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Item 1. Financial Statements

2026-05-11 compared with 2025-11-14 · 1220 added, 1664 removed, 406 unchanged (88% of the section changed)

3 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

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

Equity method investments, net

Other non-current assets

Intangible assets, net

Non-current assets of discontinued operations

Total Non-current Assets

LIABILITIES AND (DEFICIT) EQUITY

LIABILITIES AND EQUITY

CURRENT LIABILITIES:

4 unchanged sentences

Accrued liabilities and other payables

Accrued liabilities and other payables - related parties

Operating lease obligation, current portion

Advance from pending sale of noncontrolling interest - related party

Accrued liabilities and other payables - related party

Operating lease obligation

Advance from pending sale of subsidiary - related party

Derivative liability

Stock subscription liability

Note payable, net

Bridge loan payable, net

Convertible note payable, net

Note payable, net

Current liabilities of discontinued operations

Total Current Liabilities

1 unchanged sentence

Operating lease obligation, noncurrent portion

Non-current liabilities of discontinued operations

Total Non-current Liabilities

1 unchanged sentence

Commitments and Contingencies (Note 16)

(DEFICIT) EQUITY:

Preferred stock, $ 0.0001 par value;

10,000,000 shares authorized;

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

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

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

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

Liquidation preference $ 5 million at September 30, 2025

Series C Convertible Preferred Stock, 3,077 and 3,800 shares issued and outstanding at March 31, 2026 and December 31, 2025, respectively;

Liquidation preference $ 3.077 million at March 31, 2026 Series D Convertible Preferred Stock, 5,000 shares issued and outstanding at March 31, 2026 and December 31, 2025;

Liquidation preference $ 5 million at March 31, 2026

Series E Convertible Preferred Stock, 19,500 shares issued and outstanding at March 31, 2026 and December 31, 2025;

Liquidation preference $ 19.5 million at March 31, 2026

Common stock, $ 0.0001 par value;

100,000,000 shares authorized;

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

8,327,076 shares issued and 8,323,609 shares outstanding at March 31, 2026;

4,857,476 shares issued and 4,854,009 shares outstanding at December 31, 2025

1 unchanged sentence

common stock held in treasury, at cost;

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

3,467 shares at March 31, 2026 and December 31, 2025

Accumulated deficit

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Total Avalon GloboCare Corp.

stockholders’ (deficit) equity

( 4,493,019 )

stockholders’ equity

Noncontrolling interest

Total (Deficit) Equity

( 4,493,019 )

Total Liabilities and (Deficit) Equity

See accompanying notes to

the condensed consolidated financial statements.

Total Liabilities and Equity

See accompanying notes to the condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE LOSS

For the Three Months Ended

For the Nine Months Ended

September 30,

REAL PROPERTY RENTAL REVENUE

REAL PROPERTY OPERATING EXPENSES

REAL PROPERTY OPERATING INCOME

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

INCOME FROM EQUITY METHOD INVESTMENT - LAB SERVICES MSO

OTHER OPERATING EXPENSES:

2 unchanged sentences

Compensation and related benefits

Credit loss recovery

( 1,650,000 )

Amortization of intangible assets

Other general and administrative expenses

3 unchanged sentences

( 1,785,423 )

( 3,617,386 )

OTHER (EXPENSE) INCOME

OTHER EXPENSE

Interest expense - amortization of debt discount and debt issuance costs

( 1,155,310 )

( 1,115,433 )

Interest expense - other

Interest expense - related party

Change in fair value of derivative liability

Loss on extinguishment of debt

( 1,276,889 )

Other income (expense)

Total Other Expense, net

( 10,424,022 )

Other expense

Total Other Expense

( 1,655,554 )

2 unchanged sentences

( 2,266,680 )

( 5,178,739 )

NET LOSS FROM CONTINUING OPERATIONS

( 4,376,680 )

( 2,266,680 )

NET LOSS FROM DISCONTINUED OPERATIONS

$ ( 4,479,695 )

4 unchanged sentences

( 2,482,111 )

( 5,178,739 )

DEEMED CONTRIBUTION ON EXCHANGE OF EQUITY INSTRUMENTS

3 unchanged sentences

$ ( 2,319,638 )

$ ( 16,032,504 )

$ ( 5,178,739 )

NET LOSS PER COMMON SHARE ATTRIBUTABLE TO AVALON GLOBOCARE CORP.

COMMON SHAREHOLDERS:

Basic and diluted, continuing operations

Basic and diluted, discontinued operations

Basic and diluted

4 unchanged sentences

$ ( 2,482,111 )

$ ( 16,194,977 )

$ ( 5,178,739 )

OTHER COMPREHENSIVE INCOME

Unrealized foreign currency translation gain

OTHER COMPREHENSIVE (LOSS) INCOME FROM CONTINUED OPERATIONS

Unrealized foreign currency translation (loss) gain

COMPREHENSIVE LOSS

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( 2,481,832 )

( 5,175,910 )

COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST

3 unchanged sentences

$ ( 2,481,832 )

$ ( 16,194,323 )

$ ( 5,175,910 )

See accompanying notes

to the condensed consolidated financial statements.

See accompanying notes to the condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN (DEFICIT) EQUITY

For the Three and Nine Months Ended September 30, 2025

Avalon GloboCare Corp.

Stockholders’ (Deficit) Equity

Preferred Stock

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

For the Three Months Ended March 31, 2026

GloboCare Corp.

Stockholders’ Equity

Preferred Stock

1 unchanged sentence

Preferred Stock

Treasury Stock

Comprehensive

Noncontrolling

Balance, January 1, 2025

$ ( 522,500 )

$ ( 87,673,125 )

$ ( 232,000 )

Issuance of common stock upon cashless exercise of stock warrants

Issuance of common stock for services

Reclassification of derivative liability to equity

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

Foreign currency translation adjustment

Net loss for the three months ended March 31, 2025

( 2,482,111 )

Balance, March 31, 2025

( 90,155,236 )

( 3,891,270 )

Issuance of common stock upon cashless exercise of stock warrants

Issuance of common stock for services

Reclassification of derivative liability to equity

Stock-based compensation adjustment

Conversion of convertible note payable and accrued interest into common stock

Loss on extinguishment of debt recognized

Foreign currency translation adjustment

Net loss for the three months ended June 30, 2025

January 1, 2026

$ ( 522,500 )

$ ( 105,934,101 )

Balance, June 30, 2025

$ ( 241,402 )

of common stock upon cashless exercise of pre-funded stock warrants

of common stock upon cashless exercise of stock warrants

of Series C Preferred Stock into common stock

of convertible note payable and accrued interest into common stock

Reclassification

of derivative liability to equity

of common stock for services

of securities from the February 2026 private placement, net

Sale of subsidiary

currency translation adjustment

loss for the three months ended March 31, 2026

( 4,479,695 )

Sale of Series C Convertible Preferred Stock, net

Sale of common stock and warrants, net

Issuance of common stock for services

Stock-based compensation

Conversion of convertible note payable and accrued interest into common stock

Issuance of common stock as convertible note payable commitment fee

Foreign currency translation adjustment

Net loss for the three months ended September 30, 2025

Balance, September 30, 2025

( 4,479,695 )

March 31, 2026

$ ( 522,500 )

1 unchanged sentence

$ ( 241,713 )

See accompanying notes to

the condensed consolidated financial statements.

See accompanying notes to the condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

For the Three and Nine Months Ended September 30, 2024

Avalon GloboCare Corp.

Stockholders’ Equity

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

EQUITY (DEFICIT)

For the Three Months Ended March 31, 2025

GloboCare Corp.

Stockholders’ (Deficit) Equity

Preferred Stock

Treasury Stock

Preferred Stock

Comprehensive

Noncontrolling

Balance, January 1, 2024

$ ( 522,500 )

$ ( 79,769,731 )

January 1, 2025

$ ( 522,500 )

Issuance of common stock as convertible note payable commitment fee

Stock-based compensation

Foreign currency translation adjustment

Net loss for the three months ended March 31, 2024

$ ( 87,673,125 )

$ ( 232,000 )

Balance, March 31, 2024

of common stock upon cashless exercise of stock warrants

of common stock for services

Reclassification

of derivative liability to equity

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

( 9,000,000 )

Issuance of common stock as convertible note payable commitment fee

Stock-based compensation

Beneficial conversion feature related to convertible note payable

Foreign currency translation adjustment

Net loss for the three months ended June 30, 2024

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

( 11,000,000 )

( 8,651,305 )

Balance, June 30, 2024

currency translation adjustment

loss for the three months ended March 31, 2025

( 2,482,111 )

Sale of common stock, net

To correct beneficial conversion feature related to convertible note payable

Issuance of common stock for services

Stock-based compensation

Shares issued for adjustments for 1:15 reverse split

Foreign currency translation adjustment

Net loss for the three months ended September 30, 2024

( 2,482,111 )

March 31, 2025

$ ( 522,500 )

Balance, September 30, 2024

$ ( 90,155,236 )

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Nine Months Ended

September 30,

For the Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss from continuing operations

$ ( 4,376,680 )

$ ( 2,266,680 )

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

(Income) loss from equity method investment

Distribution of earnings from equity method investment

Income from equity method investment

Amortization of debt issuance costs and debt discount

Change in fair market value of derivative liability

Loss on extinguishment of debt

Changes in operating assets and liabilities:

Rent receivable

Security deposit

Deferred leasing costs

Prepaid expense and other assets

Accrued liabilities and other payables

( 1,176,402 )

Accrued liabilities and other payables - related parties

Operating lease obligation

NET CASH USED IN OPERATING ACTIVITIES

NET CASH USED IN OPERATING ACTIVITIES FROM CONTINUING OPERATIONS

( 2,860,379 )

1 unchanged sentence

CASH FLOWS FROM INVESTING ACTIVITIES:

Payment for equity interest purchase

Improvement of commercial real estate

Proceeds from sale of equity method investment

NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES

NET CASH PROVIDED BY INVESTING ACTIVITIES FROM CONTINUING OPERATIONS

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from issuance of convertible debt and warrants

Proceeds from issuance of convertible debt

Payments of convertible debt issuance costs

Repayments of bridge loan

Repayments of convertible debt

( 3,100,000 )

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 common stock and warrants

Payments of offering costs

Proceeds from equity offering

Disbursements for equity offering costs

NET CASH PROVIDED BY FINANCING ACTIVITIES

EFFECT OF EXCHANGE RATE ON CASH

NET (DECREASE) INCREASE IN CASH

Proceeds from issuance of debt

Payments of debt issuance costs

Advance from pending sale of subsidiary

Proceeds received from the February 2026 private offering

Disbursements for the February 2026 private offering costs

NET CASH PROVIDED BY FINANCING ACTIVITIES FROM CONTINUING OPERATIONS

DISCONTINUED OPERATIONS

Net cash used in operating activities from discontinued operations

NET CASH FLOWS USED IN DISCONTINUED OPERATIONS

EFFECT OF EXCHANGE RATE ON CASH - CONTINUING OPERATIONS

NET INCREASE (DECREASE) IN CASH

( 1,585,620 )

10 unchanged sentences

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

Reclassification of deferred offering costs

Stock warrants issued as placement agent fee

Settlement of derivative liability

Issuance of common stock upon cashless exercise of stock warrants

Issuance of common stock upon cashless exercise of pre-funded 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

Series C Convertible Preferred Stock converted into common stock

Related party gain on deconsolidation of Avalon RT 9

See accompanying notes to the condensed consolidated financial statements.

7 unchanged sentences

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

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

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

plans to develop additional diagnostic uses of the breathalyzer technology.

The KetoAir TM is registered with the

Food and Drug Administration as a Class I medical device.

The Company also continues to focus on advancing its intellectual property

portfolio through existing patent applications.

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

in Freehold, NJ.

Through the Company’s AI-driven subsidiary, the Company is advancing next-generation agentic AI systems targeted to consumers and

small businesses, starting with an SaaS automated video production platform.

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.

2 unchanged sentences

Healthcare Technology Co., Ltd.

(“Avalon Shanghai”), which is a wholly foreign-owned enterprise organized under the laws

of the People’s Republic of China (“PRC”).

(“Avalon Shanghai”), which is a wholly foreign-owned enterprise organized under the laws of

the People’s Republic of China (“PRC”).

Avalon Shanghai was incorporated on April 29, 2016, and was engaged in medical

4 unchanged sentences

Shanghai is no longer an operating entity.

February 7, 2017, the Company formed Avalon RT 9 Properties, LLC (“Avalon RT 9”), a New Jersey limited liability company.

On May 5, 2017, Avalon RT 9 purchased a real property located in Township of Freehold, County of Monmouth, State of New Jersey, having

a street address of 4400 Route 9 South, Freehold, NJ 07728.

This property was purchased to serve as the Company’s world-wide headquarters

for all corporate administration and operations.

On February 7, 2017, the Company formed Avalon

RT 9 Properties, LLC (“Avalon RT 9”), a New Jersey limited liability company.

On May 5, 2017, Avalon RT 9 purchased a real

property located in Township of Freehold, County of Monmouth, State of New Jersey, having a street address of 4400 Route 9 South, Freehold,

This property was purchased to serve as the Company’s world-wide headquarters for all corporate administration and operations.

In addition, the property generates rental income.

Avalon RT 9 owns this office

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

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

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

(“Avactis”), a Nevada corporation,

which is a patent holding company.

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

Biotherapeutics”) owns 40 % of Avactis.

Avactis owns 100 % of the capital stock of Avactis Nanjing Biosciences Ltd., a company incorporated

in the PRC on May 8, 2020 (“Avactis Nanjing”), which only owns a patent and is not considered an operating entity.

Avactis and Avactis Nanjing are dormant and are in process of being dissolved.

Avalon RT 9 owns this office building.

Avalon RT 9’s business consists of the

ownership and operation of the income-producing real estate property in New Jersey.

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

10 unchanged sentences

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.

On May 1, 2024, the Company

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

Q&A Distribution

is engaged in distribution of KetoAir device.

On February 21, 2025,

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

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

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 March 31, 2026.

December 5, 2025, the Company formed a wholly owned subsidiary, Avalon Quantum AI, LLC (“Avalon Quantum AI”), a Nevada company.

December 12, 2025, the Company acquired RPM Interactive, Inc., a Nevada corporation (“RPM”), in accordance with the terms

of the Agreement and Plan of Merger, dated December 12, 2025, as amended by Amendment No.

1 dated December 14, 2025 (as amended, the “Merger

Agreement”), by and among the Company, Avalon Quantum AI, LLC, a Nevada limited liability company and a wholly owned subsidiary

of the Company (the “Merger Sub”), and RPM.

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

to which the Merger Sub was the surviving entity and became a wholly owned subsidiary of the Company (the “Merger”).

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

automated video generation, and small business marketing automation solutions.

AVALON GLOBOCARE CORP.

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Details of the Company’s subsidiaries which

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

Name of Subsidiary Place and Date of Incorporation Percentage of

Ownership Principal Activities

are included in these condensed consolidated financial statements as of March 31, 2026 are as follows:

Name of Subsidiary

Place and Date of Incorporation

Percentage of Ownership

Principal Activities

Avalon Healthcare System, Inc.

(“AHS”) Delaware

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

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

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

100 % held by

Holding company for payroll and other expenses

Avalon (Shanghai) Healthcare Technology Co., Ltd.

(“Avalon Shanghai”) PRC

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

(“Avalon Shanghai”)

April 29, 2016

100 % held by

Not considered an operating entity

Genexosome Technologies Inc.

(“Genexosome”) Nevada

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

Avactis Biosciences Inc.

(“Avactis”) Nevada

July 18, 2018 60 % held by ALBT Dormant;

in process of being dissolved

Avactis Nanjing Biosciences Ltd.

(“Avactis Nanjing”) PRC

May 8, 2020 100 % held by Avactis Dormant;

in process of being dissolved

(“Genexosome”)

July 31, 2017

activities to report;

Avalon Laboratory Services, Inc.

(“Avalon Lab”) Delaware

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

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

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

Nexus MergerSub Limited (“Nexus”) BVI

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

NOTE 2 – BASIS OF PRESENTATION

AND GOING CONCERN CONDITION

(“Avalon Lab”)

October 14, 2022

100 % held by

No current activities to report;

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

100 % held by

Distributes KetoAir device

Nexus MergerSub Limited (“Nexus”)

February 21, 2025

100 % held by

No current activities to report

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

December 5, 2025

100 % held by

Is advancing next-generation agentic AI systems targeted to consumers and small businesses, starting with an SaaS automated video production

2 – BASIS OF PRESENTATION AND GOING CONCERN CONDITION

Basis of Presentation

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results that may be reported for the entire year.

The accompanying condensed consolidated financial statements have been prepared in

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

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

in the United States (“U.S.

The Company’s condensed consolidated financial statements include the accounts

of the Company and its subsidiaries.

The accompanying condensed consolidated financial statements have been prepared in accordance

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

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

the United States (“U.S.

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

Company and its subsidiaries.

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

Certain information and footnote disclosures

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

Certain information and footnote disclosures normally

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

GAAP have been condensed or omitted.

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

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

the SEC on March 31, 2025.

These condensed

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

notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025 filed with the SEC on March

of March 31, 2026, the Company determined that certain assets 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 Condensed 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 Condensed Consolidated

Balance Sheets, and the cash flows from the Company’s discontinued operations are presented in the Condensed Consolidated Statements

of Cash Flows for all periods presented.

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – BASIS OF PRESENTATION

AND GOING CONCERN CONDITION (continued)

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

Basis of Presentation (continued)

prior period balances related t o 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 Condensed Consolidated Financial Statements

are presented on a continuing operations basis unless otherwise noted.

Refer to Note 5 Discontinued Operations and Disposals for additional

information on the Company’s discontinued operations.

Going Concern

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

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

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

condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates,

among other thin gs, the realization of assets and the satisfaction of liabilities in the normal course of business.

As reflected in the accompanying

condensed consolidated financial statements, the Company had a working capital deficit of approximately $ 2,774,000 at March 31, 2026 and

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

operations of approximately $ 4,377,000 and $ 2,860,000 for the three months ended March 31, 2026, respectively.

The Company has a limited

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

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

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.

accompanying condensed 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.

operating history and its continued growth is dependent upon the continuation of generating revenue for selling of Keto Air, generating

revenue from advanced Agentic AI systems, including automated video generation and small business marketingautomation, 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

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 condensed

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.

NOTE 3 – SUMMARY

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Use of Estimates

The preparation of condensed consolidated financial

statements in conformity with U.S.

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

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

of revenues and expenses during the reporting period.

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

consolidated financial statements and accompanying notes.

Making estimates requires management to exercise significant judgment.

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

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

future confirming events.

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

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

intangible assets, the assumptions used in assessing impairment of long-term assets, the allowance for credit loss, the valuation

of deferred tax assets and the associated valuation allowances, the valuation of stock-based compensation, the valuation of Series D

convertible preferred stock (“Series D Preferred Stock”), and the assumptions used to determine fair value of warrants and

embedded conversion features of convertible note payable .

Cash and Cash Equivalents

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

September 30,

United States

For purposes of the

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

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

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

December 31, 2024.

The preparation

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

GAAP requires management to make estimates and assumptions that

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

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

Changes in these estimates and assumptions may

have a material impact on the condensed consolidated financial statements and accompanying notes.

Making estimates requires management

to exercise significant judgment.

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

of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could

change in the near term due to one or more future confirming events.

Accordingly, the actual results could differ significantly from those

Significant estimates during the three months

ended March 31, 2026 and 2025 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”), and the determination

of the fair value of the warrants.

AVALON GLOBOCARE CORP.

3 unchanged sentences

ACCOUNTING POLICIES (continued)

Cash and Cash Equivalents

March 31, 2026 and December 31, 2025, the C ompany’s cash balances by geographic area were as follows:

United States

For purposes of the condensed consolidated statements

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

accounts to be cash equivalents.

The Company had no cash equivalents at March 31, 2026 and December 31, 2025.

Fair Value of Financial Instruments and Fair Value Measurements

The Company adopted

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

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

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

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

available at the measurement date.

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

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

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

by observable market data.

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

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

on the best available information.

The fair value of the Company’s assets

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

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

The Company adopted the

guidance of Accounting Standards Codification (“ASC”) 820 for fair value measurements which clarifies the definition of fair

value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair

value as follows:

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

at the measurement date.

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

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

and inputs derived from or corroborated by observable market data.

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

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

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

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

short-term nature.

and liabilities measured at fair value on a recurring basis.

Certain assets and liabilities are measured

at fair value on a recurring basis.

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

These assets and liabilities

include derivative liability.

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

The table below reflects the

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

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

These assets and liabilities are measured at fair value on an

ongoing basis.

These assets and liabilities include derivative liability.

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

The table below reflects the activity of derivative liability measured at fair value for the three months ended March 31, 2026:

Balance of derivative liability as of January 1, 2026

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

Gain from change in the fair value of derivative liability

Loss from change in the fair value of derivative liability

Reclassification of additional paid-in capital upon conversion

Balance of derivative liability as of September 30, 2025

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

at fair value (fair value option).

The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless

a new election date occurs.

If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should

be reported in earnings at each subsequent reporting date.

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

Credit Risk and Uncertainties

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

that at times may exceed

federally-insured limits of $ 250,000 .

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

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

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

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

The Company’s concentrations of credit

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

The Company also performs ongoing credit evaluations

of its tenants to help further reduce credit risk.

( 1,281,603 )

Balance of derivative liability as of March 31, 2026

“Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair

value (fair value option).

The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new

election date occurs.

If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be

reported in earnings at each subsequent reporting date.

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

AVALON GLOBOCARE CORP.

3 unchanged sentences

ACCOUNTING POLICIES (continued)

Investment in Unconsolidated

The Company uses the equity method of accounting

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

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

for equity in earnings and cash distributions.

The Company considers whether the fair value

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

recorded value may not be recoverable.

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

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

Note 5 for discussion of equity method investment.

The Company classifies distributions received

from equity method investments using the cumulative earnings approach.

Distributions received are considered returns on the investment

and classified as cash inflows from operating activities.

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

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

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

Receivable from Sale of Equity Method Investment

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 10 - Series B Convertible Preferred

Stock Extinguished Related to Sale of Equity Method Investment).

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

laboratory services.

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

The Company maintains a reserve for credit

loss for estimated loss.

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

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

In the evaluation of Lab Services MSO’s receivable,

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

After unsuccessful collection

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

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

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

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

the amount of $ 1,650,000 .

On or about July 22, 2025, the Company

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

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

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

The Company and Laboratory Services MSO, LLC entered into

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

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

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

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

The parties provided a mutual release, as well.

The case was dismissed in August 2025.

As a result, for the three months ended

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

second quarter of 2025.

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

Credit Risk and Uncertainties

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

that at times may exceed federally-insured

limits of $ 250,000 .

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

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

The Company has not experienced

any losses in such bank accounts a nd believes it is not exposed to any risks on its cash

in bank accounts.

At March 31, 2026, the Company’s cash balances in United States bank accounts had approximately $ 506,000 in excess

of the federally-insured limits.

Sale of Subsidiary

In February 2026, the Company sold its wholly-owned

subsidiary of Avalon RT 9 to Wenzhao Lu, the Company’s chairman of the Board of Directors.

Avalon RT 9 owned and managed the corporate

office building located at 4400 Route 9 South, Freehold, NJ, which served as the Company’s headquarters and leased other space to

tenants until the sale.

Wenzhao Lu paid fair value of $ 9.0 million.

The Company recorded $ 1,861,266 to additional paid-in capital

as a result of the capital transaction with related party under applicable SEC regulations, representing the proceeds of $ 9,000,000 (which

is consisted of advance of $ 3,158,078 , satisfaction of note payable of $ 5,800,000 , and paying off due to related party of $ 41,922 on behalf

of the Company) in excess of its carrying value of $ 7,138,734 .

Capitalized Internal-use Software Costs

The Company capitalizes costs to develop or purchase

internal-use software in accordance with ASC section 350-40, Intangibles — Goodwill and Other — Internal-Use

Costs incurred to develop internal-use software are expensed as incurred during the preliminary project stage.

software development costs are capitalized upon purchase and during the application development stage, which is after:

(i) the preliminary

project stage is completed;

and (ii) management authorizes and commits to funding the project and it is probable the project will be completed

and used to perform the functions intended.

Capitalization ceases at the point the software project is substantially complete and ready

for its intended use, and after all substantial testing is completed.

Upgrades and enhancements are capitalized if it is probable that

those expenditures will result in additional functionality.

Amortization is provided for on a straight-line basis over the expected useful

life of the internal-use software development costs and related upgrades and enhancements.

When existing software is replaced with new

software, the unamortized costs of the old software are expensed when the new software is ready for its intended use.

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.

31, 2026, the Company received proceeds of $ 150,000 .

As of March 31, 2026, 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.

Per Share Data

Topic 260 “Earnings per Share,” requires presentation of both basic and diluted earnings per share (“EPS”) with

a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation.

Basic EPS excludes dilution.

Diluted 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

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

outstanding during the period.

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

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

The Company had $ 162,473 in

deemed contribution during the three months ended March 31, 2025, which increases the numerator in the net loss per share calculation.

For the three months ended March 31, 2026 and 2025, potentially dilutive common shares consisted of the common shares issuable upon the

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

warrants (using the treasury stock method).

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

if their effect would be anti-dilutive.

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

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

AVALON GLOBOCARE CORP.

3 unchanged sentences

ACCOUNTING POLICIES (continued)

Per Share Data

Topic 260 “Earnings per Share,” requires presentation of both basic and diluted earnings per share (“EPS”) with

a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation.

Basic EPS excludes dilution.

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

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

earnings of the entity.

Basic net loss per share is computed by dividing

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

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

and potentially dilutive securities outstanding during each period.

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

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

For the three and nine months ended September

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

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

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

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

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

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

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

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

these potential shares was antidilutive:

Per Share Data (continued)

The calculation

of basic and diluted net loss per common share attributable to the Company common shareholders includes 6,032,353 and 150,000 of the pre-funded

warrants that remained outstanding as of March 31, 2026 and 2025, respectively.

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:

Three Months Ended

September 30,

Nine Months Ended

September 30,

Options to purchase common stock

Warrants to purchase common stock

Series A convertible preferred stock (*)

Series B convertible preferred stock (**)

Series C convertible preferred stock (*)

Series D convertible preferred stock (**)

Series E convertible preferred stock (***)

Convertible notes and related accrued interest (****)

Potentially dilutive securities

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

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

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

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

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

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

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

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

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

(*****) Assumed

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

three and nine months ended September 30, 2025.

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

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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

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 September

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

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

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

Real Property Rental Revenue

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

accounting standards.

Rental income from operating leases is recognized

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

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

the term of the related leases.

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

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

(**) 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 three months ended

March 31, 2025.

Commitments and Contingencies

In the normal course of business, the Company

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

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

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.

Segment Reporting

The segment reporting structure uses the Company’s

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

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

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

During the nine months ended September

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

real property rental services and laboratory

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

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

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

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

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

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

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

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

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

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

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

Beginning in February 2025,

we no longer offer laboratory services.

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

The Company reports operational data to its CODM at the segment

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

method investment – Lab Services MSO.

The Company only has one segment now.

Reverse Stock Split

The Company effectuated a 1-for-15 reverse stock

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

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

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

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

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

internally and was mainly organized by services.

During the three months ended March 31, 2026, the Company was organized into one strategic

business units:

AI generated publishing services.

During the three months ended March 31, 2025, the Company was organized into one strategic

business units:

laboratory testing services (which ended on the redemption date, February 26, 2025) — 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.

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

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

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

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

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

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

Beginning in February 2025, we no longer offer

laboratory services.

AVALON GLOBOCARE CORP.

3 unchanged sentences

ACCOUNTING POLICIES (continued)

Segment Reporting

Company’s Chief Executive Officer is i ts CODM.

The Company reports operational data

to its CODM at the segment level, which he uses to evaluate performance and allocate resources based on income from equity method investment

– Lab Services MSO and AI generated publishing operating income.

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 Condensed 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

Condensed Consolidated Balance Sheets, and the cash flows from the Company’s discontinued operations are presented in the Condensed

Consolidated Statements of Cash Flows for all periods presented.

Recent Accounting Standards

In August 2020, the FASB issued Accounting Standards

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

— Contracts in 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

condensed consolidated financial statements and related disclosures.

In November 2023, the

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

The amendments in this update improve reportable segment disclosure requirements,

primarily through enhanced disclosures about significant segment expenses.

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

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

The Company adopted this guidance in the fourth

quarter of 2024.

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

In December 2023, the

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.

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.

In December 2023, the Financial Accounting Standards

Board (“FASB”) issued Accounting Standards Updates (“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.

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 condensed consolidated financial statements and related disclosures.

In November 2024, the

FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation

of Income Statement Expenses.

adoption of ASU 2023-09 did not have a material effect on the Company’s condensed consolidated financial statements and related

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.

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 condensed consolidated

financial statements.

Other accounting standards that have been issued

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

financial statements upon adoption.

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

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

The Company is currently evaluating

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

2025, the FASB issued Accounting Standards Update No.

2025-06, “Intangibles — Goodwill and Other — Internal-Use Software

(Subtopic 350-40),” (“ASU 2025-06”).

The amendments in ASU 2025-06 remove all references to prescriptive and sequential

software development stages, and require entities to start capitalizing software costs when management has authorized and committed to

funding the software project and it is probable that the project will be completed and the software will be used to perform the function

ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and interim periods within those fiscal years,

and may be adopted on a prospective, modified, or retrospective transition approach.

Early adoption is permitted.

The Company is currently

evaluating the impact of this update on its condensed consolidated financial statements.

In December 2025, the FASB issued ASU 2025–11,

Interim Reporting (Topic 270:

Narrow – Scope Improvements.

ASU 2025-11 clarifies the applicability of interim reporting guidance

and reorganizes and clarifies interim disclosure requirements under ASC topic 270, including the addition of a disclosure principal requiring

disclosure of material events occurring since the most recent annual reporting period.

ASU 2025-11 is effective for interim reporting

periods within annual periods beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the

impact of this standard on its condensed consolidated financial statements.

In December 2025, the FASB issued ASU 2025-12,

Classification Improvements.

ASU 2025–12 makes targeted amendments to various topics within the Accounting Standards Codification

intended to clarify existing guidance and correct minor inconsistencies.

ASU 2025–12 is effective for interim and annual reporting

periods beginning after December 15, 2026, with early adoption permitted.

Certain amendments require retrospective application.

is currently evaluating the impact of this standard on its condensed consolidated financial statements.

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – SUMMARY OF SIGNIFICANT

ACCOUNTING POLICIES (continued)

Recent Accounting Standards (continued)

Other accounting standards that have been issued

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

financial statements upon adoption.

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

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

NOTE 4 – PREPAID EXPENSE

AND OTHER CURRENT ASSETS

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

September 30,

March 31, 2026 and December 31, 2025, prep aid expense and other current assets consisted of the following:

Prepaid professional fees

1 unchanged sentence

Prepaid NASDAQ listing fee

Deferred leasing costs

Security deposit

Due from broker

Deferred offering costs

Finished goods

Recoverable value-added tax

Deferred offering costs

NOTE 5 – EQUITY METHOD INVESTMENT

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

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

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

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.

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).

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

During the period from February 9, 2023

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

Services MSO of 40 % and 60 %, respectively.

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

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

have a controlling financial interest over the legal entity.

However, the Company determined that it does have significant influence

as a result of its board representation.

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

statements under the equity method.

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

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

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

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

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

assets and any impairment loss relating to the investment.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – EQUITY METHOD INVESTMENT

Intangible assets consisted

of the valuation of identifiable intangible assets acquired, representing trade names and customers relationships, which were being amortized

on a straight-line method over the estimated useful life of 15 years.

The straight-line method of amortization represents the Company’s

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

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

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

comprehensive loss.

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

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

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

comprehensive loss.

Goodwill represents

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

5 – DISCONTINUED OPERATIONS AND DISPOSALS

On February 18, 2026,

Goodwill is not amortized but is tested for impairment at least once annually, or more frequently if events or changes

in circumstances indicate that the asset might be impaired.

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

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

and comprehensive loss.

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

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

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

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

Distributions

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

For the three months ended

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

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

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

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

September 30,

(Date of Sale)

September 30,

Income (loss) from operation

Net (loss) income

NOTE 6 – CONVERTIBLE NOTE

June 2024 Convertible Note

On June 5, 2024, the

Company entered into securities purchase agreements with Mast Hill Fund L.P.

(“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.

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).

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 $ 9,000,000 .

subsidiary comprises our real property operations segment.

As a result of the planned disposition of the subsidiary, the real property

operations segment met the criteria under ASC 205-20 to be classified as discontinued operations.

Accordingly, the historical results

of operations of the real property operations segment have been reflected as discontinued operations in our condensed consolidated financial

statement for all periods prior to the Amended MIPA on February 18, 2026.

Details of the net loss from discontinued operations were as

follows for the three months ended March 31:

REAL PROPERTY RENTAL REVENUE

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

Total Other Expense, net

LOSS BEFORE INCOME TAXES

$ ( 103,015 )

$ ( 215,431 )

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – CONVERTIBLE NOTE PAYABLE

June 2024 Convertible Note (continued)

Mast Hill acquired the

June 2024 Convertible Note with principal amount of $ 2,845,000 and paid the purchase price of $ 2,702,750 after an original issue discount

of $ 142,250 .

On June 5, 2024, the Company issued (i) a warrant to purchase 66,667 shares of common stock with an exercise price of $ 9.75

exercisable until June 5, 2029 (“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 of $ 1,661,540 , and to pay finder’s fee of $ 120,000 and lender’s costs of $ 40,000 related to this financing.

The Company 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

Payment Date Payment Amount

December 5, 2024 $284,500 plus accrued interest through December 5, 2024

January 5, 2025 $284,500 plus accrued interest through January 5, 2025

February 5, 2025 $379,336 plus accrued interest through February 5, 2025

March 5, 2025 $474,167 plus accrued interest through March 5, 2025

April 5, 2025 $474,167 plus accrued interest through April 5, 2025

May 5, 2025 $569,000 plus accrued interest through May 5, 2025

June 5, 2025 The entire remaining outstanding balance of the June 2024 Convertible Note

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.

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 a derivative liability, as the Company cannot avoid a net cash settlement

under certain circumstances.

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

payment when due to be remote and as such the fair value of 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

Accordingly, the fair value of the 72,000 warrants with an exercise price of $ 9.75 exercisable until June

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

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

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

following assumptions:

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

and expected life of 5 years.

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

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

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

The portion of the proceeds allocated to

the warrants are accounted for as derivative liability.

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

the transaction.

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

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

of the convertible debt (see Note 7).

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

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

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

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

Accordingly, the initial fair value of the

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

of debt discount.

5 – DISCONTINUED OPERATIONS AND DISPOSALS (continued)

following table summarizes the ass ets and liabilities of the discontinued operations:

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 condensed consolidated balance sheets.

NOTE 6 – INTANGIBLE ASSETS

Intangible assets mainly consist of the valuation

of identifiable intangible assets acquired in connection with the acquisition of RPM, representing developed technology and trade name.

The Company uses its best estimates and assumptions as part of the purchase price allocation process to accurately value the identifiable

intangible assets at the acquisition date.

The straight-line method of amortization represents the 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, the purchase price exceeded the fair value of net assets acquired by $ 12,808,197 .

The Company allocated the $ 12,808,197 excess

Goodwill is not amortized, but is tested for impairment at March 31, 2026.

On March 31, 2026, the Company assessed its goodwill

for any impairment and concluded that there were not indicators of impairment as of March 31, 2026.

the three mon ths ending March 31, 2026, the Company capitalized certain software development costs incurred amounting to $ 18,037

since the Company’s software development projects were in the application development stage.

The internal-use software has not yet

been placed in service as of March 31, 2026.

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – CONVERTIBLE NOTE PAYABLE

June 2024 Convertible Note (continued)

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

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

NOTE 6 – INTANGIBLE ASSETS (continued)

March 31, 2026 and December 31, 2 025, intangible assets consisted of the following:

Useful Life March 31,

2026 December 31,

Developed technology 1 Year $ 2,230,000 $ 2,230,000

Trade name 1 Year 22,000 22,000

Internal-use software 3 Years 18,037 -

Goodwill 12,808,197 12,808,197

15,078,234 15,060,197

accumulated amortization ( 656,833 ) ( 93,833 )

$ 14,421,401 $ 14,966,364

For the three months ended March 31, 2026 and

2025, amortization expense amounted to $ 563,000 and $0 , respectively.

of intangible assets, excluding internal-use software, which has not yet been placed in service as of March 31, 2026, attributable

to future periods is as follows:

For the Twelve-month Period Ending March 31:

2028 and thereafter

7 – CONVERTIBLE NOTE PAYABLE

June 2024 Convertible

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 C ompany.

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).

Hill acquired the June 2024 Convertible Note with principal amount of $ 2,845,000 and

paid the purchase price of $ 2,702,750 after an original issue discount of $ 142,250 .

On June 5, 2024, the Company issued (i) a warrant to purchase 66,667 shares of

common stock with an exercise price of $ 9.75 exercisable until June 5, 2029 (“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.

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.

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

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

fee of $ 150,000 to Mast Hill, and the Company issued to Mast Hill a common stock purchase warrant for the purchase of up to 150,000 shares

Mast Hill waived all amortization payments required to be made under the June 2024 Convertible Note, the Company paid a waiver fee of

Mast Hill, and the Company issued to Mast Hill a common stock purchase warrant for the purchase of up to 150,000 shares

of the Company’s common stock (“Pre-Funded Warrants”).

The Pre-Funded Warrants are immediately exercisable at issuance

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

The Pre-Funded Warrants were classified

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

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

a fixed number of shares of common stock upon exercise.

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

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

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

issuance date of the Pre-Funded Warrants.

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

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

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

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

1 unchanged sentence

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

The Company recorded

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

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

During the period from June 1, 2025 through September

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

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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

7 – CONVERTIBLE NOTE PAYABLE (continued)

June 2024 Convertible

Note (continued)

In December 2024, the Company repaid June 2024

Convertible Note principal amount of $ 288,223 in cash.

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 .

In January 2026, Mast

Hill converted its June 2024 Convertible Note in the principal amount of $ 545,950 into 545,950 shares of common stock

of the Company at a per share price of $ 1.00 (See Note 12 - Common Shares Issued for Debt Conversion).

July 2025 Convertible Note

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

accredited investors on identical terms.

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

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

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

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

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

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

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

common stock to each investor as a commitment fee.

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

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

as Convertible Note Payable Commitment Fee).

The convertible notes

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

September 30,

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.

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 was amortized over the term of the July 2025 Convertible Note.

March 2026, the Company repaid in full the July 2025 Convertible Note.

convertible notes payable as of Marc h 31, 2026 and December 31, 2025 was as follows:

Principal amount

unamortized debt discount

Convertible note payable, net

For the three months

ended March 31, 2026 and 2025, amortization of debt discount related to convertible note payable amounted to $ 8,932 and $ 283,755 ,

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

condensed consolidated statements of operations and comprehensive loss.

For the three months

ended March 31, 2026 and 2025, interest expense related to convertible note payable amounted to $ 23,192 and $ 81,956 , respectively,

which have been included in interest expense — other on the accompanying condensed consolidated statements of operations and comprehensive

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

8 – BRIDGE LOAN PAYABLE, NET

December 11, 2025, the Company entered into a securities 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 securities 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 securities purchase agreement.

The securities 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 March 31, 2026 an d December 31, 2025 was as follows:

Principal amount

unamortized debt issuance costs

1 unchanged sentence

Convertible note payable, net

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

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

the three months ended March 31, 2026, amortization of debt discount and debt issuance costs related to the bridge note amounted to $ 168,459

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.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – CONVERTIBLE NOTE PAYABLE

July 2025 Convertible Note (continued)

For the three months ended September 30, 2025

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

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

condensed consolidated statements of operations and comprehensive loss.

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

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

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

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

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

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

of operations and comprehensive loss.

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

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

accompanying condensed consolidated statements of operations and comprehensive loss.

NOTE 9 – NOTE PAYABLE, NET

February 2026, the Company entered into two securities purchase agreements with Vanquish Funding Group, Inc., pursuant to which the Company

issued to the investor two promissory notes in the princ ipal amount of $ 467,820 , for a purchase price of $ 414,000 , reflecting an

original issue discount of $ 53,820 (the “Note”).

The Note carries a one-time interest charge of $ 56,138 and is repayable in

seven monthly payments beginning August 15, 2026 in the amount of $ 288,176 and for the next 6 months thereafter in the amount of $ 39,297 .

The Note matures on February 15, 2027 .

In connection with the issuance of the two promissory notes, the Company incurred debt issuance

costs of $ 34,000 which is capitalized and will be amortized into interest expense over the term of the two promissory notes.

March 25, 2026, the Company entered into a Business Loan and Security Agreement (the “Business Loan Agreement”) with Agile

Lending, LLC, pursuant to which the Company obtained a loan from the investor 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 22, 2026 .

Pursuant to the Business Loan Agreement, the

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

In connection

with the Business Loan, the Company issued the investor a Confessed Judgement Secured Promissory Note (the “Secured Note”)

dated March 25, 2026 in t he amount $ 787,500 with a maturity date of October 22, 2026 .

The note payable as of March 31, 2026 is as follows:

Principal amount

unamortized debt issuance costs

unamortized debt discount

Note payable, net

For the three months ended March 31, 2026, amortization

of debt discount and debt issuance costs related to note payable amounted to $ 12,026 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

For the three months ended March 31, 2026, interest

expense related to note payable amounted to $ 18,337 which have been included in interest expense - other on the accompanying condensed

consolidated statements of operations and comprehensive loss.

10 – DERIVATIVE LIABILITY

As stated in Note 6, June 2024 Convertible Note,

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

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

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

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

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

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

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

feature had been estimated to be zero.

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

June 2024 Convertible Note.

On May 23, 2023, the Company issued 667 warrants

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

Upon evaluation,

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

circumstances.

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

In March 2025,

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

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

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

the following assumptions:

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

life of 2.6 years.

On July 6, 2023, the Company issued 222 warrants

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

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

Upon evaluation, the warrants

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

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

On September 30, 2025, the

estimated fair value of the 222 warrants was $ 36 .

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

Accordingly, the fair value of the 667 warrants was classified as a derivative liability on May 23, 2023.

On March 31, 2026,

the estimated fair value of the 667 warrants was $ 16 .

The estimated fair value of the warrants was computed as of March 31, 2026 using

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

1 unchanged sentence

annual dividend yield of 0 % and expected life of 2.1 years.

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

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 4,060 warrants

was classified as a derivative liability on October 9, 2023.

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

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

The estimated fair value of

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

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

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

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

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

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

Accordingly, the fair value of the 9,450 warrants

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

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

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

The estimated fair value of the warrants

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

stock price of $ 2.38 ,

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

July 6, 2023, the Company issued 222 warrants with an exercise price of $ 67.50 exercisable until July 6, 2028 to

a third party as a finder’s fee.

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

Company cannot avoid a net cash settlement under certain circumstances.

Accordingly, the fair value of the 222 warrants was

classified as a derivative liability on July 6, 2023.

On March 31, 2026, the estimated fair value of the 222 warrants was $ 5 .

estimated fair value of the warrants was computed as of March 31, 2026 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 0.53 , volatility of 133.26 %, risk-free rate of 3.79 %, annual dividend yield of 0 % and expected life of 2.3 years.

On October 9, 2023, the Company issued 560 warrants

with an exercise price of $ 37.50 exercisable until October 9, 2028 to a third party as a finder’s fee.

Upon evaluation, the

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

circumstances.

Accordingly, the fair value of the 560 warrants was classified as a derivative liability on October 9, 2023.

On March 31, 2026, the estimated fair value of the 560 warrants was $ 26 .

The estimated fair value of the warrants was computed as of March

31, 2026 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 0.53 , volatility of 129.25 %, risk-free

rate of 3.79 %, annual dividend yield of 0 % and expected life of 2.5 years.

AVALON GLOBOCARE CORP.

2 unchanged sentences

10 – DERIVATIVE LIABILITY (continued)

On June 5, 2024, the

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

Upon evaluation, the warrants meet

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

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

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

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

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

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

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

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

The estimated fair value of the warrants was computed as of

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

stock price of $ 2.38 , volatility of 102.30 %,

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

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

and was retained by Mast Hill.

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

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

On September 30, 2025, the estimated fair

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

The estimated fair value of

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

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

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

consolidated statements of operations and comprehensive loss.

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

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

30, 2025 and 2024, respectively.

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

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

respectively.

NOTE 8 – NOTE PAYABLE, NET

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

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

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

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

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

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

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

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

On October 1, 2025, the Company

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

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

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 South, Freehold, Monmouth County, New Jersey.

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

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

September 30,

Principal amount

unamortized debt issuance costs

Note payable, net

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

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

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

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

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

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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – NOTE PAYABLE, NET

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

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

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

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

On March 7, 2024, the Company issued 700 warrants

with an exercise price of $ 30.00 exercisable until March 7, 2029 to a third party as a finder’s fee.

Upon evaluation, the warrants

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

Accordingly, the fair value of the 700 warrants was classified as a derivative liability on March 7, 2024.

On March 31, 2026,

the estimated fair value of the 700 warrants was $ 43 .

The estimated fair value of the warrants was computed as of March 31, 2026 using

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

stock price of $ 0.53 , volatility of 122.40 %, risk-free rate of 3.81 %,

annual dividend yield of 0 % and expected life of 2.9 years.

On June 5, 2024, the Company issued 5,333 warrants

with an exercise price of $ 9.75 exercisable until June 5, 2029 to a third party as a finder’s fee.

Upon evaluation, the warrants

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

Accordingly, the fair value of the 5,333 warrants was classified as a derivative liability on June 5, 2024.

On March 31, 2026

the estimated fair value of the 5,333 warrants was $ 750 .

The estimated fair value of the warrants was computed as of March 31, 2026 using

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

stock price of $ 0.53 , volatility of 120.02 %, risk-free rate of 3.81 %,

annual dividend yield of 0 % and expected life of 3.2 years.

June 5, 2024, the Company issued 80,000 warrants with an exercise price of $ 7.50 exercisable until June 5, 2029 to Mast Hill (See

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 80,000 warrants was classified as a derivative liability

on June 5, 2024.

On February 11, 2026, the exercise price was adjusted to $ 1.00 and number of shares underlying was adjusted to 600,000

based on certain specified events.

On February 19, 2026, the exercise price was adjusted to $ 0.38 and number of shares underlying was

adjusted to 1,558,543 based on certain specified events.

On February 19, 2026, 408,332 warrants

were cashless exercised.

February 24, 2026, the exercise price was adjusted to $ 0.32 and number of shares underlying was adjusted to 1,405,721 based on certain

specified events.

On February 24, 2026, 304,529 warrants were cashless exercised.

On February 26, 2026, 1,020,710 warrants were cashless

On March 31, 2026, the exercise price was

adjusted to $ 0.37 and number of shares underlying was adjusted to 68,985 based on certain specified events.

On March 31, 2026,

the estimated fair value of the remaining 68,985 warrants was $ 28,602 .

The estimated fair value of the warrants was computed as of March

31, 2026 using Black-Scholes option-pricing model, with the following assumptions:

stock price of $ 0.53 , volatility of 120.02 %, risk-free

rate of 3.81 %, annual dividend yield of 0 % and expected life of 3.2 years.

Change in fair value of the derivative liability

are included as a component of total other expenses in the accompanying condensed consolidated statements of operations and comprehensive

The changes to the derivative liability resulted in an increase of $ 1,276,889 and $ 114,360 in the derivative liability and

the corresponding increase in other expense as a loss for the three months ended March 31, 2026 and 2025, respectively.

NOTE 11 – RELATED PARTY TRANSACTIONS

Rental Revenue from Related Party and Rent

Receivable – Related Party

The Company leases space of its commercial real

property located in New Jersey to D.P.

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

Board of Directors.

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

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

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

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

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

Services Provided by Related Party

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

As compensation

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

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

statements of operations and comprehensive loss.

As compensation for professional services provided, the Company recognized consulting

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

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

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

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

balance sheets.

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 $ 15,000 and $ 15,597 for the three months ended March 31, 2026 and 2025, respectively,

which have been included in professional fees on the accompanying condensed consolidated statements of operations and comprehensive loss.

As of March 31, 2026 and December 31, 2025, the accrued and unpaid services charge related to this director’s son amounted to $ 0

and $ 6,835 , respectively, which have been included in accrued professional fees on the accompanying condensed consolidated balance sheets.

Accrued Liabilities and Other Payables –

Related Parties

In 2017, the Company acquired Beijing Jieteng

(Genexosome) Biotech Co., Ltd.

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

As of both September 30, 2025 and December

31, 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

condensed consolidated balance sheets.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Stock Extinguished Related to Sale of Equity Method Investment).

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

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

parties on the accompanying condensed consolidated balance sheets.

In 2017, the Company acquired Genexosome’s

subsidiary, which was dissolved in 2022, for a cash payment of $ 450,000 .

As of both March 31, 2026 and December 31, 2025, 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 party on the accompanying condensed consolidated balance

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – RELATED PARTY TRANSACTIONS (continued)

NOTE 11 – RELATED PARTY TRANSACTIONS

Membership Interest

3 unchanged sentences

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

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

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

of the Acquisition, Mr.

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

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

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

Lu and the Company at such time that Mr.

Lu desires to exercise

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

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

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

The Acquisition is expected to close in the

first quarter of 2026.

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

On January 9, 2025,

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

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

Series D Preferred Stock of the Company.

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

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

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

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

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

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

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.

February 18, 2026, the Company and Mr.

Lu entered into an Amended and Restated Membership Interest Purchase Agreement (the “Amended

MIPA”), pursuant to which the Company sold to Mr.

Lu 100 % of the membership interests of Avalon RT9 for $ 9.0 million, the fair

market value on transaction date.

The Company recorded proceeds in excess of its carrying value (approximately $ 1.9 million) to additional

paid-in capital as a result of the capital transaction with related party under applicable SEC regulations.

Company received $ 3,158,078 from Mr.

Lu as of December 31, 2025, which was recorded as advance from pending sale of subsidiary –

related party on the accompanyi ng condensed consolidated balance sheets.

The advance of $ 3,158,078 was applied to the proceeds

of $ 9.0 million on February 18, 2026.

Therefore, as of March 31, 2026, the advance from pending sale of subsidiary – related party

Exchange Agreement

On February 18, 2926, the Company entered into an Exchange Agreement with its Chairman, Wenzhao Lu, under which it agreed

Lu 2,074,689 shares of its common stock (the “Exchange Shares”) for the 5,000 shares of Series

D Preferred Stock held by him, following shareholder approval.

The Exchange Shares was equal to the amount of shares of common stock Mr.

Lu would have been entitled to receive upon conversion of his Series D Preferred Stock.

The Exchange Shares were issued to Mr.

6, 2026 following shareholder approval at which time the shares of Series D Preferred Stock were cancelled.

NOTE 12 – EQUITY

Company is authorized to issue an aggregate of 100 ,000,000 shares of common stock and 10,000,000 shares of “blank

check” preferred stock.

Series A Convertible

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 .

shares of Series A Preferred Stock have identical terms and include the terms as set forth below .

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

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.

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

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

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

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

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

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

all shares of the Series A Preferred Stock are entitled to receive.

The Company shall mail written notice of any Liquidation not less

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

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – EQUITY (continued)

Series A Convertible

Preferred Stock (continued)

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

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

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

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

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

The Series A Holders may effect conversions by providing

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

The Series A Holders

may convert such shares into shares of the Company’s common stock at a conversion price per share equal to the greater of (i) one

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

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

In addition, following the Initial

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

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

conversion of the Series A Preferred Stock then held by such Series A Holder.

Conversion Price Adjustment:

Dividends and Stock Splits.

If the Company, at any time while the Series A Preferred Stock is outstanding:

stock dividend or otherwise makes a distribution or distributions payable in shares of common stock on shares of common stock or any

other common stock equivalents (which, for avoidance of doubt, shall not include any shares of common stock issued by the Company upon

conversion of, or payment of a dividend on, the Series A Preferred Stock), (ii) subdivides outstanding shares of common stock into a

larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of common stock into a smaller

number of shares, or (iv) issues, in the event of a reclassification of shares of the common stock, any shares of capital stock of the

Company, then the conversion price of the Series A Preferred Stock shall be multiplied by a fraction of which the numerator shall be

the number of shares of common stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of

which the denominator shall be the number of shares of common stock outstanding immediately after such event.

Any of the foregoing adjustments

shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution

and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

If, at any time while the Series A Preferred Stock is outstanding, (i) the Company, directly or indirectly,

in one or more related transactions effects any merger or consolidation of the Company with or into another individual or corporation,

partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government

(or an agency or subdivision thereof) or other entity of any kind (a “Person”), (ii) the Company (and all of its subsidiaries,

taken as a whole), directly or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of

all or substantially all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender

offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of the Company’s common

stock are permitted to sell, tender or exchange their shares for other securities, cash or property and has been accepted by the holders

of fifty percent ( 50 %) or more of the outstanding common stock, (iv) the Company, directly or indirectly, in one or more related transactions

effects any reclassification, reorganization or recapitalization of the common stock or any compulsory share exchange pursuant to which

the common stock is effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly,

in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without

limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires

more than fifty percent ( 50 %) of the outstanding shares of common stock (not including any shares of common stock held by the other Person

or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase

agreement or other business combination) (each a “Fundamental Transaction”), then, the Series A Holder shall have the right

to receive, for each conversion share that would have been issuable upon such conversion immediately prior to the occurrence of such

Fundamental Transaction (without regard to any limitation set forth in the Series A Certificate of Designations on the conversion of

the Series A Preferred Stock), the number of shares of common stock of the successor or acquiring corporation or of the Company, if it

is the surviving corporation, and/or any additional consideration (the “Alternate Consideration”) receivable as a result

of such Fundamental Transaction by a holder of the number of shares of common stock for which the Series A Preferred Stock is convertible

immediately prior to such Fundamental Transaction (without regard to the limitations set forth in the Series A Certificate of Designations

on the conversion of the Series A Preferred Stock).

For purposes of any such conversion, the determination of the conversion price shall

be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect

of one share of common stock in such Fundamental Transaction, and the Company shall apportion the conversion price among the Alternate

Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – EQUITY (continued)

Series A Convertible

Preferred Stock (continued)

holders of common stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then

the Series A Holder shall be given the same choice as to the Alternate Consideration it receives upon such Fundamental Transaction .

The Series A Holders will have no voting rights, except as otherwise required by the Delaware General Corporation

Notwithstanding the foregoing, as long as any shares of Series A Preferred Stock are outstanding, the Company shall not, without

the affirmative vote of the holders of a majority of the then outstanding shares of Series A Preferred Stock, voting as a separate class,

(a) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock in the Series A Certificate of

Designations, (b) increase the number of authorized shares of Series A Preferred Stock, (c) authorize or issue an additional class or

series of capital stock that ranks senior to the Series A Preferred Stock with respect to the distribution of assets on liquidation or

(d) enter into any agreement with respect to any of the foregoing.

No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Series

A Preferred Stock.

As to any fraction of a share of Company common stock which a Series A Holder would otherwise be entitled to upon

such conversion, the Company will, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal

to such fraction multiplied by the conversion price or round up to the next whole share.

Notwithstanding the foregoing, nothing shall

prevent any Series A Holder from converting fractional shares of Series A Preferred Stock.

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.

9,000 shares of Series A Preferred Stock of the Company for 5,000 shares of Series D Preferred Stock of the Company (See Note 10 - Series

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

As of September 30, 2025, there were no shares

of Series A Preferred Stock remain outstanding.

Series B Convertible

Preferred Stock

Company designated 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 .

shares of Series B Preferred Stock have identical terms and include the terms as set forth below .

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.

No other dividends shall be paid on shares of Series B Preferred Stock.

The Company will not pay any dividends on

its common stock unless the Company simultaneously complies with the terms set forth in the Series B Certificate of Designations.

Series B Preferred Stock will rank subordinate to the shares of the Company’s Series A Preferred Stock.

any Liquidation, the Series B Holders will be entitled to receive out of the assets available for distribution to stockholders, (i) after

and subject to the payment in full of all amounts required to be distributed to the holders of another class or series of stock of the

Company ranking on liquidation prior and in preference to the Series B Preferred Stock, including the Series A Preferred Stock, (ii)

ratably with any class or series of stock ranking on liquidation on parity with the Series B Preferred Stock and (iii) in preference

and priority to the holders of the shares of common stock, an amount equal to one hundred percent ( 100 %) of the Series B Stated Value

and no more, in proportion to the full and preferential amount that all shares of the Series B Preferred Stock are entitled to receive.

The Company shall mail written notice of any such Liquidation not less than twenty (20) days prior to the payment date stated therein,

to each Series B Holder.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – EQUITY (continued)

Series B Convertible

Preferred Stock (continued)

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

the stockholder approval and (ii) February 9, 2024 (the “Lock Up Period”), at the option of the Series B Holder thereof,

into that number of shares of common stock (subject to the limitations set forth in Series B Certificate of Designations determined by

dividing the Series B Stated Value of such share of Series B Preferred Stock by the conversion price of the Series B Preferred Stock).

Series B Holders may effectuate conversions by providing the Company with the form of conversion notice attached as Annex A to the Series

B Certificate of Designations.

The Series B Preferred Stock will be convertible into shares of the Company’s common stock at a

conversion price per share equal to $ 56.70 , subject to the adjustments set forth in the Series B Certificate of Designations.

Notwithstanding

the foregoing or the transactions contemplated by the Amended MIPA, until the consummation of the Lock Up Period, the Series B Holders

shall not, directly or indirectly, sell, transfer or otherwise dispose of any Series B Preferred Stock issued upon conversion of the

Series B conversion shares or pursuant to the Equity Earnout Payment (the “Restricted Securities”) without Company’s

prior written consent;

provided, however, the Series B Holders may sell, transfer or otherwise dispose of Restricted Securities to an

Affiliate, as defined in the Amended MIPA, of a Series B Holder without Company’s prior written consent;

provided, further, that

such Series B Holder provide prompt written notice to Company of such transfer, including the name and contact information of the Affiliate

transferee, and such Affiliate transferee agrees in writing to be bound by the terms of the transaction documents contemplated by the

Amended MIPA to which the Series B Holder is a party (which agreement shall also be provided to Company with such notice).

expiration of the Lock Up Period, the Series B Holder agrees that it and any of its Affiliate transferees shall not be entitled to in

any calendar month, sell a number of shares of Company common stock into the open market in an amount exceeding more than ten percent

( 10 %) of the total number of shares of Company common stock issuable upon conversion of the Company common stock then held by the Seller

and its Affiliates.

Conversion Price Adjustment:

Dividends and Stock Splits.

If the Company, at any time while the Series B Preferred Stock is outstanding:

stock dividend or otherwise makes a distribution or distributions payable in shares of common stock on shares of common stock or any

other common stock equivalents (which, for avoidance of doubt, shall not include any shares of common stock issued by the Company upon

conversion of, or payment of a dividend on, the Series B Preferred Stock), (ii) subdivides outstanding shares of common stock into a

larger number of shares, (iii) combines (including by way of a reverse stock split) outstanding shares of common stock into a smaller

number of shares, or (iv) issues, in the event of a reclassification of shares of the common stock, any shares of capital stock of the

Company, then the conversion price of the Series B Preferred Stock shall be multiplied by a fraction of which the numerator shall be

the number of shares of common stock (excluding any treasury shares of the Company) outstanding immediately before such event, and of

which the denominator shall be the number of shares of common stock outstanding immediately after such event.

Any of the foregoing adjustments

shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution

and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

If, at any time while the Series B Preferred Stock is outstanding, (i) the Company, directly or

indirectly, in one or more related transactions effects any merger or consolidation of the Company with or into another Person, (ii)

the Company (and all of its subsidiaries, taken as a whole), directly or indirectly, effects any sale, lease, license, assignment,

transfer, conveyance or other disposition of all or substantially all of its assets in one or a series of related transactions,

(iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether by the Company or another Person) is

completed pursuant to which holders of the Company’s common stock are permitted to sell, tender or exchange their shares for

other securities, cash or property and has been accepted by the holders of fifty percent ( 50 %) or more of the outstanding common

stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization or

recapitalization of the common stock or any compulsory share exchange pursuant to which the common stock is effectively converted

into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in one or more related

transactions consummates a Fundamental Transaction, then, at the closing of such Fundamental Transaction, without any action on the

part of the Series B Holder, the Series B Holder shall have the right to receive, for each conversion share that would have been

issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction (without regard to any limitation

in the Series B Certificate of Designations on the conversion of the Series B Preferred Stock), the number of shares of common stock

of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and/or any Alternate Consideration

receivable as a result of such Fundamental Transaction by a holder of the number of shares of common stock for which the Series B

Preferred Stock is convertible immediately prior to such Fundamental Transaction (without regard to the limitations set forth in the

Series B Certificate of Designations on the conversion of the Series B Preferred Stock).

For purposes of any such conversion, the

determination of the conversion price of the Series B Preferred Stock shall be appropriately adjusted to apply to such Alternate

Consideration based on the amount of Alternate Consideration issuable in respect of one share of common stock in such Fundamental

Transaction, and the Company shall apportion the conversion price among the Alternate Consideration in a reasonable manner

reflecting the relative value of any different components of the Alternate Consideration.

If holders of common stock are given any

choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Series B Holder shall be given

the same choice as to the Alternate Consideration it receives upon such Fundamental Transaction.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – EQUITY (continued)

Series B Convertible

Preferred Stock (continued)

The Series B Holders will have no voting rights, except as otherwise required by the Delaware General Corporation

Notwithstanding the foregoing, in addition, as long as any shares of Series B Preferred Stock are outstanding, the Company shall

not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series B Preferred Stock, voting

as a separate class, (a) alter or change adversely the powers, preferences or rights given to the Series B Preferred Stock in the Series

B Certificate of Designations, (b) increase the number of authorized shares of Series B Preferred Stock, (c) except with respect to the

Series A Preferred Stock, authorize or issue an additional class or series of capital stock that ranks senior to the Series B Preferred

Stock with respect to the distribution of assets on liquidation or (d) enter into any agreement with respect to any of the foregoing.

No fractional shares or scrip representing fractional shares shall be issued upon the conversion of the Series

B Preferred Stock.

As to any fraction of a share which a Series B Holder would otherwise be entitled to upon such conversion, the Company

shall at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied

by the conversion price or round up to the next whole share.

Notwithstanding the foregoing, nothing shall prevent any Series B Holder

from converting fractional shares of Series B Preferred Stock.

of December 31, 2024, 11,000 shares of Series B Preferred Stock were issued and outstanding.

During the first quarter of 2025, to preserve

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

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

interest in Lab Services MSO held by the Company for cash and the surrender of its Series B Preferred Stock having a carrying value of

$ 11,000,000 .

Pursuant to the terms of the Redemption Agreement, all shares of the Company’s Series B Preferred Stock previously

issued to SCBC Holdings LLC as partial consideration for the equity interests of Lab Services MSO, were permanently surrendered and relinquished

to the Company for no additional consideration (See Note 10 - Series B Convertible Preferred Stock Extinguished Related to Sale of Equity

Method Investment).

As of September 30, 2025, there were no shares of Series B Preferred Stock remain outstanding.

Company is authorized to issue an aggregate of 100,000,000 shares

of common stock and 10,000,000 shares of “blank check” preferred stock.

Series C Convertible

2 unchanged sentences

(the “Series C Certificate of Designations”) with the Department of State, Division of Corporations, of the State of Delaware,

which provides for the designation of 10,000 shares of Series C Preferred Stock of the Company, par value $ 0.0001 per share.

which provides for the designation of 10,000 shares

of Series C Preferred Stock of the Company, par value $ 0.0001 per share.

of Series C Preferred Stock has a stated value of $ 1,000 .

Series C Preferred Stock shall rank (i) senior to the Company’s common stock and any other class or series of capital stock of

the Company created hereafter, the terms of which specifically provide that such class or series shall rank junior to the Series C Preferred

Stock, (ii) pari passu with any class or series of capital stock of the Company created hereafter specifically ranking, by its terms,

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.

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.

AVALON GLOBOCARE CORP.

4 unchanged sentences

Preferred Stock (continued)

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.

share of Series C Preferred Stock shall be convertible into common stock (the “Series C Conversion Shares”) at a conversion

per share equal to $ 2.41 , at the option of the holder, at any time after the later of (i) the date of the shareholder approval of the

issuance of the Series C Conversion Shares pursuant to the rules of the Nasdaq Stock Market and (ii) the one year anniversary of the

date of the first issuance of any shares of the Series C Preferred Stock.

In addition, the holder shall not have the right to convert

any portion of the Series C Preferred Stock if, after giving effect to the conversion, such holder (together with its affiliates) would

beneficially own in excess of 19.99 % of the number of shares of the common stock outstanding immediately after giving effect to the issuance

of the respective Series C Conversion Shares.

On May 29, 2025, the Company filed a certificate of amendment to the Series C Certificate

of Designations, pursuant to which the beneficial ownership limitation of 19.99 % was amended to 4.99 % .

As of September 30,

2025 and December 31, 2024, 3,800 and 3,500 shares of Series C Preferred Stock were issued and outstanding, respectively.

issuance of the Series C Conversion Shares pursuant to the rules of the Nasdaq Stock Market and (ii) the one year anniversary of the date

of the first issuance of any shares of the Series C Preferred Stock.

In addition, the holder shall not have the right to convert any portion

of the Series C Preferred Stock if, after giving effect to the conversion, such holder (together with its affiliates) would beneficially

own in excess of 19.99 % of the number of shares of the common stock outstanding immediately after giving effect to the issuance of

the respective Series C Conversion Shares.

On May 29, 2025, the Company filed a certificate of amendment to the Series C Certificate of

Designations, pursuant to which the be neficial ownership limitation of 19.99 % was amended to 4.99 %.

In March 2026, 723 shares of Series C Preferred

Stock were converted into 300,000 shares of the Company’s common stock.

As of March 31, 2026 and December 31, 2025, 3,077

and 3,800 shares of Series C Preferred Stock were issued and outstanding, respectively.

Series D Convertible

Preferred Stock

January 6, 2025, the Company filed a certificate of designations of preferences, rights, and limitations of Series D Preferred

Stock (the “Series D Certificate of Designations”) with the Department of State, Division of Corporations, of the State of

Delaware, which provides for the designation of 5,000 shares of Series D Preferred Stock of the Company, par value $ 0.0001 per share,

upon the terms and conditions as set forth in the Series D Certificate of Designations.

Each share of Series D Preferred Stock has a

stated value of $ 1,000 .

Series D Preferred Stock shall rank (i) senior to the Company’s common stock and any other class or series of capital stock of

the Company created hereafter, the terms of which specifically provide that such class or series shall rank junior to the Series D Preferred

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.

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 Shares.

As of September 30,

2025, 5,000 shares of Series D Preferred Stock were issued and outstanding.

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.

share of Series D Preferred Stock shall be convertible into common stock (the “Series D Conversion Shares”) at a conversion

per share equal to $ 2.41 , at the option of the holder, at any time after the Company has obtained shareholder approval for the issuance

of the Series D Conversion Shares pursuant to the rules of the Nasdaq Stock Market.

In addition, the holder shall not have the right to

convert any portion of the Series D Preferred Stock if, after giving effect to the conversion, such holder (together with its affiliates)

would beneficially own in excess of 4.99 % of the number of shares of the common stock outstanding immediately after giving effect

to the issuance of the respective Series D Conversion Shares.

As of both March 31, 2026 and December 31, 2025, 5,000 shares

of Series D Preferred Stock were issued and outstanding.

On May 6, 2026, the Company issued 2,074,689 shares of its common stock (the “Exchange Shares”) to its chairman, Wenzhao Lu

following shareholder approval in exchange for 5,000 shares of the Company’s Series D Preferred Stock held by him, which shares

of Series D Preferred Stock were cancelled.

The Exchange Shares issued was equal to the amount of shares of common stock Mr.

have been entitled to receive upon conversion of his Series D Preferred Stock.

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 .

AVALON GLOBOCARE CORP.

2 unchanged sentences

NOTE 12 – EQUITY (continued)

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

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

pursuant to which Mr.

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

5,000 shares of Series D Preferred Stock of the Company.

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

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

As a result, the difference between the

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

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

in calculating earnings per share .

Each share of Series

D Preferred Stock is convertible into common stock of the Company (the “Series D Conversion Shares”) at a conversion per

share equal to $ 2.41 , which approximated the market price at the date of transaction, at the option of the holder, at any time after

the Company has obtained shareholder approval for the issuance of the Series D Conversion Shares pursuant to the rules of the Nasdaq

Stock Market.

The Company evaluated

the features of the Series D Preferred Stock under ASC 480, and classified them as permanent equity because the Series D Preferred Stock

is not mandatorily or contingently redeemable at the stockholder’s option and the liquidation preference that exists does not fall

within the guidance of SEC Accounting Series Release No.

268 – Presentation in Financial Statements of “Redeemable

Preferred Stocks” (“ASR 268”).

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

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 Cash

July 2025, the Company sold 300 shares of Series C Convertible Preferred Stock and received net proceeds of $ 290,000 after

deducting offering expenses of $ 10,000 .

Each share of Series C Convertible Preferred Stock is convertible into common stock of the Company

(the “Conversion Shares”) at a conversion per share equal to $ 2.41 , which approximated the market price at the date of transaction.

The Company is not required to issue any of the Company’s common stock upon conversion of the Series C Convertible Preferred Stock

until the shareholder approval for such issuance is obtained by the Company.

The Company evaluated

the features of the Series C Convertible Preferred Stock under ASC 480, and classified them as permanent equity because the Series C

Convertible Preferred Stock is not mandatorily or contingently redeemable at the stockholder’s option and the liquidation preference

that exists does not fall within the guidance of SEC Accounting Series Release No.

268 – Presentation in Financial Statements

of “Redeemable Preferred Stocks” (“ASR 268”).

Common Shares Issued

the nine months ended September 30, 2025, the Company issued a total of 506,494 shares of its common stock for services rendered and

to be rendered.

These shares were valued at $ 1,656,786 , the fair market values on the grant dates using the reported closing share prices

on the dates of grant, and the Company recorded stock-based compensation expense of $ 1,437,916 for the nine months ended September 30,

2025 and reduced accrued liabilities of $ 42,385 and recorded prepaid expense of $ 176,485 as of September 30, 2025 which will be amortized

over the rest of corresponding service periods .

Series E Convertible Preferred Stock (continued)

Series 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.

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 req uired,

which opinion shall be reasonably satisfactory to the Required Holders (as defined in the Series E Certificate of Designation).

As of both March 31, 2026 and December 31, 2025, 19,500 shares

of Series D Preferred Stock were issued and outstanding.

AVALON GLOBOCARE CORP.

2 unchanged sentences

NOTE 12 – EQUITY (continued)

Common Shares Issued for Warrant Exercise

March and April 2025, pursuant to the terms of related warrant agreements, the Company issued an aggregate of 429,181 shares of its common

stock upon cashless exercise of warrants .

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 September 30, 2025, the investor converted its June 2024 Convertible Note in the principal amount of $ 1,378,993 and unpaid

interest of $ 208,729 into 1,587,722 shares of common stock of the Company at a per share price of $ 1.00 (see Note 6).

Common Shares Issued as Convertible Note Payable

Commitment Fee

July 2025, the Company issued a total of 10,000 shares of its common stock as commitment fee for the purchase of July

2025 Convertible Note.

These shares were valued at $ 26,800 , the fair market value on the grant date using the reported closing share

price on the date of grant, and the Company recorded it as debt discount (see Note 6 - July 2025 Convertible Note ).

Common Shares and

Warrants Sold for Cash

July 14, 2025, the Company entered into that certain securities purchase agreement (the “Securities Purchase Agreement”),

with an accredited investor, Brown Stone Capital Ltd.

(the “Brown Stone”), pursuant to which the Company agreed to

issue and sell to Brown Stone, upon the terms and conditions set forth in the Securities Purchase Agreement, 121,200 shares of the Company’s

common stock and pre-funded warrants to purchase 354,300 shares of the Company’s common stock, in exchange for $ 475,500 .

number of shares of the Company’s common stock issuable pursuant to the pre-funded warrants is 354,300 shares.

The closing of the

transaction occurred on July 17, 2025, which is when the Company received net proceeds of $ 450,500 after deducting offering expenses

of $ 25,000 .

fair value of the pre-funded warrants was $ 832,576 and was based on the Black-Scholes pricing model.

Input assumptions used were

stock price per share of $ 2.35 , a risk-free interest rate of 4.01 %;

Common Shares and Warrants Sold for Cash from

the February 2026 Private Offering

February 2026, the Company entered into securities purchase agreements (the “Purchase Agreements”) with certain institutional

investors (the “Purchasers”) for the issuance and sale in a private placement (the “Private Placement”) of (i)

490,197 shares (the “Shares”) of the Company’s common stock at a purchase price of $ 0.51 per Share;

(ii) pre-funded

warrants (the “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 Common Stock (the “Pre-Funded Warrant Shares”);

(iii) Series A-1 warrants to purchase up to 6,372,550

shares of Common Stock (the “Series A-1 Warrants,” and the shares issuable upon exercise thereof, the “Series A-1 Warrant

Shares”) and (iv) Series A-2 warrants to purchase up to 6,372,550 shares of Common Stock (the “Series A-2 Warrants,”

together with the Series A-1 Warrants, the “Warrants”) and the shares issuable upon exercise thereof, the “Series A-2

Warrant Shares,” together with the Series A-1 Warrant Shares, the “Warrant Shares”).

The Shares, the Pre-Funded Warrants,

the Pre-Funded Warrant Shares, the Warrants and the Warrant Shares are collectively referred to herein as the “Securities”.

The total gross proceeds were $ 3,249,412 .

Warrant has an exercise price of $ 0.51 per s hare.

The Warrants are not exercisable until the Stockholders of the Company approve

the issuance of the Warrants and the Warrant Shares upon the exercise thereof (the “Stockholder Approval”).

The Series A-1

Warrants will expire five (5) years following the date of Stockholder Approval.

The Series A-2 Warrants will expire eighteen (18) months

following the date of Stockholder Approval.

A holder may not exercise any portion of the Common Warrants to the extent the Purchaser would

own more than 4.99 % of the outstanding Common Stock immediately after exercise.

A holder may increase or decrease this percentage with

respect to either the Series A-1 Common Warrants or the Series A-2 Common Warrants to a percentage not in excess of 9.99 %, except that

any such increase shall require at least 61 days’ prior notice to the Company.

The Prefunded Warrants

are immediately exercisable and may be exercised at a nominal exercise price of $ 0.0001 per share of Common Stock at any time until all

of the Prefunded Warrants are exercised in full.

A holder may not exercise any portion of the Common Warrants to the extent the Purchaser

would own more than 4.99 % of the outstanding Common Stock immediately after exercise.

A holder may increase or decrease this percentage

with respect to Prefunded Warrants to a percentage not in excess of 9.99 %, except that any such increase shall require at least 61 days’

prior notice to the Company.

As compensation to H.C.

Wainwright & Co., LLC as the exclusive placement agent in connection with the Private Placement (the “Placement Agent”),

the Company paid the Placement Agent a cash fee of 7.0 % of the aggregate gross proceeds raised in the Private Placement, plus a management

fee equal to 1.0 % of the gross proceeds raised in the Private Placement and reimbursement of certain expenses and legal fees.

also issued warrants to designees of the Placement Agent (the “Placement Agent Warrants”) to purchase up to 5.0 % of the aggregate

number of shares of Common Stock placed in the Offering, equating to 318,628 shares of Common Stock (the “Placement Agent Warrant

The Placement Agent Warrants have substantially the same terms as the Series A-1 Warrants, except that the Placement Agent

Warrants have an exercise price equal to $ 0.6375 per share.

In connection with the

Private Placement, the Company entered into a registration rights agreement (the “Registration Rights Agreement”), dated as

of February 26, 2026, with the Purchaser, pursuant to which the Company agreed to prepare and file a registration statement with the Securities

and Exchange Commission (the “SEC”) registering the resale of Shares and the shares of Common Stock underlying the Pre-Funded

Warrants and the Common Warrants no later than 45 days after the date of the Registration Rights Agreement, and to use best efforts to

have the registration statement declared effective as promptly as practical thereafter, and in any event no later than 75 days following

the date of the Registration Rights Agreement (or 90 days following the date of the Registration Rights Agreement in the event of a “full

review” by the Securities and Exchange Commission).

The fair value of the Series A-1 Warrants was

$ 6,009,845 and was based on the Black-Scholes pricing model.

Input assumptions used were as follows:

stock price per share of $ 1.09 , a

risk-free interest rate of 3.57 %;

expected volatility of 108.52 %;

1 unchanged sentence

and expected dividend yield of 0 %.

$ 354,297 of the total gross proceeds was allocated to the warrants based on the relative fair value

allocation method, which has been reflected in shareholders’ equity.

The warrants were classified in shareholders’ equity

as the number of shares were fixed and determinable, and no other provisions precluded equity treatment.

$ 121,203 of the total gross

proceeds was allocated as the value of common shares.

The direct costs related

to the issuance of the common shares and pre-funded warrants were $ 25,000 .

These direct costs were recorded as an offset against gross

proceeds with $ 18,628 being recorded in additional paid-in capital and $ 6,372 being recorded in common shares on a relative fair value

following table summarizes the shares of the Company’s common stock issuable upon exercise of options outstanding at September

The fair value of the Series A-2 Warrants was

$ 5,328,870 and was based on the Black-Scholes pricing model.

Input assumptions used were as follows:

stock price per share of $ 1.09 , a

risk-free interest rate of 3.42 %;

expected volatility of 147.59 %;

expected life of 1.5 years;

and expected dividend yield of 0 %.

The fair value of the Placement Agent Warrants

was $ 294,001 and was based on the Black-Scholes pricing model.

Input assumptions used were as follows:

stock price per share of $ 1.09 ,

a risk-free interest rate of 3.57 %;

expected volatility of 108.52 %;

expected life of 5.0 years;

and expected dividend yield of 0 %.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 – EQUITY (continued)

Common Shares and Warrants Sold for Cash from

the February 2026 Private Offering (continued)

$ 3,154,455 of the total gross proceeds was allocated

to the Pre-Funded Warrants, Series A-1 Warrants, and Series A-2 Warrants based on the relative fair value allocation method, which has

been reflected in shareholders’ equity.

These warrants were classified in shareholders’ equity as the number of shares were

fixed and determinable, and no other provisions precluded equity treatment.

$ 94,957 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 these warrants were $ 786,601 .

These direct costs were recorded as an offset against gross proceeds with $ 763,614 being

recorded in additional paid-in capital and $ 22,987 being recorded in common shares on a relative fair value basis.

Shares Iss ued for Services

During the three months ended March 31, 2026,

the Company issued a total of 505,000 shares of its common stock for services rendered and to be rendered.

These shares were

valued at $ 522,800 , the fair market values on the grant dates using the reported closing share prices on the dates of grant, and the Company

recorded stock-based compensation expense of $ 319,819 for the three months ended March 31, 2026 and reduced accrued liabilities of

$ 96,600 and recorded prepaid expense of $ 106,381 as of March 31, 2026 which will be amortized over the rest of corresponding

service periods.

Shares Issued for Pre-funded Warrant Exercise

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 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.

Common Shares Issued for Debt Conversion

In January 2026, the June 2024 Convertible Note

holder converted its June 2024 Convertible Note in the principal amount of $ 545,950 and unpaid interest of $ 5,524 into 551,474 shares

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

following table summarizes the shares of the Company’s common stock issuable upon exercise

of options outstanding at March 31, 2026:

Options Outstanding Options Exercisable

Exercise Price Number

Outstanding at

September 30,

2026 Weighted Average

2 unchanged sentences

Exercisable at

September 30,

2026 Weighted

3 unchanged sentences

$ 2.93 – 228.00 41,169 2.09 $ 79.43 41,169 $ 79.43

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 – EQUITY (continued)

Options (continued)

option activity for the nine months ended September 30, 2025 was as follows:

Outstanding at January 1, 2025

Expired / cancelled / forfeited

Outstanding at September 30, 2025

Options exercisable at September 30, 2025

Options expected to vest

aggregate intrinsic value of both stock options outstanding and stock options exercisable at September 30, 2025 was $ 0 .

The fair values of options granted during the

nine months ended September 30, 2025 were estimated at the date of grant using the Black-Scholes option-pricing model with the following

volatility of 105.10 %, risk-free rate of 4.29 %, annual dividend yield of 0 %, and expected life of 3.00 years.

The aggregate

fair value of the options granted during the nine months ended September 30, 2025 was $ 6,115 .

The fair values of options granted during the

nine months ended September 30, 2024 were estimated at the date of grant using the Black-Scholes option-pricing model with the following

volatility of 83.10 % - 91.17 %, risk-free rate of 3.47 % - 4.79 %, annual dividend yield of 0 %, and expected life of 3.00 -

The aggregate fair value of the options granted during the nine months ended September 30, 2024 was $ 26,548 .

the three months ended September 30, 2025 and 2024, stock-based compensation expense associated with stock options granted amounted

to $ 3,988 and $ 11,542 , of which, $ 3,988 and $ 3,798 was recorded as compensation and related benefits, and $ 0 and $ 7,744 was recorded

as professional fees, respectively.

the nine months ended September 30, 2025 and 2024, stock-based compensation expense (adjustment) associated with stock options granted

amounted to $( 14,938 ) and $ 37,331 , of which, $ 13,300 and $ 13,389 , respectively, was recorded as compensation and related benefits, and

$( 28,238 ) and $ 23,942 was recorded as professional fees, respectively .

summary of the status of the Company’s nonvested stock options granted as of September 30, 2025 and changes during the nine months

ended September 30, 2025 is presented below :

Nonvested at January 1, 2025

Nonvested at September 30, 2025

There was no stock option

activity during the three months ended March 31, 2026.

The aggregate intrinsic value of both stock options

outstanding and stock options exercisable at March 31, 2026 was $ 0 .

AVALON GLOBOCARE CORP.

3 unchanged sentences

Warrants (Except Pre-Funded Warrants)

following table summarizes the shares of the Company’s common stock issuable upon exercise of warrants outstanding at September

following table summ arizes the shares of the Company’s common stock issuable upon exercise of warrants outstanding at March

Warrants Outstanding Warrants Exercisable

Exercise Price Number

Outstanding at

September 30,

2026 Weighted

Contractual Life

(Years) Weighted Average

(Years) Weighted

Exercise Price Number

Exercisable at

September 30,

2025 Weighted

March 31, 2026

$ 0.37 – 0.64 13,132,713 3.20 $ 0.51 68,985 $ 0.37

2 unchanged sentences

$ 187.50 8,264 1.06 $ 187.50 8,264 $ 187.50

stock warrant activity for the nine months ended September 30, 2025 was as follows :

$ 0.37 – 187.50 13,148,459 3.20 $ 0.64 84,731 $ 20.40

warrant activity for the three months ended March 31, 2026 was as follows :

Weighted Average

Exercise Price

Outstanding at January 1, 2026

Outstanding and exercisable at September 30, 2025

The aggregate intrinsic

value of both stock warrants outstanding and stock warrants exercisable at September 30, 2025 was $ 0 .

Repricing adjustment

( 1,733,571 )

Outstanding at March 31, 2026

Exercisable at March 31, 2026

aggregate intrinsic value of stock warrants outstanding and stock warrants exercisable at March 31, 2026 was approximately $ 281,000 and

$ 11,000 , respectively .

Issued in February 2026

February 2026, the Company entered into securities purchase agreements (the “Purchase Agreements”) with certain institutional

investors (the “Purchasers”) for the issuance and sale in a private placement (the “Private Placement”) of (i)

490,197 shares (the “Shares”) of the Company’s common sto ck at a purchase price of $ 0.51 per Share;

(ii) pre-funded

warrants (the “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 Common Stock (the “Pre-Funded Warrant Shares”);

(iii) Series A-1 warrants to purchase up to 6,372,550

shares of Common Stock (the “Series A-1 Warrants,” and the shares issuable upon exercise thereof, the “Series A-1 Warrant

Shares”) and (iv) Series A-2 warrants to purchase up to 6,372,550 shares of Common Stock (the “Series A-2 Warrants,”

together with the Series A-1 Warrants, the “Warrants”) and the shares issuable upon exercise thereof, the “Series A-2

Warrant Shares,” together with the Series A-1 Warrant Shares, the “Warrant Shares”).

The Shares, the Pre-Funded Warrants,

the Pre-Funded Warrant Shares, the Warrants and the Warrant Shares are collectively referred to herein as the “Securities”.

Each Warrant has an exercise

price of $ 0.51 per share.

The Warrants are not exercisable until the Stockholders of the Company approve the issuance of the Warrants

and the Warrant Shares upon the exercise thereof (the “Stockholder Approval”).

The Series A-1 Warrants will expire five (5)

years following the date of Stockholder Approval.

The Series A-2 Warrants will expire eighteen (18) months following the date of Stockholder

A holder may not exercise any portion of the Common Warrants to the extent the Purchaser would own more than 4.99 % of the outstanding

Common Stock immediately after exercise.

A holder may increase or decrease this percentage with respect to either the Series A-1 Common

Warrants or the Series A-2 Common Warrants to a percentage not in excess of 9.99 %, except that any such increase shall require at least

61 days’ prior notice to the Company.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 – EQUITY (continued)

Warrants (Except Pre-Funded Warrants) (continued)

The Prefunded Warrants

are immediately exercisable and may be exercised at a nominal exercise price of $ 0.0001 per share of Common Stock at any time until all

of the Prefunded Warrants are exercised in full.

A holder may not exercise any portion of the Common Warrants to the extent the Purchaser

would own more than 4.99 % of the outstanding Common Stock immediately after exercise.

A holder may increase or decrease this percentage

with respect to Prefunded Warrants to a percentage not in excess of 9.99 %, except that any such increase shall require at least 61 days’

prior notice to the Company.

As compensation to H.C.

Wainwright & Co., LLC as the exclusive placement agent in connection with the Private Placement (the “Placement Agent”),

the Company paid the Placement Agent a cash fee of 7.0 % of the aggregate gross proceeds raised in the Private Placement, plus a management

fee equal to 1.0 % of the gross proceeds raised in the Private Placement and reimbursement of certain expenses and legal fees.

also issued warrants to designees of the Placement Agent (the “Placement Agent Warrants”) to purchase up to 5.0 % of the aggregate

number of shares of Common Stock placed in the Offering, equating to 318,628 shares of Common Stock (the “Placement Agent Warrant

The Placement Agent Warrants have substantially the same terms as the Series A-1 Warrants, except that the Placement Agent

Warrants have an exercise price equal to $ 0.6375 per share.

In connection with the

Private Placement, the Company entered into a registration rights agreement (the “Registration Rights Agreement”), dated as

of February 26, 2026, with the Purchaser, pursuant to which the Company agreed to prepare and file a registration statement with the Securities

and Exchange Commission (the “SEC”) registering the resale of Shares and the shares of Common Stock underlying the Pre-Funded

Warrants and the Common Warrants no later than 45 days after the date of the Registration Rights Agreement, and to use best efforts to

have the registration statement declared effective as promptly as practical thereafter, and in any event no later than 75 days following

the date of the Registration Rights Agreement (or 90 days following the date of the Registration Rights Agreement in the event of a “full

review” by the Securities and Exchange Commission).

These warrants were classified in shareholders’

equity as the number of shares were fixed and determinable, and no other provisions precluded equity treatment.

Warrants Exercised

in March and April 2025

March and April 2025, pursuant to the terms of related warrant agreements, the Company issued an aggregate of 429,181 shares of its common

stock upon cashless exercise of warrants .

summary of the status of the Company’s nonvested stock warrants issued as of September 30, 2025 and changes during the nine months

ended September 30, 2025 is presented below :

Nonvested at January 1, 2025

Nonvested at September 30, 2025

in February 2026

February 2026, pursuant to the terms of related warrant agreements, 1,733,571 warrants were cashless exercised .

Pre-Funded Warrants

number of pre-funded warrants outstanding as of September 30, 2025 is as follows:

number of pre-funded warr ants outstanding as of March 31, 2026 is as follows:

Weighted Average

Exercise Price

Pre-funded warrants issued in December 2024

Pre-funded warrants issued in July 2025

Outstanding at September 30, 2025

Pre-funded warrants issued in February 2026

Outstanding at March 31, 2026

summary of pre-funded warrant activity during the three months ended March 31, 2026 is as follows:

Weighted Average

Exercise Price

Outstanding at January 1, 2026

Pre-funded warrants granted

Pre-funded warrants exercised

Outstanding at March 31, 2026

AVALON GLOBOCARE CORP.

3 unchanged sentences

Pre-Funded Warrants

summary of pre- funded warrant activity during the nine months ended September 30, 2025 is as follows:

Outstanding at January 1, 2025

Pre-funded warrants issued

Outstanding at September 30, 2025

Warrants Is sued in February 2026

February 2026, the Company entered into securities purchase agreements (the “Purchase Agreements”) with certain institutional

investors (the “Purchasers”) for the issuance and sale in a private placement (the “Private Placement”) of (i)

490,197 shares (the “Shares”) of the Company’s common stock at a purchase price of $ 0.51 per Share;

(ii) pre-funded

warrants (the “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 Common Stock (the “Pre-Funded Warrant Shares”);

(iii) Se ries A-1 warrants to purchase up to 6,372,550

shares of Common Stock (the “Series A-1 Warrants,” and the shares issuable upon exercise thereof, the “Series A-1 Warrant

Shares”) and (iv) Series A-2 warrants to purchase up to 6,372,550 shares of Common Stock (the “Series A-2 Warrants,”

together with the Series A-1 Warrants, the “Warrants”) and the shares issuable upon exercise thereof, the “Series A-2

Warrant Shares,” together with the Series A-1 Warrant Shares, the “Warrant Shares”).

The Shares, the Pre-Funded Warrants,

the Pre-Funded Warrant Shares, the Warrants and the Warrant Shares are collectively referred to herein as the “Securities”.

The Prefunded Warrants

are immediately exercisable and may be exercised at a nominal exercise price of $ 0.0001 per share of Common Stock at any time until all

of the Prefunded Warrants are exercised in full.

A holder may not exercise any portion of the Common Warrants to the extent the Purchaser

would own more than 4.99 % of the outstanding Common Stock immediately after exercise.

A holder may increase or decrease this percentage

with respect to Prefunded Warrants to a percentage not in excess of 9.99 %, except that any such increase shall require at least 61 days’

prior notice to the Company.

NOTE 13 – STATUTORY

RESERVE AND RESTRICTED NET ASSETS

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

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

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 nine months ended

September 30, 2025 as it incurred net loss in the period.

As of both September 30, 2025 and December 31, 2024, the restricted amount

as determined pursuant to PRC statutory laws totaled $ 6,578 .

Relevant PRC laws and

regulations restrict the Company’s PRC subsidiary, Avalon Shanghai, from transferring a portion of its net assets, equivalent to

its statutory reserve and its share capital, to the Company’s shareholders in the form of loans, advances or cash dividends.

PRC entity’s accumulated profit may be distributed as dividend to the Company’s shareholders without the consent of a third

As of both September 30, 2025 and December 31, 2024, total restricted net assets amounted to $ 1,206,578 .

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 March 31, 2026 and December 31, 2025, the restricted amount as determined pursuant to PRC statutory laws totaled

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 March 31, 2026

and December 31, 2025, total restricted net assets amounted to $ 1,206,578 .

14 – CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY

to the requirements of Rule 12-04(a), 5-04(c) and 4-08(e)(3) of Regulation S-X, the condensed financial information of the parent company

shall be filed when the restricted net assets of consolidated subsidiary exceed 25 % of consolidated net assets as of the end of the most

recently completed fiscal year.

For purposes of this test, restricted net assets of consolidated subsidiary shall mean that amount of

the Company’s proportionate share of net assets of consolidated subsidiary (after intercompany eliminations) which as of the end

of the most recent fiscal year may not be transferred to the parent company by subsidiary in the form of loans, advances or cash dividends

without the consent of a third party .

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.

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 th is test, restricted net assets of consolidated subsidiary shall mean that

amount of the Company’s proportionate share of net assets of consolidated subsidiary (after intercompany eliminations) which as

of the end of the most recent fiscal year may not be transferred to the parent company by subsidiary in the form of loans, advances or

cash dividends without the consent of a third party.

Company performed a test on the res tricted 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 15 – CONCENTRATIONS

The following table sets forth information as

to each customer that accounted for 10% or more of the Company’s revenue for the three and nine months ended September 30, 2025

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 – CONCENTRATIONS (continued)

Customers (continued)

September 30,

One customer, which is a third party, whose outstanding

receivable accounted for 10% or more of the Company’s total outstanding rent receivable at September 30, 2025, accounted for 98.3 %

of the Company’s total outstanding rent receivable at September 30, 2025.

One customer, which is a third party, whose outstanding

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.

supplier accounted for 10% or more of the Company’s purchase during the three and nine months ended September

30, 2025 and 2024.

NOTE 14 – SEGMENT INFORMATION

The segment reporting

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

During the three months

ended September 30, 2025, the management reporting structure was composed of one strategic business unit, mainly organized by service,

led by the Company’s President and Chief Executive Officer, who is its CODM.

Using the accounting guidance on segment reporting,

the Company determined that its one operating segment was aligned with its one reportable segment corresponding to its strategic business

During the nine months

ended September 30, 2025, the management reporting structure was composed of two strategic business units, mainly organized by services,

led by the Company’s President and Chief Executive Officer , who is its CODM.

Using the accounting guidance on segment reporting,

the Company determined that its two operating segments were aligned with its two reportable segments corresponding to its strategic business

During the three and

nine months ended September 30, 2024, the management reporting structure was composed of two strategic business units, mainly organized

by services, led by the Company’s President and Chief Executive Officer, who is its CODM.

Using the accounting guidance on segment

reporting, the Company determined that its two operating segments were aligned with its two reportable segments corresponding to its

strategic business units.

On February 9, 2023,

the Company purchased 40 % of Lab Services MSO.

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

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

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

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

During the three months ended September 30, 2025,

the Company operated in one reportable business segment:

the real property operating segment.

During the nine months ended September

30, 2025, the Company operated in two reportable business segments:

(1) the real property operating segment, and (2) laboratory testing

services segment (which ended on February 26, 2025) since Lab Services MSO’s operating results were regularly reviewed by the Company’s

chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance.

three and nine months ended September 30, 2024, the Company operated in two reportable business segments:

(1) the real property operating

segment, and (2) laboratory testing services segment since Lab Services MSO’s operating results were regularly reviewed by the

Company’s chief operating decision maker to make decisions about resources to be allocated to the segment and assess its performance.

The Company regularly reviewed the operating results and performance of Lab Services MSO, which was the Company’s equity method

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – SEGMENT INFORMATION

accounting policies for the segments are the same as those described in Note 3.

Our reportable segments are aligned principally

around the differences in services.

Real property operating income is calculated by subtracting real property operating expenses from

real property rental revenue;

income from equity method investment – Lab Services MSO is calculated by subtracting amortization

of intangible assets acquired from acquisition from the Company’s share of Lab Services MSO’s net income.

The assets and

certain expenses related to corporate activities are not allocated to the segments.

Information with respect to these reportable business

segments for the three and nine months ended September 30, 2025 and 2024 was as follows:

Three Months Ended September 30, 2025

Real Property

Real property rental revenue

Real property operating expenses

Real property operating income

Other operating expenses

Other (expense) income:

Interest expense

$ ( 131,637 )

$ ( 122,631 )

$ ( 254,268 )

Three Months Ended September 30, 2024

Real Property

Real property rental revenue

Real property operating expenses

Real property operating income

Loss from equity method investment - Lab Services MSO

Other operating expenses

Other (expense) income:

Interest expense

$ ( 166,464 )

$ ( 447,909 )

$ ( 1,064,827 )

$ ( 1,679,200 )

Nine Months Ended September 30, 2025

Real Property

Real property rental revenue

Real property operating expenses

Real property operating income

Income from equity method investment - Lab Services MSO

Other operating expenses

( 6,218,076 )

( 6,448,104 )

Other (expense) income:

Interest expense

( 1,309,571 )

( 1,885,090 )

Loss on extinguishment of debt

( 9,076,587 )

Net (loss) income

$ ( 521,055 )

$ ( 16,066,599 )

$ ( 16,194,977 )

supplier accounted for 10 % or more of the Company’s purchase during the three

months ended March 31, 2026 and 2025.

AVALON GLOBOCARE CORP.

1 unchanged sentence

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – SEGMENT INFORMATION

Nine Months Ended September 30, 2024

Real Property

Real property rental revenue

Real property operating expenses

Real property operating income

Loss from equity method investment - Lab Services MSO

Other operating expenses

( 2,860,972 )

( 3,141,101 )

Other (expense) income:

Interest expense

( 1,291,192 )

( 1,874,113 )

Other (expense) income

$ ( 669,702 )

$ ( 669,777 )

$ ( 3,839,260 )

$ ( 5,178,739 )

Identifiable long-lived tangible assets at September 30, 2025 and December 31, 2024

September 30,

Real property operations

Corporate/other

Identifiable long-lived tangible assets at September 30, 2025 and December 31, 2024

September 30,

United States

NOTE 16 – 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.

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.

From time to time, the Company is subject to ordinary

routine litigation incidental to its normal business operations.

The Company is not currently a party to, and its property is not subject

to, any material legal proceedings, except as set forth below.

October 28, 2019, Research Institu te 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

4 unchanged sentences

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

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.

September 30, 2025 and December 31, 2024, the accrued litigation settlement amounted to $ 363,450 and $ 373,450 , respectively.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – COMMITMENTS

AND CONTINGENCIES (continued)

As of both March 31, 2026 and December 31, 2025, the accrued litigation settlement amounted to $ 363,450 .

Operating Leases Commitment

The Company is a party

to leases for office space.

These lease agreements expire through December 2026.

Rent expense under all operating leases amounted to

approximately $ 79,000 and $ 96,000 for the nine months ended September 30, 2025 and 2024, respectively.

Supplemental cash flow

information related to leases for the nine months ended September 30, 2025 and 2024 is as follows:

Nine Months Ended

September 30,

Company is a party to leases for office space.

These lease agreements expire through February 2029.

Rent expense under all operating leases

amounted to approximately $ 20,500 and $ 32,000 for the three months ended March 31, 2026 and 2025, respectively.

Supplemental cash flow information related

to leases for the three months ended March 31, 2026 and 2025 is as follows:

Three Months Ended

Cash paid for amounts included in the measurement of lease liabilities:

2 unchanged sentences

Operating lease

following table summarizes the lease term and discount rate for the Company’s operating lease as of September 30, 2025 :

following table summarizes the lease term and discount rate for the Company’s operating leases as of March 31, 2026 :

Weighted average remaining lease term (in years) 2.34

Weighted average discount rate 12.0 %

The following table summarizes the maturity of lease liabilities under

operating lease as of September 30, 2025:

For the Twelve-month Period Ending September 30:

following table summarizes the maturity of lease liabilities under operating leases as of March 31, 2026 :

For the Twelve-month Period Ending March 31:

2030 and thereafter

4 unchanged sentences

Long-term portion

Venture – Avactis Biosciences Inc.

On July 18, 2018, the Company formed a wholly

owned subsidiary, Avactis Biosciences Inc.

(“Avactis”), a Nevada corporation, which focuses on accelerating commercial activities

related to cellular therapies as well as cellular immunotherapy including CAR-T, CAR-NK, TCR-T and others.

When formed, Avactis was designed

to integrate and optimize the Company’s global scientific and clinical resources to further advance the use of cellular therapies

to treat certain cancers;

however the Company is no longer pursuing any commercial activities with respect to cellular immunotherapy

and CAR-T, in particular.

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

Biotherapeutics”) owns 40 % of Avactis.

Avactis owns 100 % of the capital stock of Avactis Nanjing Biosciences Ltd., a company incorporated

in the PRC on May 8, 2020 (“Avactis Nanjing”), which only owns a patent and is not considered an operating entity and is

in the process of being dissolved.

AVALON GLOBOCARE CORP.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – COMMITMENTS

AND CONTINGENCIES (continued)

Venture – Avactis Biosciences Inc.

The Company is required to contribute $ 10 million

(or equivalent in RMB) in cash and/or services, which shall be contributed in tranches based on milestones to be determined jointly by

Avactis and the Company in writing subject to the Company’s cash reserves.

Within 30 days, Arbele Biotherapeutics shall make contribution

of $ 6.66 million in the form of entering into a License Agreement with Avactis granting Avactis an exclusive right and license in China

to its technology and intellectual property pertaining to CAR-T/CAR-NK/TCR-T/universal cellular immunotherapy technology and any additional

technology developed in the future with terms and conditions to be mutually agreed upon the Company and Avactis and services.

date hereof, the License Agreement has not been finalized by the parties.

In addition, the Company

is responsible for contributing registered capital of RMB 5,000,000 (approximately $ 0.7 million) for working capital purposes as required

by local regulation, which is not required to be contributed immediately and will be contributed subject to the Company’s discretion.

As of the date hereof, Avactis’ activities have been limited to that of a patent holding company and there is no other activity

or planned contributions in the rest of 2025 or into the foreseeable future.

Avactis Biosciences, Inc and Avactis Nanjing are not considered

operating entities and are in the process of being dissolved.

NOTE 17 – 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.

On October 20, 2025,

the Company entered into a waiver with Mast Hill with respect to June 2024 Convertible Note.

The waiver provides for an extension of

the maturity date of the June 2024 Convertible Note to December 31, 2025.

Common Shares Issued for Debt Conversion

the period from October 1, 2025 through November 13, 2025, an investor converted its convertible note in the principal amount of $ 146,930

and unpaid interest of $ 7,970 into 154,900 shares of common stock of the Company at a per share price of $ 1.00 .

David Jin Resignation;

Meng Li Appointment

On November 12, 2025, David Jin, M.D., Ph.D.

advised the Company of his resignation as the Company’s

Chief Executive Officer and as a member of the Board of Directors, effective November 30, 2025, as a result of a personal health issue.

Jin’s resignation was not because of a disagreement with the Company on any matter relating to the Company’s operations,

policies or practices.

On November 13, 2025, the Board appointed Meng Li, the Company’s current Chief Operating Officer, as interim

Chief Executive Officer, effective November 30, 2025.

Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the financial statements

Based upon this review, other than as described below, the Company did not identify any subsequent events that would have

required adjustment or disclosure in the financial statements .

Exercise of Pre-funded

April 2026, the Company issued 1,649,353 shares of its common stock upon the cash exercise of outstanding pre-funded

warrants for aggregate proceeds of $ 165 .

Issuance of Common

Stock upon Exchange of Series D Preferred Stock

On May 6, 2026, the Company issued 2,074,689 shares of common stock

(the “Exchange Shares”) to its chairman, Wenzhao Lu following shareholder approval in exchange for 5,000 shares of the Company’s

Series D Preferred Stock, which shares of Series D Preferred Stock were cancelled.

The Exchange Shares issued was equal to the amount

of shares of common stock Mr.

Lu would have been entitled to receive upon conversion of his Series D Preferred Stock.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements