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Item 9A. Controls and Procedures

2026-03-30 compared with 2025-03-31 · 1946 added, 2377 removed, 1623 unchanged (73% of the section changed)

This section is long enough that the comparison stopped early. What follows is partial, and the remainder is not necessarily unchanged.

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Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and

procedures that are designed to ensure that material information required to be disclosed in our periodic reports filed under the

Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and to

ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer

(“CEO”) and Chief Financial Officer (“CFO”) as appropriate, to allow timely decisions regarding required

We carried out an evaluation, under the supervision and with the participation of our management, including the CEO and

the CFO, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13(a)-15(e)

under the Exchange Act, as of the end of the period covered by this report.

Our management recognizes that any controls and

procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and

management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

evaluation of disclosure controls and procedures as of December 31, 2024, conducted as part of our annual audit and preparation of

our annual financial statements, our management, including our CEO and CFO, conducted an evaluation of the effectiveness of the

design and operations of our disclosure controls and procedures and concluded that our disclosure controls and procedures were not

effective as of December 31, 2024 due to the reasons set forth below.

We maintain disclosure controls and procedures

that are designed to ensure that material information required to be disclosed in our periodic reports filed under the Exchange Act is

recorded, processed, summarized, and reported within the time periods specified in the SEC rules and forms and to ensure that such information

is accumulated and communicated to our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer

(“CFO”) as appropriate, to allow timely decisions regarding required disclosure.

We carried out an evaluation, under the supervision

and with the participation of our management, including the CEO and the CFO, of the effectiveness of the design and operation of our disclosure

controls and procedures, as defined in Rule 13(a)-15(e) under the Exchange Act, as of the end of the period covered by this report.

management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance

of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible

controls and procedures.

During evaluation of disclosure controls and procedures as of December 31, 2025, conducted as part of our annual

audit and preparation of our annual financial statements, our management, including our CEO and CFO, conducted an evaluation of the effectiveness

of the design and operations of our disclosure controls and procedures and concluded that our disclosure controls and procedures were

not effective as of December 31, 2025 due to the reasons set forth below.

Management’s Report on Internal Control

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of internal control over financial reporting may vary over time.

Management regularly assesses our internal control over financial reporting

and did so most recently for our financial reporting as of December 31, 2024.

This assessment was based on criteria for effective internal

control over financial reporting described in the Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations

(COSO) of the Treadway Commission (2013).

Based on this assessment, management has concluded that our internal control over financial

reporting was not effective as of December 31, 2024, due to the lack of segregation of duties resulting from our small size and inability

to perform an effective test of the operating effectiveness of the controls, including the oversight of our financial statement close

As a result of our Lab Services MSO transaction in February 2023, we retained additional accounting staff and hired a Controller

that worked part-time for Lab Services MSO and part-time for the Company.

In addition, the Company has transitioned all email servers

to the United States to enhance this aspect of internal controls.

Management regularly assesses our internal control

over financial reporting and did so most recently for our financial reporting as of December 31, 2025.

This assessment was based on criteria

for effective internal control over financial reporting described in the Internal Control Integrated Framework issued by the Committee

of Sponsoring Organizations (COSO) of the Treadway Commission (2013).

Based on this assessment, management has concluded that our internal

control over financial reporting was not effective as of December 31, 2025, due to the lack of segregation of duties resulting from our

small size and inability to perform an effective test of the operating effectiveness of the controls, including the oversight of our financial

statement close process.

The Company has transitioned all email servers to the United States to enhance this aspect of internal controls.

In light of the material weaknesses described

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OTHER INFORMATION

(b) During the quarter ended December 31, 2024,

none of our directors or executive officers adopted or terminated a Rule 10b5-1 trading plan or a non-Rule 10b5-1 trading arrangement

(as defined in Item 408(c) of Regulation S-K).

Business Loan and Security Agreement

On March 25, 2026, the Company entered into a

Business Loan and Security Agreement (the “Business Loan Agreement”) with a commercial funding source (the “Lender”),

pursuant to which the Company obtained a loan from the Lender in the principal amount of $787,500 (the “Business Loan”), with

net proceeds to the Company of $750,000, following the payment of an administration fee of $37,500, with a total repayment amount of $1,134,000,

including interest charges of $346,500 (assuming all payments are made on time and the Business Loan is not prepaid) repayable in 30 weekly

installments of $37,800 with a maturity date of October 20, 2026.

Pursuant to the Business Loan Agreement, the Company granted the Lender

a continuing security interest in certain collateral (as defined in the Business Loan Agreement).

In connection with the Business Loan,

the Company issued Lender a Confessed Judgement Secured Promissory Note (the “Secured Note”) dated March 25, 2026 in the amount

787,500 with a maturity date of October 20, 2026.

The foregoing descriptions of the Business Loan

Agreement are not complete and are qualified in their entirety by reference to the full text of the Business Loan Agreement and Secured

Note, copies of which are filed as Exhibit 10.123 and 4.20, respectively to this Annual Report on Form 10-K and is incorporated by reference

During the quarter ended December 31, 2025, none

of our directors or executive officers adopted or terminated a Rule 10b5-1 trading plan or a non-Rule 10b5-1 trading arrangement (as defined

in Item 408(c) of Regulation S-K).

DISCLOSURE REGARDING FOREIGN JURISDICTIONS

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DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

Below are the names of, and certain information

regarding, our executive officers and directors.

Chairman of the Board of Directors

David Jin, MD, PhD

Chief Executive Officer, President and Director

Chief Operating Officer and Secretary

Luisa Ingargiola

Chief Financial Officer

Lourdes Felix

Directors are elected annually, to hold such office

until a successor has been duly appointed and qualified, unless an director sooner dies, resigns or is removed.

Officers serve at the

discretion of the Board, subject to the terms of any employment agreement.

The principal occupation and business experience

during at least the past five years for our executive officers and directors is as follows:

Wenzhao Lu, Chairman of the Board of Directors

Wenzhao Lu has served as our Chairman of the

Board since October 10, 2016.

He is a seasoned healthcare entrepreneur with extensive operational knowledge and experience in the U.S.

He served as Chairman of the board of directors of the Daopei Medical Group (“DPMG”), from 2010 to December 2021.

Under his leadership, DPMG operated three top-ranked private hospitals (located in Beijing and Hebei), specialty hematology laboratories,

and a hematology research institute, with more than 100 partnering and collaborating hospitals in China.

DPMG was founded by Professor

Daopei Lu, a renowned hematologist pioneering in hematopoietic stem cell transplant and a member of the Academy of Engineering in China.

Lu received a Bachelor of Arts from Temple University Tyler School of Arts in 1988 and subsequently worked as senior Art Director

at Ogilvy & Mather Advertising Company.

Prior to joining DPMG, in 2009, Mr.

Lu served as Chief Operating Officer of BioTime Asia Limited,

a subsidiary of BioTime, Inc.

(NYSE American:

Lu is qualified to serve as a director because of his extensive operational knowledge

of, and executive level management experience in, the healthcare industry.

David Jin, Chief Executive Officer, President

David Jin, MD, PhD, has served as our

Chief Executive Officer, President and as a member of our Board since September 14, 2016.

From 2009 to 2017, Dr.

Jin served as the

Chief Medical Officer of BioTime, Inc.

(NYSE American:

BTX), a clinical stage regenerative medicine company with a focus on

pluripotent stem cell technology.

Jin also acts as a senior translational clinician-scientist at the Howard Hughes Medical

Institute and the Ansary Stem Cell Center at Weill Cornell Medical College of Cornell University.

Prior to his current endeavors,

Jin was Chief Consultant/Advisor for various biotech/pharmaceutical companies regarding hematology, oncology, immunotherapy and

stem cell-based technology development.

Jin has been Principle Investigator in more than 15 pre-clinical and clinical trials, as

well as an author/co-author of over 80 peer-reviewed scientific abstracts, articles, reviews, and book chapters.

medicine at SUNY Downstate College of Medicine in Brooklyn, New York.

He received his clinical training and subsequent faculty

tenure at the New York-Presbyterian Hospital (the teaching hospital for both Cornell and Columbia Universities) in the areas of

internal medicine, hematology, and clinical oncology.

Jin was honored as Top Chief Medical Officer by ExecRank in 2012, as well

as recognized by Leading Physicians of the World in 2015.

Jin is qualified to serve as a director because of his role with us,

and his extensive operational knowledge of, and executive level management experience in, the healthcare industry.

Meng Li, Chief Operating Officer and Secretary

Meng Li has served as our Chief Operating

Officer and Secretary since October 10, 2016 and served as a member of the Board from October 10, 2016 to July 9, 2018 and from April

5, 2019 through December 30, 2022.

Li has over 15 years of executive experience in international marketing, branding, communications,

and media investment consultancy.

Li served as Managing Director at Maxus/GroupM (a WPP Group company) where she was responsible for

business P&L and corporate management from 2006 to 2015.

Prior to joining Maxus/Group M, Ms.

Li worked for Zenith Media (a Publicis

Group company) from 2000 to 2006 as Senior Manager.

Li received a Bachelor of Arts in International Economic Law from Dalian Maritime

University in China.

Luisa Ingargiola, Chief Financial Officer

Luisa Ingargiola has served as our Chief Financial

Officer since February 21, 2017.

Ingargiola has significant experience serving as Chief Financial Officer or Audit Chair for multiple

Nasdaq and New York Stock Exchange companies.

She currently serves as Director and Audit Chair for several public companies, including

ElectraMeccanica (NASDAQ:SOLO), Dragonfly Energy (DFLI) and Vision Marine (VMAR).

From 2007 through 2016, Ms.

Ingargiola served as the

Chief Financial Officer and then a member of the board of directors at MagneGas Corporation (Nasdaq:

Prior to 2007, Ms.

held various roles as Budget Director and Investment Analyst in several private companies.

Ingargiola graduated in 1989 from Boston

University with a Bachelor’s degree in Business Administration and a concentration in Finance.

In 1996, she received her MBA in

Health Administration from the University of South Florida.

Ingargiola is qualified to serve as a Chief Financial Officer because

of her extensive knowledge corporate governance, regulatory requirements, executive leadership and knowledge of, and experience in, financing

and M&A transactions.

Sanders, Director

Sanders has served as a member of the Board since July 30,

Since January 2017, Mr.

Sanders has been Of Counsel to the law firm of Ortoli Rosenstadt LLP.

From July 2007 until January 2017,

Sanders was a Senior Partner at Ortoli Rosenstadt LLP.

From January 1, 2004 until June 30, 2007, he was Of Counsel to the law firm

of Rubin, Bailin, Ortoli, LLP.

From January 1, 2001 to December 31, 2003, he was Counsel at the law firm of Spitzer & Feldman PC.

Sanders also serves as a member of the board of directors of Helijet International, Inc.

and served as a member of the board of directors

of Electrameccanica Vehicles Corp.

(NASDAQ:SOLO).

Additionally, since October 2013, he has been a member of the board of directors at

the American Academy of Dramatic Arts, and, since February 2015, has been a member of the board of directors of the Bay Street Theater.

Sanders received his JD from Cornell University and his BBA from The City College of New York.

Sanders is qualified to serve as

a director because of his corporate, securities and international law experience, including working with companies in the life sciences

Lourdes Felix, Director

Lourdes Felix has served as a member of the

Board since January 9, 2023.

Felix is an entrepreneur and corporate finance executive with 30 years of combined experience in

capital markets, public accounting and in the private sector.

She presently serves as Chief Executive Officer, Chief Financial

Officer, and a member of the board of directors of BioCorRx Inc., a company focused on addiction treatment solutions and related

She has been with BioCorRx Inc.

since October 2012.

Felix is one of the founders and President of BioCorRx

Pharmaceuticals Inc., a majority owned subsidiary of BioCorRx Inc.

Prior to joining BioCorRx Inc., her experience was in the private

sector and public accounting.

Felix has expertise in finance, accounting, company-wide operations, budgeting, and internal

control principles, including U.S.

GAAP, SEC, and SOX compliance.

She has thorough knowledge of federal and state regulations and

has successfully managed and produced SEC regulatory filings.

She also has extensive experience in developing and managing financial

Felix holds a Bachelor of Science degree in Accounting from the University of Phoenix.

She continued her education

and is an MBA candidate at D’Amore-McKim School of Business, Northeastern University.

Felix is qualified to serve as a

director because of her extensive investment and executive level management experience.

Tauzin II, Director

Tauzin II has served as a member of

the Board since November 1, 2017.

From December 2010 until March 1, 2014, Congressman Tauzin served as a Special Legislative Counsel at

Alston & Bird LLP.

From December 2004 to June 2010, Congressman Tauzin was President and Chief Executive Officer of Pharmaceutical

Research and Manufacturers of America, a trade group that serves as one of the pharmaceutical industry’s top lobbying groups.

served 12.5 terms in the U.S.

House of Representatives, representing Louisiana’s 3rd Congressional District.

From January 2001 through

February 2004, Congressman Tauzin served as Chairman of the House Committee on Energy and Commerce.

He also served as a senior member

of the House Resources Committee and Deputy Majority Whip.

Prior to serving as a member of Congress, Congressman Tauzin was a member of

the Louisiana State Legislature, where he served as Chairman of the House Natural Resources Committee and Chief Administration Floor Leader.

He served as Lead Independent Director of LHC Group, a publicly traded provider of quality home health care, from 2005 to 2021 and retains

the role of Lead Independent Emeritus today.

The Congressman also served on the board of directors of Entergy, a Fortune 500 company.

In addition, the Congressman chartered a Louisiana State Savings and Loan Association and Chaired its first board of directors.

a Bachelor of Arts Degree from Nicholls State University and a Juris Doctor degree from Louisiana State University.

Congressman Tauzin

is qualified to serve as a director because of his extensive knowledge of the pharmaceutical industry and his experience as a director

of several publicly traded and privately held companies.

Stilley, III, Director

Stilley has served as a member of the Board since July 5,

Stilley has been the Chief Executive Officer of Adovate, LLC since January 2023.

Previously, he was Chief Executive Officer

of Purnovate, Inc., a subsidiary of Adial Pharmaceuticals, Inc.

(Adial) from January 2021 until May 2023, and was Chief Executive Officer

of Adial from December 2010 until August 2022, and was a member of Adial’s board of directors from December 2010 until September

From August 2008 until December 2010, he was the Vice President, Business Development and Strategic Projects at Clinical Data, Inc.

Stilley was the COO and CFO of Adenosine Therapeutics, LLC until the assets of Adenosine Therapeutics were acquired by Clinical Data,

in August 2008.

Stilley has advised both public and private companies on financing and M&A transactions, has been the interim

CFO of a public company, the interim Chief Business Officer and then Advisor for Diffusion Pharmaceuticals from September 2015 through

March 2018, the audit chair for public companies, and the COO and CFO of a number of private companies.

Before entering the business community,

Stilley served as Captain in the U.S.

Marine Corps.

Stilley has an MBA with honors from the Darden School of Business and a B.S.

in Commerce/Marketing from the McIntire School of Commerce at the University of Virginia.

He currently serves on the Advisory Board of

Virginia BIO, the statewide biotechnology organization and has guest lectured at the Darden School of Business and the University School

of Engineering.

Stilley is qualified to serve as a director because of his extensive knowledge of the biotechnology industry, significant

executive leadership and operational experience, and knowledge of, and experience in, financing and M&A transactions.

Tevi Troy, Director

Tevi Troy has served as a member of the

Board since June 4, 2018.

Troy is a former Deputy Secretary of the U.S.

Department of Health and Human Services.

Senior Fellow at the Bipartisan Policy Center in Washington.

He was the founder and CEO of the American Health Policy Institute and

a Senior Fellow at Hudson Institute.

On August 3, 2007, Dr.

Troy was unanimously confirmed by the U.S.

Senate as the Deputy

Secretary of HHS.

As Deputy Secretary, Dr.

Troy was the chief operating officer of the largest civilian department in the federal

government, with a budget of $716 billion and over 67,000 employees.

Troy has extensive White House experience, having served in

several high-level positions over a five-year period, culminating in his service as Deputy Assistant and then Acting Assistant to

the President for Domestic Policy.

Troy has held high-level positions on Capitol Hill as well.

From 1998 to 2000, Dr.

served as the Policy Director for Senator John Ashcroft.

From 1996 to 1998, Dr.

Troy was Senior Domestic Policy Adviser and later

Domestic Policy Director for the House Policy Committee, chaired by Christopher Cox.

In addition to his senior level government work

and health care expertise, Dr.

Troy is also a best-selling presidential historian and the author of five books, including, most

recently, “Fight House:

Rivalries in the White House from Truman to Trump,” which the Wall Street Journal listed as one

of the top political books of 2020.

Troy’s many other affiliations include:

contributing editor for Washingtonian

member of the publication committee of National Affairs;

member of the Board of Fellows of the Jewish Policy Center;

Senior Fellow at the Potomac Institute;

and a member of the Bipartisan Commission on Biodefense.

Troy has a B.S.

in Industrial

and Labor Relations from Cornell University and an M.A.

in American Civilization from the University of Texas at Austin.

Troy is qualified to serve as a director because of his extensive knowledge of the healthcare industry and his significant

leadership experience.

Board Composition

Our Board is currently composed of seven directors.

Our priority in selection of board members is

identification of members who will further the interests of our stockholders through his or her established record of professional accomplishment,

the ability to contribute positively to the collaborative culture among board members, knowledge of our business and understanding of

the competitive landscape.

A majority of the authorized number of directors

constitutes a quorum of the Board for the transaction of business.

However, any action required or permitted to be taken by the Board

may be taken without a meeting if all members of the Board individually or collectively consent in writing to the action.

Board Leadership Structure and Role in Risk

The positions of our Chairman of the Board and

Chief Executive Officer are separated.

Separating these positions allows our Chief Executive Officer to focus on our day-to-day business,

while allowing the Chairman of the Board to lead our Board in its fundamental role of providing advice to and independent oversight of

Our Board recognizes the time, effort and energy that the Chief Executive Officer must devote to his position in the current

business environment, as well as the commitment required to serve as our Chairman, particularly as our Board’s oversight responsibilities

continue to grow.

Our Board also believes that this structure ensures a greater role for the independent directors in the oversight of

our Company and active participation of the independent directors in setting agendas and establishing priorities and procedures for the

work of our Board.

Our Board believes its administration of its risk oversight function has not affected its leadership structure.

Although our bylaws do not require our Chairman

and Chief Executive Officer positions to be separate, our Board believes that having separate positions is the appropriate leadership

structure for us at this time and demonstrates our commitment to good corporate governance.

Risk is inherent with every business, and how

well a business manages risk can ultimately determine its success.

We face a number of risks, including those described under the section

entitled “ Risk Factors ” of this report.

Our Board is actively involved in oversight of risks that could affect us.

This oversight is conducted primarily by our full Board, which has responsibility for general oversight of risks.

Our Board satisfies this responsibility through

full reports by each committee chair regarding the committee’s considerations and actions, as well as through regular reports directly

from officers responsible for oversight of particular risks within our Company.

Our Board believes that full and open communication between

management and the Board is essential for effective risk management and oversight.

Board of Director Meetings

The primary responsibility of the Board is to provide oversight, strategic

guidance, counseling, and direction to our management team.

Our Board meets on a regular basis and additionally as required.

met five times in 2024.

Each of the directors attended at least 75% of the aggregate of (i) the total number of meetings of our Board

(held during the period for which such directors served on the Board) and (ii) the total number of meetings of all committees of our Board

on which the director served (during the periods for which the director served on such committee or committees).

We do not have a formal

policy requiring members of the Board to attend our annual meetings of stockholders.

Three of our directors attended last year’s

annual meeting.

Director Independence

Our common stock is listed on The Nasdaq Capital

Under the rules of The Nasdaq Capital Market, independent directors must comprise a majority of our Board.

In addition, the rules

of The Nasdaq Capital Market require that all the members of such committees be independent.

Members of our Audit Committee, as defined

below, must also satisfy the independence criteria set forth in Rule 10A-3 under the Exchange Act.

Compensation committee members must

also satisfy the independence criteria established by The Nasdaq Capital Market in accordance with Rule 10C-1 under the Exchange Act.

Under the rules of The Nasdaq Capital Market, a director will only qualify as an “independent director” if, among other qualifications,

in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise

of independent judgment in carrying out the responsibilities of a director.

The Board has reviewed its composition, the composition

of its committees and the independence of each director.

Based upon information requested from and provided by each director concerning

his or her background, employment and affiliations, including family relationships, the Board has determined that Steven A.

Sanders, Lourdes

Felix, William B.

Stilley, III and Tevi Troy do not, respectively, have a relationship that would interfere with the exercise of independent

judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term

is defined under the Rules of The Nasdaq Capital Market and the SEC.

In making this determination, our Board considered

the relationships that each non-employee director has with our Company and all other facts and circumstances our Board deemed relevant

in determining their independence.

We intend to comply with the other independence requirements for committees within the time periods

specified above.

Family Relationships

There are no family relationships among our directors

or executive officers.

Board Committees

The Board has established an audit committee,

a compensation committee and a nominating and corporate governance committee.

Our Board may establish other committees to facilitate the

management of our business.

The composition and functions of each committee named above are defined and described below.

Members serve

on these committees until their resignation or until otherwise determined by our Board.

Audit Committee .

We have a separately

designated standing audit committee of the Board (the “Audit Committee”), established in accordance with Section 3(a)(58)(A)

of the Exchange Act.

The Audit Committee consists of William Stilley, Steven Sanders and Tevi Troy, with Mr.

Stilley serving as the Chair

of the Audit Committee.

The Board has determined that each director currently serving on our Audit Committee is an “independent

director” as defined by Nasdaq applicable to members of an audit committee and Rule 10A-3(b)(i) under the Exchange Act.

Stilley is an “audit committee financial expert” as defined in Item 407(d)(5) of Regulation S-K and demonstrates “financial

sophistication” as defined by Nasdaq Rules.

The Audit Committee is appointed by the Board to assist with monitoring (i) the integrity

of our financial statements, (ii) our compliance with legal and regulatory requirements, and (iii) the independence and performance of

our internal and external auditors.

The principal functions and responsibilities of

the Audit Committee include:

● reviewing our annual audited

financial statements with management and our independent auditors, including major issues regarding accounting and auditing principles

and practices and financial reporting that could significantly affect our financial statements;

● reviewing our quarterly financial

statements with management and our independent auditor prior to the filing of our Quarterly Reports on Form 10-Q, including the results

of the independent auditors’ reviews of the quarterly financial statements;

● recommending to the Board the

appointment of, and continued evaluation of the performance of, our independent auditor;

● approving and conducting a

review of all related party transactions for potential conflict of interest situations on an ongoing basis;

● approving the fees to be paid

to our independent auditor for audit services and approving the retention of our independent auditor for non-audit services and all fees

for such services;

● reviewing periodic reports

from our independent auditor regarding our auditor’s independence, including discussion of such reports with the auditor;

● reviewing the adequacy of our

overall control environment, including internal financial controls and disclosure controls and procedures;

● reviewing with our management

and legal counsel legal matters that may have a material impact on our financial statements or our compliance policies and any material

reports or inquiries received from regulators or governmental agencies.

During the fiscal year ended December 31, 2024, the Audit Committee

met four times.

The Audit Committee is governed by a written charter, as adopted by the Board.

A copy of the Audit Committee Charter is

posted under the “Investors” tab under “Corporate Governance” on our website, which is located at www.avalon-globocare.com .

Compensation Committee .

The compensation

committee of the Board (the “Compensation Committee”) consists of Lourdes Felix, Steven Sanders and Tevi Troy, with Ms.

serving as the Chair of the Compensation Committee.

The Board has determined that each member of the Compensation Committee is considered

(i) an “independent director” as defined by Nasdaq Rules applicable to members of a compensation committee;

(ii) a “non-employee

director” as defined in Rule 16b-3 promulgated under the Exchange Act;

and (iii) an “outside director” as that term

is defined in Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”).

The Compensation Committee is

responsible for establishing the compensation of our senior management, including salaries, bonuses, termination arrangements, and other

executive officer benefits as well as director compensation.

The Compensation Committee also administers our equity incentive plans.

Compensation Committee works with the Chairman of the Board and our Chief Executive Officer and reviews and approves compensation decisions

regarding senior management, including compensation levels and equity incentive awards.

The Compensation Committee also approves employment

and compensation agreements with our key personnel and directors.

The Compensation Committee has the power and authority to conduct or

authorize studies, retain independent consultants, accountants or others, and obtain unrestricted access to management, our internal auditors,

human resources and accounting employees and all information relevant to its responsibilities.

The principal functions and responsibilities of

the Compensation Committee include:

● reviewing and approving the

Company’s compensation guidelines and structure;

● reviewing and approving, on

an annual basis, the corporate goals and objectives with respect to compensation for the Chief Executive Officer;

● reviewing and approving, on

an annual basis, the evaluation process and compensation structure for the Company’s other officers, including salary, bonus, incentive

and equity compensation;

● periodically reviewing and

making recommendations to the Board regarding the compensation of non-management directors;

● developing the executive compensation

philosophy and reviewing and recommending to the Board for approval all compensation policies and compensation programs for the executive

During the fiscal year ended December 31, 2024, the Compensation Committee

met two times.

The Compensation Committee is governed by a written charter, as adopted by our Board.

A copy of the Compensation Committee

Charter is posted under the “Investors” tab under “Corporate Governance” on our website, which is located at www.avalon-globocare.com .

Nominating and Corporate Governance Committee .

Our Nominating and Corporate Governance Committee consists of Steven Sanders, William Stilley and Tevi Troy, with Mr.

Sanders serving

as the Chair of our Nominating and Corporate Governance Committee.

Our Board has determined that each member of the Nominating and Governance

Committee is an “independent director” as defined by Nasdaq Rules.

The Nominating and Corporate Governance Committee is generally

responsible for recommending to our full Board certain policies, procedures, and practices designed to ensure that our corporate governance

policies, procedures, and practices continue to assist the Board and our management in effectively and efficiently promoting the best

interests of our stockholders.

The Nominating and Corporate Governance Committee is also responsible for selecting and recommending for

approval by our Board and our stockholders a slate of director nominees for election at each of our annual meetings of stockholders, and

otherwise for determining the board committee members and chairpersons, subject to ratification by our Board, as well as recommending

to the Board director nominees to fill vacancies or new positions on the Board or its committees that may occur or be created from time

to time, all in accordance with our bylaws and applicable law.

In identifying independent candidates, with significant

senior-level professional experience, to be nominated as potential members of our Board, the Nominating and Corporate Governance Committee

solicits candidates from the Board, senior management and others, and may engage a search firm in the process.

The Nominating and Corporate

Governance Committee reviews and narrows the list of candidates and interviews potential nominees.

The final candidate is also introduced

and interviewed by the Board and the lead director if one has been appointed.

In general, in considering whether to recommend any particular

candidate for inclusion in our Board’s slate of recommended director nominees, the Nominating and Corporate Governance Committee

will apply the criteria set forth in our corporate governance guidelines.

These criteria include the candidate’s integrity, business

acumen, commitment to understanding our business and industry, experience, conflicts of interest and the ability to act in the interests

of our stockholders.

Further, specific consideration is given to, among other things, diversity of background and experience that a candidate

would bring to our Board.

The Nominating and Corporate Governance Committee does not assign specific weights to particular criteria and

no particular criterion is a prerequisite for each prospective nominee.

We believe that the backgrounds and qualifications of our directors,

considered as a group, should provide a composite mix of experience, knowledge and abilities that will allow our Board to fulfill its

responsibilities.

Stockholders may recommend individuals to the Nominating and Corporate Governance Committee for consideration as potential

director candidates by submitting the names, together with appropriate biographical information and background materials to our Nominating

and Corporate Governance Committee.

The Nominating and Corporate Governance Committee considers recommendations from stockholders if submitted

in a timely manner in accordance with the procedures set forth in our bylaws and will apply the same criteria to all persons being considered.

The principal functions and responsibilities of

the Nominating and Corporate Governance Committee include:

● developing and maintaining

our corporate governance policy guidelines;

● developing and maintaining

our Code of Business Conduct and Ethics;

● overseeing the interpretation

and enforcement of our Code of Business Conduct and Ethics for the Chief Executive Officer and Senior Financial and Accounting Officers;

● evaluating the performance

of our Board, its committees, and committee chairpersons and our directors;

● selecting and recommending

a slate of director nominees for election at each of our annual meetings of the stockholders and recommending to the Board director nominees

to fill vacancies or new positions on the Board or its committees that may occur from time to time.

During the fiscal year ended December 31, 2024, the Nominating and

Corporate Governance Committee met one time.

The Nominating and Corporate Governance Committee is governed by a written charter approved

by our Board.

A copy of the Nominating and Corporate Governance Committee Charter is posted under the “Investors” tab under

“Corporate Governance” on our website, which is located at www.avalon-globocare.com .

Stockholder Nominations for Directorships

Stockholders may recommend individuals to the

Nominating and Corporate Governance Committee for consideration as potential director candidates by submitting their names and background

to the Secretary of the Company at the address set forth below under “Stockholder Communications” in accordance with the provisions

set forth in our bylaws.

All such recommendations will be forwarded to the Nominating and Corporate Governance Committee, which will review

and only consider such recommendations if appropriate biographical and other information is provided, including, but not limited to, the

items listed below, on a timely basis.

● the name and address of record

of the security holder;

● a representation that the security

holder is a record holder of the Company’s securities, or if the security holder is not a record holder, evidence of ownership

in accordance with Rule 14a-8(b)(2) of the Exchange Act;

● the name, age, business and

residential address, educational background, current principal occupation or employment, and principal occupation or employment for the

preceding five (5) full fiscal years of the proposed director candidate;

● a description of the qualifications

and background of the proposed director candidate and a representation that the proposed director candidate meets applicable independence

requirements;

● a description of any arrangements

or understandings between the security holder and the proposed director candidate;

● the consent of the proposed

director candidate to be named in the proxy statement relating to the Company’s annual meeting of stockholders and to serve as

a director if elected at such annual meeting.

All security holder recommendations for director

candidates must be received by the Company in the timeframe(s) set forth under the heading “Stockholder Proposals” below.

Assuming that appropriate information is timely provided for candidates recommended by stockholders, the Nominating and Corporate Governance

Committee will evaluate those candidates by following substantially the same process, and applying substantially the same criteria, as

for candidates submitted by members of the Board or other persons, as described above and as set forth in its written charter.

Compensation Committee Interlocks and Insider

Participation

None of our executive officers currently serves,

or in the past year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive

officers on our board of directors or compensation committee.

Code of Ethics

We have adopted a written Code of Business Conduct

and Ethics that applies to our employees, officers and directors.

A copy of the Code of Business Conduct and Ethics is posted under the

“Investors” tab under “Corporate Governance” in our website, which is located at www.avalon-globocare.com .

We intend to disclose future amendments to certain provisions of our Code of Business Conduct and Ethics, or waivers of such provisions

applicable to any principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing

similar functions, and our directors, on our website identified above or in filings with the SEC.

Insider trading arrangements and

We have adopted an insider trading policy that governs the purchase,

sale, and/or other transactions of our securities by our directors, officers and employees.

A copy of our insider trading policy is filed

as Exhibit 19.1 to this Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

In addition, with regard to us trading

in our own securities, it is our policy to comply with the federal securities laws and the applicable exchange listing requirements in

all respects.

Limitation of Director Liability and Indemnification

The Delaware General Corporation Law authorizes

corporations to limit or eliminate, subject to certain conditions, the personal liability of directors to corporations and their stockholders

for monetary damages for breach of their fiduciary duties.

Our Amended and Restated Certificate of Incorporation (the “Certificate

of Incorporation”) limits the liability of our directors to the fullest extent permitted by Delaware law.

In addition, we have entered

into indemnification agreements with each of our directors and officers whereby we have agreed to indemnify those directors and officers

to the fullest extent permitted by law, including indemnification against expenses and liabilities incurred in legal proceedings to which

the director or officer was, or is threatened to be made, a party by reason of the fact that such director or officer is or was a director,

officer, employee or agent of the Company, provided that such director or officer acted in good faith and in a manner that the director

or officer reasonably believed to be in, or not opposed to, the best interests of the Company.

We have director and officer liability insurance

to cover liabilities our directors and officers may incur in connection with their services to us, including matters arising under the

Securities Act.

Our Certificate of Incorporation and bylaws also provide that we will indemnify our directors and officers who, by reason

of the fact that he or she is one of our officers or directors, is involved in any action, suit or proceeding, whether civil, criminal,

administrative or investigative related to their board role with us.

There is no pending litigation or proceeding involving

any of our directors, officers, employees or agents in which indemnification will be required or permitted.

We are not aware of any threatened

litigation or proceeding that may result in a claim for such indemnification.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires our

directors and executive, officers, and persons who are beneficial owners of more than 10% of a registered class of our equity securities,

to file reports of ownership and changes in ownership with the SEC.

These persons are required by SEC regulations to furnish us with copies

of all Section 16(a) forms they file.

Based solely upon our review of copies of Forms 3, 4 and 5 furnished

to us, we believe that all of our directors, executive officers and 10% stockholders timely filed all reports required by Section 16(a)

of the Exchange Act during the fiscal year ended December 31, 2024.

The information required by this Item will be

set forth in our definitive proxy statement with respect to our 2026 annual meeting of stockholders to be filed not later than 120 days

after the end of the 2025 fiscal year and is incorporated herein by reference.

We have adopted a code of business conduct and

ethics that applies to all our employees, officers and directors, including those officers responsible for financial reporting.

of business conduct and ethics is available on the investor relations section of our website www.avalon-globocare.com .

We have adopted an insider trading policy applicable

to our directors, officers, employees, and other covered persons, and have implemented processes for the company, that we believe are

reasonably designed to promote compliance with insider trading laws, rules and regulations, and the Nasdaq Capital Marke listing standards.

Our insider trading policy is included as Exhibit 19.1 to this Annual Report on Form 10-K and is available in the investor relations section

of our website www.avalon-globocare.com .

EXECUTIVE COMPENSATION

Executive Officer Compensation

We are currently a “smaller reporting company,”

as such term is defined in the rules promulgated under the Securities Act.

We have opted to comply with the scaled down disclosure rules

applicable to smaller reporting companies which require certain compensation disclosure for (i) our principal executive officer, (ii)

our two most highly compensated executive officers, other than the principal executive officer, whose total compensation for 2024 exceeded

$100,000 and who were serving as executive officers as of December 31, 2024, and (iii) up to two additional individuals for whom disclosure

would have been provided pursuant to the foregoing clause (ii) but for the fact that the individual was not serving as an executive officer

as of December 31, 2024.

We refer to these individuals as “named executive officers.” Our named executive officers for the

year ended December 31, 2024 were Dr.

David Jin, Luisa Ingargiola and Meng Li.

Certain information regarding their 2024 compensation is

included below.

2024 Summary Compensation Table

Name and principal position

incentive plan

Luisa Ingargiola

Employment Agreements

On December 1, 2016, the Company entered into

an Executive Employment Agreement with David Jin, the Company’s CEO and President.

Pursuant to the agreement, Mr.

Jin was employed

as President and Chief Executive Officer of the Company, which agreement had a term initially through November 30, 2017 unless earlier

terminated pursuant to the terms of the agreement.

On February 20, 2020, the Company entered into a Letter Agreement with Dr.

to which the term of Dr.

Jin’s Executive Employment Agreement was extended an additional three years.

During the term of the agreement,

Jin is entitled to a base salary and will be eligible for a discretionary performance bonus, equity awards and to participate in employee

benefits plans as the Company may institute from time to time at the discretion of the Board.

On January 3, 2019, the Company entered into a Letter Agreement with

Jin, pursuant to which his annual base salary set forth in his employment agreement was increased to $360,000, effective January 1,

Pursuant to the agreement, Mr.

Jin may be terminated for “cause” as defined and Mr.

Jin may resign for “good reason”

In the event Mr.

Jin is terminated without cause or resigns for good reason, the Company will be required to pay Mr.

accrued salary and bonuses, reimbursement for all business expenses and Mr.

Jin’s salary for one year.

In the event Mr.

Jin is terminated

with cause, resigns without good reason, dies or is disabled, the Company will be required to pay Mr.

Jin all accrued salary and bonuses

and reimbursement for all business expenses.

Under the agreement Mr.

Jin is subject to confidentiality, non-compete and non-solicitation

restrictions.

This agreement has not been extended, however Dr.

Jin is continuing his employment with the Company at will and otherwise

under the same terms and conditions, except that Dr.

Jin agreed to a salary reduction as set forth in the table above for the years ended

December 31, 2024 and 2023 as part of the Company’s cost reduction measures.

Luisa Ingargiola

On February 21, 2017, Ms.

Ingargiola and the Company

entered into an Executive Retention Agreement effective February 9, 2017, pursuant to which Ms.

Ingargiola agreed to serve as Chief Financial

Officer in consideration of an annual salary.

On January 3, 2019, the Company entered into a Letter Agreement with Ms.

Ingargiola, pursuant

to which her annual base salary set forth in her employment agreement was increased to $350,000 effective January 1, 2019.

The employment of Ms.

Ingargiola is at will and

may be terminated at any time, with or without formal cause.

Pursuant to the terms of Executive Retention Agreement with Ms.

the Company has agreed to provide specified severance and bonus amounts and to accelerate the vesting on her equity awards upon termination

upon a change of control or an involuntary termination, as each term is defined in the agreements.

In the event of a termination upon a change

of control, Ms.

Ingargiola is entitled to receive an amount equal to 12 months of her base salary and the target bonus then in

effect for the executive officer for the year in which such termination occurs, such bonus payment to be pro-rated to reflect the

full number of months the executive remained in the Company’s employ.

In addition, the vesting on any stock option held by the

executive officer will be accelerated in full.

At the election of the executive officer, the Company will also continue to provide

health related employee insurance coverage for twelve months, at the Company’s expense.

In the event of an involuntary termination, Ms.

Ingargiola is entitled to receive an amount equal to six months of her base salary and the target bonus then in effect for the executive

officer for the six months in which such termination occurs, such bonus payment to be pro-rated to reflect the full number of months the

executive remained in the Company’s employ.

Such payment will be increased to 12 months upon the one-year anniversary of the retention

In addition, the vesting on any stock option held by the executive officer will be accelerated in full.

At the election of

the executive officer, the Company will also continue to provide health related employee insurance coverage for twelve months, at the

Company’s expense.

On January 11, 2017, Avalon Shanghai entered into

an Executive Employment Agreement with Meng Li, the Company’s COO and Secretary.

Pursuant to the agreement, Ms.

Li was employed

as Chief Operating Officer and President of Avalon Shanghai initially through November 30, 2019, unless earlier terminated pursuant to

the terms of the agreement.

On February 20, 2020, the Company entered into a Letter Agreement with Meng Li pursuant to which the term

Li’s Executive Employment Agreement entered between the Company’s subsidiary and Ms.

Li dated January 11, 2017 was

extended an additional three years.

During the term of the agreement, Ms.

Li is entitled

to a base salary and will be eligible for a discretionary performance bonus, equity awards and to participate in employee benefits plans

as the Avalon Shanghai may institute from time to time at the discretion of its Board of Directors.

On January 3, 2019, the Company entered

into a Letter Agreement with Ms.

Li, pursuant to which her annual base salary set forth in her employment agreement was increased to $340,000

effective January 1, 2019, except that Ms.

Li agreed to a salary reduction as set forth in the table above for the years ended December

31, 2024 and 2023 as part of the Company’s cost reduction measures.

Pursuant to the agreement, Ms.

Li may be terminated for “cause”

as defined and Ms.

Li may resign for “good reason” as defined.

In the event Ms.

Li is terminated without cause or resigns

for good reason, Avalon Shanghai will be required to pay Ms.

Li all accrued salary and bonuses, reimbursement for all business expenses

Li’s salary for one year.

In the event Ms.

Li is terminated with cause, resigns without good reason, dies or is disabled,

Avalon Shanghai will be required to pay Ms.

Li all accrued salary and bonuses and reimbursement for all business expenses.

Under the agreement

Li is subject to confidentiality, non-compete and non-solicitation restrictions.

Option Exercises and Stock Vested

There were no options exercised by our executive

officers or stock vested to our executive officers during the year ended December 31, 2024.

Outstanding Equity Awards at 2024 Fiscal Year

The following table sets forth information with respect to the outstanding

equity awards of our named executive officers at December 31, 2024:

Outstanding Equity Awards

Option Awards

(#) (Exercisable)

(#) (Unexercisable)

unexercised unearned

Policies and Practices Related to the Grant of Certain Equity Awards

Close in Time to the Release of Material Nonpublic Information

We do not have any formal policy that requires us to grant, or avoid

granting, stock options at particular times.

Consistent with its annual compensation cycle, if options are to be granted, the Compensation

Committee generally seeks to grant annual stock option awards after its Annual Report on Form 10-K has been filed.

The timing of any stock

option grants in connection with new hires, promotions, or other non-routine grants is tied to the event giving rise to the award (such

as an employee’s commencement of employment or promotion effective date).

As a result, in all cases, the timing of grants of stock

options occurs independent of the release of any material nonpublic information, and we do not time the disclosure of material nonpublic

information for the purpose of affecting the value of executive compensation.

No stock options were issued to executive officers in 2024 during any

period beginning four business days before the filing of a periodic report or current report disclosing material non-public information

and ending one business day after the filing or furnishing of such report with the SEC.

No Pension Benefits

We do not maintain any plan that provides for

payments or other benefits to its executive officers at, following or in connection with retirement and including, without limitation,

any tax-qualified defined benefit plans or supplemental executive retirement plans.

No Nonqualified Deferred Compensation

We do not maintain any defined contribution or

other plan that provides for the deferral of compensation on a basis that is not tax-qualified.

2024 Director Compensation

The following table sets forth information concerning

the compensation earned or paid to certain of our non-employee directors during the fiscal year ended December 31, 2024:

Earned or Paid in

Incentive Plan

Pension Value

Lourdes Felix (1)

Stilley, III (3)

Tauzin II (4)

Tevi Troy (5)

Felix’s 2024 compensation consisted of cash of

$70,000 and 533 stock options vested and valued at $2,697.

Sanders’s 2024 compensation consisted of cash of

$70,000 and 533 options vested and valued at $2,697.

Stilley’s 2024 compensation consisted of cash of

$70,000 and 533 options vested and valued at $2,697.

Tauzin’s 2024 compensation consisted of cash of

$25,000 and 1,333 options vested and valued at $4,697.

Troy’s 2024 compensation consisted of cash of $60,000

and 533 options vested and valued at $2,697.

The information required by this Item will be set forth in our definitive

proxy statement with respect to our 2026 annual meeting of stockholders to be filed not later than 120 days after the end of the 2025

fiscal year, and is incorporated herein by reference.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL

OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

Amended and Restated 2020 Stock Incentive Plan

On August 29, 2023, the Board adopted the Avalon

GloboCare Corp.

Amended and Restated 2020 Stock Incentive Plan (the “Amended and Restated 2020 Plan”), subject to stockholder

approval, which was received on December 19, 2023.

The Amended and Restated 2020 Plan provides for the grant of incentive stock options

that are intended to qualify under Section 422 of the Code (“ISOs”), nonstatutory stock options, stock appreciation rights,

restricted stock awards, restricted stock unit awards, performance-based stock awards and performance-based cash awards.

ISOs may be granted

only to employees.

All other awards may be granted to employees, including officers, and to the Company’s non-employee directors,

consultants and other advisors.

A total of 133,333 shares of our common stock

were initially available under the Amended and Restated 2020 Plan.

In addition, the number of shares of our common stock reserved for

issuance under the Amended and Restated 2020 Plan automatically increases on January 1 of each year, beginning on January 1, 2024, by

1% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year, or a lesser number of

shares determined by our Board.

On January 1, 2024 and 2025, the number of shares of our common stock reserved for issuance under the

Amended and Restated 2020 Plan was increased by 7,333 and 14,425 shares, respectively.

As of March 31, 2025, a total of 142,424 shares

of our common stock were available for issuance under the Amended and Restated 2020 Plan, including shares that are the subject of outstanding

awards as of such date.

Clawback/Recoupment.

Awards granted

under the Amended and Restated 2020 Plan are subject to the requirement that the awards be forfeited or amounts repaid to the Company

after they have been distributed to the participant (i) to the extent set forth in an award agreement or (ii) to the extent covered by

any clawback or recapture policy adopted by the Company from time to time (including the Clawback Policy adopted by the Board on November

16, 2023), or any applicable laws that impose mandatory forfeiture or recoupment, under circumstances set forth in such applicable laws.

Amendment, Termination .

may at any time amend, suspend or terminate the Amended and Restated 2020 Plan for the purpose of satisfying the requirements of the Code,

or other applicable law or regulation or for any other legal purpose, provided that, without the consent of our stockholders, the Board

may not (i) increase the number of shares of our common stock available under the Amended and Restated 2020 Plan, (ii) change the group

of individuals eligible to receive awards, or (iii) extend the term of the Amended and Restated 2020 Plan.

2020 Incentive Stock Plan

On June 12, 2020, the Board adopted the Avalon

GloboCare Corp.

2020 Incentive Stock Plan (the “2020 Plan”), subject to stockholder approval, which was received on August

The general purpose of the 2020 Plan is to provide

a means whereby eligible directors, officers, employees or consultants to the Company develop a sense of proprietorship and personal involvement

in our development and financial success, and to encourage them to devote their best efforts to our business, thereby advancing our interests

and the interests of our stockholders.

We believe that the 2020 Plan advances the Company’s interests by enhancing our ability to

(i) attract, retain and reward employees, officers, directors and consultants who are in a position to make significant contributions

to our success;

(ii) encourage our employees, officers, directors and consultants to take into account our long-term interests through

ownership of our shares of our common stock;

and (iii) to provide incentives for such persons to exert maximum efforts for our success.

The Board has reserved 33,333 shares of our common

stock for issuance under the 2020 Plan, subject to customary adjustments for stock splits, stock dividends or similar transactions.

the 2020 Plan, awards may be made in the form of options to purchase shares of our common stock, as well as restricted shares of our common

stock and restricted stock units payable in shares of our common stock.

Options may be granted which are intended to qualify as ISOs under

Section 422 of the Code or which are not intended to qualify as ISOs thereunder.

However, ISOs may only be granted to employees.

option granted under the 2020 Plan terminates without having been exercised in full or if any award is forfeited, or if shares otherwise

issuable are withheld to satisfy tax withholding obligations, the number of shares of our common stock as to which such option or award

was forfeited or withheld will be available for future grants under the 2020 Plan.

The 2020 Plan is not a qualified deferred compensation

plan under Section 401(a) of the Code and is not subject to the provisions of the Employee Retirement Income Security Act of 1974.

2019 Incentive Stock Plan

On June 7, 2019, the Board adopted the Avalon

GloboCare Corp.

2019 Incentive Stock Plan (the “2019 Plan”), subject to stockholder approval, which was received on August

There are 33,333 shares of our common stock reserved for issuance under the 2019 Plan, subject to customary adjustments for stock

splits, stock dividends or similar transactions.

As of March 31, 2025, 6,213 shares remained available for issuance under the 2019 Plan.

The following table provides information with

respect to our 2019 Plan, 2020 Plan, and Amended and Restated 2020 Plan under which equity compensation was authorized as of December

Plan category

available for

under equity compensation plans (excluding

Equity compensation plan approved by security holders

Amended and Restated 2020 Plan

Equity compensation plans not approved by security holders

(1) Includes 1,867 shares of our common stock issuable upon exercise

of outstanding options and 10,800 shares of our common stock issuable pursuant to outstanding restricted stock units.

(2) The weighted average exercise price does not take into account

the shares issuable pursuant to outstanding restricted stock units, which have no exercise price.

(3) Includes 30,047 shares of our common stock issuable upon

exercise of outstanding options and 3,174 shares of our common stock issuable pursuant to outstanding restricted stock units.

(4) Includes 26,800 shares of our common stock issuable upon exercise of outstanding options and 320 shares of our common stock issuable

pursuant to outstanding restricted stock units.

Security Ownership of Certain Beneficial Owners

and Management

Beneficial ownership is determined in accordance

with the rules of the SEC and generally includes voting or investment power with respect to securities.

In accordance with SEC rules,

shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become

exercisable within 60 days of the date of the applicable table below are deemed beneficially owned by the holders of such options and

warrants and are deemed outstanding for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding

for the purpose of computing the percentage of ownership of any other person.

Subject to community property laws, where applicable, the

persons or entities named in the tables below have sole voting and investment power with respect to all shares of our common stock indicated

as beneficially owned by them.

The following table sets forth certain information,

as of March 31, 2025 with respect to the beneficial ownership of the outstanding common stock by:

● Each of our named executive officers and directors;

● Our directors and executive officers as a group;

● Holders of more than 5% of our common stock

Except as otherwise indicated, each of the stockholders

listed below has sole voting and investment power over the shares beneficially owned.

Name of Beneficial Owner (1)

Common Stock Beneficially Owned

Percentage of Common Stock (2)

Wenzhao Lu* (3)

David Jin, MD, PhD* (4)

Luisa Ingargiola* (6)

Tauzin II* (8)

Stilley III* (9)

Tevi Troy* (10)

Lourdes Felix* (11)

All officers and directors as a group (9 persons)

Shareholder owning 5% or more:

Vision Capital NY Inc.

* Officer and/or director of our company

(1) Except as otherwise indicated, the address of each beneficial

owner is c/o Avalon GloboCare Corp., 4400 Route 9 South, Suite 3100, Freehold, New Jersey 07728.

(2) Applicable percentage ownership is based on 1,651,667 shares of our common stock outstanding as of March 31, 2025, together with

securities exercisable or convertible into shares of our common stock within 60 days of March 31, 2025 for each stockholder.

ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.

Shares of common stock that are currently exercisable or exercisable within 60 days of March 31, 2025 are deemed to be beneficially

owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated

as outstanding for the purpose of computing the percentage ownership of any other person.

(3) Wenzhao Lu holds 238,928 shares of our common stock.

(4) David Jin holds (i) 103,000 shares of our common stock and (ii)

102,667 vested options to acquire 102,667 shares of our common stock.

(5) Meng Li holds (i) 34,334 shares of our common stock and (ii)

402,000 vested options to acquire 402,000 shares of our common stock.

(6) Represents 416,000 vested options to acquire 416,000 shares

of our common stock.

(7) Represents 102,665 vested options to acquire 102,665 shares

of our common stock.

(8) Wilbert J.

Tauzin II holds (i) 1,037 shares of our common stock and

(ii) 104,533 vested options to acquire 104,533 shares of our common stock.

(9) Represents 102,665 vested options to acquire 102,665 shares

of our common stock.

(10) Represents 102,665 vested options to acquire 102,665 shares

of our common stock.

(11) Represents 101,053 vested options to acquire 101,053 shares

of our common stock.

(12) Vision Capital NY Inc.

holds 100,000 shares of our common stock.

Vision Capital NY Inc.’s address is 600 Pine Hollow Road #16-5B, East Norwich, NY 11732.

The information required by this Item will be

set forth in our definitive proxy statement with respect to our 2026 annual meeting of stockholders to be filed not later than 120 days

after the end of the 2025 fiscal year, and is incorporated herein by reference.

CERTAIN RELATIONSHIPS AND RELATED

TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Other than compensation arrangements for our named

executive officers and directors, we describe below each transaction or series of similar transactions, since January 1, 2023 to which

we were a party or will be a party, in which:

● the amounts involved exceeded

or will exceed the lesser of (i) $120,000 or (ii) 1% of the average total assets of the Company at year end for the last two completed

fiscal years;

● any of our directors, executive

officers, promoters or holders of more than 5% of our capital stock, or any member of the immediate family of the foregoing persons,

had or will have a direct or indirect material interest.

Compensation arrangements for our named executive

officers and directors are described in the section entitled “Executive Compensation.”

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,

the years ended December 31, 2024 and 2023, the related party rental revenue amounted to $50,400 and has been included in real property

rental revenue on the accompanying consolidated statements of operations and comprehensive loss.

At December 31, 2024 and 2023, the related

party rent receivable totaled $0 and $124,500, respectively, which has been included in rent receivable on the accompanying consolidated

balance sheets.

Provided by Related Party

From 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 $63,644 and $86,528 for the years ended December 31, 2024 and 2023, respectively, which have been included

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

As of both December 31, 2024 and

2023, the accrued and unpaid services charge related to this director’s son amounted to $15,000, which have been included in accrued

professional fees on the accompanying consolidated balance sheets.

Accrued Liabilities and Other Payables –

Related Parties

In 2017, the Company acquired Beijing Genexosome

for a cash payment of $450,000.

As of both December 31, 2024 and 2023, the unpaid acquisition consideration of $100,000, was payable to

Yu Zhou, former director and former co-chief executive officer and 40% owner of Genexosome, and has been included in accrued liabilities

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

From time to time, Lab Services MSO paid shared

expense on behalf of the Company.

In addition, Lab Services MSO made a payment of $566,667 for equity method investment payable on behalf

of the Company in the year ended December 31, 2024.

As of December 31, 2024 and 2023, the balance due to Lab Services MSO amounted to

$632,916 and $72,746, respectively, which has been included in accrued liabilities and other payables — related parties on the accompanying

consolidated balance sheets.

As of December 31, 2024 and 2023, $0 and $33,712

of accrued and unpaid interest related to borrowings from Wenzhao Lu, the Company’s chairman of the Board of Directors, respectively,

have been included in accrued liabilities and other payables — related parties on the accompanying consolidated balance sheets.

Borrowings from Related Party

Line of Credit

On August 29, 2019, the Company entered into a

Line of Credit Agreement (the “Line of Credit Agreement”) providing the Company with a $20 million line of credit (the “Line

of Credit”) from Mr.

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

The Line of Credit allowed the Company to request

loans thereunder and to use the proceeds of such loans for working capital and operating expense purposes until the facility matured on

December 31, 2024.

The loans are unsecured and are not convertible into equity of the Company.

Loans drawn under the Line of Credit bear

interest at an annual rate of 5% and each individual loan is payable three years from the date of issuance.

The Company has a right to

draw down on the line of credit and not at the discretion of Mr.

Lu, the related party lender.

The Company may, at its option, prepay

any borrowings under the Line of Credit, in whole or in part at any time prior to maturity, without premium or penalty.

The Line of Credit

Agreement includes customary events of default.

If any such event of default occurs, Mr.

Lu may declare all outstanding loans under the

Line of Credit to be due and payable immediately.

In the years ended December 31, 2024 and 2023,

activity recorded for the Line of Credit is summarized in the following table:

Outstanding principal under the Line of Credit at January 1, 2023

Draw down from Line of Credit

Outstanding principal under the Line of Credit at December 31, 2023

Repayment of Line of Credit

Reclassification of Line of Credit to advance from related party

Outstanding principal under the Line of Credit at December 31, 2024

For the years ended December 31, 2024 and 2023,

the interest expense related to related party borrowing amounted to $42,445 and $33,712, respectively, and has been reflected as interest

expense — related party on the accompanying consolidated statements of operations and comprehensive loss.

As of December 31, 2024 and 2023, the related

accrued and unpaid interest for Line of Credit was $0 and $33,712, respectively, and has been included in accrued liabilities and other

payables — related parties on the accompanying consolidated balance sheets.

Membership Interest

Purchase Agreement

On November 17, 2023,

the Company entered into a Membership Interest Purchase Agreement (the “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 the Purchaser

and the Company at such time that the Purchaser desires to exercise the Option.

The Company received $3,108,106 and $485,714 from Wenzhao

Lu as of December 31, 2024 and 2023, respectively, which was recorded as advance from pending sale of noncontrolling interest –

related party on the accompanying consolidated balance sheets.

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

Policies and Procedures for Related Party Transactions

Our Board has adopted a policy that our executive

officers, directors, nominees for election as a director, beneficial owners of more than 5% of any class of our common stock, any members

of the immediate family of any of the foregoing persons and any firms, corporations or other entities in which any of the foregoing persons

is employed or is a partner or principal or in a similar position or in which such person has a 5% or greater beneficial ownership interest,

are not permitted to enter into a transaction with us without the prior consent of our Board acting through the Audit Committee or, in

certain circumstances, the Chairman of the Audit Committee.

Any request for us to enter into a transaction with a related party, in which

the amount involved exceeds $100,000 and such related party would have a direct or indirect interest must first be presented to our Audit

Committee, or in certain circumstances the Chairman of our Audit Committee, for review, consideration and approval.

In approving or rejecting

any such proposal, our Audit Committee, or the Chairman of our Audit Committee, is to consider the material facts of the transaction,

including, but not limited to, whether the transaction is on terms no less favorable than terms generally available to an unaffiliated

third party under the same or similar circumstances, the extent of the benefits to us, the availability of other sources of comparable

products or services and the extent of the related party’s interest in the transaction.

PRINCIPAL ACCOUNTING FEES AND SERVICES

M&K CPAS PLLC served as our independent auditors

for the year ended December 31, 2024.

Marcum LLP (“Marcum”) served as our independent auditors for the year ended December

Aggregate fees billed to the Company for professional

services rendered by M&K CPAS PLLC and Marcum LLP during the last two years were as follows:

Audit Fees (1)

Audit Related Fees (2)

All Other Fees (4)

(1) Consists of fees billed for professional services rendered for

the audit of our annual consolidated financial statements, review of our Annual Report on Form 10-K, and review of the interim consolidated

financial statements included in our Quarterly Reports on Form 10-Q, and services that are normally provided by our independent auditors

in connection with statutory and regulatory filings or engagements, including registration statements.

(2) Consists of fees billed for assurance and related services that

are reasonably related to the performance of the audit and or review of our consolidated financial statements and are not reported under

“Audit Fees”, such as audits and reviews in connection with the acquisition of Lab Services MSO.

(3) Consists of fees billed for professional services for tax compliance,

tax advice and tax planning.

(4) Consists of fees for products and services other than the services

reported above.

Pre-Approval Policy and Procedures

The current policy of the directors, acting

as the Audit Committee, is to approve the appointment of the principal auditing firm and any permissible audit-related services.

audit and audit related fees include fees for the annual audit of the financial statements and review of financial statements

included in Quarterly Reports on Form 10-Q.

Fees charged by the auditor were approved by the Board with engagement letters signed by

the Audit Committee Chairman.

The Audit Committee is responsible for the pre-approval

of audit and permitted non-audit services to be performed by the Company’s independent auditor.

The Audit Committee will, on an

annual basis, consider and, if appropriate, approve the provision of audit and non-audit services by the auditor.

Thereafter, the Audit

Committee will, as necessary, consider and, if appropriate, approve the provision of additional audit and non-audit services by the auditor

which are not encompassed by the Audit Committee’s annual pre-approval and are not prohibited by law.

The Audit Committee has delegated

to the Chair of the Audit Committee the authority to pre-approve, on a case-by-case basis, non-audit services to be performed by the auditor.

The Audit Committee has approved all audit and permitted non-audit services performed by the auditor for the year ended December 31, 2024.

The information required by this Item will be set forth in our definitive

proxy statement with respect to our 2026 annual meeting of stockholders to be filed not later than 120 days after the end of the 2025

fiscal year, and is incorporated herein by reference.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required by this Item will be set forth in our definitive

proxy statement with respect to our 2026 annual meeting of stockholders to be filed not later than 120 days after the end of the 2025

fiscal year, and is incorporated herein by reference.

EXHIBIT AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part

of this report:

(1) Financial Statements:

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 2025 and 2024

Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2025 and 2024

Consolidated Statements of Changes in Stockholders’ Equity for the years ended December 31, 2025 and 2024

Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024

Notes to Consolidated Financial Statements

The consolidated financial statements required

by this Item are included beginning at page F-1.

(1) Financial Statement Schedules:

All financial statement schedules have been omitted

because they are not applicable, not required or the information required is shown in the consolidated financial statements or the notes

EXHIBIT INDEX

Open Market Sale Agreement SM , dated as of December 13, 2019, by and between Avalon GloboCare Corp.

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Agreement and Plan of Merger, dated March 7, 2025, by and among Avalon GloboCare Corp., Nexus MergerSub Limited and YOOV Group Holding Limited (incorporated by reference to Exhibit 2.1 to the registrant’s Current Report on Form 8-K filed on March 10, 2025).

Agreement and Plan of Merger, dated December 12, 2025, by and among Avalon Globocare Corp., Avalon Quantum AI, LLC and RPM Interactive, Inc.

(incorporated by reference to Exhibit 2.1 to the registrant’s Current Report on Form 8-K filed with the SEC on December 15, 2025)

Amended and Restated Membership Interest Purchase Agreement dated February 18, 2026, dated February 18, 2026, between Avalon Globocare Corp.

and Wenzhao Lu (incorporated by reference to Exhibit 2.1 to the registrant’s Current Report on Form 8-K filed with the SEC on February 19, 2026)

Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K/A filed with the Securities and Exchange Commission on April 26, 2018) .

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1 to the Avalon Bylaws, as adopted and approved by the Avalon Board on March 7, 2025 (incorporated by reference to Exhibit 3.3 to the registrant’s Current Report on Form 8-K filed with the SEC on March 10, 2025).

Certificate of Amendment to the Series C Certificate of Designations, as filed on May 29, 2025, with the Department of State, Division of Corporations, of the State of Delaware (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the SEC on June 4, 2025)

Certificate of Amendment to the Series C Certificate of Designations, as filed on May 29, 2025, with the Department of State, Division of Corporations, of the State of Delaware (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed with the SEC on August 29, 2025)

Certificate of Designation of Series E Non-Voting Convertible Preferred Stock (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K filed with the SEC on December 15, 2025)

Form of Subscription Agreement by and between Avalon GloboCare Corp.

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and Emma Li Xu Qingbo dated August 5, 2022 (incorporated by reference to Exhibit 4.2 of the Current Report on Form 8-K filed with the Securities and Exchange Commission on August 8, 2022).

Promissory Note between the Company and Anthony Macaluso, dated July 3, 2025 (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on July 9, 2025)

Promissory Note between the Company and Lawrence Bruno, dated July 3, 2025 (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on July 9, 2025)

Warrants issued by the Company to Investor dated as of July 14, 2025 (incorporated by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed with the SEC on July 18, 2025)

Bridge Note, between the Company and Allen O Cage Jr., dated as of December 11, 2025 (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on December 15, 2025)

Promissory Note (incorporated by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed with the SEC on February 18, 2026)

Amendment to Unsecured Bridge Note dated December 11, 2025 (incorporated by reference to Exhibit 4.1 to the registrant’s Current Report on Form 8-K filed with the SEC on February 19, 2026)

Promissory Note dated February 19, 2026 (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on February 25, 2026)

Confessed Judgement Secured Promissory Note dated March 26, 2026

Share Exchange Agreement dated as of October 19, 2016 by and among Avalon Healthcare System, Inc., the shareholders of Avalon Healthcare System, Inc.

197 unchanged sentences

(incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 5, 2024).

Secured Promissory Note, dated June 5, 2024, between Avalon Globocare Corp.

Senior Secured Promissory Note, dated June 5, 2024, between Avalon Globocare Corp.

and Mast Hill Fund, L.P.

(incorporated by reference to

Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 5, 2024).

(incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed with the SEC on June 5, 2024).

First Warrant, dated June 5, 2024, between Avalon Globocare Corp.

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Form of Lock-Up Agreement (incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the SEC on March 10, 2025).

Securities Purchase Agreement, between the Company and Investor, dated as of June 4, 2025 (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on June 4, 2025)

Waiver, between the Company and Holder dated as of Mary 29, 2025 (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on June 4, 2025)

Definitive Agreement by and between the Company, Q&A, and Qi Diagnostics dated June 23, 2025 (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on June 26, 2025)

Securities Purchase Agreement by and between the Company and Investor, dated as of July 14, 2025 (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on July 18, 2025)

Registration Rights Agreement by and between the Company and Investor, dated as of July 14, 2025 (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on July 18, 2025)

Securities Purchase Agreement by and between the Company and Investor, dated as of July 21, 2025 (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on July 23, 2025)

Waiver by and between the Company and Investor, dated as of July 28, 2025 (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on July 29, 2025)

Securities Purchase Agreement, between the Company and Allen O Cage Jr., dated as of December 11, 2025 (incorporated by reference to Exhibit 10.2 to the registrant’s Current Report on Form 8-K filed with the SEC on December 15, 2025)

Amendment to Securities Purchase Agreement and Unsecured Bridge Note dated December 14, 2025, between the Company and Allen O Cage Jr.

(incorporated by reference to Exhibit 10.3 to the registrant’s Current Report on Form 8-K filed with the SEC on December 15, 2025)

Amendment No.

1 dated December 14, 2025 by and among Avalon Globocare Corp., Avalon Quantum AI, LLC and RPM Interactive, Inc (incorporated by reference to Exhibit 10.4 to the registrant’s Current Report on Form 8-K filed with the SEC on December 15, 2025)

Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on February 18, 2026)

Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on February 25, 2026)

Ingargiola Combined Company Executive Retention Agreement (incorporated by reference to Exhibit 10.111 to the registrant’s Registration Statement on Form S-4 filed with the SEC on June 9, 2025)

Wong Combined Company Executive Retention Agreement (incorporated by reference to Exhibit 10.112 to the registrant’s Registration Statement on Form S-4 filed with the SEC on June 9, 2025)

Mark Wong Combined Company Executive Retention Agreement (incorporated by reference to Exhibit 10.113 to the registrant’s Registration Statement on Form S-4 filed with the SEC on June 9, 2025)

Mutual Termination and Release Agreement, dated as of January 21, 2026, by and among Avalon Globocare Corp., Nexus MergerSub Limited and YOOV Group Holding Limited (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K filed with the SEC on January 22, 2026)

Business Loan and Security Agreement dated as of March 26, 2026

Insider Trading Policy.

List of Subsidiaries (incorporated by reference to Exhibit 21.1 of the Registration Statement on Form S-1/A filed with the Securities and Exchange Commission on July 20, 2018) .

Consent of Independent Registered Public Accounting

(incorporated by reference to Exhibit 19.1 to the Registrant’s Annual Report on Form 10-K filed with the SEC on March 31, 2025)

List of Subsidiaries

Consent of Independent Registered Public Accounting Firm.

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Furnished herewith.

† Management contract or compensatory

plan or arrangement.

Management contract or compensatory plan or arrangement.

The schedules (and similar attachments) to this exhibit have been omitted from this filing pursuant to Item 601(b)(10) of Regulation S-K.

The Company agrees to furnish a supplemental copy of any omitted schedule (or similar attachment) to the Securities and Exchange Commission upon request.

FORM 10-K SUMMARY

4 unchanged sentences

March 30, 2026

Chief Executive Officer and President

Interim Chief Executive Officer and President

(Principal Executive Officer)

6 unchanged sentences

KNOW ALL PERSONS BY THESE PRESENTS, that each

individual whose signature appears below constitutes and appoints David K.

Jin and Luisa Ingargiola, and each of them individually, his

or her true and lawful attorney-in-fact, with full power of substitution and re-substitution for him or her and in his or her name, place

individual whose signature appears below constitutes and appoints Meng Li and Luisa Ingargiola, and each of them individually, his or

her true and lawful attorney-in-fact, with full power of substitution and re-substitution for him or her and in his or her name, place

and stead, in any and all capacities to sign any and all amendments to the Annual Report on Form 10-K and to file the same, with all exhibits

1 unchanged sentence

that said attorney-in-fact or his substitute may lawfully do or cause to be done by virtue thereof.

In accordance with the Exchange Act, this report

has been signed below by the following persons on March 31, 2025, on behalf of the registrant and in the capacities indicated.

Chief Executive Officer, President and Director

Pursuant to the requirements of the Securities

Act of 1934, this Annual Report on Form 10-K has been signed below by the following persons on behalf of the registrant and in the capacities

and on the dates indicated.

Interim Chief Executive Officer

March 30, 2026

(Principal Executive Officer)

1 unchanged sentence

Chief Financial Officer

March 30, 2026

Luisa Ingargiola

2 unchanged sentences

Chairman of the Board of Directors

March 30, 2026

/s/ Steven A.

March 30, 2026

/s/ Lourdes Felix

March 30, 2026

Lourdes Felix

/s/ Wilbert J.

/s/ William B.

/s/ Tevi Troy

/s/ Michael Mathews

March 30, 2026

Michael Mathews

AVALON GLOBOCARE CORP.

3 unchanged sentences

Report of Independent Registered Public Accounting Firm (PCAOB No.

Consolidated Financial Statements:

4 unchanged sentences

Notes to Consolidated Financial Statements F-7

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

To the Board of Directors and Stockholders of Avalon GloboCare

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

To the Board of Directors and

Stockholders of Avalon GloboCare Corp.

Opinion on the Financial Statements

1 unchanged sentence

balance sheets of Avalon GloboCare Corp.

(the Company) as of December 31, 2024, and the related consolidated statements of operations

and comprehensive loss, changes in equity, and cash flows for the year ended December 31, 2024, and the related notes (collectively referred

to as the financial statements).

We have audited the reverse stock split presentation for year-end December 31, 2023.

We have audited

note 20 in regards to the presentation of segment information for the year-ended December 31, 2023.

In our opinion, the financial statements

present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations

and its cash flows for the year ended December 31, 2024, in conformity with accounting principles generally accepted in the United States

The financial statements of Avalon GloboCare Corp., as of December 31, 2023, were audited by other auditors whose report dated

April 15, 2024, expressed an unqualified opinion on those financial statements.

(the Company) as of December 31, 2025 and 2024, and the related consolidated statements of operations

and comprehensive loss, changes in equity, and cash flows for each of the years in the two-year period ended December 31, 2025, and the

related notes (collectively referred to as the financial statements).

In our opinion, the financial statements present fairly, in all

material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash

flows for each of the years in the two-year period ended December 31, 2025, in conformity with accounting principles generally accepted

in the United States of America.

Going Concern

41 unchanged sentences

on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill and Intangible Assets

As discussed in the notes to the financial statements,

the Company has an equity method investment in an unconsolidated subsidiary.

Auditing management’s valuation of the carrying value of the

investment involves significant judgements and estimates to determine the proper value.

To evaluate the appropriateness of the valuation of the investment,

we evaluated management’s significant judgments and estimates to determine that the investment is properly valued.

the Company completed a business combination during the year, which required the assets and liabilities assumed to be measured at fair

value on the date of the acquisition.

The acquisition resulted in the capitalization of goodwill and intangible assets.

Auditing management’s valuation of the initial

values of goodwill and intangible assets involves significant judgements and estimates to determine the proper value.

To evaluate the appropriateness of the valuation

of the goodwill and intangible assets, we evaluated management’s significant judgments and estimates to determine that the goodwill

and intangible assets are properly valued.

/s/ M&K CPAS, PLLC

We have served as the Company’s auditor since 2024.

We have served as the Company’s auditor

The Woodlands, TX

March 30, 2026

REPORT OF INDEPENDENT

REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Directors of

AVALON GLOBOCARE CORP.

Opinion on the Financial Statements

We have audited,

before the effects of the adjustments to retrospectively apply the reverse stock split described in Note 3, and before the effects of

the retrospective adjustment for the adoption of ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures

(“ASU 2023-07”) discussed in Note 3 and Note 20 to the consolidated financial statements, the accompanying consolidated balance

sheet of Avalon GloboCare Corp.

(the “Company”) as of December 31, 2023, and the related

consolidated statements of operations and comprehensive loss, changes in equity and cash flows the year ended December 31, 2023, and the

related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements, before the

effects of the adjustments to retrospectively apply the reverse stock split described in Note 3, and before the effects of the retrospective

adjustment for the adoption of ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures (“ASU

2023-07”) discussed in Note 3 and Note 20 to the consolidated financial statements, present fairly, in all material respects, the

financial position of the Company as of December 31, 2023, and the results of its operations and its cash flows for the year ended December

31, 2023, in conformity with accounting principles generally accepted in the United States of America.

We were not engaged to audit, review, or apply

any procedures to the retrospective reverse stock split described in Note 3, or retrospective adjustment for the adoption of ASU 2023-07

discussed in Note 3 and Note 20 to the consolidated financial statements, and accordingly, we do not express an opinion or any other form

of assurance about whether such retrospective adjustments are appropriate and have been properly applied.

Those retrospective adjustments

were audited by other auditors.

Explanatory Paragraph – Going Concern

The accompanying financial statements have been

prepared assuming that the Company will continue as a going concern.

As more fully described in Note 2, the Company has a significant

working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its

These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in

regard tao these matters are also described in Note 2.

The financial statements do not include any adjustments that might result from

the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility

of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audit.

are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are

required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and

regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the

standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal

control over financial reporting.

Accordingly, we express no such opinion.

Our audit included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audit provides a reasonable basis for our opinion.

/s/ Marcum llp

We have served as the Company’s auditor from 2019 to 2024.

April 15, 2024

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

CONSOLIDATED BALANCE

CONSOLIDATED BALANCE SHEETS

CURRENT ASSETS:

Rent receivable

Receivable from sale of equity method investment

Prepaid expense and other current assets

Current assets of discontinued operations

Total Current Assets

2 unchanged sentences

Property and equipment, net

Investment in real estate, net

Intangible assets, net

Equity method investments, net

Other non-current assets

Non-current assets of discontinued operations

Total Non-current Assets

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Advance from pending sale of noncontrolling interest - related party

Equity method investment payable

Derivative liability

Note payable, net

Stock subscription liability

Bridge loan payable, net

Convertible note payable, net

Current liabilities of discontinued operations

Total Current Liabilities

NON-CURRENT LIABILITIES:

Operating lease obligation - noncurrent portion

Note payable, net - noncurrent portion

Loan payable - related party

Non-current liabilities of discontinued operations

Total Non-current Liabilities

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10,000,000 shares authorized;

Series A Convertible Preferred Stock, 9,000 shares issued and outstanding at December 31, 2024 and 2023 Liquidation preference $ 9 million at December 31, 2024

Series B Convertible Preferred Stock, 11,000 shares issued and outstanding at December 31, 2024 and 2023 Liquidation preference $ 11 million at December 31, 2024

Series C Convertible Preferred Stock, 3,500 shares issued and outstanding at December 31, 2024 Liquidation preference $ 3.5 million at December 31, 2024

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

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

Series C Convertible Preferred Stock, 3,800 and 3,500 shares issued and outstanding at December 31, 2025 and 2024, respectively;

Liquidation preference $ 3.8 million at December 31, 2025

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

Liquidation preference $ 5 million at December 31, 2025

Series E Convertible Preferred Stock, 19,500 and 0 shares issued and outstanding at December 31, 2025 and 2024, respectively;

Liquidation preference $ 19.5 million at December 31, 2025

Common stock, $ 0.0001 par value;

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For the Years Ended

REAL PROPERTY RENTAL REVENUE

REAL PROPERTY OPERATING EXPENSES

REAL PROPERTY OPERATING INCOME

LOSS FROM EQUITY METHOD INVESTMENT - LAB SERVICES MSO

INCOME (LOSS) FROM EQUITY METHOD INVESTMENT - LAB SERVICES MSO

$ ( 846,588 )

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( 1,136,412 )

( 1,291,814 )

Interest expense - other

2 unchanged sentences

Change in fair value of derivative liability

Impairment of equity method investment - Epicon

Gain on debts extinguishment

Other expense

Loss on extinguishment of debt

( 9,076,587 )

Other income (expense)

Total Other Expense, net

( 9,927,514 )

( 2,198,354 )

LOSS BEFORE INCOME TAXES

1 unchanged sentence

( 7,039,604 )

NET LOSS FROM CONTINUING OPERATIONS

( 17,518,873 )

( 7,039,604 )

NET LOSS FROM DISCONTINUED OPERATIONS

$ ( 18,260,976 )

$ ( 7,903,394 )

NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

NET LOSS AFTER NONCONTROLLING INTEREST

( 18,260,976 )

( 7,903,394 )

DEEMED CONTRIBUTION ON EXCHANGE OF EQUITY INSTRUMENTS

NET LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

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COMMON SHAREHOLDERS:

Basic and diluted, continuing operations

Basic and diluted, discontinued operations

Basic and diluted

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$ ( 7,903,394 )

OTHER COMPREHENSIVE LOSS

OTHER COMPREHENSIVE LOSS FROM CONTINUED OPERATIONS

Unrealized foreign currency translation loss

8 unchanged sentences

See accompanying notes to the consolidated financial statements.

GLOBOCARE CORP.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

STATEMENTS OF CHANGES IN EQUITY

the Years Ended December 31, 2024 and 2023

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Years Ended December 31, 2025 and 2024

Avalon GloboCare Corp.

Stockholders' Equity

Preferred Stock Series B

Preferred Stock Series C

Preferred Stock Common Stock Treasury Stock Accumulated

Number of Number of Number of Number of Additional Paid-in Number of Accumulated Statutory Other

Comprehensive Noncontrolling Total

Shares Amount Shares Amount Shares Amount Shares Amount Capital Shares Amount Deficit Reserve Loss Interest Equity

Series A Preferred Stock

Series B Preferred Stock

Series C Preferred Stock

Series D Preferred Stock

Series E Preferred Stock

Treasury Stock

Comprehensive

Noncontrolling

Balance, January 1, 2024

To correct shares issued for adjustments for 1:10 reverse split - - - - - - 3,333 - - - - - - - - -

Issuance of Series B Convertible Preferred Stock for equity method investment - - 11,000 11,000,000 - - - - - - - - - - - 11,000,000

$ ( 522,500 )

$ ( 79,769,731 )

$ ( 231,727 )

Issuance of common stock as convertible note payable commitment fee

Sale of common stock, net

Issuance of common stock upon cashless exercise of stock warrants

Issuance of common stock for services

Reclassification of derivative liability to equity

Sale of Series C Convertible Preferred Stock

Issuance of pre-funded warrants

Stock-based compensation

Shares issued for adjustments for 1:15 reverse split

Foreign currency translation adjustment

Net loss for the year

( 7,903,394 )

Balance, December 31, 2024

Issuance of common stock as convertible note payable commitment fee - - - - - - 33,800 3 320,543 - - - - - - 320,546

Sale of common stock, net - - - - - - 281,843 28 2,544,283 - - - - - - 2,544,311

( 87,673,125 )

Issuance of common stock upon cashless exercise of stock warrants

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Reclassification of derivative liability to equity

Sale of Series C Convertible Preferred Stock - - - - 3,500 3,500,000 - - - - - - - - - 3,500,000

Issuance of pre-funded warrants - - - - - - - - 688,794 - - - - - - 688,794

Stock-based compensation - - - - - - - - 51,159 - - - - - - 51,159

Shares issued for adjustments for 1:15 reverse split - - - - - - 206,033 21 ( 21 ) - - - - - - -

Series D Convertible Preferred Stock issued in exchange of Series A Convertible Preferred Stock

( 9,000,000 )

Series B Convertible Preferred Stock extinguished related to sale of equity method investment

( 11,000,000 )

( 8,651,305 )

Stock-based compensation adjustment

Conversion of convertible note payable and accrued interest into common stock

Loss on extinguishment of debt recognized

Sale of Series C Convertible Preferred Stock, net

Series E Convertible Preferred Stock issued for acquisition

Sale of common stock and warrants, net

Issuance of common stock as convertible note payable commitment fee

Foreign currency translation adjustment

Net loss for the year

( 18,260,976 )

Balance, December 31, 2025

$ ( 522,500 )

$ ( 105,934,101 )

$ ( 241,402 )

See accompanying notes to the consolidated financial statements.

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CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss from continuing operations

$ ( 17,518,873 )

$ ( 7,039,604 )

Adjustments to reconcile net loss to

net cash used in operating activities:

Change in straight-line rent receivable

Adjustments to reconcile net loss to net cash used in

operating activities:

Depreciation and amortization of intangible assets

Amortization of operating lease right-of-use asset

Stock-based compensation and service expense

Loss from equity method investments

(Income) loss from equity method investment

Distribution of earnings from equity method investment

Impairment of equity method investment - Epicon

Amortization of debt issuance costs and debt discount

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Debt modification charge

Gain on debts extinguishment

Loss on extinguishment of debt

Changes in operating assets and liabilities:

Rent receivable

Security deposit

Deferred leasing costs

Prepaid expense and other assets

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Operating lease obligation

NET CASH USED IN OPERATING ACTIVITIES

NET CASH USED IN OPERATING ACTIVITIES FROM CONTINUING OPERATIONS

( 4,580,620 )

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CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

Payment for equity interest purchase

NET CASH USED IN INVESTING ACTIVITIES

Cash acquired on acquisition

Proceeds from sale of equity method investment

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES FROM CONTINUING OPERATIONS

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from loan payable - related party

Repayments of loan payable - related party

Proceeds from issuance of convertible debts and warrants

Payments of convertible debts issuance costs

Repayments of convertible debts

Proceeds from issuance of convertible debt and warrants

Proceeds from issuance of convertible debt

Payments of convertible debt issuance costs

Repayments of convertible debt

( 3,388,222 )

Proceeds from issuance of balloon promissory note

Payments of balloon promissory note issuance costs

Repayments of loan payable - related party

Proceeds from stock subscription liability

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 bridge loan

Proceeds from issuance of common stock and warrants

Payments of offering costs

Proceeds from equity offering

Disbursements for equity offering costs

Proceeds from issuance of convertible preferred stock

NET CASH PROVIDED BY FINANCING ACTIVITIES

EFFECT OF EXCHANGE RATE ON CASH

NET INCREASE (DECREASE) IN CASH

NET CASH PROVIDED BY FINANCING ACTIVITIES FROM CONTINUING OPERATIONS

DISCONTINUED OPERATIONS

Net cash used in operating activities from discontinued operations

Net cash used in investing activities from discontinued operations

NET CASH FLOWS USED IN DISCONTINUED OPERATIONS

EFFECT OF EXCHANGE RATE ON CASH - CONTINUING OPERATIONS

NET (DECREASE) INCREASE IN CASH

( 2,549,091 )

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NON-CASH INVESTING AND FINANCING ACTIVITIES:

Common stock issued for future services

Common stock issued for accrued liabilities

Reclassification of advances for equity interest purchase to equity method investment

Series B Convertible Preferred Stock issued related to equity method investment

Accrued purchase price related to equity method investment

Warrants issued as convertible notes payable finder’s fee

Warrants issued with convertible notes payable recorded as debt discount

Common stock issued as convertible notes payable commitment fee

Deferred financing costs in accrued liabilities

Receivable related to sale of equity method investment

Related party payable extinguished upon sale of equity method investment

Series B Convertible Preferred Stock extinguished related to sale of equity method investment

Series D Convertible Preferred Stock issued in exchange of Series A Convertible Preferred Stock

Warrants issued as convertible note payable finder's fee

Warrants issued with convertible note payable recorded as debt discount

Common stock issued as convertible note payable commitment fee

Equity method investment payable paid by a related party

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Settlement of derivative liability

Reclassification of related party loan payable and accrued expenses to advance from related party

Issuance of common stock upon cashless exercise of stock warrants

Initial ROU asset and lease liability

Conversion of convertible note payable and accrued interest into common stock

Deferred financing costs in accrued liabilities

Legal fees recorded to receivable from sale of equity method investment

Reclassification of related party loan payable and accrued expenses to advance from related party

Shares issued for adjustments for 1:15 reverse split

Bridge loan issuance costs in accrued liabilities

Common stock issued as convertible note payable commitment fee included in accrued liabilities

See accompanying notes to the consolidated financial statements.

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

The Company is a commercial-stage company dedicated to developing and

delivering precision diagnostic consumer products.

The Company is currently marketing the Keto Air breathalyzer device and plans to develop

additional diagnostic uses of the breathalyzer technology.

The Company also provided laboratory services in 2024 and 2023, offering a

broad portfolio of diagnostic tests, including drug testing, toxicology, and a broad array of test services, from general bloodwork to

anatomic pathology, and urine toxicology.

The Company is a technology-focused company developing

and acquiring innovative artificial intelligence platforms.

Through its AI-driven subsidiary, the Company is advancing next-generation

AI systems, including automated video generation, enterprise documentation, and workflow automation solutions.

The Company is also expanding

its intellectual property portfolio in cellular therapy and generative AI publishing and software.

In addition, the Company is marketing

the KetoAir™ breathalyzer device, which is registered with the U.S.

Food and Drug Administration as a Class I medical device, and

plans to pursue additional diagnostic applications for the technology.

In addition, the Company owned and operated commercial real estate

at its headquarters in Freehold, NJ through February 2026.

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

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building is 98.5 %.

On July 18, 2018, the Company formed a wholly

owned subsidiary, Avactis Biosciences Inc.

(“Avactis”), a Nevada corporation, which is a patent holding company.

on April 6, 2022, the Company owns 60 % of Avactis and Arbele Biotherapeutics Limited (“Arbele Biotherapeutics”) owns 40 % of

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.

Currently, Avactis and Avactis Nanjing

are dormant and are in process of being dissolved.

On February 18, 2026, the Company sold 100 % of Avalon RT 9 to Wenzhao Lu, the Company’s chairman of the

Board of Directors.

On October 14, 2022, the Company formed a wholly

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On February 9, 2023, Avalon Lab purchased 40 %

40 % of the issued and outstanding equity interests of Laboratory Services MSO, LLC, a private limited company formed under the laws of

the State of Delaware on September 6, 2019 (“Lab Services MSO”), and its subsidiaries.

of the issued and outstanding equity interests of Laboratory Services MSO, LLC, a private limited company formed under the laws of the

State of Delaware on September 6, 2019 (“Lab Services MSO”), and its subsidiaries.

Lab Services MSO, through its subsidiaries,

is engaged in providing laboratory testing services.

During 2025, to preserve cash, the Company entered into discussions with Lab Services

MSO for the potential redemption of our investment and on February 26, 2025, Lab Services MSO redeemed the 40 % equity interest in Lab

Services MSO held by Avalon Lab.

See Note 22 – Subsequent Events - Redemption Agreement.

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

Distribution is engaged in distribution of KetoAir device.

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

with Lab Services MSO for the potential redemption of our investment and on February 26, 2025, Lab Services MSO redeemed the 40 %

equity interest in Lab Services MSO held by Avalon Lab.

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

On May 1, 2024, the Company formed a wholly owned

subsidiary, Q&A Distribution LLC (“Q&A Distribution”), a Texas company.

Q&A Distribution is engaged in distribution

of KetoAir device.

On February 21, 2025, the Company formed a wholly

owned subsidiary, Nexus MergerSub Limited (“Nexus”), a British Virgin Islands (“BIV”) company.

There was no activity

for the subsidiary since its incorporation through December 31, 2025.

On December 5, 2025, the Company formed a wholly

owned subsidiary, Avalon Quantum AI, LLC (“Avalon Quantum AI”), a Nevada company.

On December 12, 2025, the Company acquired RPM

Interactive, Inc., a Nevada corporation (“RPM”), in accordance with the terms of the Agreement and Plan of Merger, dated December

12, 2025, as amended by Amendment No.

1 dated December 14, 2025 (as amended, the “Merger Agreement”), by and among the Company,

Avalon Quantum AI, LLC, a Nevada limited liability company and a wholly owned subsidiary of the Company (the “Merger Sub”),

Pursuant to the Merger Agreement, RPM merged with and into the Merger Sub, pursuant to which the Merger Sub was the surviving

entity and became a wholly owned subsidiary of the Company (the “Merger”).

a result of the above Merger transaction, effective December 12, 2025, Avalon Quantum AI is advancing next-generation AI systems, including

automated video generation, enterprise documentation, and workflow automation solutions.

AVALON GLOBOCARE CORP.

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are included in these consolidated financial statements as of December 31, 2025 are as follows:

Name of Subsidiary Place and date of

Incorporation Percentage of

Ownership Principal Activities

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

Avalon Healthcare System, Inc.

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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

February 7, 2017 100 % held by ALBT Owned and operated an income-producing real property and held and managed the corporate headquarters through February 2026

Avalon (Shanghai) Healthcare Technology Co., Ltd.

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

Avactis Biosciences Inc.

(“Avactis”) Nevada

July 18, 2018 60 % held by ALBT Dormant, is in process of being dissolved

Avactis Nanjing Biosciences Ltd.

(“Avactis Nanjing”) PRC

May 8, 2020 100 % held by Avactis Dormant, is in process of being dissolved

Avalon Laboratory Services, Inc.

(“Avalon Lab”) Delaware

October 14, 2022 100 % held by ALBT Laboratory holding company with a 40% membership interest in Lab Services MSO (1)

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

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

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

(1) 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.

Nexus MergerSub Limited (“Nexus”) BVI

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

Avalon Quantum AI, LLC (“Avalon Quantum AI”) Nevada

December 5, 2025 100 % held by ALBT Advanced Agentic AI systems, including automated video generation and workflow automation solutions."

2 – BASIS OF PRESENTATION AND GOING CONCERN CONDITION

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in consolidation.

As of December 31, 2025, the Company determined

that certain assets that have been disposed of in February 2026 met the criteria for discontinued operations presentation.

For all periods

presented, the operating results associated with the assets disposed of have been reclassified into net loss from discontinued operations

in the Consolidated Statements of Operations and Comprehensive Loss.

The associated assets and liabilities have been reflected as current

and long-term assets and liabilities of discontinued operations in the Consolidated Balance Sheets, and the cash flows from the Company’s

discontinued operations are presented in the Consolidated Statements of Cash Flows for all periods presented.

Certain prior period balances related to the Company's

reportable segments and discontinued operations have been reclassified to conform to the current presentation in the financial statements

and accompanying notes.

The notes to the Consolidated Financial Statements are presented on a continuing operations basis unless otherwise

Refer to Note 7 Discontinued Operations and Disposals for additional information on the Company's discontinued operations.

AVALON GLOBOCARE CORP.

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Going Concern

The Company is a commercial-stage company dedicated to developing and

delivering precision diagnostic consumer products.

The Company is currently marketing the Keto Air breathalyzer device and plans to develop

additional diagnostic uses of the breathalyzer technology.

In addition, the Company owns commercial real estate that houses its headquarters

in Freehold, New Jersey.

These consolidated financial statements have been prepared assuming that the Company will continue as a going

concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of

These consolidated financial statements have been

prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets

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

As reflected in the accompanying consolidated

financial statements, the Company had a working capital deficit of approximately $ 10,646,000 at December 31, 2024 and had incurred recurring

net losses and generated negative cash flow from operating activities of approximately $ 7,903,000 and $ 4,969,000 for the year ended December

31, 2024, respectively.

financial statements, the Company had a working capital deficit of approximately $ 12,651,000 at December 31, 2025 and had incurred

recurring net losses from continuing operations and generated negative cash flow from operating activities of continuing operations of

approximately $ 17,519,000 and $ 4,581,000 for the year ended December 31, 2025, respectively.

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 and obtaining additional financing to fund future obligations and pay liabilities arising from normal business operations.

In addition, the current cash balance cannot be projected to cover the operating expenses for the next twelve months from the release

date of this report.

These matters raise substantial doubt about the Company’s ability to continue as a going concern.

of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital, implement its business

plan, and generate significant revenue.

There are no assurances that the Company will be successful in its efforts to generate significant

revenue, maintain sufficient cash balance or report profitable operations or to continue as a going concern.

The Company plans on raising

capital through the sale of equity to implement its business plan.

However, there is no assurance these plans will be realized and that

any additional financings will be available to the Company on satisfactory terms and conditions, if any.

The accompanying consolidated financial statements

do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification

its continued growth is dependent upon the continuation of generating revenue for selling of Keto Air, generating revenue from advanced

Agentic AI systems, including automated video generation and workflow automation, and obtaining additional financing to fund future obligations

and pay liabilities arising from normal business operations.

In addition, the current cash balance cannot be projected to cover the operating

expenses for the next twelve months from the release date of this report.

These matters raise substantial doubt about the Company’s

ability to continue as a going concern.

The ability of the Company to continue as a going concern is dependent on the Company’s

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

There are no assurances that the Company

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

to continue as a going concern.

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

there is no assurance these plans will be realized and that any additional financings will be available to the Company on satisfactory

terms and conditions, if any.

The accompanying consolidated financial statements do

not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification

of liabilities that may result should the Company be unable to continue as a going concern.

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Use of Estimates

The preparation

of consolidated financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the

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

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

Changes in these estimates and assumptions may have a material

impact on the consolidated financial statements and accompanying notes.

The preparation of consolidated financial statements

in conformity with U.S.

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

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

during the reporting period.

Changes in these estimates and assumptions may have a material impact on the consolidated financial statements

and accompanying notes.

Making estimates requires management to exercise significant judgment.

It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the

date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or

more future confirming events.

Accordingly, the actual results could differ significantly from those estimates.

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.

the actual results could differ significantly from those estimates.

Significant estimates during the years ended December

31, 2024 and 2023 include the useful life of investment in real estate and intangible assets, the assumptions used in assessing impairment

of long-term assets, the valuation of deferred tax assets and the associated valuation allowances, the valuation of stock-based compensation,

the assumptions used to determine fair value of warrants and embedded conversion features of convertible note payable, and the fair value

of the consideration given and assets acquired in the purchase of 40 % of Lab Services MSO.

31, 2025 and 2024 include the useful life of intangible assets, the assumptions used in assessing impairment of long-term assets, the

allowance for credit loss, the valuation of deferred tax assets and the associated valuation allowances, the valuation of stock-based

compensation, the valuation of Series D convertible preferred stock (“Series D Preferred Stock”), the fair value of the consideration

given in the purchase of RPM, the fair value of assets acquired and liabilities assumed in acquisition, and the assumptions used to determine

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

Cash and Cash Equivalents

At December 31, 2025 and 2024, the Company’s

cash balances by geographic area were as follows:

December 31, 2025

December 31, 2024

United States

For purposes of the consolidated statements of

cash flows, the Company considers all highly liquid instruments with a maturity of three months or less when purchased and money market

accounts to be cash equivalents.

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

AVALON GLOBOCARE CORP.

8 unchanged sentences

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

● 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.

● 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.

The fair value of the Company’s assets and

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activity of derivative liability measured at fair value for the years ended December 31, 2025 and 2024:

Significant Unobservable Inputs

Balance of derivative liability as of January 1, 2024

Initial fair value of derivative liability attributable to warrants issuance with May, July, and October 2023 fund raises

Gain from change in the fair value of derivative liability

Balance of derivative liability as of December 31, 2023

Initial fair value of derivative liability attributable to warrants issuance with March and June 2024 fund raises

2 unchanged sentences

Balance of derivative liability as of December 31, 2024

Initial fair value of derivative liability attributable to Second Warrant issuance with June 2024 fund raise (See Note 11)

Gain from change in the fair value of derivative liability

Reclassification of additional paid-in capital upon conversion

Balance of derivative liability as of December 31, 2025

and liabilities measured at fair value on a nonrecurring basis.

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on the accompanying consolidated statements of operations and comprehensive loss.

There is no comparative impairment for the year ended

December 31, 2025 since the laboratory equipment was fully impaired at December 31, 2024.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Instruments and Fair Value Measurements (continued)

method investment in Epicon Biotech Co., Ltd.

The factors used to determine fair value are subject to management’s judgment

and expertise and include, but are not limited to, the investee’s series of operating losses and the joint venture partner unable

to obtain funds to commence operations.

These assumptions represent Level 3 inputs.

Impairment of equity method investment in Epicon Biotech

for the year ended December 31, 2023 was $ 454,679 .

There is no comparative impairment for the year ended December 31, 2024 since

the investment was fully impaired at December 31, 2023.

method investment in Laboratory Services MSO, LLC The factors used to determine

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Impairment of equity

method investment in Laboratory Services MSO, LLC for the years ended December 31, 2024 and 2023 was $ 259,579 and $ 9,196,682 , respectively,

which have been included in loss from equity method investment – Lab Services MSO on the accompanying consolidated statements of

operations and comprehensive loss.

method investment in Laboratory Services MSO, LLC for the year ended December 31, 2024 was $ 259,579 , which have been included in loss

from equity method investment – Lab Services MSO on the accompanying consolidated statements of operations and comprehensive loss.

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

5 unchanged sentences

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

Cash and Cash Equivalents

At December 31, 2024 and 2023, the Company’s

cash balances by geographic area were as follows:

December 31, 2024

December 31, 2023

United States

For purposes of the consolidated statements of

cash flows, the Company considers all highly liquid instruments with a maturity of three months or less when purchased and money market

accounts to be cash equivalents.

The Company had no cash equivalents at December 31, 2024 and 2023.

Credit Risk and Uncertainties

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.

The Company has not experienced

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

At December 31, 2024, the Company’s

cash balances in United States bank accounts had approximately $ 2,413,000 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.

Rent Receivable and Reserve for Credit

Rent receivable

is presented net of reserve for credit losses.

Rent receivable balance consists of base rents, tenant reimbursements and receivables arising

from straight-lining of rents represent amounts accrued and unpaid from tenants in accordance with the terms of the respective leases,

subject to the Company’s revenue recognition policy.

A reverse for the uncollectible portion of rent receivable is determined based

upon an analysis of the tenant’s payment history, the financial condition of the tenant, business conditions in the industry in

which the tenant operates and economic conditions in Freehold, New Jersey in which the property is located.

believes that the rent receivable is fully collectable.

Therefore, no material reverse for credit losses is deemed to be required on its

rent receivable at December 31, 2024 and 2023.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (continued)

The 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 .

manages this credit risk by concentrating its cash balances in high quality financial institutions and by periodically evaluating the

credit quality of the primary financial institutions holding such deposits.

The Company has not experienced any losses in such bank accounts

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

At December 31, 2025, there were no balances in excess of the

federally-insured limits.

Deferred Offering Costs

2 unchanged sentences

equity upon completion of the equity offering.

As of December 31, 2024 and 2023, deferred offering costs amounted to $ 0 and $ 175,136 ,

respectively, which were included in prepaid expense and other current assets.

Deferred Leasing Costs

Costs incurred

to obtain tenant leases are amortized using the straight-line method over the term of the related lease agreement.

Such costs include

lease incentives and leasing commissions.

If the lease is terminated early, the remaining unamortized deferred leasing cost is written

As of December 31, 2025 and 2024, deferred offering costs amounted to $ 84,652 and $0 , respectively,

which were included in prepaid expense and other current assets.

Property and Equipment

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reflect the fact that their recorded value may not be recoverable.

Investment In Real

Estate and Depreciation

Investment in real estate is carried at cost less

accumulated depreciation, and consists of building and improvement.

The Company depreciates real estate building and improvement on a

straight-line basis over estimated useful life.

Expenditures for ordinary repair and maintenance costs are charged to expense as incurred.

Expenditure for improvements, renovations, and replacements of real estate asset is capitalized and depreciated over its estimated useful

life if the expenditure qualifies as betterment.

Impairment of Long-lived Assets

In accordance with ASC Topic 360, the Company

reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may

not be fully recoverable, or at least annually.

The Company recognizes an impairment loss when the sum of expected undiscounted future

cash flows is less than the carrying amount of the asset.

The amount of impairment is measured as the difference between the asset’s

estimated fair value and its book value.

year ended December 31, 2024, the Company incurred impairment charges in operations of $ 111,033 on its laboratory equipment.

The valuation

of the laboratory equipment, and the amount of the impairment charge, were based on impairment assessment conducted on the equipment at

December 31, 2024.

Intangible Assets

Intangible assets consist of goodwill and developed

technology and trade name.

Goodwill represents the excess of the purchase price paid over the fair value of net assets acquired in the

business acquisition incurred on December 12, 2025.

Goodwill is not amortized, but is tested for impairment at December 31, 2025.

technology and trade name are being amortized on a straight-line method over the estimated useful life of 1 year.

Investment in Unconsolidated

9 unchanged sentences

Impairment of

equity method investment amounted to $ 259,579 and $ 9,651,361 for the years ended December 31, 2024 and 2023, respectively.

for discussion of equity method investments.

equity method investment amounted to $ 259,579 for the year ended December 31, 2024.

See Note 9 for discussion of equity method investments.

The Company classifies distributions received

10 unchanged sentences

POLICIES (continued)

Deferred Rental Income

Deferred rental income represents rental income

collected but not earned as of the reporting date.

The Company defers the revenue related to lease payments received from tenants in advance

of their due dates.

As of December 31, 2024 and 2023, deferred rental income totaled $ 38,346 and $ 11,429 , respectively, which were included

in accrued liabilities and other payables on the accompanying consolidated balance sheets.

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 consolidated balance sheets .

Impairment of Long-lived Assets

In accordance with ASC Topic 360, the Company

reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may

not be fully recoverable, or at least annually.

The Company recognizes an impairment loss when the sum of expected undiscounted future

cash flows is less than the carrying amount of the asset.

The amount of impairment is measured as the difference between the asset’s

estimated fair value and its book value.

year ended December 31, 2024, the Company incurred impairment charges in operations of $ 111,033 on its laboratory equipment.

valuation of the laboratory equipment, and the amount of the impairment charge, were based on impairment assessment conducted on the equipment

at December 31, 2024.

Business Acquisition

The Company accounts for business acquisition

in accordance with ASC No.

805, Business Combinations.

The assets acquired and liabilities assumed from the acquired business are

recorded at fair value, with the residual of the purchase price recorded as goodwill.

The result of operations of the acquired business

is included in the Company’s operating result from the date of acquisition.

Receivable from Sale of Equity Method Investment

During the first quarter of 2025, to preserve

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

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

Lab Services MSO redeemed 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 16 - Series

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

Accordingly, beginning in February 2025, the

Company no longer offers laboratory services.

Receivable from sale of equity method investment

is presented net 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

At June 30, 2025, the Company established a reserve for credit loss in the amount of $ 1,650,000 .

On or about July 22, 2025, the Company filed a

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

The Company has

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

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

The Company and Laboratory Services MSO, LLC entered into a Confidential

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

of $ 1,722,000 ($ 50,000 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

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 December 31, 2025, the reserve for credit loss amounted to $ 0 .

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (continued)

Assets Held for Sale

Assets held for sale represent property, equipment,

and improvement less accumulated depreciation as well as any other assets that are held for sale in conjunction with the sale of a business.

The Company records assets held for sale in accordance with ASC 360 at the lower of carrying value or fair value less costs to sell.

value is the amount obtainable from the sale of the asset in an arm’s length transaction.

The reclassification takes place when

the assets are available for immediate sale and the sale is highly probable.

These conditions are usually met from the date on which a

letter of intent or agreement to sell is ready for signing.

Discontinued Operations

A component of an entity is identified as operations

and cash flows that can be clearly distinguished, operationally and financially, from the rest of the entity.

Under ASC 205-20, “Presentation

of Financial Statements - Discontinued Operations” (“ASC 205-20”), a discontinued operation is a component of an entity

that either has been disposed of, or is classified as held for sale and represents a strategic shift that has or will have a major effect

on the entity’s operations and financial results, or a newly acquired business or nonprofit activity that upon acquisition is classified

as held for sale.

Discontinued operations are presented separately from continuing operations in the consolidated statements of operations

and the consolidated statements of cash flows (See Note 7).

For long-lived assets or disposals groups that are classified as held for

sale but do not meet the criteria for discontinued operations, the assets and liabilities are presented separately on the balance sheet

of the initial period in which it is classified as held for sale.

Stock Subscription Liability

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

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

As of December 31, 2025, the Company received proceeds of $ 150,000 .

As of December 31, 2025, these shares have not yet been issued and

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

When a lease contains “rent holidays”,

2 unchanged sentences

lease possession date.

Real Property Operating Expenses

Real property operating expenses consist of property

management fees, property insurance, real estate taxes, depreciation, repairs and maintenance fees, utilities and other expenses related

to the Company’s rental properties.

Research and Development

Expenditures for research and product development

costs are expensed as incurred.

The Company incurred research and development expense of $ 0 and $ 109,618 in the years ended

December 31, 2024 and 2023, respectively.

Advertising and Marketing Costs

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currency of the Company is the U.S.

The functional currency of the parent company, AHS, Avalon RT 9, Avalon Lab, and Q&A Distribution

The functional currency of the parent company, AHS, Avalon Lab, and Q&A Distribution is

dollar and the functional currency of Avalon Shanghai is the Chinese Renminbi (“RMB”).

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Transaction gains or losses have not had, and are not expected to have, a material effect on the results of operations of

liability accounts at December 31, 2024 and 2023 were translated at 7.2980 RMB and 7.0786 RMB to $ 1.00 , respectively, which were the exchange

rates on the balance sheet dates.

liability accounts at December 31, 2025 and 2024 were translated at 6.9964 RMB and 7.2980 RMB to $ 1.00 , respectively, which

were the exchange rates on the balance sheet dates.

Equity accounts were stated at their historical rates.

The average translation rates applied to the

statements of operations for the years ended December 31, 2024 and 2023 were 7.1889 RMB and 7.0752 RMB to $ 1.00 , respectively.

from the Company’s operations are calculated based upon the local currencies using the average translation rate.

The average translation rates

applied to the statements of operations for the years ended December 31, 2025 and 2024 were 7.1889 RMB and 7.1889 RMB to

$ 1.00 , respectively.

Cash flows from the Company’s operations are calculated based upon the local currencies using the average translation

AVALON GLOBOCARE CORP.

3 unchanged sentences

POLICIES (continued)

Comprehensive Loss

Comprehensive loss is comprised of net loss and

all changes to the statements of equity, except those due to investments by stockholders, changes in paid-in capital and distributions

to stockholders.

For the Company, comprehensive loss for the years ended December 31, 2024 and 2023 consisted of net loss and unrealized

loss from foreign currency translation adjustment.

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.

Per Share Data

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Basic EPS excludes dilution.

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.

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

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and potentially dilutive securities outstanding during each period.

For the years ended December 31, 2024 and 2023, potentially dilutive

common shares consist 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 Company had $ 162,473 in deemed contribution during the year

ended December 31, 2025, which increases the numerator in the net loss per share calculation.

For the years ended December 31, 2025 and

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

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

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

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 remain outstanding as

of December 31, 2024.

per common share attributable to the Company common shareholders includes 504,300 of the pre-funded warrants that remained outstanding

as of December 31, 2025.

The following table summarizes the securities

that were excluded from the diluted per share calculation because the effect of including these potential shares was antidilutive:

Years Ended December 31,

Options to purchase common stock

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Series C convertible preferred stock (***)

Convertible notes (****)

Series D convertible preferred stock (****)

Series E convertible preferred stock (*****)

Convertible notes and related accrued interest (******)

Potentially dilutive securities

5 unchanged sentences

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

(****) Assumed the Series

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

(*****) Assumed the Series

E convertible preferred stock was converted into shares of common stock of the Company at a conversion price of $ 1.50 per share.

(******) Assumed the convertible

notes were converted into shares of common stock of the Company at a conversion price of $ 11.25 per share for the year ended December

Assumed the convertible notes were converted into shares of common stock of the Company at a conversion price of $ 67.50 and

$ 22.50 per share for the year ended December 31, 2023.

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

Assumed the convertible notes were converted into shares of common stock of the Company at a conversion price of $ 11.25 per

share for the year ended December 31, 2024.

AVALON GLOBOCARE CORP.

3 unchanged sentences

POLICIES (continued)

Comprehensive Loss

Comprehensive loss is comprised of net loss and

all changes to the statements of equity, except those due to investments by stockholders, changes in paid-in capital and distributions

to stockholders.

For the Company, comprehensive loss for the years ended December 31, 2025 and 2024 consisted of net loss and unrealized

loss from foreign currency translation adjustment.

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.

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

Noncontrolling Interest

3 unchanged sentences

Since the fourth quarter of 2019, the non-controlling interest has remained inactive.

Reclassification

Certain prior period

amounts have been reclassified to conform to the current period presentation.

These reclassifications have no effect on the previously

reported financial position, results of operations and cash flows.

Segment Reporting

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

internally and is mainly organized by services.

The Company is organized into two services-oriented strategic business units:

real property

rental services and laboratory testing services — which are led by our strategic business unit managers.

Operating segments are

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

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

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 year ended December 31, 2025, the Company was organized into two services-oriented strategic business units:

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

and AI generated publishing services (which commenced on the acquisition date, December 12, 2025).

During the year ended December 31,

2024, the Company was organized into one services-oriented strategic business units:

laboratory testing services — which were led

by our strategic business unit managers.

Operating segments are defined as components of an enterprise for which separate financial information

is available and evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to make operating decisions,

allocate resources and assess performance.

On February 9, 2023, the Company purchased 40 %

of Lab Services MSO.

Commencing from the purchase date, February 9, 2023, the Company is active in the management of Lab Services MSO.

During the years ended December 31, 2024 and 2023, the Company operated in two reportable business segments:

(1) the real property operating

segment, and (2) laboratory testing services segment (which commenced with the purchase date, February 9, 2023) since Lab Services MSO’s

operating results are regularly reviewed by the Company’s chief operating decision maker to determine the resources to be allocated

to the segment and assess its performance.

The Company regularly reviews the operating results and performance of Lab Services MSO, for

which the Company accounts for under the equity method.

The 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 from equity method investment – 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.

The Company’s Chief Executive Officer

The Company reports operational data to its CODM at the segment level, which he uses to evaluate performance and allocate

resources based on income/loss from equity method investment – Lab Services MSO and AI generated publishing operating income.

Company only has one segment now.

On February 18, 2026,

the Company and Wenzhao Lu, the Company’s chairman of the Board of Directors, entered into an Amended and Restated Membership Interest

Purchase Agreement, pursuant to which the Company sold to Mr.

Lu 100 % of the membership interests of Avalon RT 9.

The Company determined

that the assets and operations that had been disposed of met the criteria for discontinued operations presentation.

For all periods presented,

the operating results associated with the assets disposed of have been reclassified into net loss from discontinued operations in the

Consolidated Statements of Operations and Comprehensive Loss.

The associated assets and liabilities have been reflected as current and

long-term assets and liabilities of discontinued operations in the Consolidated Balance Sheets, and the cash flows from the Company’s

discontinued operations are presented in the Consolidated Statements of Cash Flows for all periods presented.

Fiscal Year End

Company has adopted a fiscal year end of December 31st.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (continued)

Reverse Stock Split

5 unchanged sentences

Recent Accounting

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 eliminates the current models that require separation of beneficial conversion and cash conversion

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

in an entity’s own equity.

The new standard also introduces additional disclosures for convertible debt and freestanding instruments

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

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

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

ASU 2020-06 is effective for fiscal years beginning after

December 15, 2022, 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 consolidated financial statements and related disclosures.

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 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

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 this ASU.

In December 2023, the FASB issued ASU 2023-09,

Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

This guidance was intended to enhance the transparency and decision-usefulness

of income tax disclosures.

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

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

and in foreign jurisdictions.

ASU 2023-09 was

effective for fiscal years beginning after December 15, 2024 on a prospective basis, with the option to apply the standard retrospectively.

Early adoption was permitted.

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

statements and related disclosures.

In November 2024, the FASB issued ASU 2024-03,

Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement

In January 2025, the FASB issued ASU No.

2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation

Disclosures (Subtopic 220-40), Clarifying the Effective Date.

ASU 2024-03 requires public companies to disclose, in interim and reporting

periods, additional information about certain expenses in the financial statements.

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

for public entities for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

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

The Company is currently evaluating

the impact that the updated standard will have on the Company’s disclosures within the consolidated financial statements.

Other accounting standards that have been issued

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

statements upon adoption.

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

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

NOTE 4 – ACQUISITION

The Company accounts

for acquisition using the acquisition method of accounting, whereby the results of operations are included in the financial statements

from the date of acquisition.

The purchase price is allocated to the acquired assets and assumed liabilities based on their estimated

fair values at the date of acquisition, and any excess is allocated to goodwill.

December 12, 2025, pursuant to the Agreement and Plan of Merger as discussed in Note 1, the Company acquired 100 % of RPM by issuance of

19,500 its Series E Convertible Preferred Stock which has a fair value of $ 14,916,753 based on a third party valuation report in connection

with this acquisition.

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (continued)

Recent Accounting

Standards (continued)

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.

Refer to Note 20 - Segment Information.

The Company’s results of operations, cash flows, and financial condition

were not impacted by the adoption of this ASU.

2023, the FASB ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures.

This guidance is intended to enhance the

transparency and decision-usefulness of income tax disclosures.

The amendments in ASU 2023-09 address 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 is effective for fiscal years beginning after December 15, 2024 on a prospective basis, with the option to

apply the standard retrospectively.

Early adoption is permitted.

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

consolidated financial statements and related disclosures.

Other accounting

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

impact on the consolidated financial statements upon adoption.

The Company does not discuss recent pronouncements that are not anticipated

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

NOTE 4 – ACQUISITION (continued)

according to the acquisition, RPM’s assets and liabilities were recorded at their fair values as of the effective date, December

12, 2025, and the results of operations of RPM are consolidated with results of operations of the Company, starting on December 12, 2025.

purchase price exceeded the fair value of net assets acquired by $ 12,808,197 .

The Company allocated the $ 12,808,197 excess to goodwill.

The results of operations of RPM are included in the consolidated results of operations of the Company from the effective date of December

12, 2025 to December 31, 2025.

For the period from the effective date of December 12, 2025 to December 31, 2025, revenue and net loss

included in the consolidated statements of operations from RPM amounted to $ 0 and $ 94,453 , respectively.

connection with the combination, for the year ended December 31, 2025, the Company incurred acquisition related costs of $ 75,000 which,

pursuant to ASC 805, are expensed and included in professional fees on the accompanying consolidated statements of operations.

The following summarizes total consideration

transferred to the RPM stockholders under the acquisition as well as the fair value of the assets acquired and liabilities assumed under

the acquisition:

Assets acquired:

Intangible assets

Liabilities assumed:

Accounts payable and accrued liabilities

Total liabilities

Purchase price

Net assets were valued at their respective carrying

amounts, which the Company believes approximate their current fair values at the acquisition date.

Goodwill represents the excess of the

purchase price over the fair value of the net assets acquired.

On December 31, 2025, the Company assessed goodwill

for any impairment and concluded that there were not indicators of impairment as of December 31, 2025.

following unaudited pro forma consolidated results of operations have been prepared as if the acquisition of RPM had occurred as of the

beginning of the following periods:

Years Ended December 31,

Net loss attributable to Avalon GloboCare Corp.

Net loss per share

forma data does not purport to be indicative of the results that would have been obtained had these events actually occurred at the beginning

of the periods presented and is not intended to be a projection of future results.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – PREPAID EXPENSE

5 unchanged sentences

Deferred offering costs

Deferred leasing costs

Security deposit

1 unchanged sentence

Finished goods

Recoverable VAT

Recoverable value-added tax

NOTE 6 – PROPERTY AND EQUIPMENT

1 unchanged sentence

and 2024, property and equipment consisted of the following:

December 31, 2024

Useful Life December 31,

2025 December 31,

Laboratory equipment

Office equipment and furniture

Office equipment and furniture 3 Years $ 10,045 $ 9,630

accumulated depreciation ( 9,318 ) ( 8,332 )

$ 727 $ 1,298

For the years ended December

31, 2024 and 2023, depreciation expense of property and equipment amounted to $ 9,234 and $ 43,037 , respectively, of which, $ 8,623 and $ 7,221

was included in real property operating expenses, $ 611 and $ 417 was included in other operating expenses, and $ 0 and $ 35,399 was included

in research and development expense, respectively.

31, 2025 and 2024, depreciation expense of property and equipment amounted to $ 610 and $ 611 , respectively, which was included in other

operating expenses.

7 – DISCONTINUED OPERATIONS AND DISPOSALS

In accordance with ASC

205-20 Presentation of Financial Statements:

Discontinued Operations, a disposal of a component of an entity or a group of components

of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have)

a major impact on an entity’s operations and financial results when the components of an entity meet the criteria in ASC paragraph

205-20-45-10.

In the period in which the component meets the held for sale or discontinued operations criteria the major current assets,

non-current assets, current liabilities and non-current liabilities shall be reported as a component of total assets and liabilities separate

from those balances of the continuing operations.

At the same time, the results of all discontinued operations, less applicable income

taxes (benefit), shall be reported as components of net income (loss) separate from the income (loss) of continuing operations.

On February 18, 2026,

the Company and Wenzhao Lu, the Company’s chairman of the Board of Directors, entered into an Amended and Restated Membership Interest

Purchase Agreement (the “Amended MIPA”), pursuant to which the Company sold to Mr.

Lu 100 % of the membership interests of

Avalon RT 9 for approximately $ 9,000,000 .

The subsidiary comprises

our real property operations segment.

As a result of the planned disposition of the subsidiary, the real property operations segment meets

the held for sale criteria of ASC 205-20.

Accordingly, the historical results of operations of the real property operations segment have

been reflected as discontinued operations in our consolidated financial statement for all periods prior to the Amended MIPA on February

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6 – EQUIPMENT HELD FOR SALE

The Company measures

long-lived assets to be disposed of by sale at the lower of carrying amount or fair value, less associated costs to sell these assets.

The assets held for sale is no longer subject to depreciation as they are not used in operations.

As of December 31, 2024, the Company

committed to a plan to sell certain laboratory equipment that was used to research and development as equipment held for sale, which was

included in “Other non-current assets” on the accompanying consolidated balance sheets.

The Company evaluated equipment for

impairment at December 31, 2024.

The Company compared the estimated fair value of the equipment to its carrying value with impairment

indicators and recorded an impairment charge for the excess of carrying value over fair value.

For the year ended December 31, 2024, the

Company incurred an impairment charge in operations of $ 111,033 on laboratory equipment.

Although the Company is actively seeking and

negotiating with potential buyers, the Company can give no assurances that the sale process will be successful and, if it were successful,

there are no assurances as to the amount or timing of any potential proceeds.

7 – INVESTMENT IN REAL ESTATE

At December 31, 2024

and 2023, investment in real estate consisted of the following:

Useful Life December 31, 2024 December 31, 2023

Commercial real property building 39 Years $ 7,708,571 $ 7,708,571

Improvement 12 Years 529,372 529,372

7 – DISCONTINUED OPERATIONS AND DISPOSALS (continued)

Details of the net loss

from discontinued operations were as follows for the years ended December 31:

REAL PROPERTY RENTAL REVENUE

REAL PROPERTY OPERATING EXPENSES

( 1,050,599 )

accumulated depreciation ( 1,215,222 ) ( 1,046,539 )

( 1,065,574 )

For both the years ended

December 31, 2024 and 2023, depreciation expense of this commercial real property amounted to $ 168,683 , which was included in real property

operating expenses.

REAL PROPERTY OPERATING INCOME

OTHER OPERATING EXPENSES:

Professional fees

Compensation and related benefits

Total Other Operating Expenses

INCOME (LOSS) FROM OPERATIONS

OTHER (EXPENSE) INCOME

Interest expense - amortization of debt discount and debt issuance costs

Interest expense - other

Other income (expense)

Total Other Expense, net

LOSS BEFORE INCOME TAXES

$ ( 742,103 )

$ ( 863,790 )

The following table summarizes

the assets and liabilities of the discontinued operations as of December 31:

CURRENT ASSETS

Rent receivable

Prepaid expense and other current assets

Total Current Assets

NON-CURRENT ASSETS:

Property and equipment, net

Investment in real estate, net

Deferred leasing costs and other non-current assets

Total Non-current Assets

CURRENT LIABILITIES:

Accrued liabilities and other payables

Note payable, net

Total Current Liabilities

NON-CURRENT LIABILITIES:

Deferred rental income

Total Non-current Liabilities

Total Liabilities

The above tables exclude

intercompany payables that are eliminated within our consolidated balance sheets.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – INTANGIBLE ASSETS

Intangible assets consist of the valuation of

identifiable intangible assets acquired (See Note 4), representing developed technology and trade name.

The Company uses its best estimates

and assumptions as part of the purchase price allocation process to accurately value the identifiable intangible assets at the acquisition

The straight-line method of amortization represents the Company’s best estimate of the distribution of the economic value

of the identifiable intangible assets.

In addition, in connection with the acquisition

of RPM (See Note 4), the purchase price exceeded the fair value of net assets acquired by $ 12,808,197 .

The Company allocated the $ 12,808,197

excess to goodwill.

Goodwill is not amortized, but is tested for impairment at December 31, 2025.

On December 31, 2025, the Company assessed

its goodwill for any impairment and concluded that there were not indicators of impairment as of December 31, 2025.

At December 31, 2025, intangible assets consisted

of the following:

Useful Life December 31,

Developed technology 1 Year $ 2,230,000

Trade name 1 Year 22,000

Goodwill 12,808,197

accumulated amortization ( 93,833 )

For the year ended December 31, 2025, amortization

expense amounted to $ 93,833 , which represented amortization from December 12, 2025 (the date of acquisition) to December 31, 2025.

was no comparable amortization prior to the date of acquisition.

Amortization of intangible assets attributable to future periods is

For the Year Ending December 31:

Amortization Amount

2027 and thereafter

NOTE 9 – EQUITY

METHOD INVESTMENTS

Investment in Epicon

Biotech Co., Ltd.

As of December 31, 2023,

the equity method investment in Epicon Biotech Co., Ltd.

(“Epicon”) amounted to $ 0 .

The investment represents the Company’s

subsidiary, Avalon Shanghai’s interest in Epicon.

Epicon was incorporated on August 14, 2018 in PRC.

Avalon Shanghai and an unrelated

company, Jiangsu Unicorn Biological Technology Co., Ltd.

(“Unicorn”), have an ownership interest in Epicon of 40 % and 60 %,

respectively.

Epicon is focused on cell preparation, third party testing, biological sample repository for commercial and scientific research

purposes and clinical transformation of scientific achievements.

The Company is not involved in the management of Epicon.

Therefore, it

is a passive investment.

In June 2023, the Company

assessed its equity method investment in Epicon for any impairment and concluded that there were indicators of impairment as of June 30,

The impairment is due to the Company’s conclusion that it will be unable to recover the carrying amount of the investment

due to the investee’s series of operating losses and the inability of Avalon Shanghai’s joint venture partner (Unicorn) to

obtain adequate funding to commence operations.

The Company calculated that the estimated undiscounted cash flows were less than the carrying

amount related to the equity method investment.

The Company has recognized an impairment loss of $ 454,679 related to the equity method

investment for the year ended December 31, 2023, which reduced the investment value to zero.

Under the equity method,

if there is a commitment for the Company to fund the losses of its equity method investees, the Company would continue to record its share

of losses resulting in a negative equity method investment, which would be presented as a liability on the consolidated balance sheets.

Commitments may be explicit and may include formal guarantees, legal obligations, or arrangements by contract.

Implicit commitments may

arise from reputational expectations, intercompany relationships, statements by the Company of its intention to provide support, a history

of providing financial support or other facts and circumstances.

When the Company has no commitment to fund the losses of its equity method

investees, the carrying value of its equity method investments will not be reduced below zero.

The Company has no commitment to fund additional

losses of its equity method investments.

As of December 31, 2025 and 2024, the equity method

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

On February 9, 2023, the Company entered into

and closed an Amended and Restated Membership Interest Purchase Agreement (the “Amended MIPA”), by and among Avalon Lab, SCBC

Holdings LLC (the “Seller”), the Zoe Family Trust, Bryan Cox and Sarah Cox as individuals (each an “Owner” and

collectively, the “Owners”), and Lab Services MSO.

Pursuant to the terms and conditions set forth

in the Amended MIPA, Avalon Lab acquired from the Seller, 40 % of the issued and outstanding equity interests of Lab Services MSO

(the “Purchased Interests”).

The consideration paid by Avalon Lab to Seller for the Purchased Interests consisted of $ 20,666,667 ,

which was comprised of (i) $ 9,000,000 in cash, (ii) $ 11,000,000 pursuant to the issuance of 11,000 shares of the Company’s

Series B Preferred Stock, stated value $ 1,000 (the “Series B Stated Value”), which approximated the fair value, and (iii)

a $ 666,667 cash payment on February 9, 2024.

The Series B Preferred Stock was convertible into shares of the Company’s common

stock at a conversion price per share equal to $ 56.70 , which approximated the market price at the date of closing, or an aggregate of 194,004 shares

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

During the first quarter of 2025, to preserve

cash, the Company entered into discussions with Lab Services MSO for the potential redemption of 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).

AVALON GLOBOCARE CORP.

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METHOD INVESTMENTS (continued)

Investment in Laboratory

Services MSO, LLC

On February 9, 2023 (the

“Closing Date”), the Company entered into and closed an Amended and Restated Membership Interest Purchase Agreement (the “Amended

MIPA”), by and among Avalon Lab, SCBC Holdings LLC (the “Seller”), the Zoe Family Trust, Bryan Cox and Sarah Cox as

individuals (each an “Owner” and collectively, the “Owners”), and Lab Services MSO.

Pursuant to the terms

and conditions set forth in the Amended MIPA, Avalon Lab acquired from the Seller, 40 % of the issued and outstanding equity interests

of Lab Services MSO (the “Purchased Interests”).

The consideration paid by Avalon Lab to Seller for the Purchased Interests

consisted of $ 20,666,667 , which was comprised of (i) $ 9,000,000 in cash, (ii) $ 11,000,000 pursuant to the issuance of 11,000 shares

of the Company’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”), stated value $ 1,000 (the

“Series B Stated Value”), which approximated the fair value, and (iii) a $ 666,667 cash payment on February 9, 2024.

Series B Preferred Stock is convertible into shares of the Company’s common stock at a conversion price per share equal to $ 56.70 ,

which approximated the market price at the date of closing, or an aggregate of 194,004 shares of the Company’s common

stock, which are subject to a lock-up period and restrictions on sale.

Lab Services MSO, through

its subsidiaries, is engaged in providing laboratory testing services.

Avalon Lab and an unrelated company, have an ownership interest

in Lab Services MSO of 40 % and 60 %, respectively.

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.

in February 2025, we no longer offer laboratory services.

In accordance with ASC

810, the Company determined that Lab Services MSO does not qualify as a variable interest entity, nor does it have a controlling financial

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.

7 unchanged sentences

was approximately $ 19,460,000 which was attributable to intangible assets and goodwill.

Thereafter, the investment is adjusted for

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.

Intangible assets consist

of the valuation of identifiable intangible assets acquired, representing trade names and customers relationships, which are being amortized

Intangible assets consisted

of the valuation of identifiable intangible assets acquired, representing trade names and customers relationships, which were being amortized

on a straight-line method over the estimated useful life of 15 years.

1 unchanged sentence

Company’s best estimate of the distribution of the economic value of the identifiable intangible assets.

For the year ended December

31, 2024 and for the period from February 9, 2023 (date of investment) through December 31, 2023, amortization expense of these intangible

assets amounted to $ 666,932 and $ 611,356 , respectively, which was included in loss from equity method investment — Lab Services

For the period from January

1, 2025 through February 26, 2025 (date of sale) and for the year ended December 31, 2024, amortization expense of these intangible assets

amounted to $ 111,156 and $ 666,932 , respectively, which was included in income (loss) from equity method investment — Lab Services

MSO in the accompanying consolidated statements of operations and comprehensive loss.

4 unchanged sentences

in circumstances indicate that the asset might be impaired.

In September 2024 and

December 2023, the Company assessed its equity method investment in Laboratory Services MSO, LLC for any impairment and concluded that

there were indicators of impairment as of September 30, 2024 and December 31, 2023, respectively.

The Company calculated that the estimated

undiscounted cash flows of goodwill were less than the carrying amount of goodwill related to the equity method investment.

has recognized impairment loss of $ 259,579 and $ 9,196,682 related to the equity method investment for the year ended December 31,

2024 and for the period from February 9, 2023 (date of investment) through December 31, 2023, respectively, which was included in loss

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

For the year ended December

31, 2024 and for the period from February 9, 2023 (date of investment) through December 31, 2023, the Company’s share of Lab Services

MSO’s net income was $ 79,923 and $ 1,236,391 , respectively, which was included in loss from equity method investment —

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

In September 2024, the

Company assessed its equity method investment in Laboratory Services MSO, LLC for any impairment and concluded that there were indicators

of impairment as of September 30, 2024.

The Company calculated that the estimated undiscounted cash flows of goodwill were less than the

carrying amount of goodwill related to the equity method investment.

The Company has recognized impairment loss of $ 259,579 related to

the equity method investment for the year ended December 31, 2024, which was included in loss from equity method investment — Lab

Services MSO in the accompanying consolidated statements of operations and comprehensive loss.

For the period from January 1, 2025 through February

26, 2025 (date of sale) and for the year ended December 31, 2024, the Company’s share of Lab Services MSO’s net income was

$ 503,833 and $ 79,923 , respectively, which was included in income (loss) from equity method investment — Lab Services MSO in

the accompanying consolidated statements of operations and comprehensive loss.

The Company classifies

2 unchanged sentences

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

For the year ended December 31, 2024 and for the

period from February 9, 2023 (date of investment) through December 31, 2023, distribution of earnings from the Company’s investment

on Lab Services MSO amounted to $ 611,888 and $ 0 , respectively.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – EQUITY

METHOD INVESTMENTS (continued)

Investment in Laboratory

Services MSO, LLC (continued)

For the period from January 1, 2025 through February

26, 2025 (date of sale) and for the year ended December 31, 2024, distribution of earnings from the Company’s investment on Lab

Services MSO amounted to $ 0 and $ 611,888 , respectively.

In the years ended December

1 unchanged sentence

Equity investment carrying amount at January 1, 2024

Payment for equity method investment:

The Company’s interest in the fair value of Lab Services MSO’s net assets at February 9, 2023

The Company’s interest in the net excess of Lab Services MSO’s fair value over net assets which was attributable to identifiable intangible assets at February 9, 2023

The Company’s interest in the net excess of Lab Services MSO’s fair value over net assets which was attributable to goodwill at February 9, 2023

Total payment for equity method investment

Lab Services MSO’s net income attributable to the Company

Intangible assets amortization amount

Distribution of earnings from equity investment

Impairment of goodwill

( 9,196,682 )

Equity investment carrying amount at December 31, 2024

1 unchanged sentence

Intangible assets amortization amount

Distribution of earnings from equity investment

Impairment of goodwill

Sale of equity investment

( 11,029,221 )

Equity investment carrying amount at December 31, 2025

As of December 31, 2024, the Company’s carrying

value of the identified intangible assets and goodwill which are included in the equity investment carrying amount was $ 8,725,712 and

$ 0 , respectively.

As of December 31, 2023, the Company’s carrying value of the identified intangible assets and goodwill which are

included in the equity investment carrying amount was $ 9,392,644 and $ 259,579 , respectively.

The tables below present the summarized financial

information, as provided to the Company by the investee, for the unconsolidated company:

December 31, 2024

December 31, 2023

Current assets

Noncurrent assets

Current liabilities

Noncurrent liabilities

For the year Ended December 31, 2024

For the Period from

2023 (Date of Investment) through December 31, 2023

(Loss) income from operation

Net loss income

During 2025, to preserve cash, the Company entered

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

See Note 22 – Subsequent Events - Redemption Agreement.

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – EQUITY

METHOD INVESTMENTS (continued)

As of December 31, 2024, the Company’s carrying

value of the identified intangible assets and goodwill which are included in the equity investment carrying amount was $ 8,725,712 and

$0 , respectively.

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

(Date of Sale)

Income (loss) from operation

NOTE 10 – ACCRUED LIABILITIES

2 unchanged sentences

and 2024, accrued liabilities and other payables consisted of the following:

Accrued tenants’ improvement reimbursement

Tenants’ security deposit

Accrued loan commitment fee

Accrued business expense reimbursement

Accrued utilities

Deferred rental income

Accrued real property cleaning service fee

Interest payable

32 unchanged sentences

as a finder’s fee) which was capitalized and was amortized into interest expense over the term of the May 2023 Convertible Note.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – CONVERTIBLE NOTE PAYABLE

May 2023 Convertible

Note (continued)

Based upon the Company’s

8 unchanged sentences

dividend yield of 0 % and expected life of 5 years.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – CONVERTIBLE NOTE PAYABLE

May 2023 Convertible

Note (continued)

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

12 unchanged sentences

of 13.0 % senior secured promissory notes in the aggregate principal amount of $ 500,000 (collectively, the “July 2023 Convertible

Note”) convertible into shares of the Company’s common stock, as well as the issuance of 1,667 shares of common stock as a

commitment fee and warrants for the purchase of 5,122 shares of common stock of the Company.

The Company and its subsidiaries also entered

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

performance and discharge in full of all of the Company’s obligations under the July 2023 Convertible Note.

Principal amount and

interest under the July 2023 Convertible Note were convertible into shares of common stock of the Company at a conversion price of $ 67.50

per share unless the Company failed to make an amortization payment when due, in which case the conversion price would be the lower of

$ 67.50 or the trading price of the shares, subject to a floor of $ 22.50 .

Note”) convertible into shares of the Company’s common stock, as well as the issuance of 1,667 shares of common

stock as a commitment fee and warrants for the purchase of 5,122 shares of common stock of the Company.

The Company and its

subsidiaries also entered into a security agreement, creating a security interest in certain property of the Company and its subsidiaries

to secure the prompt payment, performance and discharge in full of all of the Company’s obligations under the July 2023 Convertible

Principal amount and interest under the July 2023 Convertible Note were convertible into shares of common stock of the Company at

a conversion price of $ 67.50 per share unless the Company failed to make an amortization payment when due, in which case the conversion

price would be the lower of $ 67.50 or the trading price of the shares, subject to a floor of $ 22.50 .

FirstFire acquired the

July 2023 Convertible Note with principal amount of $ 500,000 and paid the purchase price of $ 475,000 after an original issue discount

of $ 25,000 .

On July 6, 2023, the Company issued (i) a warrant to purchase 2,778 shares of common stock with an exercise price of $ 67.50

exercisable until the five-year anniversary of July 6, 2023 (“First Warrant”), (ii) a warrant to purchase 2,344 shares of

common stock with an exercise price of $ 48.00 exercisable until the five-year anniversary of July 6, 2023 (“Second Warrant”).

The Second Warrant was never fair valued and was cancelled and extinguished against payment of the July 2023 Convertible Note, and (iii)

1,667 shares of common stock as a commitment fee for the purchase of the July 2023 Convertible Note, which were earned in full as of July

On July 6, 2023, the Company delivered such duly executed July 2023 Convertible Note, warrants and common stock to FirstFire

against delivery of such purchase price.

July 2023 Convertible Note with principal amount of $ 500,000 and paid the purchase price of $ 475,000 after an original issue

discount of $ 25,000 .

On July 6, 2023, the Company issued (i) a warrant to purchase 2,778 shares of common stock with an exercise

price of $ 67.50 exercisable until the five-year anniversary of July 6, 2023 (“First Warrant”), (ii) a warrant to purchase 2,344 shares

of common stock with an exercise price of $ 48.00 exercisable until the five-year anniversary of July 6, 2023 (“Second Warrant”).

The Second Warrant was never fair valued and was cancelled and extinguished against payment of the July 2023 Convertible Note, and (iii) 1,667 shares

of common stock as a commitment fee for the purchase of the July 2023 Convertible Note, which were earned in full as of July 6, 2023.

On July 6, 2023, the Company delivered such duly executed July 2023 Convertible Note, warrants and common stock to FirstFire against delivery

of such purchase price.

The Company was obligated

18 unchanged sentences

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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – CONVERTIBLE NOTE PAYABLE

July 2023 Convertible

Note (continued)

The portion of the proceeds

5 unchanged sentences

term of the July 2023 Convertible Note.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – CONVERTIBLE NOTE PAYABLE

Convertible Note

On October 9, 2023, the

Company entered into securities purchase agreements with Mast Hill and FirstFire for the issuance of 13.0 % senior secured promissory notes

in the aggregate principal amount of $ 700,000 (collectively, the “October 2023 Convertible Note”) convertible into shares

of the Company’s common stock, as well as the issuance of 4,666 shares of common stock as a commitment fee and warrants for the

purchase of 12,834 shares of common stock of the Company.

The Company and its subsidiaries also entered into that certain security agreements,

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

in full of all of the Company’s obligations under the October 2023 Convertible Note.

Principal amount and interest under the October

2023 Convertible Note were convertible into shares of common stock of the Company at a conversion price of $ 22.50 per share unless the

Company failed to make an amortization payment when due, in which case the conversion price would be the lower of $ 22.50 or the market

price (as defined in the October 2023 Convertible Note) of the shares.

Company entered into securities purchase agreements with Mast Hill and FirstFire for the issuance of 13.0 % senior secured promissory

notes in the aggregate principal amount of $ 700,000 (collectively, the “October 2023 Convertible Note”) convertible into

shares of the Company’s common stock, as well as the issuance of 4,666 shares of common stock as a commitment fee and

warrants for the purchase of 12,834 shares of common stock of the Company.

The Company and its subsidiaries also entered into

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

payment, performance and discharge in full of all of the Company’s obligations under the October 2023 Convertible Note.

amount and interest under the October 2023 Convertible Note were convertible into shares of common stock of the Company at a conversion

price of $ 22.50 per share unless the Company failed to make an amortization payment when due, in which case the conversion price

would be the lower of $ 22.50 or the market price (as defined in the October 2023 Convertible Note) of the shares.

Mast Hill acquired the

40 unchanged sentences

annual dividend yield of 0 % and expected life of 5 years.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – CONVERTIBLE NOTE PAYABLE

Convertible Note (continued)

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

8 unchanged sentences

over the term of the October 2023 Convertible Note.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – CONVERTIBLE NOTE PAYABLE

March 2024 Convertible

46 unchanged sentences

term of the March 2024 Convertible Note.

June 2024 Convertible

On June 5, 2024, the

Company entered into securities purchase agreements with Mast Hill for the issuance of 13.0 % senior secured promissory notes in the

aggregate principal amount of $ 2,845,000 (collectively, the “June 2024 Convertible Note”) convertible into shares of

the Company’s common stock, as well as the issuance of 26,800 shares of common stock as a commitment fee and warrants

for the purchase of 146,667 shares of common stock of the Company.

The Company and its subsidiaries have also entered into a

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

performance and discharge in full of all of the 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).

AVALON GLOBOCARE CORP.

3 unchanged sentences

June 2024 Convertible

Note (continued)

June 5, 2024, the Company entered into securities purchase agreements with Mast Hill for the issuance of 13.0 %

senior secured promissory notes in the aggregate principal amount of $ 2,845,000 (collectively,

the “June 2024 Convertible Note”) convertible into shares of the Company’s common stock, as well as the issuance of 26,800 shares

of common stock as a commitment fee and warrants for the purchase of 146,667 shares

of common stock of the Company.

The Company and its subsidiaries have also entered into a security agreement, creating a security interest

in certain property of the Company and its subsidiaries to secure the prompt payment, performance and discharge in full of all of the

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).

Mast Hill acquired the

2 unchanged sentences

On June 5, 2024, the Company issued (i) a warrant to purchase 66,667 shares of common stock with an exercise

price of $ 9.75 exercisable until the five-year anniversary of June 5, 2024 (“First Warrant”), (ii) a warrant to purchase 80,000 shares

of common stock with an exercise price of $ 7.50 exercisable until the five-year anniversary of June 5, 2024 (“Second Warrant”).

The Second Warrant will not be fair valued and shall be cancelled and extinguished against payment of the June 2024 Convertible Note,

and (iii) 26,800 shares of common stock as a commitment fee for the purchase of the June 2024 Convertible Note, which were earned

in full as of June 5, 2024.

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

stock to Mast Hill against delivery of such purchase price.

price of $ 9.75 exercisable until June 5, 2029 (“First Warrant”), (ii) a warrant to purchase 80,000 shares of

common stock with an exercise price of $ 7.50 exercisable until June 5, 2029 (“Second Warrant”), and (iii) 26,800 shares

of common stock as a commitment fee for the purchase of the June 2024 Convertible Note, which were earned in full as of June 5, 2024.

As of March 31, 2025, the Second Warrant was not fair valued since the Company believed the Second Warrant would be cancelled and extinguished

against payment of the June 2024 Convertible Note on June 5, 2025.

On June 5, 2024, the Company delivered such duly executed June 2024

Convertible Note, warrants and common stock to Mast Hill against delivery of the purchase price.

The Company received

net cash amount of $ 881,210 from the June 2024 Convertible Note financing after using the proceeds to pay off all previously issued

convertible notes to Mast Hill of $ 1,206,867 and FirstFire of $ 454,673 , respectively, and to pay finder’s fee of $ 120,000 and

lender’s costs of $ 40,000 related to this financing.

The Company is obligated

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

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

June 5, 2025 The entire remaining outstanding balance of the June 2024 Convertible Note

In connection with the

issuance of the June 2024 Convertible Note, the Company incurred debt issuance costs of $ 224,221 (including the issuance of 5,333 warrants

as a finder’s fee) which is capitalized and will be amortized into interest expense over the term of the June 2024 Convertible Note.

In connection with the issuance of the June 2024

Convertible Note, the Company incurred debt issuance costs of $ 224,221 (including the issuance 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.

Based upon the Company’s

1 unchanged sentence

finder’s fee meet the definition of a derivative liability, as the Company cannot avoid a net cash settlement under certain circumstances.

Management determined the probability of failing to make an amortization payment when due to be remote and as such the fair value of the 80,000 warrants

with an exercise price of $ 7.50 exercisable until the five-year anniversary of June 5, 2024, which warrant shall be cancelled and

extinguished against payment of the June 2024 Convertible Note, has been estimated to be zero.

Accordingly, the fair value of the 72,000 warrants

with an exercise price of $ 9.75 exercisable until the five-year anniversary of June 5, 2024 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 the five-year

anniversary of June 5 , 2024 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.

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 80,000 warrants with an exercise price of $ 7.50 exercisable until June 5, 2029 ,

which warrant shall be cancelled and extinguished against payment of the June 2024 Convertible Note, had been estimated to be zero.

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.

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:

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.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – CONVERTIBLE NOTE PAYABLE

June 2024 Convertible

Note (continued)

In accordance with ASC

9 unchanged sentences

(See Note 12).

However, 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 has been estimated to be zero.

The Company recorded

a total debt discount of $ 838,990 related to the original issue discount, common shares issued and warrants issued to Mast Hill,

which will be amortized over the term of the June 2024 Convertible Note.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – CONVERTIBLE NOTE PAYABLE

June 2024 Convertible

Note (continued)

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

payment when due to be remote and as such the fair value of the embedded conversion feature had been estimated to be zero.

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

On June 5, 2025, the Second

Warrant was not cancelled and was retained by Mast Hill.

Accordingly, the initial fair value of the Second Warrant of $ 621,353 was

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

The Company recorded a total debt discount of

$ 1,460,343 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.

On December 15, 2024,

the Company and Mast Hill entered into that certain consent, acknowledgement, and waiver agreement (“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 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 instrument that

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

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.

5 unchanged sentences

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

convertible note payable as of December 31, 2024 and 2023 is as follows:

December 31, 2024

December 31, 2023

On 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 December

31, 2025, Mast Hill converted its June 2024 Convertible Note in the principal amount of $ 2,010,827 into 2,010,827 shares of

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

July 2025 Convertible Note

On July 3, 2025, the Company issued 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.

Pursuant to the terms of the July 2025 Convertible

Note, beginning six months after the issue date, the two investors may convert the outstanding principal and accrued interest into shares

of the 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.

As 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 16 - Common Shares Issued as Convertible Note Payable Commitment

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – CONVERTIBLE NOTE PAYABLE

July 2025 Convertible Note (continued)

The convertible notes payable as of December 31,

2025 and 2024 was as follows:

Principal amount

2 unchanged sentences

Convertible note payable, net

In subsequent period,

Mast Hill converted its June 2024 Convertible Note in the principal amount of $ 545,949 into 545,949 shares of common

stock of the Company at a per share price of $ 1.00 (See Note 23 - Common Shares Issued for Debt Conversion).

For the years ended December

31, 2024 and 2023, amortization of debt discount and debt issuance costs related to convertible note payable amounted to $ 1,291,814 and

$ 437,453 , respectively, which have been included in interest expense — amortization of debt discount and debt issuance costs on

the accompanying consolidated statements of operations and comprehensive loss.

31, 2025 and 2024, amortization of debt discount and debt issuance costs related to convertible note payable amounted to $ 1,082,226 (including

the initial fair value of the Second Warrant of $ 621,353 ) and $ 1,291,814 , respectively, which have been included in interest expense —

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

For the years ended December

2 unchanged sentences

NOTE 12 – DERIVATIVE LIABILITY

in Note 10, 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 31, 2024, management determined the probability of failing to make an amortization payment and repayment, respectively, when

due to be remote and as such the fair value of the embedded conversion feature has been estimated to be zero.

As stated in Note 11, June 2024 Convertible Note,

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

which is adjustable based on future prices of the 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 the five-year anniversary of May 23, 2023 to Mast Hill and a third party as a finder’s

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 9,000 warrants was classified as a derivative liability

on May 23, 2023.

On December 31, 2023, the estimated fair value of the 9,000 warrants was $ 14,805 .

The estimated fair value of the warrants

was computed as of December 31, 2023 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 7.24 , volatility

of 83.96 %, risk-free rate of 3.84 %, annual dividend yield of 0 % and expected life of 4.4 years.

On December 31, 2024, the estimated fair

value of the 9,000 warrants was $ 3,714 .

The estimated fair value of the warrants was computed as of December 31, 2024 using Black-Scholes

option-pricing model, with the following assumptions:

stock price of $ 3.26 , volatility of 97.00 %, risk-free rate of 4.27 %, annual dividend

yield of 0 % and expected life of 3.4 years.

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.

December 31, 2024, the estimated fair value of the 9,000 warrants was $ 3,714 .

The estimated fair value of the warrants was computed as

of December 31, 2024 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 3.26 , volatility of 97.00 %,

risk-free rate of 4.27 %, annual dividend yield of 0 % and expected life of 3.4 years.

In March 2025, 8,333 warrants held by Mast

Hill were cashless exercised.

On December 31, 2025, the estimated fair value of the rest of 667 warrants was $ 11 .

The estimated

fair value of the warrants was computed as of December 31, 2025 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 1.20 , volatility of 99.55 %, risk-free rate of 3.47 %, annual dividend yield of 0 % and expected life of 2.4 years.

On July 6, 2023, the Company issued 3,000 warrants

with an exercise price of $ 67.50 exercisable until July 6, 2028 to FirstFire 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 3,000 warrants was classified as a derivative liability on July 6, 2023.

November 18, 2024, 2,778 warrants held by FirstFire were cashless exercised.

On December 31, 2024, the estimated fair value

of the rest of 222 warrants was $ 94 .

The estimated fair value of the warrants was computed as of December 31, 2024 using

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

stock price of $ 3.26 , volatility of 95.85 %, risk-free rate of 4.27 %,

annual dividend yield of 0 % and expected life of 3.5 years.

On December 31, 2025, the estimated fair value of the 222 warrants

The estimated fair value of the warrants was computed as of December 31, 2025 using Black-Scholes option-pricing model, with the

following assumptions:

stock price of $ 1.20 , volatility of 98.29 %, risk-free rate of 3.55 %, annual dividend yield of 0 % and expected life

of 2.5 years.

AVALON GLOBOCARE CORP.

2 unchanged sentences

NOTE 12 – DERIVATIVE LIABILITY

On July 6, 2023, the Company issued 3,000 warrants

with an exercise price of $ 67.50 exercisable until the five-year anniversary of July 6, 2023 to FirstFire 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 3,000 warrants was classified as a derivative

liability on July 6, 2023.

On October 9, 2023, the Company issued 7,560 warrants

with an exercise price of $ 37.50 exercisable until October 9, 2028 to Mast Hill and FirstFire and 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.

Accordingly, the fair value of the 7,560 warrants was classified as a derivative liability

on October 9, 2023.

On November 18, 2024, 3,500 warrants held by FirstFire were cashless exercised.

On December 31, 2024, the

estimated fair value of the rest of 4,060 warrants was $ 2,880 .

The estimated fair value of the warrants was computed as

of December 31, 2024 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 3.26 , volatility of 93.90 %,

risk-free rate of 4.27 %, annual dividend yield of 0 % and expected life of 3.8 years.

On March 26, 2025, 3,500 warrants

held by Mast Hill were cashless exercised.

On December 31, 2025, the estimated fair value of the rest of 560 warrants was $ 30 .

The estimated fair value of the warrants was computed as of December 31, 2025 using Black-Scholes option-pricing model, with the following

stock price of $ 1.20 , volatility of 96.27 %, risk-free rate of 3.55 %, annual dividend yield of 0 % and expected

life of 2.8 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 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 December 31, 2024, the estimated fair value of the 9,450 warrants was $ 8,191 .

The estimated fair value of the warrants was

computed as of December 31, 2024 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 3.26 , volatility

of 90.43 %, risk-free rate of 4.38 %, annual dividend yield of 0 % and expected life of 4.2 years.

On April 3, 2025, 8,750 warrants

held by Mast Hill were cashless exercised.

On December 31, 2025, the estimated fair value of the 700 warrants was $ 82 .

The estimated

1 unchanged sentence

stock price of $ 1.20 , volatility of 98.70 %, risk-free rate of 3.55 %, annual dividend yield of 0 % and expected life of 3.2 years.

On November 18, 2024, 2,778 warrants held by FirstFire were cashless exercised.

On December 31, 2024, the estimated fair value of the rest

of 222 warrants was $ 94 .

The estimated fair value of the warrants was computed as of December 31, 2024 using Black-Scholes option-pricing

model, with the following assumptions:

stock price of $ 3.26 , volatility of 95.85 %, risk-free rate of 4.27 %, annual dividend

yield of 0 % and expected life of 3.5 years.

On October 9, 2023, the Company issued 7,560 warrants

with an exercise price of $ 37.50 exercisable until the five-year anniversary of October 9, 2023 to Mast Hill and FirstFire and a

third party as a finder’s fee.

5, 2024, the Company issued 152,000 warrants to Mast Hill and a third party as

a finder’s fee (See Note 11).

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

Company cannot avoid a net cash settlement under certain circumstances.

Accordingly, the fair value of the 7,560 warrants was

classified as a derivative liability on October 9, 2023.

On December 31, 2024 and June 5, 2024, Management

determined the probability of failing to make an amortization payment when due to be remote and as such the fair value of the 80,000 warrants

with an exercise price of $ 7.50 exercisable until June 5, 2029 , has been estimated to

Accordingly, the fair value of the 72,000 warrants with an exercise price

of $ 9.75 exercisable until June 5, 2029 was classified as a derivative liability on

June 5, 2024.

On December 31, 2024, the estimated fair value of the 72,000 warrants

with an exercise price of $ 9.75 exercisable until June 5, 2029 as derivative liability

was $ 112,666 .

The estimated fair value of the warrants was computed as of December 31, 2024

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

stock price of $ 3.26 ,

volatility of 88.64 %, risk-free rate of 4.38 %,

annual dividend yield of 0 % and expected life of 4.4 years.

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

On December 31, 2025, the estimated fair value

of the 5,333 warrants with an exercise price of $ 9.75 exercisable until June 5, 2029 was $ 1,854 .

The estimated fair value

of the warrants was computed as of December 31, 2025 using Black-Scholes option-pricing model, with the following assumptions:

of $ 1.20 , volatility of 101.69 %, risk-free rate of 3.55 %, annual dividend yield of 0 % and expected life of 3.4 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 December 31, 2025, the estimated fair value of the 80,000 warrants with an exercise price of $ 7.50 exercisable

until June 5, 2029 was $ 32,175 .

The estimated fair value of the warrants was computed as of December 31, 2025 using Black-Scholes option-pricing

2 unchanged sentences

yield of 0 % and expected life of 3.4 years.

On November 18, 2024, 3,500 warrants held by FirstFire were cashless exercised.

On December 31, 2024, the estimated fair value of the rest of 4,060 warrants was $ 2,880 .

The estimated fair value of the warrants

was computed as of December 31, 2024 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 3.26 , volatility

of 93.90 %, risk-free rate of 4.27 %, annual dividend yield of 0 % and expected life of 3.8 years.

On March 7, 2024, the

Company issued 9,450 warrants with an exercise price of $ 30.00 exercisable until the five-year anniversary of March 7,

2024 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 December 31, 2024, the estimated fair value of the 9,450 warrants

was $ 8,191 .

The estimated fair value of the warrants was computed as of December 31, 2024 using Black-Scholes option-pricing model, with

the following assumptions:

stock price of $ 3.26 , volatility of 90.43 %, risk-free rate of 4.38 %, annual dividend yield of 0 %

and expected life of 4.2 years.

On June 5, 2024, the

Company issued 152,000 warrants to Mast Hill and a third party as a finder’s fee (see Note 10).

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.

Management determined the probability of failing to make an amortization payment when due to be remote and as such the fair value of the 80,000 warrants

with an exercise price of $ 7.50 exercisable until the five-year anniversary of June 5, 2024, which warrant shall be cancelled and

extinguished against payment of the June 2024 Convertible Note, has been estimated to be zero.

Accordingly, the fair value of the 72,000 warrants

with an exercise price of $ 9.75 exercisable until the five-year anniversary of June 5, 2024 was classified as a derivative liability

on June 5, 2024.

On December 31, 2024, the estimated fair value of the 72,000 warrants with an exercise price of $ 9.75 exercisable

until the five-year anniversary of June 5, 2024 as derivative liability was $ 112,666 .

The estimated fair value of the warrants was computed

as of December 31, 2024 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 3.26 , volatility of 88.64 %,

risk-free rate of 4.38 %, annual dividend yield of 0 % and expected life of 4.4 years.

Increases or decreases

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

statements of operations and comprehensive loss.

The changes to the derivative liability resulted in a decrease of $ 374,365 and $ 188,374 in

the derivative liability and the corresponding increase in other income as a gain for the years ended December 31, 2024 and 2023, respectively.

NOTE 12 – NOTE PAYABLE, NET

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 $ 4,800,00 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 in Township of Freehold, County of Monmouth, State of New Jersey, having a street address of 4400 Route 9 South,

Freehold, NJ 07728.

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

consolidated statements of operations and comprehensive loss.

The changes to the derivative liability resulted in a decrease of $ 538,213 and

$ 374,365 in the derivative liability and the corresponding increase in other income as a

gain for the years ended December 31, 2025 and 2024, respectively.

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 – NOTE PAYABLE, NET

In May 2023, the Company

borrowed $ 1,000,000 from the same lender.

The principal of $ 1,000,000 accrues interest at an annual rate of 13.0 % and is payable in monthly

installments of interest-only in the amount of $ 10,833 , commencing in June 2023 and continuing through October 2025 (at which point any

unpaid balance of principal, interest and other charges are due and payable).

The loan is secured by a second-lien mortgage on certain

real property and improvements located at 4400 Route 9, Freehold, Monmouth County, New Jersey.

note payable as of December 31, 2024 and 2023 was as follows:

December 31, 2024

December 31, 2023

NOTE 13 – BRIDGE LOAN PAYABLE,

December 11, 2025, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Allen O Cage Jr.,

an individual, pursuant to which the Company issued an unsecured bridge note with a maturity date of April 15, 2026 , in the principal

sum of $ 375,000 .

The bridge note carries an original issue discount of $ 75,000 .

Accordingly, on December 11, 2025, Allen paid the purchase

price of $ 300,000 to the Company for the bridge note.

This bridge note shall not bear interest.

The Company is required to make the following

payments in cash to Allen under the bridge note:

(i) $ 125,000 on February 15, 2026, (ii) $ 125,000 on March 15, 2026, and (iii) $ 125,000

on April 15, 2026.

Upon the occurrence of an event of default under the bridge note, Allen may convert the bridge note into the Company’s

common stock at a conversion price equal to 50 % of the volume weighted average price of the Company’s common stock during the five

(5) trading day period prior to the respective conversion date (the “Conversion Price”), subject to adjustment as provided

in the bridge note as well as beneficial ownership limitations.

The Conversion Price may not be lower than the floor price, which is equal

to 80 % of the Minimum Price (as such term is defined by the rules and regulations of the Nasdaq Stock Market LLC, Rule 5635(d)(1)(A))

measured from the effective date of the Purchase Agreement, or such lower amount as permitted, from time to time, by the Nasdaq Stock

Market, subject to downward adjustments for share splits, share dividends, share combinations, recapitalizations or other similar events

(for the avoidance of doubt, share splits, share dividends, share combinations, recapitalizations or other similar events shall not cause

an adjustment to increase the floor price).

The Company agreed to issue 100,000 shares of its common stock as a commitment fee to Allen

pursuant to the Purchase Agreement.

The Purchase Agreement contains customary representations, warranties, and covenants of the Company.

The issuance of such 100,000 shares as well as any conversion of the bridge note into shares of the Company’s common stock is subject

to the prior shareholder approval of the Company as is required by the applicable rules and regulations of the Nasdaq Stock Market (or

any successor entity).

On February 15, 2026,

the Company entered into Amendment (the “Note Amendment”) to unsecured bridge note.

The Note Amendment extended the time periods

under the bridge note for the first payment deadline, the second payment deadline and third payment deadline as follows:

(i) the first

payment deadline under this Note Amendment is extended to March 16, 2026 from February 15, 2026;

the second payment deadline under the

Note Amendment is extended to April 15, 2026 from March 15, 2026 and (iii) the third payment deadline under the Note Amendment is extended

to May 15, 2026 from April 15, 2026.

In connection with the issuance of the bridge

note, the Company incurred debt issuance costs of $ 18,846 which is capitalized and will be amortized into interest expense over the

term of the bridge note.

In accordance with ASC 480-10-25-14, the Company

determined that the conversion provisions contain an embedded derivative feature and the Company valued the derivative feature separately,

recording debt discount and derivative liability in accordance with the provisions of the bridge note.

However, management determined

the probability of occurrence of an event of default under the bridge note to be remote and as such the fair value of the embedded conversion

feature has been estimated to be zero.

The Company recorded

a total debt discount of $ 213,000 related to the original issue discount and common shares which the Company agreed to issue as a commitment

fee to Allen, which will be amortized over the term of the bridge note.

bridge loan payable as of December 31, 2025 was as follows:

Principal amount

unamortized debt issuance costs

Note payable, net

Current portion

Noncurrent portion

For the years ended December

31, 2024 and 2023, amortization of debt issuance costs related to note payable amounted to $ 119,228 and $ 106,557 , respectively, which

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

statements of operations and comprehensive loss.

For the years ended December

31, 2024 and 2023, interest expense related to note payable amounted to $ 658,000 and $ 606,722 , respectively, which have been included

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

NOTE 13 – RELATED PARTY TRANSACTIONS

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,

the years ended December 31, 2024 and 2023, the related party rental revenue amounted to $ 50,400 and has been included in real property

rental revenue on the accompanying consolidated statements of operations and comprehensive loss.

At December 31, 2024 and 2023, the related

party rent receivable totaled $ 0 and $ 124,500 , respectively, which has been included in rent receivable on the accompanying consolidated

balance sheets.

Provided by Related Party

From 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 $ 63,644 and $ 86,528 for the years ended December 31, 2024 and 2023, respectively, which have been included

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

As of both December 31, 2024 and

2023, the accrued and unpaid services charge related to this director’s son amounted to $ 15,000 , which have been included in accrued

professional fees on the accompanying consolidated balance sheets.

Accrued Liabilities and Other Payables –

Related Parties

In 2017, the Company acquired Beijing Genexosome

for a cash payment of $ 450,000 .

As of both December 31, 2024 and 2023, the unpaid acquisition consideration of $ 100,000 , was payable to

Yu Zhou, former director and former co-chief executive officer and 40 % owner of Genexosome, and has been included in accrued liabilities

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

unamortized debt discount

Convertible note payable, net

For the year ended December

31, 2025, amortization of debt discount and debt issuance costs related to the bridge note amounted to $ 54,186 , which have been included

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

of operations and comprehensive loss.

AVALON GLOBOCARE CORP.

2 unchanged sentences

NOTE 14 – RELATED PARTY TRANSACTIONS

Provided by Related Party

From time to time, Wilbert Tauzin, a former

director of the Company, and his son provide consulting services to the Company.

As compensation for professional services provided, the

Company recognized consulting expenses of $ 60,794 and $ 63,644 for the years ended December 31, 2025 and 2024, respectively,

which have been included in professional fees on the accompanying consolidated statements of operations and comprehensive loss.

December 31, 2025 and 2024, the accrued and unpaid services charge related to this director’s son amounted to $ 6,835 and $ 15,000 ,

respectively, which have been included in accrued professional fees on the accompanying consolidated balance sheets.

Accrued Liabilities and Other Payables –

Related Parties (continued)

Related Parties

In 2017, the Company acquired Genexosome’s

subsidiary, which was dissolved in 2022, for a cash payment of $ 450,000 .

As of both December 31, 2025 and 2024, the unpaid acquisition

consideration of $ 100,000 , was payable to Dr.

Yu Zhou, former director and former co-chief executive officer and 40 % owner of Genexosome,

and has been included in accrued liabilities and other payables — related parties on the accompanying consolidated balance sheets.

From time to time, Lab Services MSO paid shared

expense on behalf of the Company.

In addition, Lab Services MSO made a payment of $ 566,667 for equity method investment payable on behalf

of the Company in the year ended December 31, 2024.

As of December 31, 2024 and 2023, the balance due to Lab Services MSO amounted to

$ 632,916 and $ 72,746 , respectively, which has been included in accrued liabilities and other payables — related parties on the accompanying

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.

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 16 - Series B Convertible Preferred Stock Extinguished Related to

Sale of Equity Method Investment).

As of December 31, 2025 and 2024, the balance due to Lab Services MSO amounted to $0 and

$ 632,916 , respectively, which has been included in accrued liabilities and other payables — related parties on the accompanying

consolidated balance sheets.

As of December 31, 2024 and 2023, $ 0 and $ 33,712

of accrued and unpaid interest related to borrowings from Wenzhao Lu, the Company’s chairman of the Board of Directors, respectively,

have been included in accrued liabilities and other payables — related parties on the accompanying consolidated balance sheets.

Borrowings from Related Party

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On August 29, 2019, the Company entered into a

Line of Credit Agreement (the “Line of Credit Agreement”) providing the Company with a $ 20 million line of credit (the “Line

of Credit”) from Mr.

Line of Credit Agreement (the “Line of Credit Agreement”) providing the Company with a $ 20 million line of credit (the

“Line of Credit”) from Mr.

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

The Line of Credit allowed the Company to request

loans thereunder and to use the proceeds of such loans for working capital and operating expense purposes until the facility matured on

December 31, 2024 .

The Line of Credit allowed the Company

to request loans thereunder and to use the proceeds of such loans for working capital and operating expense purposes until the facility

matured on December 31, 2024.

The loans are unsecured and are not convertible into equity of the Company.

Loans drawn under the Line of Credit bear

interest at an annual rate of 5 % and each individual loan is payable three years from the date of issuance.

The Company has a right to

draw down on the line of credit and not at the discretion of Mr.

Loans drawn under the Line

of Credit bear interest at an annual rate of 5 % and each individual loan is payable three years from the date of issuance.

has a right to draw down on the line of credit and not at the discretion of Mr.

Lu, the related party lender.

The Company may, at its option, prepay

any borrowings under the Line of Credit, in whole or in part at any time prior to maturity, without premium or penalty.

The Line of Credit

Agreement includes customary events of default.

The Company may, at its

option, prepay any borrowings under the Line of Credit, in whole or in part at any time prior to maturity, without premium or penalty.

The Line of Credit Agreement includes customary events of default.

If any such event of default occurs, Mr.

Lu may declare all outstanding loans under the

Line of Credit to be due and payable immediately.

In the years ended December 31, 2024 and 2023,

activity recorded for the Line of Credit is summarized in the following table:

Lu may declare all outstanding

loans under the Line of Credit to be due and payable immediately.

In the year ended December 31, 2024, activity

recorded for the Line of Credit is summarized in the following table:

Outstanding principal under the Line of Credit at January 1, 2024

Draw down from Line of Credit

Outstanding principal under the Line of Credit at December 31, 2023

Repayment of Line of Credit

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Outstanding principal under the Line of Credit at December 31, 2024

For the years ended December 31, 2024 and 2023,

the interest expense related to related party borrowing amounted to $ 42,445 and $ 33,712 , respectively, and has been reflected as interest

expense — related party on the accompanying consolidated statements of operations and comprehensive loss.

As of December 31, 2024 and 2023, the related

accrued and unpaid interest for Line of Credit was $ 0 and $ 33,712 , respectively, and has been included in accrued liabilities and other

payables — related parties on the accompanying consolidated balance sheets.

For the year ended December 31, 2024, the interest

expense related to related party borrowing amounted to $ 42,445 and has been reflected as interest expense — related party on the

accompanying consolidated statements of operations and comprehensive loss.

Membership Interest

Purchase Agreement

On November 17, 2023,

the Company entered into a Membership Interest Purchase Agreement (the “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 the Purchaser

and the Company at such time that the Purchaser desires to exercise the Option.

The Company received $ 3,108,106 and $ 485,714 from Wenzhao

Lu as of December 31, 2024 and 2023, respectively, which was recorded as advance from pending sale of noncontrolling interest –

related party on the accompanying consolidated balance sheets.

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

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

Lu desires to exercise the Option.

AVALON GLOBOCARE CORP.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – RELATED PARTY TRANSACTIONS

Membership Interest Purchase Agreement (continued)

On February 18, 2026, the Company and Mr.

into an Amended and Restated Membership Interest Purchase Agreement (the “Amended MIPA”), pursuant to which the Company sold

Lu 100 % of the membership interests of Avalon RT9 for (i) $ 3,158,078 and (ii) the satisfaction, in full, of an approximately $ 5,900,000

balance due on an existing mortgage financing.

This represents a total amended aggregated purchase price of approximately $ 9,000,000 (See

Note 23 - Amended and Restated Membership Interest Purchase Agreement).

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

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

related party on the accompanying consolidated balance sheets.

Series D Convertible Preferred Stock Issued

in Exchange 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 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 year ended December

31, 2025 that increased additional paid-in capital and income available to common shareholders in calculating earnings per share (See

Note 16 - Series D Convertible Preferred Stock Issued in Exchange of Series A Convertible Preferred Stock).

NOTE 15 – INCOME

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Under the Income Tax Laws of PRC,

Chinese companies are generally subject to an income tax at an effective rate of 25 % on income reported in the statutory financial statements

after appropriate tax adjustments.

The Company has a cumulative deficit from its foreign subsidiary of $ 3,399,273 as of December 31, 2024,

which is included in the consolidated accumulated deficit.

Chinese companies are generally subject to an income tax at an effective rate of 25 % on income reported in the statutory financial

statements after appropriate tax adjustments.

The Company has a cumulative deficit from its foreign subsidiary of $ 3,485,177 as of

December 31, 2025, which is included in the consolidated accumulated deficit.

The Company’s

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Total income taxes expense

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – INCOME TAXES (continued)

The table below summarizes the differences between

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foreign entity did not pay any income taxes during the years ended December 31, 2025 and 2024.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – INCOME TAXES (continued)

The Company’s components of deferred taxes

as of December 31, 2024 and 2023 were as follows:

The Company’s components of deferred

taxes as of December 31, 2025 and 2024 were as follows:

Deferred tax assets

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Additionally,

as of December 31, 2024, $ 61,847 of the future utilization of the net operating loss carryforward to offset future taxable income is subject

to special tax rules which may limit their usage under IRS Section 382 (Change of Ownership) and possibly the Separate Return Limitation

Year (“SRLY”) rules.

as of December 31, 2025, $ 61,847 of the future utilization of the net operating loss carryforward to offset future taxable income

is subject to special tax rules which may limit their usage under IRS Section 382 (Change of Ownership) and possibly the Separate Return

Limitation Year (“SRLY”) rules.

A full valuation allowance has been provided against

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has been notified and assessed an IRS Section 6038 penalty of $10,000 for failure to file a foreign entity tax disclosure.

has appealed the penalty and awaits the Internal Revenue Service’s review of the appeal.

There is no assurance such appeal will

be successful.

Company has appealed the penalty and awaits the Internal Revenue Service’s review of the appeal.

There is no assurance such appeal

will be successful.

has not been audited by any jurisdiction since its inception.

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Preferred Stock

The Company designated

up to 15,000 shares of its previously undesignated preferred stock as Series A Preferred Stock.

Each share of Series A Preferred Stock

has a par value of $ 0.0001 per share and a stated value equal to $ 1,000 .

The shares of Series

A Preferred Stock have identical terms and include the terms as set forth below.

The Series A Holders are

entitled to receive, and the Company shall pay, dividends on shares of Series A Preferred Stock equal (on an as-if-converted-to-common-stock

basis, disregarding for such purpose any conversion limitations set forth in the Series A Certificate of Designations) to and in the same

form as dividends actually paid on shares of the 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 A Preferred Stock.

The Company will not pay any dividends on its common

stock unless the Company simultaneously complies with the terms set forth in the Series A Certificate of Designation.

The Company designated up to 15,000 shares

of its previously undesignated preferred stock as Series A Preferred Stock.

Each share of Series A Preferred Stock has a par value of

$ 0.0001 per share and a stated value equal to $ 1,000 .

The shares of Series A Preferred Stock have identical

terms and include the terms as set forth below.

Holders of Series A Preferred

Stock (each, a “Series A Holder” and collectively, the “Series A Holders”) are entitled to receive, and the Company

shall pay, dividends on shares of Series A Preferred Stock equal (on an as-if-converted-to-common-stock basis, disregarding for such purpose

any conversion limitations set forth in the Series A Certificate of Designations) to and in the same form as dividends actually paid on

shares of the 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 A Preferred Stock.

The Company will not pay any dividends on its common stock unless the Company simultaneously

complies with the terms set forth in the Series A Certificate of Designations.

Upon any dissolution,

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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.

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.

Each share of Series A

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

as described above, in accordance with the Nasdaq Stock Market Listing Rules, and (ii) the nine (9) month anniversary of the

Closing (the “Initial Conversion Date”), at the option of the Series A Holder, into that number of shares of common stock

(subject to the limitations set forth in Series A Certificate of Designations, determined by dividing the Stated Value of such share of

Series A Preferred Stock by the Conversion Price (as defined below)).

The Series A Holders may effect conversions by providing the Company

with the form of conversion notice attached as Annex A to the Series A Certificate of Designation.

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 (collectively, the “Conversion Price”), 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.

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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Preferred Stock (continued)

Conversion Price Adjustment:

Fundamental Transaction.

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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 Designation on the conversion of the Series A Preferred Stock), the number of shares of common

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

1 unchanged sentence

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 Designation on the conversion of the Series A Preferred Stock).

to the limitations set forth in the Series A Certificate of Designations on the conversion of the Series A Preferred Stock).

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.

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.

Voting Rights.

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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 Designation, (b) increase the number of authorized shares

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

1 unchanged sentence

Fractional Shares.

fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Series A Preferred Stock.

fraction of a share of Company common stock which a Series A Holder would otherwise be entitled to upon such conversion, the Company will,

at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the

Conversion Price or round up to the next whole share.

Notwithstanding the foregoing, nothing shall prevent any Series A Holder from converting

fractional shares of Series A Preferred Stock.

As of December 31, 2024

and 2023, 9,000 shares of Series A Preferred Stock were issued and outstanding.

On January 9, 2025, the 9,000 shares of Series A Preferred

Stock were exchanged for 5,000 shares of Series D Preferred Stock of the Company (see Note 22 – Subsequent Events - Series D Convertible

Preferred Stock).

No fractional shares

or scrip representing fractional shares shall be issued upon the conversion of the Series A Preferred Stock.

As to any fraction of a share

of Company common stock which a Series A Holder would otherwise be entitled to upon such conversion, the Company will, at its election,

either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the conversion price

or round up to the next whole share.

Notwithstanding the foregoing, nothing shall prevent any Series A Holder from converting fractional

shares of Series A Preferred Stock.

As of December 31, 2024, 9,000 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 16 - Series D Convertible

Preferred Stock Issued in Exchange of Series A Convertible Preferred Stock).

As of December 31, 2025, there were no shares of

Series A Preferred Stock remain outstanding.

Series B Convertible

2 unchanged sentences

up to 15,000 shares of its previously undesignated preferred stock as Series B Preferred Stock.

Each 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 .

AVALON GLOBOCARE CORP.

4 unchanged sentences

Preferred Stock (continued)

The shares of Series

B Preferred Stock have identical terms and include the terms as set forth below.

The Series B Holders shall

be entitled to receive, and the Company shall pay, dividends on shares of Series B Preferred Stock equal (on an as-if-converted-to-common-stock

basis, disregarding for such purpose any conversion limitations set forth in the Series B Certificate of Designations) to and in the same

form as dividends actually paid on shares of the 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 Designation.

The shares of Series B Preferred Stock have identical

terms and include the terms as set forth below.

The holders of Series B

Preferred Stock (each, a “Series B Holder” and collectively, the “Series B Holders”) shall be entitled to receive,

and the Company shall pay, dividends on shares of Series B Preferred Stock equal (on an as-if-converted-to-common-stock basis, disregarding

for such purpose any conversion limitations set forth in the Series B Certificate of Designations) to and in the same form as dividends

actually paid on shares of the Company’s common stock when, as and if such dividends are paid on shares of the common stock.

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 Series B Preferred Stock

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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) the one year anniversary of the Closing Date (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 Designation 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 effect conversions by providing the Company with the form of conversion notice attached as Annex A to the Series

B Certificate of Designation.

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 Designation.

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).

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.

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).

After the expiration of the Lock Up Period, the Series

B Holder agrees that it and any of its Affiliate transferees shall not be entitled to in any calendar month, sell a number of shares of

Company common stock into the open market in an amount exceeding more than ten percent ( 10 %) of the total number of shares of Company

common stock issuable upon conversion of the Company common stock then held by the Seller and its Affiliates.

Conversion Price Adjustment:

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Preferred Stock (continued)

Conversion Price

Fundamental Transaction.

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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 Designation on the conversion of the Series B Preferred Stock), the number of shares of common stock of

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

1 unchanged sentence

is convertible immediately prior to such Fundamental Transaction (without regard to the limitations set forth in the Series B Certificate

of Designation on the conversion of the Series B Preferred Stock).

of Designations on the conversion of the Series B Preferred Stock).

For purposes of any such conversion, the determination of the conversion

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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 Designation, (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.

the powers, preferences or rights given to the Series B Preferred Stock in the Series B Certificate of Designations, (b) increase the

number of authorized shares of Series B Preferred Stock, (c) except with respect to the Series A Preferred Stock, authorize or issue an

additional class or series of capital stock that ranks senior to the Series B Preferred Stock with respect to the distribution of assets

on liquidation or (d) enter into any agreement with respect to any of the foregoing.

Fractional Shares.

No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Series B Preferred Stock.

any fraction of a share which a Series B Holder would otherwise be entitled to upon such conversion, the Company shall at its election,

either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the Conversion Price

or round up to the next whole share.

Notwithstanding the foregoing, nothing shall prevent any Series B Holder from converting fractional

shares of Series B Preferred Stock.

As of December 31, 2024

and 2023, 11,000 shares of Series B Preferred Stock were issued and outstanding.

On February 26, 2025, all shares of the Company’s

Series B Convertible Preferred Stock were permanently surrendered and relinquished to the Company for no additional consideration (see

Note 22 – Subsequent Events - Redemption Agreement).

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

Notwithstanding the foregoing, nothing shall prevent any Series B Holder from converting fractional shares of Series B Preferred

As 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 .

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

As of December 31, 2025, there were no shares of Series B Preferred Stock remain outstanding.

Series C Convertible

1 unchanged sentence

On December 13, 2024,

the Company filed a certificate of designations of preferences, rights, and limitations of Series C Convertible Preferred Stock (the “Series

the Company filed a certificate of designations of preferences, rights, and limitations of Series C Preferred Stock (the “Series

C Certificate of Designations”) with the Department of State, Division of Corporations, of the State of Delaware, which provides

for the designation of 10,000 shares of Series C Preferred Stock of the Company, par value $ 0.0001 per share.

Each share of Series C Preferred

Stock has a stated value of $ 1,000 .

The Series C Preferred

Stock shall rank (i) senior to the Company’s common stock (the “Common Stock”) and any other class or series of capital

stock of the Company created hereafter, the terms of which specifically provide that such class or series shall rank junior to the Series

C Preferred Stock, (ii) pari passu with any class or series of capital stock of the Company created hereafter specifically ranking, by

its terms, on par with the Series C Preferred Stock, (iii) pari passu with Series B Convertible Preferred Stock of the Company (the “Series

B Preferred Stock”) with respect to its rights, preferences and restrictions, and (iv) subordinate to the Series A Convertible Preferred

Stock of the Company (the “Series A Preferred Stock”).

of Series C Preferred Stock has a stated value of $ 1,000 .

AVALON GLOBOCARE CORP.

4 unchanged sentences

Preferred Stock (continued)

Holders of the Series

C Preferred Stock shall be entitled to receive, and the Company shall pay, dividends on shares of Series C Preferred Stock equal (on an

as-if-converted-to-Common-Stock basis, disregarding for such purpose any conversion limitations hereunder) to and in the same form as

dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock.

Holders of the Series

C Preferred Stock have no voting power except as otherwise required by the Delaware General Corporation Law.

Upon any liquidation,

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

Preferred Stock shall be entitled to receive out of the assets available for distribution to stockholders, (i) after and subject to the

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

liquidation prior and in preference to the Series C Preferred Stock, including the Series A Preferred Stock, (ii) ratably with any class

or series of stock ranking on liquidation on parity with the Series C Preferred Stock and (iii) in preference and priority to the holders

of the shares of Common Stock, an amount equal to 100 % of the Stated Value of the Series C Preferred Stock, in proportion to the full

and preferential amount that all shares of the Series C Preferred Stock are entitled to receive.

Each share of Series

C Preferred Stock shall be convertible into Common Stock (the “Conversion Shares”) at a conversion per share equal to $ 2.41 ,

at the option of the holder, at any time after the later of (i) the date of the shareholder approval of the issuance of the Conversion

Shares pursuant to the rules of the Nasdaq Stock Market and (ii) the one year anniversary of the date of the first issuance of any shares

of the Series C Preferred Stock.

The 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, on par with the Series C Preferred Stock, (iii)

pari passu with Series B Preferred Stock of the Company with respect to its rights, preferences and restrictions, and (iv) subordinate

to the Series A Preferred Stock of the Company.

Holders of the Series C Preferred Stock shall

be entitled to receive, and the Company shall pay, dividends on shares of Series C Preferred Stock equal (on an as-if-converted-to-common-stock

basis, disregarding for such purpose any conversion limitations hereunder) to and in the same form as dividends actually paid on shares

of the common stock when, as and if such dividends are paid on shares of the common stock.

Holders of the Series C Preferred Stock have no

voting power except as otherwise required by the Delaware General Corporation Law.

Upon any liquidation, dissolution or winding-up

of the Company, whether voluntary or involuntary (a “Liquidation”), the holders of the Series C Preferred Stock shall be entitled

to receive out of the assets available for distribution to stockholders, (i) after and subject to the payment in full of all amounts required

to be distributed to the holders of another class or series of stock of the Company ranking on liquidation prior and in preference to

the Series C Preferred Stock, including the Series A Preferred Stock, (ii) ratably with any class or series of stock ranking on liquidation

on parity with the Series C Preferred Stock and (iii) in preference and priority to the holders of the shares of common stock, an amount

equal to 100 % of the Stated Value of the Series C Preferred Stock, in proportion to the full and preferential amount that all shares

of the Series C Preferred Stock are entitled to receive.

Each share of Series C Preferred Stock shall be

convertible into common stock (the “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 Conversion Shares.

As of December 31, 2024,

3,500 shares of Series C Preferred Stock were issued and outstanding.

Series B Convertible

Preferred Stock Issued for Equity Method Investment

On February 9, 2023, the Company issued 11,000 shares of its Series

B Convertible Preferred Stock as a part of consideration for the purchase of 40 % of equity interest of Lab Services MSO.

Preferred Stock is convertible into shares of the Company’s common stock at a conversion price per share equal to $ 56.70 , which

approximated the market price at the date of closing, or an aggregate of 194,004 shares of the Company’s common stock and are subject

to a lock-up period and restrictions on sale.

Series C Convertible

Preferred Stock Sold for Cash

During the year ended December 31, 2024, the Company sold an aggregate

of 3,500 shares of Series C Convertible Preferred stock and received proceeds of $ 3,500,000 .

Each share of Series C Convertible Preferred

Stock is convertible into common stock of the Company (the “Conversion Shares”) at a conversion per share equal to $ 2.41 ,

which approximated the market price at the date of transaction, at the option of the holder, at any time after the later of (i) the date

of the shareholder approval of the issuance of the Conversion Shares pursuant to the rules of the Nasdaq Stock Market (the “Shareholder

Approval”) and (ii) the one year anniversary of the date of the first issuance of any shares of the Series C Convertible Preferred

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.

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

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 December 31, 2025 and 2024, 3,800 and 3,500 shares

of Series C Preferred Stock were issued and outstanding, respectively.

Series D Convertible Preferred Stock

On 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 .

The Series D Preferred Stock shall rank (i) senior

to the Company’s common stock and any other class or series of capital stock of the Company created hereafter, the terms of which

specifically provide that such class or series shall rank junior to the Series D Preferred Stock, (ii) pari passu with any class or series

of capital stock of the Company created hereafter specifically ranking, by its terms, on par with the Series D Preferred Stock, (iii)

pari passu with the Series B Preferred Stock of the Company with respect to its rights, preferences and restrictions, and (iv) pari passu

with the Series C Preferred Stock of the Company.

Holders of the Series D Preferred Stock have no

voting power except as otherwise required by the Delaware General Corporation Law.

Upon any liquidation, dissolution or winding-up

of the Company, whether voluntary or involuntary (a “Liquidation”), the holders of the Series D Preferred Stock shall be entitled

to receive out of the assets available for distribution to stockholders, (i) after and subject to the payment in full of all amounts required

to be distributed to the holders of another class or series of stock of the Company ranking on liquidation prior and in preference to

the Series D Preferred Stock, including the Series A Preferred Stock, (ii) ratably with any class or series of stock ranking on liquidation

on parity with the Series D Preferred Stock and (iii) in preference and priority to the holders of the shares of common stock, an amount

equal 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.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 – EQUITY

Series D Convertible Preferred Stock (continued)

Each share of Series D Preferred Stock shall be

convertible into common stock (the “Series D Conversion Shares”) at a conversion per share equal to $ 2.41 , at the option of

the holder, at any time after the Company has obtained shareholder approval for the issuance of the Series D Conversion Shares pursuant

to the rules of the Nasdaq Stock Market.

In addition, the holder shall not have the right to convert any portion of the Series D Preferred

Stock if, after giving effect to the conversion, such holder (together with its affiliates) would beneficially own in excess 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

As of December 31, 2025, 5,000 shares

of Series D Preferred Stock were issued and outstanding.

Series E Convertible Preferred Stock

12, 2025, the Company filed a certificate of designations of preferences, rights, and limitations of Series E Non-Voting Convertible Preferred

Stock (the “Series E Certificate of Designations”) with the Department of State, Division of Corporations, of the State of

Delaware, which provides for the designation of 19,500 shares of Series E Preferred Stock of the Company, par value $ 0.0001 per share,

upon the terms and conditions as set forth in the Series E Certificate of Designations.

Each share of Series E Preferred Stock has a Stated

Value of $ 1,000 .

E 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 E Preferred Stock,

(ii) pari passu with any class or series of capital stock of the Company

created hereafter specifically ranking, by its terms, on par with the Series E Preferred Stock, (iii) pari passu with

Series C Convertible Preferred Stock of the Company with respect to its rights, preferences and restrictions, and (iv) pari

passu the Series D Convertible Preferred Stock of the Company.

Holders of the Series E Preferred Stock shall

be entitled to receive, and the Company shall pay, dividends on shares of Series E Preferred Stock equal (on an as-if-converted-to-Common-Stock

basis, disregarding for such purpose any conversion limitations hereunder) to and in the same form as dividends actually paid on shares

of the Common Stock when, as and if such dividends are paid on shares of the Common Stock.

of the Series E Preferred Stock have no voting power except as otherwise required by the Delaware General Corporation Law.

Notwithstanding

the foregoing, in addition, as long as any shares of Series E Preferred Stock are outstanding, the Corporation shall not, without the

affirmative vote of the Holders of a majority of the then outstanding shares of the Series E Preferred Stock, voting as a separate class,

(a) alter or change adversely the powers, preferences or rights given to the Series E Preferred Stock in this Certificate of Designation,

(b) increase the number of authorized shares of Series E Preferred Stock, (c) authorize or issue an additional class or series of capital

stock that ranks senior to the Series E Preferred Stock with respect to the distribution of assets on liquidation, or (d) enter into any

agreement with respect to any of the foregoing.

Upon any liquidation, dissolution or winding-up

of the Company, whether voluntary or involuntary (a “Liquidation”), the holders of the Series E Preferred Stock shall be entitled

to receive out of the assets available for distribution to stockholders, (i) after and subject to the payment in full of all amounts required

to be distributed to the holders of another class or series of stock of the Company ranking on liquidation prior and in preference to

the Series E Preferred Stock, including the Series A Preferred Stock, (ii) ratably with any class or series of stock ranking on liquidation

on parity with the Series E Preferred Stock and (iii) in preference and priority to the holders of the shares of Common Stock, an amount

equal to the greater of (i) 100 % of the Stated Value of the Series E Preferred Stock, in proportion to the full and preferential amount

that all shares of the Series E Preferred Stock are entitled to receive or (ii) such amount per share as would have been payable had all

shares of Series E Preferred Stock been converted into Common Stock (without regard to any limitations on conversion set forth herein

or otherwise) pursuant to Section 6 immediately prior to such Liquidation.

Each share of Series E Preferred Stock shall be

convertible into Common Stock (the “Conversion Shares”), at any time from and after May 12, 2026, or such earlier time as

consented to by the Company in writing at the option of the Holder thereof, into that number of shares of Common Stock (subject to certain

limitations, determined by dividing the Stated Value of such share of Series E Preferred Stock by the Conversion Price of $ 1.50 .

the holder shall not have the right to convert any portion of the Series E Preferred Stock if, after giving effect to the conversion,

such holder (together with its affiliates) would beneficially own in excess 4.99 % of the number of shares of the Common Stock outstanding

immediately after giving effect to the issuance of shares of Common Stock issuable upon conversion of Series E Preferred Stock held by

the applicable holder.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 – EQUITY

Series E Convertible Preferred Stock (continued)

In addition, the Company shall not issue any shares

of Common Stock upon conversion of the Series E Preferred Stock or otherwise pursuant to the terms of the Series E Certificate of Designation

if the issuance of such shares of Common Stock would exceed the aggregate number of shares of Common Stock which the Company may issue

upon exercise or conversion (as the case may be) of the Series E Preferred Stock without breaching the Company’s obligations under

the rules and regulations the listing rules of the Company’s Principal Market (the maximum number of shares of Common Stock which

may be issued without violating such rules and regulations, the “Exchange Cap”), except that such limitation shall not apply

in the event that the Company (A) obtains the approval of its stockholders as required by the applicable rules and regulations of the

Principal Market for issuances of shares of Common Stock in excess of such amount (the “Stockholder Approval Date”) or (B)

obtains a written opinion from outside counsel to the Company that such approval is not required, which opinion shall be reasonably satisfactory

to the Required Holders (as defined in the Series E Certificate of Designation).

On December 12, 2025, the Company issued 19,500 shares

of its Series E Convertible Preferred Stock as consideration for the purchase of 100 % of equity interest of RPM.

The Series E Preferred

Stock is convertible into shares of the Company’s common stock at a conversion price per share equal to $ 1.50 , subject to certain

conditions which include, among others, limiting the number of shares of Series E Preferred Stock that can convert if such conversion

would exceed the aggregate number of shares of Common Stock which the Company may issue upon such conversion without breaching the Company’s

obligations under the NASDAQ listing rules and regulations (See Note 4).

The Company evaluated the features of the Series

E Convertible Preferred Stock under ASC 480, and classified them as permanent equity because the Series E Convertible Preferred Stock

is not mandatorily or contingently redeemable at the 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

as Convertible Note Payable Commitment Fee

As of December 31, 2025, 19,500 shares

of Series D Preferred Stock were issued and outstanding.

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 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 year ended December

31, 2025 that increased additional paid-in capital and income available to common shareholders in calculating earnings per share.

Each share of Series D Preferred Stock is convertible

into common stock of the Company (the “Series D Conversion Shares”) at a conversion per share equal to $ 2.41 , which approximated

the market price at the date of transaction, at the option of the holder, at any time after the Company has obtained shareholder approval

for the issuance of the Series D Conversion Shares pursuant to the rules of the Nasdaq Stock Market.

The Company evaluated the features of the Series

D Preferred Stock under ASC 480, and classified them as permanent equity because the Series D Preferred Stock is not mandatorily or contingently

redeemable at the 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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 – EQUITY

Series B Convertible Preferred Stock Extinguished

Related to Sale of Equity Method Investment

During the first quarter of 2025, to preserve

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

the Company and Lab Services MSO entered into a Redemption and Abandonment Agreement, whereby Lab Services MSO redeemed 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.

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

During the year ended

December 31, 2023, the Company issued a total of 11,333 shares of its common stock as commitment fee for the purchases of May 2023 Convertible

Note, July 2023 Convertible Note, and October 2023 Convertible Note.

These shares were valued at $ 236,400 , the fair market values on the

grant dates using the reported closing share prices on the dates of grant, and the Company recorded it as debt discount.

December 31, 2024, the Company sold an aggregate of 3,500 shares of Series C Convertible Preferred stock and received proceeds

of $ 3,500,000 .

Each share of Series C Convertible Preferred Stock is convertible into common stock of the Company (the “Conversion

Shares”) at a conversion per share equal to $ 2.41 , which approximated the market price at the date of transaction, at the option

of the holder, at any time after the later of (i) the date of the shareholder approval of the issuance of the Conversion Shares pursuant

to the rules of the Nasdaq Stock Market (the “Shareholder Approval”) and (ii) the one year anniversary of the date of the

first issuance of any shares of the Series C Convertible Preferred Stock.

In July 2025, 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 .

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 as Convertible Note Payable

Commitment Fee

During the year ended

3 unchanged sentences

the reported closing share prices on the dates of grant, and the Company recorded it as debt discount.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – EQUITY

In 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.

shares were valued at $ 26,800 , the fair market value on the grant date using the reported closing share price on the date of grant, and

the Company recorded it as debt discount (See Note 11 - July 2025 Convertible Note ).

Common Shares Sold

3 unchanged sentences

During the year ended

December 31, 2023, Roth sold an aggregate of 30,442 shares of common stock at an average price of $ 20.85 per share to investors

and the Company recorded net proceeds of $ 414,396 , net of commission and other offering costs of $ 220,995 .

During the year ended

December 31, 2024, Roth sold an aggregate of 281,843 shares of common stock at an average price of $ 10.14 per share to

investors and the Company recorded net proceeds of $ 2,544,311 , net of commission and other offering costs of $ 313,541 .

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 – EQUITY

Common Shares and Warrants Sold for Cash

On July 14, 2025, the Company entered into that

certain securities purchase agreement (the “Securities Purchase Agreement”), with an accredited investor, Brown Stone Capital

(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 .

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 of $ 25,000 .

The fair value of the pre-funded warrants

was $ 832,576 and was based on the Black-Scholes pricing model.

Input assumptions used were as follows:

stock price per share of $ 2.35 ,

a risk-free interest rate 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 basis.

Common Shares Issued for Services

year ended December 31, 2023, the Company issued a total of 24,089 shares of its common stock for services rendered.

These shares were

valued at $ 999,655 , 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 $ 834,784 for the year ended December 31, 2023 and reduced accrued liabilities of $ 164,871 .

During the year ended December 31, 2024, the Company

issued a total of 145,153 shares of its common stock for services rendered.

These shares were valued at $ 530,350 , the fair market values

on the grant dates using the reported closing share prices on the dates of grant, and the Company recorded stock-based compensation expense

of $ 470,350 for the year ended December 31, 2024 and reduced accrued liabilities of $ 60,000 .

These shares were valued at $530,350, the fair market

values on the grant dates using the reported closing share prices on the dates of grant, and the Company recorded stock-based compensation

expense of $ 470,350 for the year ended December 31, 2024 and reduced accrued liabilities of $ 60,000 .

During the year ended December 31, 2025, the Company

issued a total of 606,494 shares of its common stock for services rendered and to be rendered.

These shares were valued at $ 1,880,786 ,

the fair market values on the grant dates using the reported closing share prices on the dates of grant, and the Company recorded stock-based

compensation expense of $ 1,829,871 for the year ended December 31, 2025 and reduced accrued liabilities of $ 42,385 and recorded

prepaid expense of $8,530 as of December 31, 2025 which will be amortized over the rest of corresponding service periods.

Common Shares Issued

1 unchanged sentence

On November 18, 2024,

the Company issued 42,381 shares of its common stock upon cashless exercise of warrants to purchase 6,278 shares of common stock.

pursuant to the terms of related warrant agreements, the Company issued 42,381 shares of its common stock upon cashless exercise of warrants.

In March and April 2025, pursuant to the terms

of related warrant agreements, the Company issued an aggregate of 429,181 shares of its common stock upon cashless exercise

Common Shares Issued

for Adjustment for 1:15 Reverse Split

The Company issued 206,033

shares of its common stock, resulting from the rounding up of the fractional shares at the one-for-fifteen reverse stock split effected

on October 28, 2024.

The Company issued 206,033 shares

of its common stock, resulting from the rounding up of the fractional shares at the one-for-fifteen reverse stock split effected on October

Pre-Funded Warrants

1 unchanged sentence

On December 15, 2024,

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

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 as they are freestanding

financial instrument that is immediately exercisable, does not embody an obligation for the Company to repurchase its own shares and permit

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

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.

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 as they

are freestanding financial instrument that is immediately exercisable, does not embody an obligation for the Company to repurchase its

own shares and permit the holder to receive a fixed number of shares of common stock upon exercise.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 – EQUITY

Common Shares Issued for Debt Conversion

On May 29, 2025, the Company and the June 2024

Convertible Note holder entered into that certain waiver, pursuant to which, during the period from June 1, 2025 through December 31,

2025, the investor converted its June 2024 Convertible Note in the principal amount of $ 2,010,827 and unpaid interest of $ 233,795 into 2,244,622 shares

of common stock of the Company at a per share price of $ 1.00 (See Note 11).

The following table summarizes

1 unchanged sentence

Options Outstanding Options Exercisable

Range of Exercise Price Number

Outstanding at

2024 Weighted Average Remaining Contractual Life (Years) Weighted Average

Exercise Price

Number Exercisable at

2024 Weighted Average Exercise

2025 Weighted

Life (Years) Weighted

Exercisable at

2025 Weighted

$ 2.93 – 31.20 15,419 2.82 $ 6.49 15,419 $ 6.49

2 unchanged sentences

$ 2.93 – 228.00 41,169 2.34 $ 79.43 41,169 $ 79.43

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – EQUITY

Options (continued)

Stock option activity

4 unchanged sentences

Outstanding at December 31, 2024

Expired / cancelled / forfeited

Outstanding at December 31, 2025

Options exercisable at December 31, 2025

Options expected to vest

The aggregate intrinsic value of stock options

outstanding and stock options exercisable at December 31, 2024 was approximately $ 1,900 an $ 900 , respectively.

The aggregate intrinsic value of both stock options

outstanding and stock options exercisable at December 31, 2025 was $ 0 .

The fair values of options granted during the

year ended December 31, 2025 were estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

volatility of 83.10 % - 96.36 %, risk-free rate of 3.47 % - 4.79 %, annual dividend yield of 0 %, and expected life

of 3.00 - 5.00 years.

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 year ended December 31, 2025 was $ 6,115 .

5 unchanged sentences

For the years ended December 31, 2025 and 2024,

stock-based compensation expense associated with stock options granted amounted to $ 51,159 and $ 284,977 , of which, $ 19,878 and

$ 172,943 was recorded as compensation and related benefits, $ 31,281 and $ 106,565 was recorded as professional fees, and

$ 0 and $ 5,469 was recorded as research and development expenses, respectively.

stock-based compensation expense (adjustment) associated with stock options granted amounted to $(13,409) and $ 51,159 , of which, $ 14,829 and

$ 19,878 , respectively, was recorded as compensation and related benefits, and $( 28,238 ) and $ 31,281 was recorded as professional fees,

respectively.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 – EQUITY

Options (continued)

A summary of the status of the Company’s

5 unchanged sentences

Nonvested at December 31, 2025

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – EQUITY

Warrants (Except Pre-Funded Warrants)

2 unchanged sentences

Warrants Outstanding Warrants Exercisable

Exercise Price Number

Range of Exercise Price Number

Outstanding at

2024 Weighted Average

Life (Years) Weighted

Exercise Price Number

Exercisable at

, 2024 Weighted Average Exercise

2025 Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Number

at December 31,

2025 Weighted

$ 7.50 – 37.50 86,593 3.42 $ 8.01 86,593 $ 8.01

4 unchanged sentences

for the years ended December 31, 2025 and 2024 was as follows:

Number of Warrants

Weighted Average Exercise Price

Outstanding at January 1, 2024

Outstanding at December 31, 2023

Cancelled (*)

Outstanding at December 31, 2024

Warrants exercisable at December 31, 2024

Warrants expected to vest

Outstanding and exercisable at December 31, 2025

* Second Warrant, which was issued on May 23, 2023, July 6,

1 unchanged sentence

Second Warrant, which was issued on June 5, 2024, is still outstanding

as of December 31, 2024.

as of December 31, 2025 and 2024.

The aggregate intrinsic value of both stock warrants

outstanding and stock warrants exercisable at December 31, 2025 was $ 0 .

Warrants Issued in

In connection with the

issuance of May 2023 Convertible Note (See Note 10), the Company issued (i) a warrant to purchase 8,333 shares of common stock with an

exercise price of $67.50 exercisable until the five-year anniversary of May 23, 2023, and (ii) a warrant to purchase 7,033 shares of common

stock with an exercise price of $48.00 exercisable until the five-year anniversary of May 23, 2023, which warrant was never fair valued

and was cancelled and extinguished against payment of the May 2023 Convertible Note, to Mast Hill;

and issued a warrant to purchase 667

shares of common stock with an exercise price of $67.50 exercisable until the five-year anniversary of May 23, 2023 to a third party as

a finder’s fee.

Based upon the Company’s

analysis of the criteria contained in ASC 815, the Company determined that all the warrants issued to Mast Hill and a third party as a

finder’s fee meet the definition of derivative liability, as the Company cannot avoid a net cash settlement under certain circumstances.

Accordingly, the fair value of the 9,000 warrants with an exercise price of $ 67.50 exercisable until the five-year anniversary of May

23, 2023 was classified as derivative liability on May 23, 2023.

The fair values of the 9,000 warrants with an exercise price of $ 67.50

exercisable until the five-year anniversary of May 23, 2023 issued on May 23, 2023 were computed using the Black-Scholes option-pricing

model with the following assumptions:

stock price of $ 29.40 , volatility of 88.80 %, risk-free rate of 3.76 %, annual dividend yield of 0 %

and expected life of 5 years.

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – EQUITY

Warrants (Except Pre-Funded Warrants) (continued)

Warrants Issued in

May 2023 (continued)

The warrants with an

exercise price of $ 67.50 exercisable until the five-year anniversary of May 23, 2023 issued to Mast Hill to purchase 8,333 shares of the

Company’s common stock were treated as a discount on the convertible note payable and were valued at $ 127,654 and were amortized

over the term of the May 2023 Convertible Note.

The warrants with an

exercise price of $ 67.50 exercisable until the five-year anniversary of May 23, 2023 issued to a third party as a finder’s fee to

purchase 667 shares of the Company’s common stock were treated as convertible debt issuance costs and were valued at $ 11,162 and

were amortized over the term of the May 2023 Convertible Note.

Warrants Issued in

In connection with the

issuance of July 2023 Convertible Note (See Note 10), the Company issued (i) a warrant to purchase 2,778 shares of common stock with an

exercise price of $67.50 exercisable until the five-year anniversary of July 6, 2023, and (ii) a warrant to purchase 2,344 shares of common

stock with an exercise price of $48.00 exercisable until the five-year anniversary of July 6, 2023, which warrant was never fair valued

and was cancelled and extinguished against payment of the July 2023 Convertible Note, to Firstfire;

and issued a warrant to purchase 222

shares of common stock with an exercise price of $67.50 exercisable until the five-year anniversary of July 6, 2023 to a third party as

a finder’s fee.

Based upon the Company’s

analysis of the criteria contained in ASC 815, the Company determined that all the warrants issued to Firstfire and a third party as a

finder’s fee meet the definition of derivative liability, as the Company cannot avoid a net cash settlement under certain circumstances.

Accordingly, the fair value of the 3,000 warrants with an exercise price of $ 67.50 exercisable until the five-year anniversary of July

6, 2023 was classified as derivative liability on July 6, 2023.

The fair values of the 3,000 warrants with an exercise price of $ 67.50

exercisable until the five-year anniversary of July 6, 2023 issued on July 6, 2023 were computed using the Black-Scholes option-pricing

model with the following assumptions:

stock price of $ 21.30 , volatility of 88.52 %, risk-free rate of 4.37 %, annual dividend yield of 0 %

and expected life of 5 years.

The warrants with an

exercise price of $ 67.50 exercisable until the five-year anniversary of July 6, 2023 issued to Firstfire to purchase 2,778 shares of the

Company’s common stock were treated as a discount on the convertible note payable and were valued at $ 28,691 and were amortized

over the term of the July 2023 Convertible Note.

The warrants with an exercise price of $ 67.50

exercisable until the five-year anniversary of July 6, 2023 issued to a third party as a finder’s fee to purchase 222 shares of

the Company’s common stock were treated as convertible debt issuance costs and were valued at $ 2,435 and were amortized over the

term of the July 2023 Convertible Note.

Warrants Issued in

In connection with the

issuance of October 2023 Convertible Note (See Note 10), the Company issued (i) a warrant to purchase 7,000 shares of common stock with

an exercise price of $37.50 exercisable until the five-year anniversary of October 9, 2023, (ii) a warrant to purchase 5,834 shares of

common stock with an exercise price of $27.00 exercisable until the five-year anniversary of October 9, 2023, which warrant was never

fair valued and was cancelled and extinguished against payment of the October 2023 Convertible Note, to Mast Hill and Firstfire;

a warrant to purchase 560 shares of common stock with an exercise price of $37.50 exercisable until the five-year anniversary of October

9, 2023 to a third party as a finder’s fee.

Based upon the Company’s analysis of the

criteria contained in ASC 815, the Company determined that all the warrants issued to Mast Hill and Firstfire and a third party as a finder’s

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

the fair value of the 7,560 warrants with an exercise price of $ 37.50 exercisable until the five-year anniversary of October 9, 2023 was

classified as a derivative liability on October 9, 2023.

The fair values of the 7,560 warrants with an exercise price of $ 37.50 exercisable

until the five-year anniversary of October 9, 2023 issued on October 9, 2023 were computed using the Black-Scholes option-pricing model

with the following assumptions:

stock price of $ 11.55 , volatility of 89.70 %, risk-free rate of 4.75 %, annual dividend yield of 0 % and

expected life of 5 years.

The warrants with an

exercise price of $ 37.50 exercisable until the five-year anniversary of October 9, 2023 issued to Mast Hill and Firstfire to purchase

7,000 shares of the Company’s common stock were treated as a discount on the convertible note payable and were valued at $ 39,848

and were amortized over the term of the October 2023 Convertible Note.

GLOBOCARE CORP.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 – EQUITY

1 unchanged sentence

Warrants Issued in

October 2023 (continued)

The warrants with an exercise price of $ 37.50

exercisable until the five-year anniversary of October 9, 2023 issued to a third party as a finder’s fee to purchase 560 shares

of the Company’s common stock were treated as convertible debt issuance costs and were valued at $ 3,380 and were amortized over

the term of the October 2023 Convertible Note.

Warrants Issued in

In connection with the

36 unchanged sentences

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

determined the probability of failing to make an amortization payment when due to be remote and as such the fair value of the 80,000 warrants

with an exercise price of $ 7.50 exercisable until the five-year anniversary of June 5, 2024, which warrant shall be cancelled and

extinguished against payment of the June 2024 Convertible Note, has been estimated to be zero.

Accordingly, the fair value of the 72,000 warrants

with an exercise price of $ 9.75 exercisable until the five-year anniversary of June 5, 2024 was classified as a derivative liability

on June 5, 2024.

The fair values of the 72,000 warrants with an exercise price of $ 9.75 exercisable until the five-year

anniversary of June 5 , 2024 issued on June 5, 2024 were computed using the Black-Scholes option-pricing model with the following assumptions:

stock price of $ 10.39 , volatility of 85.72 %, risk-free rate of 4.31 %, annual dividend yield of 0 % and expected life of 5 years.

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 80,000 warrants with an exercise price of $ 7.50 exercisable until the five-year anniversary

of June 5, 2024, which warrant shall be cancelled and extinguished against payment of the June 2024 Convertible Note, has been estimated

Accordingly, the fair value of the 72,000 warrants with an exercise price of $ 9.75 exercisable until the five-year

anniversary of June 5, 2024 was classified as a derivative liability on June 5, 2024.

The fair values of the 72,000 warrants

with an exercise price of $ 9.75 exercisable until the five-year anniversary of June 5, 2024 issued on June 5, 2024 were computed

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

stock price of $ 10.39 , volatility of 85.72 %, risk-free

rate of 4.31 %, annual dividend yield of 0 % and expected life of 5 years .

The warrants with an exercise price of $ 9.75 exercisable

until the five-year anniversary of June 5, 2024 issued to Mast Hill to purchase 66,667 shares of the Company’s common

stock were treated as a discount on the convertible note payable and were valued at $ 418,194 and will be amortized over the term

of the June 2024 Convertible Note.

GLOBOCARE CORP.

stock were treated as a discount on the convertible note payable and were valued at $ 418,194 and were amortized over the term of

the June 2024 Convertible Note.

The warrants with an exercise price of $ 9.75 exercisable

until the five-year anniversary of June 5, 2024 issued to a third party as a finder’s fee to purchase 5,333 shares of

the Company’s common stock were treated as convertible debt issuance costs and were valued at $ 39,221 and were amortized over

the term of the June 2024 Convertible Note.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 16 – EQUITY

Warrants (Except Pre-Funded Warrants) (continued)

Warrants Issued in

June 2024 (continued)

The warrants with an exercise price of $ 9.75 exercisable

until the five-year anniversary of June 5, 2024 issued to a third party as a finder’s fee to purchase 5,333 shares of

the Company’s common stock were treated as convertible debt issuance costs and were valued at $ 39,221 and will be amortized

over the term of the June 2024 Convertible Note.

Warrants Cancelled

3 unchanged sentences

Warrants Exercised

in November 2024

On November 18, 2024,

6,278 warrants were cashless exercised.

A summary of the status

of the Company’s nonvested stock warrants issued as of December 31, 2024 and changes during the years ended December 31, 2024 and

2023 was presented below:

On November 18, 2024, 6,278 warrants

were cashless exercised.

In March and April 2025, 87,250 warrants were

cashless exercised.

summary of the status of the Company’s nonvested stock warrants issued as of December 31, 2025 and changes during the years ended

December 31, 2025 and 2024 was presented below:

Number of Warrants

3 unchanged sentences

Nonvested at December 31, 2025

Pre-Funded Warrants

number of pre-funded warrants outstanding as of December 31, 2025 is as follows:

Number Outstanding

Weighted Average Exercise Price

Pre-funded warrants issued in December 2024

Pre-funded warrants issued in July 2025

Outstanding at December 31, 2025

summary of pre-funded warrant activity during the years ended December 31, 2025 and 2024 is as follows:

Number of Pre-Funded Warrants

Weighted Average Exercise Price

Outstanding at January 1, 2024

Pre-funded warrants issued

Outstanding at December 31, 2024

Pre-funded warrants issued

Outstanding at December 31, 2025

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17 - STATUTORY

RESERVE AND RESTRICTED NET ASSETS

The Company’s PRC

subsidiary, Avalon Shanghai, is restricted in its ability to transfer a portion of its net asset to the Company.

The payment of dividends

by entities organized in China is subject to limitations, procedures and formalities.

Regulations in the PRC currently permit payment

of dividends only out of accumulated profits as determined in accordance with accounting standards and regulations in China.

The Company is required

to make appropriations to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus reserve, based

on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”).

Appropriations

to the statutory surplus reserve are required to be at least 10 % of the after-tax net income determined in accordance with PRC GAAP

until the reserve is equal to 50 % of the entity’s registered capital.

Appropriations to the discretionary surplus reserve are

made at the discretion of the Board of Directors.

The statutory reserve may be applied against prior year losses, if any, and may be used

for general business expansion and production or increase in registered capital, but are not distributable as cash dividends.

did not make any appropriation to statutory reserve for Avalon Shanghai during the years ended December 31, 2024 and 2023 as it incurred

net loss in the periods.

The Company’s PRC subsidiary, Avalon Shanghai,

is restricted in its ability to transfer a portion of its net asset to the Company.

The payment of dividends by entities organized in

China is subject to limitations, procedures and formalities.

Regulations in the PRC currently permit payment of dividends only out of

accumulated profits as determined in accordance with accounting standards and regulations in China.

The Company is required to make appropriations

to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus reserve, based on after-tax net income

determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”).

Appropriations to the statutory

surplus reserve are required to be at least 10 % of the after-tax net income determined in accordance with PRC GAAP until the reserve

is equal to 50 % of the entity’s registered capital.

Appropriations to the discretionary surplus reserve are made at the discretion

of the Board of Directors.

The statutory reserve may be applied against prior year losses, if any, and may be used for general business

expansion and production or increase in registered capital, but are not distributable as cash dividends.

The Company did not make

any appropriation to statutory reserve for Avalon Shanghai during the years ended December 31, 2025 and 2024 as it incurred net loss in

As of both December 31, 2025 and 2024, the restricted amount as determined pursuant to PRC statutory laws totaled $ 6,578 .

Relevant PRC laws and

regulations restrict the 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 December 31, 2024 and 2023, total restricted net assets amounted to $ 1,206,578 and $ 1,106,578 , respectively.

GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

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.

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 December 31,

2025 and 2024, total restricted net assets amounted to $ 1,206,578 .

NOTE 18 – NONCONTROLLING

1 unchanged sentence

31, 2025, Dr.

Yu Zhou, former director and former co-chief executive officer of Genexosome, who owns 40 % of the equity interests of Genexosome,

which is not under the Company’s control.

During the years ended December 31, 2024 and 2023, the Company did not allocate any net

loss and foreign currency translation adjustment to the noncontrolling interest holder due to its inability to satisfy these deficits.

Yu Zhou, former director and former co-chief executive officer of Genexosome, who owns 40 % of the equity interests

of Genexosome, which is not under the Company’s control.

During the years ended December 31, 2025 and 2024, the Company did not

allocate any net loss to the noncontrolling interest holder due to its inability to satisfy these deficits.

NOTE 19 – CONDENSED

FINANCIAL INFORMATION OF THE PARENT COMPANY

Pursuant to the requirements

of Rule 12-04(a), 5-04(c) and 4-08(e)(3) of Regulation S-X, the condensed financial information of the parent company shall be filed when

the restricted net assets of consolidated subsidiary exceed 25 % of consolidated net assets as of the end of the most recently completed

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.

The 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.

Pursuant to the requirements of Rule 12-04(a),

5-04(c) and 4-08(e)(3) of Regulation S-X, the condensed financial information of the parent company shall be filed when the restricted

net assets of consolidated subsidiary 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

The 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.

NOTE 20 - CONCENTRATIONS

The following

table sets forth information as to each customer that accounted for 10 % or more of the Company’s revenues for the years ended December

accounted for 10 % or more of the Company’s purchase during the years ended December

31, 2025 and 2024.

Years Ended December 31,

One customer, which is

a third party, whose outstanding receivable accounted for 10 % or more of the Company’s total outstanding rent receivable at December

31, 2024, accounted for 76.9 % of the Company’s total outstanding rent receivable at December 31, 2024.

Two customers, of which

one is a related party and the other is a third party, whose outstanding receivables accounted for 10 % or more of the Company’s

total outstanding rent receivable at December 31, 2023, accounted for 80.6 % of the Company’s total outstanding rent receivable at

December 31, 2023.

accounted for 10 % or more of the Company’s purchase during the years ended December 31, 2024 and 2023.

21 – SEGMENT INFORMATION

1 unchanged sentence

management reporting structure as its foundation to reflect how the Company manages the businesses internally.

The management reporting

structure is composed of two strategic business units, mainly organized by services, led by the Company’s President and Chief Executive

Officer, who is its Chief Operating Decision Maker.

Using the accounting guidance on segment reporting, the Company determined that its

two operating segments are aligned with its two reportable segments corresponding to its strategic business units.

GLOBOCARE CORP.

On December 12, 2025, the Company purchased 100 %

During the year ended December 31, 2025, the management reporting structure was composed of two strategic business units, mainly

organized by services, led by the Company’s 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 year ended December 31, 2024, the management

reporting structure was composed of one strategic business unit, mainly organized by services, led by the Company’s 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 unit.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 20 – SEGMENT

INFORMATION (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

21 – SEGMENT INFORMATION (continued)

On February 9, 2023, the Company purchased 40 %

of Lab Services MSO.

Commencing from the purchase date, February 9, 2023, the Company was active in the management of Lab Services MSO.

During the years ended December 31, 2024 and 2023, the Company operated in two reportable business segments:

(1) the real property operating

segment, and (2) laboratory testing services segment (which commenced with the purchase date, February 9, 2023) since Lab Services MSO’s

operating results are 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 reviews the operating results and performance of Lab Services

MSO, which is the Company’s equity method investee.

See Note 22—Subsequent Events—Redemption Agreement.

The accounting policies for the segments are the

same as those described in Note 3.

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.

Beginning in February

2025, the Company no longer offers laboratory services.

During the year ended December 31, 2025, the Company operated in two reportable

business segments:

(1) the AI generated polishing segment (which commenced on December 12, 2025), and (2) laboratory testing services

segment (which ended on February 26, 2025) since Lab Services 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.

year ended December 31, 2024, the Company operated in one reportable business segment:

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.

The 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;

loss from equity method investment

– Lab Services MSO is calculated by subtracting amortization of intangible assets acquired from acquisition and impairment of goodwill

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;

and AI generated publishing income is calculated by subtracting

AI generated publishing cost of revenue and AI generated publishing operating expenses from AI generated publishing revenue.

and certain expenses related to corporate activities are not allocated to the segments.

Discontinued operations are not included in the

applicable reportable segments.

Information with respect to these reportable business

segments for the years ended December 31, 2025 and 2024 was as follows:

Year Ended December 31, 2025

Income from equity method investment - Lab Services MSO

Other operating expenses

( 7,889,483 )

( 7,984,036 )

Other (expense) income:

Interest expense

( 1,456,694 )

Loss on extinguishment of debt

( 9,076,587 )

Net income (loss)

$ ( 17,817,097 )

$ ( 17,518,873 )

Year Ended December 31, 2024

Loss from equity method investment - Lab Services MSO

$ ( 846,588 )

Other operating expenses

( 3,994,662 )

Other expense:

Interest expense

( 1,659,745 )

Other expense

$ ( 846,588 )

$ ( 6,193,016 )

$ ( 7,039,604 )

Identifiable long-lived tangible assets at December 31, 2025 and 2024

Corporate/Other

Identifiable long-lived tangible assets at December 31, 2025 and 2024

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 22 – COMMITMENTS

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

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 December 31, 2025 and 2024, the accrued litigation

settlement amounted to $ 363,450 and $ 373,450 , respectively.

Leases Commitment

The Company is a party to leases for office space.

These lease agreements expire through December 2026.

Rent expense under all operating leases amounted to approximately $ 97,000 and

$ 127,000 for the years ended December 31, 2025 and 2024, respectively.

Supplemental cash flow information related to leases

for the years ended December 31, 2025 and 2024 is as follows:

Years Ended December 31,

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows paid for operating lease

Right-of-use assets obtained in exchange for lease obligation:

Operating lease

The following table summarizes the maturity of lease liabilities under

operating lease as of December 31, 2025:

For the Year Ending December 31:

Operating Lease

2027 and thereafter

Total lease payments

Amount of lease payments representing interest

Total present value of operating lease liabilities

NOTE 23 – SUBSEQUENT

The Company evaluated

subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements were issued.

Based upon this review, other than as described below, the Company did not identify any subsequent events that would have required adjustment

or disclosure in the financial statements.

Common Shares Issued for Debt Conversion

During the period from January 1, 2026 through

March 17, 2026, an investor converted its convertible note in the principal amount of $ 545,949 and unpaid interest of $ 5,525 into 551,474

shares of common stock of the Company at a per share price of $ 1.00 .

Common Shares Issued for Pre-Funded Warrants

In January 2026, the Company issued an aggregate

of 354,257 shares of its common stock upon cashless exercise of pre-funded warrants.

Common Shares Issued for Services

During the period from January 1, 2026 through

March 17, 2026, the Company issued a total of 505,000 shares of its common stock for services rendered and to be rendered.

shares were valued at $ 522,800 , the fair market values on the grant dates using the reported closing share prices on the dates of grant.

Common Shares Issued for Warrant Exercise

In February 2026, pursuant to the terms of related

warrant agreements, the Company issued an aggregate of 1,268,672 shares of its common stock upon cashless exercise of warrants.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 23 – SUBSEQUENT EVENTS (continued)

Securities Purchase

On February 11, 2026,

the Company entered into a securities purchase agreement with an accredited investor pursuant to which the Company issued to the investor

a promissory note in the principal amount of $ 233,910 , (inclusive of a $ 26,910 original issuance discount) for gross proceeds of $ 207,000 .

On February 19, 2026, the Company entered

into a securities purchase agreement with an accredited investor pursuant to which the Company issued to the investor a promissory note

in the principal amount of $ 233,910 (inclusive of a $ 26,910 original issuance discount) for gross proceeds of $ 207,000 .

On February 26, 2026, the Company entered into

securities purchase agreements with certain institutional investors for the issuance and sale in a private placement of (i) 490,197 shares

of the Company’s common stock at a purchase price of $ 0.51 per share;

(ii) pre-funded warrants at a purchase price of 0.5099 per

pre-funded warrant to purchase up to an aggregate of 5,882,353 shares of the Company’s common stock;

(iii) Series A-1 warrants to

purchase up to 6,372,550 shares of the Company’s common stock;

and (iv) Series A-2 warrants to purchase up to 6,372,550 shares of

the Company’s common stock.

Amendment to Unsecured Bridge Note

On February 15, 2026, the Company entered into

Amendment #2 (the “Note Amendment”) to unsecured bridge note dated December 11, 2025 in the original principal amount of $ 375,000 .

The Note Amendment extended the time periods under the bridge note for the first payment deadline, the second payment deadline and third

payment deadline as follows:

(i) the first payment deadline under this Note Amendment is extended to March 16, 2026 from February 15,

the second payment deadline under the Note Amendment is extended to April 15, 2026 from March 15, 2026 and (iii) the third payment

deadline under the Note Amendment is extended to May 15, 2026 from April 15, 2026.

Amended and Restated Membership Interest Purchase

As previously reported, on November 17, 2023,

the Company entered into a Membership Interest Purchase Agreement (the “MIPA”) with Wenzhao Lu, the Chairman of the Company’s

Board of Directors, pursuant to which (i) Mr.

Lu acquired from the Company 30 % of the total outstanding membership interests of Avalon

RT 9 for a cash purchase price of $ 3 million (the “Acquisition”), and (ii) for a period of twelve months following the closing

of the Acquisition, Mr.

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

of Avalon RT 9 for a purchase price of up to $ 7 million.

On February 18, 2026, the Company and Mr.

into an Amended and Restated Membership Interest Purchase Agreement (the “Amended MIPA”), pursuant to which the Company sold

Lu 100 % of the membership interests of Avalon RT 9 for (i) approximately $ 3.1 million, and (ii) the satisfaction, in full, of an

approximately $ 5.9 million balance due on an existing mortgage financing.

This represents a total amended aggregated purchase price of

approximately $ 9 million.

Directors Resignation and Appointment

On February 24, 2026,

each of William B.

Stilley, III, Wilbert J.

Tauzin II and Tevi Troy informed the Company that they will be resigning from the Company’s

Board of Directors (the “Board”) as well as the Company’s Board committees on which they respectively served effective

as of February 24, 2026.

Stilley’s, Tauzin’s and Troy’s resignations were not the result of any disagreement

with the Company, any matter related to the Company’s operations, policies or practices, the Company’s management or the Board.

On February 24, 2026,

the Board appointed (i) Lourdes Felix as a member and Chair of the audit committee and member of the compensation committee;

Mathews as a member of the audit committee, the compensation committee and the nominating and corporate governance committee and Chair

of the nominating and corporate governance committee;

and (ii) Steven Sanders as lead independent director and Chair of the compensation

All of the foregoing appointments are effective as of February 24, 2026.

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-K

Item 9A. Controls and Procedures