceeds was allocated to the warrants based on the relative fair value

allocation method, which has been reflected in shareholders’ equity.

The warrants were classified in shareholders’ equity

as the number of shares were fixed and determinable, and no other provisions precluded equity treatment.

$ 121,203 of the total gross

proceeds was allocated as the value of common shares.

The direct costs related

to the issuance of the common shares and pre-funded warrants were $ 25,000 .

These direct costs were recorded as an offset against gross

proceeds with $ 18,628 being recorded in additional paid-in capital and $ 6,372 being recorded in common shares on a relative fair value

following table summarizes the shares of the Company’s common stock issuable upon exercise of options outstanding at September

Options Outstanding Options Exercisable

Exercise Price Number

Outstanding at

2025 Weighted

Average Remaining

September 30,

2025 Weighted Average

Contractual Life

(Years) Weighted

Average Exercise

Exercisable at

September 30,

2025 Weighted

Average Exercise

$ 2.93 – 31.20 15,419 3.07 $ 6.49 14,754 $ 6.64

7 unchanged sentences

Options (continued)

option activity for the six months ended June 30, 2025 was as follows:

Number of Options

Average Exercise

option activity for the nine months ended September 30, 2025 was as follows:

Outstanding at January 1, 2025

Expired / cancelled / forfeited

Outstanding at June 30, 2025

Options exercisable at June 30, 2025

Outstanding at September 30, 2025

Options exercisable at September 30, 2025

Options expected to vest

aggregate intrinsic value of both stock options outstanding and stock options exercisable at June 30, 2025 was $ 0 .

fair values of options granted during the six months ended June 30, 2025 were estimated at the date of grant using the Black-Scholes option-pricing

model with the following assumptions:

volatility of 105.10 %, risk-free rate of 4.29 %, annual dividend yield of 0 %,

and expected life of 3.00 years.

The aggregate fair value of the options granted during the six months ended June 30, 2025 was

fair values of options granted during the six months ended June 30, 2024 were estimated at the date of grant using the Black-Scholes

option-pricing model with the following assumptions:

volatility of 83.10 % - 91.17 %, risk-free rate of 3.93 % - 4.79 %,

annual dividend yield of 0 %, and expected life of 3.00 - 5.00 years.

The aggregate fair value of the options

granted during the six months ended June 30, 2024 was $ 15,483 .

the three months ended June 30, 2025 and 2024, stock-based compensation expense (adjustment) associated with stock options

granted amounted to $( 28,085 ) and $ 12,256 , of which, $ 4,454 and $ 4,488 was recorded as compensation and related

benefits, and $( 32,539 ) and $ 7,768 was recorded as professional fees, respectively.

For the six months ended June 30, 2025 and 2024, stock-based compensation

expense (adjustment) associated with stock options granted amounted to $( 18,926 ) and $ 25,789 , of which, $ 9,312 and $ 9,591 , respectively, was

recorded as compensation and related benefits, and $( 28,238 ) and $ 16,198 was recorded as professional fees, respectively.

summary of the status of the Company’s nonvested stock options granted as of June 30, 2025 and changes during the six months ended

June 30, 2025 is presented below :

Number of Options

Average Exercise

aggregate intrinsic value of both stock options outstanding and stock options exercisable at September 30, 2025 was $ 0 .

The fair values of options granted during the

nine months ended September 30, 2025 were estimated at the date of grant using the Black-Scholes option-pricing model with the following

volatility of 105.10 %, risk-free rate of 4.29 %, annual dividend yield of 0 %, and expected life of 3.00 years.

The aggregate

fair value of the options granted during the nine months ended September 30, 2025 was $ 6,115 .

The fair values of options granted during the

nine months ended September 30, 2024 were estimated at the date of grant using the Black-Scholes option-pricing model with the following

volatility of 83.10 % - 91.17 %, risk-free rate of 3.47 % - 4.79 %, annual dividend yield of 0 %, and expected life of 3.00 -

The aggregate fair value of the options granted during the nine months ended September 30, 2024 was $ 26,548 .

the three months ended September 30, 2025 and 2024, stock-based compensation expense associated with stock options granted amounted

to $ 3,988 and $ 11,542 , of which, $ 3,988 and $ 3,798 was recorded as compensation and related benefits, and $ 0 and $ 7,744 was recorded

as professional fees, respectively.

the nine months ended September 30, 2025 and 2024, stock-based compensation expense (adjustment) associated with stock options granted

amounted to $( 14,938 ) and $ 37,331 , of which, $ 13,300 and $ 13,389 , respectively, was recorded as compensation and related benefits, and

$( 28,238 ) and $ 23,942 was recorded as professional fees, respectively .

summary of the status of the Company’s nonvested stock options granted as of September 30, 2025 and changes during the nine months

ended September 30, 2025 is presented below :

Nonvested at January 1, 2025

Nonvested at June 30, 2025

Nonvested at September 30, 2025

AVALON GLOBOCARE CORP.

3 unchanged sentences

Warrants (Except Pre-Funded Warrants)

following table summarizes the shares of the Company’s common stock issuable upon exercise of warrants outstanding at June

following table summarizes the shares of the Company’s common stock issuable upon exercise of warrants outstanding at September

Warrants Outstanding Warrants Exercisable

Outstanding at

September 30,

2025 Weighted

Contractual Life

(Years) Weighted

(Years) Weighted Average

Exercisable at

September 30,

2025 Weighted

3 unchanged sentences

$ 7.50 – 187.50 95,746 3.48 $ 24.06 95,746 $ 24.06

warrant activity for the six months ended June 30, 2025 was as follows :

stock warrant activity for the nine months ended September 30, 2025 was as follows :

Outstanding at January 1, 2025

Outstanding and exercisable at June 30, 2025

Outstanding and exercisable at September 30, 2025

The aggregate intrinsic

value of both stock warrants outstanding and stock warrants exercisable at June 30, 2025 was $ 0 .

value of both stock warrants outstanding and stock warrants exercisable at September 30, 2025 was $ 0 .

Warrants Exercised

in March and April 2025

March and April 2025, pursuant to the terms of related warrant agreements, the Company issued an aggregate of

429,181 shares of its common stock upon cashless exercise of warrants.

summary of the status of the Company’s nonvested stock warrants issued as of June 30, 2025 and changes during the six months ended

June 30, 2025 is presented below :

March and April 2025, pursuant to the terms of related warrant agreements, the Company issued an aggregate of 429,181 shares of its common

stock upon cashless exercise of warrants .

summary of the status of the Company’s nonvested stock warrants issued as of September 30, 2025 and changes during the nine months

ended September 30, 2025 is presented below :

Nonvested at January 1, 2025

Nonvested at June 30, 2025

Nonvested at September 30, 2025

Pre-Funded Warrants

of June 30, 2025, there were 150,000 pre-funded warrants outstanding with an exercise price of $ 0.01 per share.

There was no activity related to these warrants during the six months ended June 30, 2025.

number of pre-funded warrants outstanding as of September 30, 2025 is as follows:

Pre-funded warrants issued in December 2024

Pre-funded warrants issued in July 2025

Outstanding at September 30, 2025

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – EQUITY (continued)

Pre-Funded Warrants

summary of pre- funded warrant activity during the nine months ended September 30, 2025 is as follows:

Outstanding at January 1, 2025

Pre-funded warrants issued

Outstanding at September 30, 2025

NOTE 11 - STATUTORY

4 unchanged sentences

currently permit payment of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – STATUTORY

RESERVE AND RESTRICTED NET ASSETS (continued)

Company is required to make appropriations to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus

7 unchanged sentences

cash dividends.

The Company did not make any appropriation to statutory reserve for Avalon Shanghai during the six months ended June 30,

2025 as it incurred net loss in the period.

As of both June 30, 2025 and December 31, 2024, the restricted amount as determined pursuant

to PRC statutory laws totaled $ 6,578 .

PRC laws and regulations restrict the Company’s PRC subsidiary, Avalon Shanghai, from transferring a portion of its net assets,

equivalent to its statutory reserve and its share capital, to the Company’s shareholders in the form of loans, advances or cash

Only PRC entity’s accumulated profit may be distributed as dividend to the Company’s shareholders without the consent

of a third party.

As of both June 30, 2025 and December 31, 2024, total restricted net assets amounted to $ 1,206,578 .

The Company did not make any appropriation to statutory reserve for Avalon Shanghai during the nine months ended

September 30, 2025 as it incurred net loss in the period.

As of both September 30, 2025 and December 31, 2024, the restricted amount

as determined pursuant to PRC statutory laws totaled $ 6,578 .

Relevant PRC laws and

regulations restrict the Company’s PRC subsidiary, Avalon Shanghai, from transferring a portion of its net assets, equivalent to

its statutory reserve and its share capital, to the Company’s shareholders in the form of loans, advances or cash dividends.

PRC entity’s accumulated profit may be distributed as dividend to the Company’s shareholders without the consent of a third

As of both September 30, 2025 and December 31, 2024, total restricted net assets amounted to $ 1,206,578 .

12 – CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

to the requirements of Rule 12-04(a), 5-04(c) and 4-08(e)(3) of Regulation S-X, the condensed financial information of the parent company

shall be filed when the restricted net assets of consolidated subsidiary exceed 25 % of consolidated net assets as of the end

of the most recently completed fiscal year.

For purposes of this test, restricted net assets of consolidated subsidiary shall mean that

amount of the Company’s proportionate share of net assets of consolidated subsidiary (after intercompany eliminations) which as

of the end of the most recent fiscal year may not be transferred to the parent company by subsidiary in the form of loans, advances or

cash dividends without the consent of a third party.

shall be filed when the restricted net assets of consolidated subsidiary exceed 25 % of consolidated net assets as of the end of the most

recently completed fiscal year.

For purposes of this test, restricted net assets of consolidated subsidiary shall mean that amount of

the Company’s proportionate share of net assets of consolidated subsidiary (after intercompany eliminations) which as of the end

of the most recent fiscal year may not be transferred to the parent company by subsidiary in the form of loans, advances or cash dividends

without the consent of a third party .

Company performed a test on the restricted net assets of consolidated subsidiary in accordance with such requirement and concluded

that it was not applicable to the Company as the restricted net assets of the Company’s PRC subsidiary did not exceed 25 % of

the consolidated net assets of the Company, therefore, the condensed financial statements for the parent company have not been required.

that it was not applicable to the Company as the restricted net assets of the Company’s PRC subsidiary did not exceed 25 % of the

consolidated net assets of the Company, therefore, the condensed financial statements for the parent company have not been required.

NOTE 13 - CONCENTRATIONS

following table sets forth information as to each customer that accounted for 10 % or more of the Company’s revenue for

the three and six months ended June 30, 2025 and 2024 .

Three Months Ended

Six Months Ended

The following table sets forth information as

to each customer that accounted for 10% or more of the Company’s revenue for the three and nine months ended September 30, 2025

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 – CONCENTRATIONS (continued)

Customers (continued)

September 30,

One customer, which is a third party, whose outstanding

receivable accounted for 10% or more of the Company’s total outstanding rent receivable at June 30, 2025, accounted for 86.0 %

of the Company’s total outstanding rent receivable at June 30, 2025.

receivable accounted for 10% or more of the Company’s total outstanding rent receivable at September 30, 2025, accounted for 98.3 %

of the Company’s total outstanding rent receivable at September 30, 2025.

One customer, which is a third party, whose outstanding

1 unchanged sentence

of the Company’s total outstanding rent receivable at December 31, 2024.

supplier accounted for 10% or more of the Company’s purchase during the three and six months ended June 30, 2025 and 2024 .

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

supplier accounted for 10% or more of the Company’s purchase during the three and nine months ended September

30, 2025 and 2024.

NOTE 14 – SEGMENT INFORMATION

2 unchanged sentences

During the three months

ended June 30, 2025, the management reporting structure was composed of one strategic business unit, mainly organized by service, led

by the Company’s President and Chief Executive Officer, who is its CODM.

Using the accounting guidance on segment reporting, the

Company determined that its one operating segment was aligned with its one reportable segment corresponding to its strategic business

During the six months

ended June 30, 2025, the management reporting structure was composed of two strategic business units, mainly organized by services, led

by the Company’s President and Chief Executive Officer , who is its CODM.

Using the accounting guidance on segment reporting, the

Company determined that its two operating segments were aligned with its two reportable segments corresponding to its strategic business

ended September 30, 2025, the management reporting structure was composed of one strategic business unit, mainly organized by service,

led by the Company’s President and Chief Executive Officer, who is its CODM.

Using the accounting guidance on segment reporting,

the Company determined that its one operating segment was aligned with its one reportable segment corresponding to its strategic business

During the nine months

ended September 30, 2025, the management reporting structure was composed of two strategic business units, mainly organized by services,

led by the Company’s President and Chief Executive Officer , who is its CODM.

Using the accounting guidance on segment reporting,

the Company determined that its two operating segments were aligned with its two reportable segments corresponding to its strategic business

During the three and

six months ended June 30, 2024, the management reporting structure was composed of two strategic business units, mainly organized by

services, led by the Company’s President and Chief Executive Officer, who is its CODM.

nine months ended September 30, 2024, the management reporting structure was composed of two strategic business units, mainly organized

by services, led by the Company’s President and Chief Executive Officer, who is its CODM.

Using the accounting guidance on segment

reporting, the Company determined that its two operating segments were aligned with its two reportable segments corresponding

to its strategic business units.

February 9, 2023, the Company purchased 40 % of Lab Services MSO.

During the first quarter of 2025, to preserve cash, the Company

entered into discussions with Lab Services MSO for the potential redemption of our investment and on February 26, 2025, the Company and

Lab Services MSO entered into a Redemption and Abandonment Agreement, whereby Lab Services MSO redeemed the 40 % equity interest

in Lab Services MSO held by the Company.

During the three months ended June 30, 2025, the Company operated in one reportable business

reporting, the Company determined that its two operating segments were aligned with its two reportable segments corresponding to its

strategic business units.

On February 9, 2023,

the Company purchased 40 % of Lab Services MSO.

During the first quarter of 2025, to preserve cash, the Company entered into discussions

with Lab Services MSO for the potential redemption of our investment and on February 26, 2025, the Company and Lab Services MSO entered

into a Redemption and Abandonment Agreement, whereby Lab Services MSO redeemed the 40 % equity interest in Lab Services MSO held by the

Beginning in February 2025, the Company no longer offers laboratory services.

During the three months ended September 30, 2025,

the Company operated in one reportable business segment:

the real property operating segment.

During the six months ended June 30, 2025, the Company operated in two reportable

business segments:

(1) the real property operating segment, and (2) laboratory testing services segment (which ended on February 26, 2025)

since Lab Services MSO’s operating results were regularly reviewed by the Company’s chief operating decision maker to make

decisions about resources to be allocated to the segment and assess its performance.

During the three and six months ended June 30, 2024,

During the nine months ended September

30, 2025, the Company operated in two reportable business segments:

(1) the real property operating segment, and (2) laboratory testing

services segment since Lab Services MSO’s operating results were regularly reviewed by the Company’s chief operating decision

maker to make decisions about resources to be allocated to the segment and assess its performance.

The Company regularly reviewed the

operating results and performance of Lab Services MSO, which was the Company’s equity method investee.

services segment (which ended on February 26, 2025) since Lab Services MSO’s operating results were regularly reviewed by the Company’s

chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance.

three and nine months ended September 30, 2024, the Company operated in two reportable business segments:

(1) the real property operating

segment, and (2) laboratory testing services segment since Lab Services MSO’s operating results were regularly reviewed by the

Company’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance.

The Company regularly reviewed the operating results and performance of Lab Services MSO, which was the Company’s equity method

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – SEGMENT INFORMATION

accounting policies for the segments are the same as those described in Note 3.

Our reportable segments are aligned principally around

the differences in services.

Real property operating income is calculated by subtracting real property operating expenses from real property

rental revenue;

income from equity method investment – Lab Services MSO is calculated by subtracting amortization of intangible

assets acquired from acquisition from the Company’s share of Lab Services MSO’s net income.

The assets and certain expenses

related to corporate activities are not allocated to the segments.

with respect to these reportable business segments for the three and six months ended June 30, 2025 and 2024 was as follows:

Three Months Ended June 30, 2025

Real Property Operations

Corporate / Other

Our reportable segments are aligned principally

around the differences in services.

Real property operating income is calculated by subtracting real property operating expenses from

real property rental revenue;

income from equity method investment – Lab Services MSO is calculated by subtracting amortization

of intangible assets acquired from acquisition from the Company’s share of Lab Services MSO’s net income.

The assets and

certain expenses related to corporate activities are not allocated to the segments.

Information with respect to these reportable business

segments for the three and nine months ended September 30, 2025 and 2024 was as follows:

Three Months Ended September 30, 2025

Real Property

Real property rental revenue

Real property operating expenses

1 unchanged sentence

Other operating expenses

( 3,908,516 )

( 3,987,316 )

Other (expense) income:

1 unchanged sentence

$ ( 131,637 )

Loss on extinguishment of debt

$ ( 122,631 )

$ ( 254,268 )

Other (expense) income

$ ( 173,987 )

$ ( 13,284,611 )

$ ( 13,458,598 )

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – SEGMENT INFORMATION

Three Months Ended June 30, 2024

Real Property Operations

Lab Services MSO

Corporate / Other

Three Months Ended September 30, 2024

Real Property

Real property rental revenue

3 unchanged sentences

Other operating expenses

( 1,123,371 )

( 1,217,425 )

Other (expense) income:

Interest expense

Other (expense) income

$ ( 166,464 )

2 unchanged sentences

$ ( 1,679,200 )

Six Months Ended June 30, 2025

Real Property Operations

Lab Services MSO

Corporate / Other

Nine Months Ended September 30, 2025

Real Property

Real property rental revenue

16 unchanged sentences

$ ( 16,194,977 )

Six Months Ended June 30, 2024

Real Property Operations

Lab Services MSO

Corporate / Other

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – SEGMENT INFORMATION

Nine Months Ended September 30, 2024

Real Property

Real property rental revenue

8 unchanged sentences

( 1,291,192 )

( 1,874,113 )

Other (expense) income

3 unchanged sentences

$ ( 5,178,739 )

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – SEGMENT INFORMATION

Identifiable long-lived tangible assets at June 30, 2025 and December 31, 2024

Identifiable long-lived tangible assets at September 30, 2025 and December 31, 2024

September 30,

Real property operations

Corporate/other

Identifiable long-lived tangible assets at June 30, 2025 and December 31, 2024

Identifiable long-lived tangible assets at September 30, 2025 and December 31, 2024

September 30,

United States

1 unchanged sentence

AND CONTINGENCIES

From time to time, the Company is subject to ordinary

routine litigation incidental to its normal business operations.

The Company is not currently a party to, and its property is not subject

to, any material legal proceedings, except as set forth below.

On October 28, 2019, Research Institute at Nationwide Children’s

Hospital (“Research Institute”) filed a Complaint in the United States District Court for the Southern District of Ohio Eastern

Division against Dr.

Zhou, Li Chen, the Company and Genexosome with various claims against the Company and Genexosome including misappropriation

of trade secrets in violation of the Defend Trade Secrets Act of 2016 and violation of Ohio Uniform Trade Secrets Act.

The Company, Genexosome

and the Research Institute entered into a Settlement Agreement dated June 7, 2022 (the “Settlement Date”) whereby the Company

agreed to pay the Research Institute $ 450,000 on each of the sixty-day, one year and two-year anniversaries of the Settlement Date.

In addition, the Company agreed to pay the Research Institute 30 % of the Company’s initial pre-tax profit of $ 3,333,333 , 20 %

of the Company’s second pre-tax profit of $ 3,333,333 and 10 % of the Company’s third pre-tax profit of $ 3,333,333 .

From time to time, the Company is subject to

ordinary routine litigation incidental to its normal business operations.

The Company is not currently a party to, and its property is

not subject to, any material legal proceedings, except as set forth below.

October 28, 2019, Research Institute at Nationwide Children’s Hospital (“Research Institute”) filed a Complaint in

the United States District Court for the Southern District of Ohio Eastern Division against Dr.

Zhou, Li Chen, the Company and Genexosome

with various claims against the Company and Genexosome including misappropriation of trade secrets in violation of the Defend Trade Secrets

Act of 2016 and violation of Ohio Uniform Trade Secrets Act.

The Company, Genexosome and the Research Institute entered into a Settlement

Agreement dated June 7, 2022 (the “Settlement Date”) whereby the Company agreed to pay the Research Institute $ 450,000 on

each of the sixty-day, one year and two-year anniversaries of the Settlement Date.

In addition, the Company agreed to pay the

Research Institute 30 % of the Company’s initial pre-tax profit of $ 3,333,333 , 20 % of the Company’s second pre-tax profit

of $ 3,333,333 and 10 % of the Company’s third pre-tax profit of $ 3,333,333 .

The parties provided a mutual release as well.

As of both June 30, 2025 and December 31, 2024, the accrued litigation settlement amounted

to $ 373,450 .

September 30, 2025 and December 31, 2024, the accrued litigation settlement amounted to $ 363,450 and $ 373,450 , respectively.

AVALON GLOBOCARE CORP.

7 unchanged sentences

These lease agreements expire through December 2026.

Rent expense under all operating leases amounted to approximately

$ 59,000 and $ 64,000 for the six months ended June 30, 2025 and 2024, respectively.

Rent expense under all operating leases amounted to

approximately $ 79,000 and $ 96,000 for the nine months ended September 30, 2025 and 2024, respectively.

Supplemental cash flow

information related to leases for the six months ended June 30, 2025 and 2024 is as follows:

Six Months Ended

information related to leases for the nine months ended September 30, 2025 and 2024 is as follows:

Nine Months Ended

September 30,

Cash paid for amounts included in the measurement of lease liabilities:

2 unchanged sentences

Operating lease

following table summarizes the lease term and discount rate for the Company’s operating lease as of June 30, 2025:

Operating Lease

following table summarizes the lease term and discount rate for the Company’s operating lease as of September 30, 2025 :

Weighted average remaining lease term (in years) 1.25

1 unchanged sentence

The following table summarizes the maturity of lease liabilities under

operating lease as of June 30, 2025:

For the Twelve-month Period Ending June 30:

Operating Lease

operating lease as of September 30, 2025:

For the Twelve-month Period Ending September 30:

2028 and thereafter

4 unchanged sentences

Long-term portion

Joint Venture – Avactis Biosciences Inc.

July 18, 2018, the Company formed a wholly owned subsidiary, Avactis Biosciences Inc.

(“Avactis”), a Nevada corporation, which

focuses on accelerating commercial activities related to cellular therapies as well as cellular immunotherapy including CAR-T, CAR-NK,

TCR-T and others.

When formed, Avactis was designed to integrate and optimize the Company’s global scientific and clinical resources

to further advance the use of cellular therapies to treat certain cancers;

however the Company is no longer pursuing any commercial activities

with respect to cellular immunotherapy and CAR-T, in particular.

Commencing on April 6, 2022, the Company owns 60 % of Avactis

and Arbele Biotherapeutics Limited (“Arbele Biotherapeutics”) owns 40 % of Avactis.

Avactis owns 100 % of the capital

stock of Avactis Nanjing Biosciences Ltd., a company incorporated in the PRC on May 8, 2020 (“Avactis Nanjing”), which only

owns a patent and is not considered an operating entity and is in the process of being dissolved.

Venture – Avactis Biosciences Inc.

On July 18, 2018, the Company formed a wholly

owned subsidiary, Avactis Biosciences Inc.

(“Avactis”), a Nevada corporation, which focuses on accelerating commercial activities

related to cellular therapies as well as cellular immunotherapy including CAR-T, CAR-NK, TCR-T and others.

When formed, Avactis was designed

to integrate and optimize the Company’s global scientific and clinical resources to further advance the use of cellular therapies

to treat certain cancers;

however the Company is no longer pursuing any commercial activities with respect to cellular immunotherapy

and CAR-T, in particular.

Commencing on April 6, 2022, the Company owns 60 % of Avactis and Arbele Biotherapeutics Limited (“Arbele

Biotherapeutics”) owns 40 % of Avactis.

Avactis owns 100 % of the capital stock of Avactis Nanjing Biosciences Ltd., a company incorporated

in the PRC on May 8, 2020 (“Avactis Nanjing”), which only owns a patent and is not considered an operating entity and is

in the process of being dissolved.

AVALON GLOBOCARE CORP.

3 unchanged sentences

AND CONTINGENCIES (continued)

Joint Venture – Avactis Biosciences Inc.

Company is required to contribute $ 10 million (or equivalent in RMB) in cash and/or services, which shall be contributed in

tranches based on milestones to be determined jointly by Avactis and the Company in writing subject to the Company’s cash reserves.

Within 30 days, Arbele Biotherapeutics shall make contribution of $ 6.66 million in the form of entering into a License Agreement

with Avactis granting Avactis an exclusive right and license in China to its technology and intellectual property pertaining to CAR-T/CAR-NK/TCR-T/universal

cellular immunotherapy technology and any additional technology developed in the future with terms and conditions to be mutually agreed

upon the Company and Avactis and services.

As of the date hereof, the License Agreement has not been finalized by the parties .

In addition, the Company is responsible for contributing registered

capital of RMB 5,000,000 (approximately $ 0.7 million) for working capital purposes as required by local regulation, which

is not required to be contributed immediately and will be contributed subject to the Company’s discretion.

As of the date hereof,

Avactis’ activities have been limited to that of a patent holding company and there is no other activity or planned contributions

in the rest of 2025 or into the foreseeable future .

Avactis Biosciences, Inc and Avactis Nanjing

are not considered operating entities and are in the process of being dissolved.

Venture – Avactis Biosciences Inc.

The Company is required to contribute $ 10 million

(or equivalent in RMB) in cash and/or services, which shall be contributed in tranches based on milestones to be determined jointly by

Avactis and the Company in writing subject to the Company’s cash reserves.

Within 30 days, Arbele Biotherapeutics shall make contribution

of $ 6.66 million in the form of entering into a License Agreement with Avactis granting Avactis an exclusive right and license in China

to its technology and intellectual property pertaining to CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy technology and any additional

technology developed in the future with terms and conditions to be mutually agreed upon the Company and Avactis and services.

date hereof, the License Agreement has not been finalized by the parties.

In addition, the Company

is responsible for contributing registered capital of RMB 5,000,000 (approximately $ 0.7 million) for working capital purposes as required

by local regulation, which is not required to be contributed immediately and will be contributed subject to the Company’s discretion.

As of the date hereof, Avactis’ activities have been limited to that of a patent holding company and there is no other activity

or planned contributions in the rest of 2025 or into the foreseeable future.

Avactis Biosciences, Inc and Avactis Nanjing are not considered

operating entities and are in the process of being dissolved.

NOTE 16 – SUBSEQUENT

Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements

Based upon this review, other than as described below, the Company did not identify any subsequent events that would have

required adjustment or disclosure in the financial statements .

Convertible Promissory Notes Issuance

On July 3, 2025, the Company

issued two c onvertible promissory notes to two accredited investors on identical terms.

note had a principal amount of $ 100,000 , bears a one-time interest charge of $ 30,000 , and matures nine months from the date of issuance.

In addition, the Company issued an aggregate of 10,000 shares of its common stock to these two investors as a commitment fee.

Common Stock Sold

On July 14, 2025, the

Company entered into that certain securities purchase agreement with an accredited investor, Brown Stone Capital Ltd.

(“Brown Stone”),

pursuant to which the Company agreed to issue and sell to Brown Stone 121,200 shares of the Company’s common stock and pre-funded

warrants to purchase 354,300 shares of the Company’s common stock in exchange for $ 475,500 .

The total number of shares of the Company’s

common stock issuable pursuant to the pre-funded warrants is 354,300 shares.

The closing of the transaction occurred on July 17, 2025,

which is when the Company received net proceeds of $ 450,500 after deducting offering expenses.

Series C Convertible

Preferred Stock Sold for Cash

On July 21, 2025, the

Company entered into that certain securities purchase agreement with Mast Hill, pursuant to which the Company agreed to issue and sell

to Mast Hill 300 shares of Series C Convertible Preferred Stock for up to an aggregate of $ 300,000 , which is equal to $ 1,000 per share.

The Company received net proceeds of $ 290,000 at the closing after deducting offering expenses.

July 28, 2025, the Company entered into a waiver with Mast Hill with respect to June 2024 Convertible Note.

The waiver provides for an

extension of the maturity date of the June 2024 Convertible Note to August 31, 2025.

Shares Issued for Services

During the period from July 1,

2025 through August 13, 2025, the Company issued a total of 314,216 shares of its common stock for services rendered and to

Shares Issued for Debt Conversion

During the period from July 1,

2025 through August 13, 2025, an investor converted its convertible note in the principal amount of $ 1,015,052 and unpaid interest of

$ 25,557 into 1,040,609 shares of common stock of the Company at a per share price of $ 1.00 .

July 22, 2025, the Company filed a lawsuit in the Court of Chancery of the State of Delaware against Laboratory Services MSO, LLC and

certain affiliates.

The Company has asserted a variety of claims, including breach of contract, arising out of its prior transactions

with the defendants, including the Redemption and Abandonment Agreement, dated as of February 26, 2025.

The time for the defendants to

respond to the Complaint has not yet expired.

The parties have agreed to a settlement in principle and the Company expects the lawsuit to be dismissed.

The Company evaluated

subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued.

Based upon this review, other than as described below, the Company did not identify any subsequent events that would have required adjustment

or disclosure in the financial statements.

On October 20, 2025,

the Company entered into a waiver with Mast Hill with respect to June 2024 Convertible Note.

The waiver provides for an extension of

the maturity date of the June 2024 Convertible Note to December 31, 2025.

Common Shares Issued for Debt Conversion

the period from October 1, 2025 through November 13, 2025, an investor converted its convertible note in the principal amount of $ 146,930

and unpaid interest of $ 7,970 into 154,900 shares of common stock of the Company at a per share price of $ 1.00 .

David Jin Resignation;

Meng Li Appointment

On November 12, 2025, David Jin, M.D., Ph.D.

advised the Company of his resignation as the Company’s

Chief Executive Officer and as a member of the Board of Directors, effective November 30, 2025, as a result of a personal health issue.

Jin’s resignation was not because of a disagreement with the Company on any matter relating to the Company’s operations,

policies or practices.

On November 13, 2025, the Board appointed Meng Li, the Company’s current Chief Operating Officer, as interim

Chief Executive Officer, effective November 30, 2025.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements