What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-11 compared with 2025-11-14 · 340 added, 465 removed, 83 unchanged (91% of the section changed)

2 unchanged sentences

This Quarterly Report on Form 10-Q contains

forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under

Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange

Act of 1934, as amended (the “Exchange Act”).

Forward-looking statements include statements with respect to our beliefs,

plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and

unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance

or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking

All statements other than statements of historical fact are statements that could be forward-looking statements.

identify these forward-looking statements through our use of words such as “may,” “will,” “can,”

“anticipate,” “assume,” “should,” “indicate,” “would,” “believe,”

“contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,”

“point to,” “project,” “predict,” “could,” “intend,” “target,”

“potential” and other similar words and expressions of the future.

Accordingly, factors that may affect our results include,

but are not limited to:

forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section

27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934,

as amended (the “Exchange Act”).

Forward-looking statements include statements with respect to our beliefs, plans, objectives,

goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties

and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially

different from future results, performance or achievements expressed or implied by such forward-looking statements.

All statements other

than statements of historical fact are statements that could be forward-looking statements.

You can identify these forward-looking statements

through our use of words such as “may,” “will,” “can,” “anticipate,” “assume,”

“should,” “indicate,” “would,” “believe,” “contemplate,” “expect,”

“seek,” “estimate,” “continue,” “plan,” “point to,” “project,”

“predict,” “could,” “intend,” “target,” “potential” and other similar words

and expressions of the future.

Accordingly, factors that may affect our results include, but are not limited to:

● our ability to commercialize our product candidates and the

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an inflationary environment and tariffs.

All forward-looking

statements are expressly qualified in their entirety by this cautionary notice.

You are cautioned not to place undue reliance on any

forward-looking statements, which speak only as of the filing date of this Quarterly Report on Form 10-Q or the date of the document

incorporated by reference into this Quarterly Report on Form 10-Q.

We have no obligation, and expressly disclaim any obligation, to update,

revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise.

expressed our expectations, beliefs and projections in good faith, and we believe they have a reasonable basis.

However, we cannot assure

you that our expectations, beliefs or projections will result or be achieved or accomplished.

following discussion and analysis of our financial condition and results of operations for the three and nine months ended September

30, 2025 and 2024 should be read in conjunction with our condensed consolidated financial statements and related notes to those condensed

consolidated financial statements that are included elsewhere in this Quarterly Report on Form 10-Q .

We are developer of

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

We are currently marketing the

KetoAir™ breathalyzer device, which is owned and manufactured by Qi Diagnostics Limited, and plan to develop additional diagnostic

uses of the breathalyzer technology.

The KetoAir TM is registered with the U.S.

Food and Drug Administration as a Class I medical

We also continue to focus on advancing our intellectual property portfolio through existing patent applications.

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

had the following areas of focus in the three and nine months ended September 30, 2025 and 2024 :

All forward-looking statements are expressly qualified

in their entirety by this cautionary notice.

You are cautioned not to place undue reliance on any forward-looking statements, which speak

only as of the filing date of this Quarterly Report on Form 10-Q or the date of the document incorporated by reference into this Quarterly

Report on Form 10-Q.

We have no obligation, and expressly disclaim any obligation, to update, revise or correct any of the forward-looking

statements, whether as a result of new information, future events or otherwise.

We have expressed our expectations, beliefs and projections

in good faith, and we believe they have a reasonable basis.

However, we cannot assure you that our expectations, beliefs or projections

will result or be achieved or accomplished.

The following discussion and analysis of our financial

condition and results of operations for the three months ended March 31, 2026 and 2025 should be read in conjunction with our condensed

consolidated financial statements and related notes to those condensed consolidated financial statements that are included elsewhere in

this Quarterly Report on Form 10-Q.

Through our AI-driven subsidiary, we are advancing next-generation agentic AI systems targeted to consumers and small businesses, starting

with an SaaS automated video production platform.

We are also expanding our intellectual

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

In addition, we are marketing the KetoAir™ breathalyzer

device, which is registered with the U.S.

Food and Drug Administration as a Class I medical device, and plan to pursue additional diagnostic

applications for the technology.

In addition, we owned and operated commercial real estate at our headquarters in Freehold, NJ through

February 2026.

We had the following

areas of focus in the three months ended March 31, 2026 and 2025:

Research and Development

are focused on bringing forward the existing patent applications previously filed with the Massachusetts Institute of Technology (“MIT”).

We completed a sponsored research and co-development project with MIT led by Professor Shuguang Zhang as Principal Investigator.

the unique QTY code protein design platform, six water-soluble variant cytokine receptors have been successfully designed and tested

in a laboratory to show binding affinity to the respective cytokines.

We currently are focused on bringing forward the existing patent

applications previously filed as part of this program.

We also continue to bring forward the existing patent application previously filed

with Arbele related to CAR-T cellular therapy technologies .

We are focused on bringing forward the existing

patent applications previously filed with the Massachusetts Institute of Technology (“MIT”).

We completed a sponsored research

and co-development project with MIT led by Professor Shuguang Zhang as Principal Investigator.

Using the unique QTY code protein design

platform, six water-soluble variant cytokine receptors have been successfully designed and tested in a laboratory to show binding affinity

to the respective cytokines.

We currently are focused on bringing forward the existing patent applications previously filed as part of

this program.

We also continue to bring forward the existing patent application previously filed with Arbele related to CAR-T cellular

therapy technologies.

Product Commercialization

have begun the commercialization and development of a versatile breathalyzer system .

were granted exclusive distributorship rights for the KetoAir from Qi Diagnostics for the following territories:

North America, South

America, the EU and the UK.

For our commercialization strategy, we intend to target the diabetes and obesity markets.

We sell the product

through the KetoAir website and social media.

We believe the KetoAir device has some competitive advantages to other methods for measuring

The KetoAir is a handheld

device that allows the user to detect acetone levels in exhaled breath.

The acetone level is in concentration units (ppm, part-per-million)

such that the user will know his/her real-time ketosis status:

inadequate ketosis (0-3.99 ppm), mild ketosis (4-9.99 ppm), optimal ketosis

(10-40 ppm), or alarming level (> 40 ppm).

The KetoAir is registered with the United States Food and Drug Administration as a Class

I medical device.

The device is also paired with an “AI Nutritionist” software program (via Bluetooth connection) which is

downloadable from Google Play (for Android mobile phones, approved) and iPhone (the app is currently being reviewed by Apple iOS AppStore).

It helps users monitor and manage their ketogenic diet and related programs.

We believe the KetoAir can be an essential tool to help

diabetic patients adhere to their therapeutic programs and optimize their ketogenic dietary management.

Cessation of Laboratory

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

of our investment and on February 26, 2025, we and Lab Services MSO entered into a Redemption and Abandonment Agreement, whereby Lab

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

Accordingly, beginning in February 2025, we no longer offer

laboratory services .

In order to preserve

cash and focus on product commercialization, we have suspended all research and development efforts related to cellular therapy.

redirecting our funding efforts to our core business strategies outlined above.

We have begun the commercialization and development

of a versatile breathalyzer system.

We were granted distributorship rights for the

KetoAir from Qi Diagnostics for the following territories:

North America, South America, the EU and the UK.

For our commercialization

strategy, we intend to target the diabetes and obesity markets.

We sell the product through the KetoAir website and social media.

the KetoAir device has some competitive advantages to other methods for measuring ketosis.

The KetoAir is a handheld device that allows the

user to detect acetone levels in exhaled breath.

The acetone level is in concentration units (ppm, part-per-million) such that the user

will know his/her real-time ketosis status:

inadequate ketosis (0-3.99 ppm), mild ketosis (4-9.99 ppm), optimal ketosis (10-40 ppm), or

alarming level (> 40 ppm).

The KetoAir is registered with the United States Food and Drug Administration as a Class I medical device.

The device is also paired with an “AI Nutritionist” software program (via Bluetooth connection) which is downloadable from

Google Play (for Android mobile phones, approved) and iPhone (the app is currently being reviewed by Apple iOS AppStore).

It helps users

monitor and manage their ketogenic diet and related programs.

We believe the KetoAir can be an essential tool to help diabetic patients

adhere to their therapeutic programs and optimize their ketogenic dietary management.

Cessation of Laboratory Services

During the first quarter of 2025, to preserve

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

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

in Lab Services MSO held by us.

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

Artificial Intelligence Content Technology

Through our wholly-owned subsidiary, Avalon Quantum

AI LLC, we are advancing next-generation Agentic AI systems, including automated video generation and small business marketing automation

In order to preserve cash and focus on product

commercialization, we have suspended all research and development efforts related to cellular therapy.

We are redirecting our funding

efforts to our core business strategies outlined above.

Going Concern

Our condensed consolidated

financial statements have been prepared assuming that we will continue as a going concern, which contemplates, among other things, the

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

As reflected in the

accompanying condensed consolidated financial statements, we had 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.

have a limited operating history and our continued growth is dependent upon the continuation of generating rental revenue from our income-producing

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

Our condensed consolidated financial statements

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

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

As reflected in the accompanying condensed consolidated

financial statements, we had 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.

We have a limited operating history and our continued

growth is dependent upon the continuation of generating revenue for selling of Keto Air, generating revenue from advanced Agentic AI systems,

including automated video generation and small business marketing automation, and obtaining additional financing to fund future obligations

and pay liabilities arising from ordinary course business operations.

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There are no assurances that we will be successful

in our efforts to generate sufficient revenues, maintain sufficient cash balance or report profitable operations or to continue as a

going concern.

in our efforts to generate sufficient revenues, maintain sufficient cash balance or report profitable operations or to continue as a going

We plan on raising capital through the sale of equity to implement our business plan.

However, there is no assurance these

plans will be realized and that any additional financings will be available to us on satisfactory terms and conditions, or at all .

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 we be unable to continue as a going

Critical Accounting

However, there is no assurance these plans

will be realized and that any additional financings will be available to us on satisfactory terms and conditions, or at all.

The accompanying 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 we be unable to continue as a going concern.

Accounting Policies

Use of Estimates

preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United

States of America (“U.S.

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

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

of revenues and expenses during the reporting period.

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

consolidated financial statements and accompanying notes.

The preparation of the condensed consolidated

financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S.

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

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

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, and the assumptions used to

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

Real Property

have determined that the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”)

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

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 .

are governed by the income tax laws of China and the United States.

Income taxes are accounted for pursuant to ASC 740 “Accounting

for Income Taxes,” which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities

for the expected future tax consequences of events that have been recognized in our financial statements or tax returns.

The charge for

taxes is based on the results for the period as adjusted for items, which are non-assessable or disallowed.

It is calculated using tax

rates that have been enacted or substantively enacted by the balance sheet date .

Deferred tax is accounted

for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount

of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit.

In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to

the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized.

Deferred tax is calculated

using tax rates that are expected to apply to the period when the asset is realized or the liability is settled.

Deferred tax is charged

or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred

tax is changed to equity.

Deferred tax assets and liabilities are offset when they related to income taxes levied by the same taxation

authority and we intend to settle its current tax assets and liabilities on a net basis.

It is at least reasonably possible that the estimate of

the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered

in formulating its estimate, could change in the near term due to one or more future confirming events.

Accordingly, the actual results

could differ significantly from those estimates.

Significant estimates during the 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.

We are governed by the income tax laws of China

and the United States.

Income taxes are accounted for pursuant to ASC 740 “Accounting for Income Taxes,” which is an asset

and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of

events that have been recognized in our financial statements or tax returns.

The charge for taxes is based on the results for the period

as adjusted for items, which are non-assessable or disallowed.

It is calculated using tax rates that have been enacted or substantively

enacted by the balance sheet date.

Deferred tax is accounted for using the balance

sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities

in the financial statements and the corresponding tax basis used in the computation of assessable tax profit.

In principle, deferred tax

liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probable

that taxable profit will be available against which deductible temporary differences can be utilized.

Deferred tax is calculated using tax rates that

are expected to apply to the period when the asset is realized or the liability is settled.

Deferred tax is charged or credited in the

income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is changed

Deferred tax assets and liabilities are offset when they related to income taxes levied by the same taxation authority and

we intend to settle its current tax assets and liabilities on a net basis.

Recent Accounting

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Comparison of Results of Operations for the

Three and Nine Months Ended September 30, 2025 and 2024

Real Property

Rental Revenue

the three months ended September 30, 2025, we had real property rental revenue of $350,099, as compared to $345,159 for the three

months ended September 30, 2024, representing an increase of $4,940, or 1.4%.

For the nine months ended September 30, 2025, we had real

property rental revenue of $1,050,305, as compared to $987,634 for the nine months ended September 30, 2024, representing an increase

of $62,671, or 6.3%.

The increase was primarily attributable to the increase in the number of tenants occupying the building in the three

and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024.

We expect that our revenue

from real property rental will remain at its current level with minimal increase in the near future.

Real Property

Operating Expenses

property operating expenses consist of property management fees, property insurance, real estate taxes, depreciation, repairs and maintenance

fees, utilities and other expenses related to our rental properties .

For the three months

ended September 30, 2025, our real property operating expenses amounted to $234,366, as compared to $245,528 for the three months ended

September 30, 2024, representing a decrease of $11,162, or 4.5%.

The decrease was primarily attributable to a decrease in repairs and

maintenance of approximately $19,000, offset by an increase in other miscellaneous items of approximately $8,000.

For the nine months

ended September 30, 2025, our real property operating expenses amounted to $765,833, as compared to $794,142 for the nine months ended

September 30, 2024, representing a decrease of $28,309, or 3.6%.

The decrease was primarily attributable to a decrease in repairs and

maintenance of approximately $66,000, offset by an increase in utilities of approximately $10,000, an increase in building cleaning fee

of approximately $11,000, and an increase in other miscellaneous items of approximately $17,000.

Real Property

Operating Income

Our real property operating

income for the three months ended September 30, 2025 was $115,733, representing an increase of $16,102, or 16.2%, as compared to $99,631

for the three months ended September 30, 2024.

Our real property operating income for the nine months ended September 30, 2025 was $284,472,

representing an increase of $90,980, or 47.0%, as compared to $193,492 for the nine months ended September 30, 2024.

The increase was

primarily attributable to the increase in real property rental revenue and the decrease in real property operating expenses as described

We expect our real property operating income will remain at its current level with minimal increase in the near future.

(Loss) income

from Equity Method Investment – Lab Services MSO

a result of the sale of our ownership of 40% of Lab Services MSO on February 26, 2025, for the three months ended September 30, 2025,

we had no income from our investment in Lab Services MSO.

For the nine months ended September 30, 2025,

we had income from our investment in Lab Services MSO of $392,677, which consisted of our share of Lab Services MSO’s net income

of $503,833 and amortization of identifiable intangible assets acquired from Lab Services MSO acquisition of $111,156.

We sold our ownership

of 40% of Lab Services MSO on February 26, 2025.

For the three months ended September 30, 2024,

we had loss from our investment in Lab Services MSO of $447,909, which consists of our share of Lab Services MSO’s net loss of

$21,597, and amortization of identifiable intangible assets acquired from Lab Services MSO acquisition of $166,733, and impairment of

goodwill acquired from Lab Services MSO acquisition of $259,579, which was primarily attributable to Lab Services MSO’s lower revenues

and net incomes than anticipated and the decline in our stock price and market capitalization.

For the nine months ended September 30, 2024,

we had loss from our investment in Lab Services MSO of $669,777, which consists of our share of Lab Services MSO’s net income of

$90,001, and amortization of identifiable intangible assets acquired from Lab Services MSO acquisition of $500,199, and impairment of

goodwill acquired from Lab Services MSO acquisition of $259,579, which was primarily attributable to Lab Services MSO’s lower revenues

and net incomes than anticipated and the decline in our stock price and market capitalization.

Three Months Ended March 31, 2026 and 2025

Income from Equity

Method Investment – Lab Services MSO

a result of the sale of our ownership of 40% of Lab Services MSO on February 26, 2025, for the three months ended March 31, 2026, we had

no income from our investment in Lab Services MSO.

For the three months ended March 31, 2025, we

had income from our investment in Lab Services MSO of $392,677, which consists of our share of Lab Services MSO’s net income of

$503,833 and amortization of identifiable intangible assets acquired from Lab Services MSO acquisition of $111,156.

Other Operating Expenses

the three and nine months ended September 30, 2025 and 2024, other operating expenses consisted of the following:

the three months ended March 31, 2026 and 2025, other operating expenses consisted of the following :

Three Months Ended

September 30,

Nine Months Ended

September 30,

Advertising and marketing expenses

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Compensation and related benefits

Credit loss recovery

Miscellaneous taxes

1 unchanged sentence

Travel and entertainment

Rent and related utilities

Other general and administrative

● For the three months ended September 30, 2025, advertising

and marketing expenses increased by $104,287, or 72.1%, as compared to the three months ended September 30, 2024.

For the nine months

ended September 30, 2025, advertising and marketing expenses increased by $390,329, or 154.7%, as compared to the nine months ended September

The increase was primarily due to increased advertising activities in the three and nine months ended September 30, 2025.

expect that our advertising and marketing expenses will likely remain at its current quarterly level with minimal increase in the near

● Professional fees primarily consisted of accounting fees,

audit fees, legal service fees, consulting fees, investor relations service charges, fairness opinion charge, valuation service fees

and other fees.

For the three months ended September 30, 2025, professional fees increased by $945,150, or 311.6%, as compared to the

three months ended September 30, 2024, which was primarily attributable to an increase in consulting fees of approximately $782,000,

mainly due to the increase in use of consulting service providers related to our potential merger with YOOV Group Holding Limited, a

business company incorporated in the British Virgin Islands (“YOOV”), and an increase in legal service fees of approximately

$253,000, mainly due to the increased legal services related to our potential merger with YOOV, offset by a decrease in other miscellaneous

items of approximately $90,000.

For the nine months ended September 30, 2025, professional fees increased by $3,225,949, or 271.1%, as

compared to the nine months ended September 30, 2024, which was primarily attributable to an increase in consulting fees of approximately

$1,998,000, mainly due to the increase in use of consulting service providers related to our potential merger with YOOV, an increase

in accounting fees of approximately $383,000, mainly due to the increased accounting services related to our potential merger with YOOV,

an increase in legal service fees of approximately $917,000, mainly due to the increased legal services related to our potential merger

with YOOV, and an increase in fairness opinion charge of approximately $129,000 resulting from the increased fairness opinion services

related to our potential merger with YOOV, offset by a decrease in audit fees of approximately $142,000, mainly due to our switching

to a different audit service provider, resulting in a lower audit fee, and a decrease in other miscellaneous items of approximately $59,000.

We expect that our professional fees will decrease in the near future.

● For the three months ended September 30, 2025, compensation

and related benefits decreased by $112,976, or 32.9%, as compared to the three months ended September 30, 2024.

For the nine months ended

September 30, 2025, compensation and related benefits decreased by $159,333, or 15.1%, as compared to the nine months ended September

The decrease was primarily attributable to the decreased compensation for our executive officer, David Jin.

● For the three months

ended March 31, 2026, advertising and marketing expenses increased by $138,696, or 194.9%, as compared to the three months ended March

The increase was primarily due to increased advertising activities in the three months ended March 31, 2026.

We expect that

our compensation and related benefits will likely remain at its current quarterly level with minimal increase in the near future.

● For the three months ended September

30, 2025, we recorded credit loss recovery of $1,650,000.

Based on our periodic review of receivable from sale of equity method investment

balance, we adjusted the allowance for credit loss after considering management’s evaluation of the collectability of the receivable

balance, including the analysis of subsequent collection, age of the balance, Lab Services MSO’s collection history, and recent

economic events.

After unsuccessful collection efforts during the second quarter of 2025, management had decided to write off the

On or about July 22, 2025, we filed a lawsuit against Lab Services MSO.

We and Lab Services MSO entered into a Confidential

Settlement Agreement and Mutual Release dated August 26, 2025 whereby Lab Services MSO agreed to pay us in the aggregate of $1,722,000,

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 suit was dismissed

in August 2025.

As a result, for the three months ended September 30, 2025, we recorded a credit loss recovery of $1,650,000

to reinstate the receivable which was written-off in the second quarter of 2025.

For the nine months ended September 30, 2025, our credit

loss recovery, net, was $0.

For the three and nine months ended September 30, 2024, we did not record any credit loss recovery.

● For the three months ended September 30, 2025, miscellaneous

taxes increased by $31,600, or 263.3%, as compared to the three months ended September 30, 2024, which was primarily attributable to

the increase in Delaware state franchise tax in the third quarter of 2025.

For the nine months ended September 30, 2025, miscellaneous

taxes decreased by $137,785, or 51.7%, as compared to the nine months ended September 30, 2024.

The decrease was primarily attributable

to decreased Delaware state franchise tax.

our advertising and marketing expenses will likely remain at its current level with minimal increase in the near future.

● Professional fees

primarily consisted of accounting fees, audit fees, legal service fees, consulting fees, investor relations service charges, advisory

service fees, fairness opinion charge, valuation service fees and other fees.

For the three months ended March 31, 2026, professional

fees decreased by $50,264, or 3.1%, as compared to the three months ended March 31, 2025, which was primarily attributable to a decrease

in legal service fees of approximately $108,000, mainly due to the decreased legal services related to our potential merger with YOOV,

offset by an increase in other miscellaneous items of approximately $58,000.

We expect that our professional fees will decrease in the

near future .

● For the three

months ended March 31, 2026, compensation and related benefits decreased by $85,606, or 27.7%, as compared to the three months ended

March 31, 2025.

The decrease was primarily attributable to the decreased compensation for our interim chief executive officer, Meng Li,

and decreased compensation for our directors due to the resignations of some directors in the three months ended March 31, 2026.

that our compensation and related benefits will likely remain at its current level with minimal decrease in the near future.

● For the three months ended March 31, 2026, miscellaneous taxes increased by $665, or 1.7%, as compared

to the three months ended March 31, 2025.

We expect that our miscellaneous taxes will remain relatively steady, with minimal increase,

in the near future.

● For the three months ended September 30, 2025, directors’

and officers’ liability insurance premium decreased by $4,541, or 11.7%, as compared to the three months ended September 30, 2024.

For the nine months ended September 30, 2025, directors’ and officers’ liability insurance premium decreased by $71,669,

or 40.4%, as compared to the nine months ended September 30, 2024.

The decrease was mainly due to our switching to a different insurance

provider, resulting in a lower premium.

● For the three months ended September 30, 2025, travel

and entertainment expense decreased by $12,680, or 37.5%, as compared to the three months ended September 30, 2024, which was primarily

attributable to decreased business travel activities in the third quarter of 2025.

For the nine months ended September 30, 2025, travel

and entertainment expense increased by $25,893, or 33.1%, as compared to the nine months ended September 30, 2024, which was primarily

attributable to increased business travel activities in the nine months ended September 30, 2025 as compared to the corresponding period

● For the three months ended September 30, 2025, rent and related

utilities expenses decreased by $13,768, or 87.3%, as compared to the three months ended September 30, 2024.

For the nine months ended

September 30, 2025, rent and related utilities expenses decreased by $18,778, or 40.1%, as compared to the nine months ended September

The decrease was mainly due to the decreased monthly rent driven by decreased office space.

● Other general and administrative expenses mainly consisted

of NASDAQ listing fee, SEC registration fees, office supplies, and other miscellaneous items.

For the three months ended September 30,

2025, other general and administrative expenses decreased by $16,829, or 56.2%, as compared to the three months ended September 30, 2024,

which was mainly attributable to a decrease in NASDAQ listing fee of approximately $3,000, and a decrease in other miscellaneous items

of approximately $14,000.

For the nine months ended September 30, 2025, other general and administrative expenses increased by $52,397,

or 69.3%, as compared to the nine months ended September 30, 2024, which was mainly attributable to an increase in SEC registration fees

of approximately $48,000 related to our registration statements on Form S-4 and Form S-3, and an increase in other miscellaneous items

of approximately $4,000.

● For the three months ended March 31, 2026, directors’

and officers’ liability insurance premium decreased by $1,413, or 4.0%, as compared to the three months ended March 31, 2025.

decrease was mainly due to our switching to a different insurance provider, resulting in a lower premium .

● For the three months ended March 31, 2026, travel and

entertainment expense decreased by $11,566, or 25.9%, as compared to the three months ended March 31, 2025, which was primarily attributable

to decreased business travel activities in the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 .

● For the three months ended March 31, 2026, amortization expense

increased by $563,000, or 100.0%, as compared to the three months ended March 31, 2025, which was attributable to increased amortization

of identifiable intangible assets acquired, representing developed technology and trade name.

There was no comparable amortization prior

to the date of acquisition, December 12, 2025.

● Other general and administrative expenses mainly consisted of NASDAQ listing fee, office supplies, and

other miscellaneous items.

For the three months ended March 31, 2026, other general and administrative expenses decreased by $10,486,

or 23.2%, as compared to the three months ended March 31, 2025, due to our efforts at stricter controls on corporate expenditure.

Loss from Operations

As a result of the foregoing,

for the three months ended September 30, 2025, loss from operations amounted to $76,193, as compared to $1,269,961 for the three months

ended September 30, 2024, representing a decrease of $1,193,768, or 94.0%.

As a result of the foregoing, for the nine months ended September

30, 2025, loss from operations amounted to $5,770,955, as compared to $3,617,386 for the nine months ended September 30, 2024, representing

an increase of $2,153,569, or 59.5%.

a result of the foregoing, for the three months ended March 31, 2026, loss from operations amounted to $2, 721,126,

as compared to $1,785,423 for the three months ended March 31, 2025, representing an increase of $935,703, or 52.4%.

Other Expense

Other (expense) income

mainly includes third party and related party interest expense, change in fair value of derivative liability, loss on extinguishment

of debt, and other miscellaneous income (expense).

expense, net, totaled $178,075 for the three months ended September 30, 2025, as compared to $409,239 for the three months ended September

30, 2024, representing a decrease of $231,164, or 56.5%, which was primarily attributable to a decrease in third party interest expense

of approximately $269,000, mainly driven by the decrease in amortization of debt discount and debt issuance costs of approximately $247,000

mainly due to the maturity of our June 2024 Convertible Note in June 2025 and the decreased interest expense of approximately $22,000

from third party debts, a decrease in interest expense – related party of approximately $11,000, and a decrease in other expense

of approximately $95,000 mainly due to the gain from litigation settlement, offset by a decrease in gain from change in fair value of

derivative liability of approximately $144,000 .

Other expense, net,

totaled $10,424,022 for the nine months ended September 30, 2025, as compared to $1,561,353 for the nine months ended September 30, 2024,

representing an increase of $8,862,669, or 567.6%, which was primarily attributable to an increase in third party interest expense of

approximately $43,000, mainly driven by the increase in amortization of debt discount and debt issuance costs of approximately $40,000

and the increased interest expense of approximately $3,000 from third party debts, and an increase in loss on extinguishment of debt

of approximately $9,077,000 resulted from the reduction in the conversion price of our June 2024 Convertible Note, offset by an increase

in gain from change in fair value of derivative liability of approximately $91,000, a decrease in interest expense – related party

of approximately $32,000, and a decrease in other expense of approximately $134,000 mainly due to the gain from litigation settlement.

We did not have any

income taxes expense for the three and nine months ended September 30, 2025 and 2024 since we incurred losses in these periods.

As a result of the factors

described above, our net loss was $254,268 for the three months ended September 30, 2025, as compared to $1,679,200 for the three months

ended September 30, 2024, representing a decrease of $1,424,932, or 84.9%.

Other expense mainly includes interest expense,

change in fair value of derivative liability, and other miscellaneous expense.

expense totaled $ 1,655,554 for the three months ended March 31, 2026, as compared to $481,257 for the three months ended March

31, 2025, representing an increase of $1,174,297, or 244.0%, which was primarily attributable to an increase in loss from change in fair

value of derivative liability of approximately $1,163,000, and an increase in other expense of approximately $106,000 mainly due to the

loss from litigation settlement, offset by a decrease in interest expense of approximately $94,000, mainly driven by the decrease in amortization

of debt discount and debt issuance costs of approximately $94,000.

have any income taxes expense for the three months ended March 31, 2026 and 2025 since we incurred losses in these periods.

Net Loss from Continuing

As a result of the factors described above, our

net loss from continuing operations was $4,376,680 for the three months ended March 31, 2026, as compared to $2,266,680 for the three

months ended March 31, 2025, representing an increase of $2,110,000, or 93.1%.

Net Loss from Discontinued

Our net loss from discontinued operations was

$103,015 for the three months ended March 31, 2026, as compared to $215,431 for the three months ended March 31, 2025, representing a

decrease of $112,416, or 52.2%.

As a result of the factors

described above, our net loss was $16,194,977 for the nine months ended September 30, 2025, as compared to $5,178,739 for the nine months

ended September 30, 2024, representing an increase of $11,016,238, or 212.7%.

described above, our net loss was $4,479,695 for the three months ended March 31, 2026, as compared to $2,482,111 for the three months

ended March 31, 2025, representing an increase of $1,997,584, or 80.5%.

Net Loss Attributable to Avalon GloboCare

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The net loss attributable to our common shareholders

was $254,268, or $0.06 per share (basic and diluted), for the three months ended September 30, 2025, as compared to $1,679,200, or $1.82

per share (basic and diluted), for the three months ended September 30, 2024, representing a decrease of $1,424,932, or 84.9%.

The net loss attributable to our common shareholders

(after taking into effect $162,473 in deemed contribution) was $16,032,504, or $6.10 per share (basic and diluted), for the nine months

ended September 30, 2025, as compared to $5,178,739, or $6.45 per share (basic and diluted), for the nine months ended September 30,

2024, representing an increase of $10,853,765, or 209.6%.

was $4,479,695, or $0.50 per share (basic and diluted), for the three months ended March 31, 2026, as compared to $2,319,638 (after taking

into effect $162,473 in deemed contribution), or $1.43 per share (basic and diluted), for the three months ended March 31, 2025, representing

an increase of $2,160,057, or 93.1%.

Foreign Currency Translation Adjustment

reporting currency is the U.S.

The functional currency of our parent company, AHS, Avalon RT 9, Avalon Lab, and Q&A Distribution

dollar and the functional currency of Avalon Shanghai is the Chinese Renminbi (“RMB”).

The financial statements

of our subsidiary whose functional currency is the RMB are translated to U.S.

dollars using period end rate of exchange for assets and

liabilities, average rate of exchange for revenues, costs, and expenses and cash flows, and at historical exchange rate for equity.

gains and losses resulting from foreign exchange transactions are included in the results of operations.

As a result of foreign currency

translations, which are a non-cash adjustment, we reported a foreign currency translation gain of $271 and $3,043 for the three months

ended September 30, 2025 and 2024, respectively.

The functional currency of our U.S.

entities is the U.S.

dollar and the functional currency

of Avalon Shanghai is the Chinese Renminbi (“RMB”).

The financial statements of our subsidiary whose functional currency is

the RMB are translated to U.S.

dollars using period end rate of exchange for assets and liabilities, average rate of exchange for revenues,

costs, and expenses and cash flows, and at historical exchange rate for equity.

Net gains and losses resulting from foreign exchange transactions

are included in the results of operations.

As a result of foreign currency translations, which are a non-cash adjustment, we reported

a foreign currency translation gain of $654 and $2,829 for the nine months ended September 30, 2025 and 2024, respectively.

This non-cash

gain had the effect of decreasing our reported comprehensive loss in each respective period.

a foreign currency translation loss of $(311) and a foreign currency translation gain of $279 for the three months ended March 31, 2026

and 2025, respectively.

This non-cash loss/gain had the effect of increasing/decreasing our reported comprehensive loss in each respective

Comprehensive Loss

As a result of our foreign

currency translation adjustment, we had comprehensive loss of $253,997 and $1,676,157 for the three months ended September 30, 2025 and

2024, respectively.

a result of our foreign currency translation adjustment, we had comprehensive loss of $16,194,323 and $5,175,910 for the nine months

ended September 30, 2025 and 2024, respectively .

a result of our foreign currency translation adjustment, we had comprehensive loss of $4,480,006 and $2,481,832 for the three months ended

March 31, 2026 and 2025, respectively .

Liquidity and Capital Resources

We have a limited operating

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

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

and pay liabilities arising from ordinary course business operations.

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

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

These matters raise substantial doubt about our

ability to continue as a going concern.

Our ability to continue as a going concern is dependent on our ability to raise additional capital,

implement our business plan, and generate sufficient revenues.

There are no assurances that we will be successful in our efforts to generate

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

We plan to raise

capital in the future through the sale of equity or debt to implement our business plan.

However, there is no assurance these plans will

be realized and that any additional financings will be available to us on satisfactory terms and conditions, if at all.

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

from advanced Agentic AI systems, including automated video generation and small business marketing automation, as well as obtaining additional

financing to fund future obligations and pay liabilities arising from ordinary course business operations.

In addition, the current cash

balance cannot be projected to cover our operating expenses for the next twelve months from the release date of this report.

These matters

raise substantial doubt about our ability to continue as a going concern.

Our ability to continue as a going concern is dependent on our

ability to raise additional capital, implement our business plan, and generate sufficient revenues.

There are no assurances that we will

be successful in our efforts to generate sufficient revenues, maintain sufficient cash balance or report profitable operations or to continue

as a going concern.

We plan to raise capital in the future through the sale of equity or debt to implement our business plan.

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

conditions, if at all.

Liquidity is the ability

1 unchanged sentence

on an ongoing basis.

At September 30, 2025 and December 31, 2024, we had a cash balance of approximately $334,000 and $2,856,000, respectively.

At March 31, 2026 and December 31, 2025, we had a cash balance of approximately $776,000 and $109,000, respectively.

These funds are kept in financial institutions located as follows:

September 30, 2025

March 31, 2026

December 31, 2025

United States

following table sets forth a summary of changes in our working capital deficit from December 31, 2024 to September 30, 2025 :

September 30,

following table sets forth a summary of changes in our working capital deficit from December 31, 2025 to March 31, 2026:

Working capital deficit:

Total current assets

$ (1,147,465 )

Total current liabilities

2 unchanged sentences

$ (12,651,237 )

working capital deficit increased by $868,585 to $11,514,642 at September 30, 2025 from $10,646,057 at December 31, 2024.

in working capital deficit was primarily attributable to a decrease in cash of approximately $2,522,000, an increase in accrued professional

fees of approximately $709,000 which was mainly attributable to the increase in professional services related to our potential merger

with YOOV, an increase in accrued payroll liability and compensation of approximately $326,000, and an increase in stock subscription

liability of $150,000 resulting from the securities purchase agreement signed in June 2025, offset by an increase in receivable from

sale of equity method investment of approximately $1,029,000 resulting from execution of the Redemption Agreement signed on February

26, 2025 and the Confidential Settlement Agreement and Mutual Release signed on August 26, 2025 as described elsewhere in this report,

an increase in prepaid expense and other current assets of approximately $340,000 mainly due to the increase in prepaid professional

fees of approximately $351,000, a decrease in accrued liabilities and other payables of approximately $ 233,000 driven by payments

made to our vendors in the nine months ended September 30, 2025, a decrease in accrued liabilities and other payables – related

parties of approximately $633,000 which was extinguished upon our sale of equity method investment in the first quarter of 2025, and

working capital deficit decreased by $9,876,806 to $2,774,431 at March 31, 2026 from $12,651,237 at December 31, 2025.

The decrease in

working capital deficit was primarily attributable to an increase in cash of approximately $667,000, an increase on prepaid expense and

other current assets of approximately $144,000 which was mainly attributable to the increase in prepaid professional fees of approximately

$194,000 due to prepayments made to our professional service providers in the first quarter of 2026, a decrease in accrued professional

fees of approximately $526,000 driven by the payments made to our professional service providers in the first quarter of 2026,

a decrease in accrued payroll liability and compensation of approximately $354,000 driven by the payments made to our employees and directors

in the first quarter of 2026, a decrease in advance from pending sale of subsidiary – related party of approximately $3,158,000

resulting from the sale of our subsidiary of Avalon RT 9 to Mr.

Lu in the first quarter of 2026 as described in elsewhere in this report,

a decrease in convertible note payable, net, of approximately $737,000 mainly due to the conversion of our June 2024 Convertible Note

in the principal amount of approximately $1,379,000 into our common stock in the nine months ended September 30, 2025 and the increase

in debt discount of approximately $27,000 resulting from our issuance of the July 2025 Convertible Note in the third quarter of 2025,

which was offset by our issuance of the July 2025 Convertible Note with principal of $200,000 in the third quarter of 2025 and the amortization

of debt discount and debt issuance costs for our convertible note of approximately $452,000 (excluding the initial fair value of the

Second Warrant of $621,353) in the nine months ended September 30, 2025.

the exchange rate conversion is different for the condensed consolidated balance sheets and the condensed consolidated statements of

cash flows, the changes in assets and liabilities reflected on the condensed consolidated statements of cash flows are not necessarily

in the principal amount of approximately $546,000 into our common stock in the first quarter of 2026 and the repayments of principal of

$200,000 made to two individual investors in the first quarter of 2026, and the decrease in current liabilities of discontinued operations

of approximately $6,061,000 driven by the sale of our subsidiary of Avalon RT 9 to Mr.

Lu in the first quarter of 2026 as described in

elsewhere in this report, offset by a decrease in receivable from sale of equity method investment of approximately $281,000 due to the

payments received in the first quarter of 2026, a decrease in current assets of discontinued operations of approximately $357,000 driven

by the sale of our subsidiary of Avalon RT 9 to Mr.

Lu in the first quarter of 2026 as described in elsewhere in this report, and an increase

in note payable, net, of approximately $1,142,000 resulting from our loan financing in the first quarter of 2026.

the exchange rate conversion is different for the cond ensed consolidated balance sheets and the condensed consolidated statements

of cash flows, the changes in assets and liabilities reflected on the condensed consolidated statements of cash flows are not necessarily

identical with the comparable changes reflected on the condensed consolidated balance sheets.

Cash Flows for the Nine Months Ended September

30, 2025 Compared to the Nine Months Ended September 30, 2024

following summarizes the key components of our cash flows for the nine months ended September 30, 2025 and 2024:

Nine Months Ended

September 30,

Net cash used in operating activities

Cash Flows for the Three Months Ended March

31, 2026 Compared to the Three Months Ended March 31, 2025

following table summarizes the key components of our cash flows for the three months ended March 31, 2026 and 2025:

Three Months Ended

Net cash used in operating activities from continuing operations

$ (2,860,379 )

$ (1,691,135 )

Net cash provided by (used in) investing activities

Net cash provided by financing activities

Effect of exchange rate on cash

Net (decrease) increase in cash

Net cash provided by investing activities from continuing operations

Net cash provided by financing activities from continuing operations

Net cash flows used in discontinued operations

Effect of exchange rate on cash – continuing operations

Net increase (decrease) in cash

$ (1,585,620 )

cash flow used in operating activities for the nine months ended September 30, 2025 was $ 4,388,557, which primarily reflected

our consolidated net loss of approximately $16,195,000, and the non-cash item adjustments, consisting of income from equity method investment

cash flow used in operating activities from continuing operations for the three months ended March 31, 2026 was $2,860,379, which primarily

reflected our consolidated net loss from continuing operations of approximately $4,377,000, and the changes in operating assets and liabilities,

primarily consisting of a decrease in accrued liabilities and other payables of approximately $796,000 which was mainly driven by payments

made to our vendors in the first quarter of 2026, offset by the non-cash item adjustments, primarily consisting of depreciation and amortization

of intangible assets of approximately $563,000 mainly due to the amortization of identifiable intangible assets acquired, representing

developed technology and trade name, in the first quarter of 2026 as described in elsewhere in this report, stock-based compensation and

service expense of approximately $320,000, amortization of debt issuance costs and debt discount

of approximately $189,000, and change in fair market value of derivative liability of approximately $1,277,000.

cash flow used in operating activities from continuing operations for the three months ended March 31, 2025 was $1,691,135, which primarily

reflected our consolidated net loss from continuing operations of approximately $2,267,000, and the non-cash item adjustments, primarily

consisting of income from equity method investment of approximately $393,000, offset by amortization of debt issuance costs and debt discount

of approximately $284,000, and change in fair market value of derivative liability of approximately $114,000, and the changes in operating

assets and liabilities, primarily consisting of an increase in prepaid expense and other assets of approximately $185,000 mainly due

to the increase in prepaid professional fees which were paid by cash of approximately $175,000, offset by an increase in accrued liabilities

and other payables of approximately $985,000 which was mainly driven by the increase in professional services related to our potential

merger with YOOV in the nine months ended September 30, 2025, and the non-cash item adjustments, primarily consisting of depreciation

of approximately $133,000, stock-based compensation and service expense of approximately $1,423,000, amortization of debt issuance costs

and debt discount of approximately $1,155,000, and loss on extinguishment of debt of approximately $9,077,000 resulted from the reduction

in the conversion price of our June 2024 Convertible Note.

cash flow used in operating activities for the nine months ended September 30, 2024 was $3,890,993, which primarily reflected

our consolidated net loss of approximately $5,179,000, and the non-cash item adjustments, primarily consisting of change in fair market

value of derivative liability of approximately $381,000, and the changes in operating assets and liabilities, primarily consisting of

a decrease in accrued liabilities and other payables of approximately $1,176,000 resulting from payments made to our vendors in the nine

months ended September 30, 2024, offset by a decrease in rent receivable of approximately $132,000 driven by our collection efforts,

and the non-cash item adjustments, primarily consisting of depreciation of approximately $133,000, stock-based compensation and service

expense of approximately $255,000, loss from equity method investment of approximately $670,000 which was mainly attributable to the

amortization of identifiable intangible assets acquired from Lab Services MSO acquisition of approximately $500,000 and the impairment

of goodwill acquired from Lab Services MSO acquisition of approximately $260,000, resulting from Lab Services MSO’s lower revenues

and net incomes than anticipated and the decline in our stock price and market capitalization, distribution of earnings from equity method

investment of approximately $612,000, and amortization of debt issuance costs and debt discount of approximately $1,115,000.

expect our cash used in operating activities to increase in the next 12 months due to the following :

assets and liabilities, primarily consisting of an increase in accrued liabilities and other payables of approximately $575,000, mainly

due to the increase in services related to our potential merger with YOOV in the three months ended March 31, 2025 .

expect our cash used in o perating activities to increase in the next 12 months due to the following:

the development and commercialization of new products;

● an increase in public relations and/or sales promotions for

existing and/or new brands as we expand within existing markets or enter new markets.

cash flow provided by investing activities was $752,635 for the nine months ended September 30, 2025, as compared to net cash flow used

in investing activities of $100,000 for the nine months ended September 30, 2024.

During the nine months ended September 30, 2025, we

received proceeds from sale of equity method investment of approximately $789,000, offset by payments made for improvement of commercial

real estate of approximately $36,000.

During the nine months ended September 30, 2024, we paid $100,000 for the acquisition of a 40%

interest in Lab Services MSO.

Net cash flow provided

by financing activities was $1,112,871 for the nine months ended September 30, 2025, as compared to $4,726,942 for the nine months ended

September 30, 2024.

During the nine months ended September 30, 2025, we received proceeds from issuance of July 2025 Convertible Note

of $200,000, proceeds from stock subscription of $150,000, an advance from pending sale of noncontrolling interest in subsidiary of approximately

$50,000, net proceeds from the issuance of convertible preferred stock of $290,000 (net of cash paid for convertible preferred stock

issuance costs of $10,000), and proceeds from issuance of common stock and warrants approximately $476,000, offset by payments made for

offering costs of approximately $53,000.

During the nine months ended September 30, 2024, we received net proceeds from the issuance

of convertible debts and warrants of approximately $3,085,000 (net of original issue discount of approximately $177,000 and cash paid

for convertible note issuance costs of approximately $283,000), an advance from the pending sale of a noncontrolling interest in a subsidiary

of approximately $2,022,000, and net proceeds from equity offering of approximately $2,719,000 (net of cash paid for commission and other

offering costs of approximately $138,000), offset by repayments made for convertible debt of $3,100,000.

following trends are reasonably likely to result in a material decrease in our liquidity over the near to long term :

an increase in public relations and/or sales promotions for existing and/or new brands as we expand within existing markets or enter new markets.

Net cash flow provided by investing activities

from continuing operations was $280,500 for the three months ended March 31, 2026, as compared to $95,000 for the three months ended March

During the three months ended March 31, 2026 and 2025, we received proceeds from sale of equity method investment of approximately

$281,000 and $95,000, respectively.

Net cash flow provided by financing activities

from continuing operations was $3,436,812 for the three months ended March 31, 2026, as compared to $219,972 for the three months ended

March 31, 2025.

During the three months ended March 31, 2026, we received net proceeds from issuance of debt of $1,130,000 (net of original

issue discount of approximately $91,000 and cash paid for debt issuance costs of $34,000), net proceeds from the February 2026 private

offering of approximately $2,757,000 (net of cash paid for the February 2026 private offering costs of approximately $493,000), offset

by repayments made for bridge loan of $250,000, and repayments made for convertible debt of $200,000.

During the three months ended March

31, 2025, we received advance from pending sale of subsidiary of approximately $220,000.

The following trends

are reasonably likely to result in a material decrease in our liquidity over the near to long term:

increase in working capital requirements to finance our current business;

1 unchanged sentence

cost of being a public company.

addition, the impact that the imposition of tariffs and changes to global trade policies could have on our results of operations is uncertain .

estimate that, based on current plans and assumptions, our available cash will be insufficient to satisfy our cash requirements under

our present operating expectations through cash flow provided by operations and sales of equity.

Other than funds received as described

above and cash resources generated from our operations, we presently have no other significant alternative source of working capital.

We have used these funds to fund our operating expenses, pay our obligations and grow our company.

We will need to raise significant

additional capital to fund our operations and to provide working capital for our ongoing operations and obligations.

Therefore, our future

operation is dependent on our ability to secure additional financing.

Financing transactions may include the issuance of equity or debt

securities, obtaining credit facilities, or other financing mechanisms.

However, there can be no assurance that financing will be available

in amounts or on terms acceptable to the Company.

Additionally, the trading price of our common stock and a downturn in the U.S.

and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities.

Even if we are able

to raise the funds required, it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements

that would force us to seek alternative financing.

Furthermore, if we issue additional equity or debt securities, stockholders may experience

additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our

common stock.

The inability to obtain additional capital may restrict our ability to grow and may reduce our ability to continue to conduct

business operations.

If we are unable to obtain additional financing, we will be required to cease our operations.

To date, we have not

considered this alternative, nor do we view it as a likely occurrence .

In addition, the impact that the imposition of

tariffs and changes to global trade policies could have on our results of operations is uncertain.

We estimate that, based on current plans and assumptions,

our available cash will be insufficient to satisfy our cash requirements under our present operating expectations through cash flow provided

by operations and sales of equity.

Other than funds received as described above and cash resources generated from our operations, we presently

have no other significant alternative source of working capital.

We have used these funds to fund our operating expenses, pay our obligations

and grow our company.

We will need to raise significant additional capital to fund our operations and to provide working capital for our

ongoing operations and obligations.

Therefore, our future operation is dependent on our ability to secure additional financing.

transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms.

there can be no assurance that financing will be available in amounts or on terms acceptable to the Company.

Additionally, the trading

price of our common stock and a downturn in the U.S.

equity and debt markets could make it more difficult to obtain financing through

the issuance of equity or debt securities.

Even if we are able to raise the funds required, it is possible that we could incur unexpected

costs and expenses or experience unexpected cash requirements that would force us to seek alternative financing.

Furthermore, if we issue

additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences

or privileges senior to those of existing holders of our common stock.

The inability to obtain additional capital may restrict our ability

to grow and may reduce our ability to continue to conduct business operations.

If we are unable to obtain additional financing, we will

be required to cease our operations.

To date, we have not considered this alternative, nor do we view it as a likely occurrence.

Foreign Currency

2 unchanged sentences

in China in 2022, with the exception of a small administrative office.

We did not during the three and nine months ended September 30,

2025, and do not expect in the foreseeable future, to generate any additional revenue from PRC operations.

Thus, exchange rate fluctuations

between the RMB and the U.S.

We did not during the three months ended March 31, 2026, and do

not expect in the foreseeable future, to generate any additional revenue from PRC operations.

Thus, exchange rate fluctuations between

the RMB and the U.S.

dollar do not, and are not expected to, have a material effect on us.

For the three months ended September

30, 2025 and 2024, we had an unrealized foreign currency translation gain of approximately $300 and $3,000, respectively, because of

changes in the exchange rate.

For the nine months ended September 30, 2025 and 2024, we had an unrealized foreign currency translation

gain of approximately $700 and $2,800, respectively, because of changes in the exchange rate.

For the three months ended March 31, 2026 and

2025, we had an unrealized foreign currency translation loss of approximately $(300) and an unrealized foreign currency translation gain

of approximately $300, respectively, because of changes in the exchange rate.

The effect of inflation

on our revenues and operating results was not significant for the three and nine months ended September 30, 2025 and 2024.

on our revenues and operating results was not significant for the three months ended March 31, 2026 and 2025.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

2 unchanged sentences

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 2. Management’s Discussion and Analysis