Change Agents Corporation. 10-Q

Item 1. Financial Statements. AVALON GLOBOCARE CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS March 31, December 31, 2026 2025 (Unaudited) ASSETS CURRENT ASSETS: Cash $ 775,995 $ 109,091 Receivable from sale of equity method investment 467,500 748,000 Prepaid expense and other current assets 426,647 282,170 Current assets of discontinued operations - 356,616 Total Current Assets 1,670,142 1,495,877 NON-CURRENT ASSETS: Operating lease right-of-use assets, net 153,345 - Property and equipment, net 579 727 Intangible assets, net 1,613,204 2,158,167 Goodwill 12,808,197 12,808,197 Non-current assets of discontinued operations - 6,937,769 Total Non-current Assets 14,575,325 21,904,860 Total Assets $ 16,245,467 $ 23,400,737 LIABILITIES AND EQUITY CURRENT LIABILITIES: Accrued professional fees $ 1,306,913 $ 1,832,606 Accrued research and development fees 153,772 153,772 Accrued payroll liability and compensation 718,595 1,072,553 Accrued litigation settlement 363,450 363,450 Accrued liabilities and other payables 281,066 281,063 Accrued liabilities and other payables - related party 100,000 100,000 Operating lease obligation 83,508 6,000 Advance from pending sale of subsidiary - related party - 3,158,078 Derivative liability 29,442 34,156 Stock subscription liability 150,000 150,000 Bridge loan payable, net 115,800 197,341 Convertible note payable, net - 737,018 Note payable, net 1,142,027 - Current liabilities of discontinued operations - 6,061,077 Total Current Liabilities 4,444,573 14,147,114 NON-CURRENT LIABILITIES: Operating lease obligation, noncurrent portion 76,837 - Non-current liabilities of discontinued operations - 23,515 Total Non-current Liabilities 76,837 23,515 Total Liabilities 4,521,410 14,170,629 Commitments and Contingencies (Note 16) EQUITY: Preferred stock, $ 0.0001 par value; 10,000,000 shares authorized; 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; 3,067,000 3,790,000 Liquidation preference $ 5 million at March 31, 2026 8,837,527 8,837,527 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 14,916,753 14,916,753 Common stock, $ 0.0001 par value; 100,000,000 shares authorized; 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 832 486 Additional paid-in capital 96,073,376 88,376,767 Less: common stock held in treasury, at cost; 3,467 shares at March 31, 2026 and December 31, 2025 ( 522,500 ) ( 522,500 ) Accumulated deficit ( 110,413,796 ) ( 105,934,101 ) Statutory reserve 6,578 6,578 Accumulated other comprehensive loss ( 241,713 ) ( 241,402 ) Total Avalon GloboCare Corp. stockholders’ equity 11,724,057 9,230,108 Noncontrolling interest - - Total Equity 11,724,057 9,230,108 Total Liabilities and Equity $ 16,245,467 $ 23,400,737 See accompanying notes to the condensed consolidated financial statements. - 1 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) For the Three Months Ended March 31, 2026 2025 INCOME FROM EQUITY METHOD INVESTMENT - LAB SERVICES MSO $ - $ 392,677 OTHER OPERATING EXPENSES: Advertising and marketing expenses 209,846 71,150 Professional fees 1,581,951 1,632,215 Compensation and related benefits 223,416 309,022 Amortization of intangible assets 563,000 - Other general and administrative expenses 142,913 165,713 Total Other Operating Expenses 2,721,126 2,178,100 LOSS FROM OPERATIONS ( 2,721,126 ) ( 1,785,423 ) OTHER EXPENSE Interest expense - amortization of debt discount and debt issuance costs ( 189,417 ) ( 283,755 ) Interest expense - other ( 82,029 ) ( 81,956 ) Change in fair value of derivative liability ( 1,276,889 ) ( 114,360 ) Other expense ( 107,219 ) ( 1,186 ) Total Other Expense ( 1,655,554 ) ( 481,257 ) LOSS BEFORE INCOME TAXES ( 4,376,680 ) ( 2,266,680 ) INCOME TAXES - - NET LOSS FROM CONTINUING OPERATIONS ( 4,376,680 ) ( 2,266,680 ) NET LOSS FROM DISCONTINUED OPERATIONS ( 103,015 ) ( 215,431 ) NET LOSS $ ( 4,479,695 ) $ ( 2,482,111 ) LESS: NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST - - NET LOSS AFTER NONCONTROLLING INTEREST ( 4,479,695 ) ( 2,482,111 ) DEEMED CONTRIBUTION ON EXCHANGE OF EQUITY INSTRUMENTS - 162,473 NET LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS $ ( 4,479,695 ) $ ( 2,319,638 ) NET LOSS PER COMMON SHARE ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS: Basic and diluted, continuing operations $ ( 0.49 ) $ ( 1.30 ) Basic and diluted, discontinued operations ( 0.01 ) ( 0.13 ) Basic and diluted $ ( 0.50 ) $ ( 1.43 ) WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: Basic and diluted 8,963,998 1,624,629 COMPREHENSIVE LOSS: NET LOSS $ ( 4,479,695 ) $ ( 2,482,111 ) OTHER COMPREHENSIVE (LOSS) INCOME FROM CONTINUED OPERATIONS Unrealized foreign currency translation (loss) gain ( 311 ) 279 COMPREHENSIVE LOSS ( 4,480,006 ) ( 2,481,832 ) LESS: COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTEREST - - COMPREHENSIVE LOSS ATTRIBUTABLE TO AVALON GLOBOCARE CORP. COMMON SHAREHOLDERS $ ( 4,480,006 ) $ ( 2,481,832 ) See accompanying notes to the condensed consolidated financial statements. - 2 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY For the Three Months Ended March 31, 2026 (Unaudited) Avalon GloboCare Corp. Stockholders’ Equity Series C Preferred Stock Series D Preferred Stock Series E Preferred Stock Common Stock Additional Treasury Stock Accumulate Other Number of Number of Number of Number of Paid-in Number of Accumulated Statutory Comprehensive Noncontrolling Total Shares Amount Shares Amount Shares Amount Shares Amount Capital Shares Amount Deficit Reserve Loss Interest Equity Balance, January 1, 2026 3,800 $ 3,790,000 5,000 $ 8,837,527 19,500 $ 14,916,753 4,857,476 $ 486 $ 88,376,767 ( 3,467 ) $ ( 522,500 ) $ ( 105,934,101 ) $ 6,578 $ ( 241,402 ) $ - $ 9,230,108 Issuance of common stock upon cashless exercise of pre-funded stock warrants - - - - - - 354,257 35 ( 35 ) - - - - - - - Issuance of common stock upon cashless exercise of stock warrants - - - - - - 1,268,672 127 ( 127 ) - - - - - - - Conversion of Series C Preferred Stock into common stock ( 723 ) ( 723,000 ) - - - - 300,000 30 722,970 - - - - - - - Conversion of convertible note payable and accrued interest into common stock - - - - - - 551,474 55 551,419 - - - - - - 551,474 Reclassification of derivative liability to equity - - - - - - - - 1,281,603 - - - - - - 1,281,603 Issuance of common stock for services - - - - - - 505,000 50 522,750 - - - - - - 522,800 Sales of securities from the February 2026 private placement, net - - - - - - 490,197 49 2,756,763 - - - - - - 2,756,812 Sale of subsidiary (Note 3) - - - - - - - - 1,861,266 - - - - - - 1,861,266 Foreign currency translation adjustment - - - - - - - - - - - - - ( 311 ) - ( 311 ) Net loss for the three months ended March 31, 2026 - - - - - - - - - - - ( 4,479,695 ) - - - ( 4,479,695 ) Balance, March 31, 2026 3,077 $ 3,067,000 5,000 $ 8,837,527 19,500 $ 14,916,753 8,327,076 $ 832 $ 96,073,376 ( 3,467 ) $ ( 522,500 ) $ ( 110,413,796 ) $ 6,578 $ ( 241,713 ) $ - $ 11,724,057 See accompanying notes to the condensed consolidated financial statements. - 3 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (DEFICIT) For the Three Months Ended March 31, 2025 (Unaudited) Avalon GloboCare Corp. Stockholders’ (Deficit) Equity Series A Preferred Stock Series B Preferred Stock Series C Preferred Stock Series D Preferred Stock Common Stock Additional Treasury Stock Accumulate Other Total Number of Number of Number of Number of Number of Paid-in Number of Accumulated Statutory Comprehensive Noncontrolling Equity Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Capital Shares Amount Deficit Reserve Loss Interest (Deficit) Balance, January 1, 2025 9,000 $ 9,000,000 11,000 $ 11,000,000 3,500 $ 3,500,000 - $ - 1,445,979 $ 145 $ 72,023,525 ( 3,467 ) $ ( 522,500 ) $ ( 87,673,125 ) $ 6,578 $ ( 232,000 ) $ - $ 7,102,623 Issuance of common stock upon cashless exercise of stock warrants - - - - - - - - 186,877 19 ( 19 ) - - - - - - - Issuance of common stock for services - - - - - - - - 22,278 2 111,230 - - - - - - 111,232 Reclassification of derivative liability to equity - - - - - - - - - - 18,853 - - - - - - 18,853 Series D Convertible Preferred Stock issued in exchange of Series A Convertible Preferred Stock ( 9,000 ) ( 9,000,000 ) - - - - 5,000 8,837,527 - - 162,473 - - - - - - - Series B Convertible Preferred Stock extinguished related to sale of equity method investment - - ( 11,000 ) ( 11,000,000 ) - - - - - - 2,348,695 - - - - - - ( 8,651,305 ) Stock-based compensation - - - - - - - - - - 9,159 - - - - - - 9,159 Foreign currency translation adjustment - - - - - - - - - - - - - - - 279 - 279 Net loss for the three months ended March 31, 2025 - - - - - - - - - - - - - ( 2,482,111 ) - - - ( 2,482,111 ) Balance, March 31, 2025 - $ - - $ - 3,500 $ 3,500,000 5,000 $ 8,837,527 1,655,134 $ 166 $ 74,673,916 ( 3,467 ) $ ( 522,500 ) $ ( 90,155,236 ) $ 6,578 $ ( 231,721 ) $ - $ ( 3,891,270 ) See accompanying notes to the condensed consolidated financial statements. - 4 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the Three Months Ended March 31, 2026 2025 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: Depreciation and amortization of intangible assets 563,158 151 Amortization of operating lease right-of-use asset 16,398 18,956 Stock-based compensation and service expense 319,819 26,371 Income from equity method investment - ( 392,677 ) Amortization of debt issuance costs and debt discount 189,417 283,755 Change in fair market value of derivative liability 1,276,889 114,360 Changes in operating assets and liabilities: Security deposit - 5,473 Prepaid expense and other assets ( 37,854 ) ( 36,904 ) Accrued liabilities and other payables ( 796,128 ) 575,016 Operating lease obligation ( 15,398 ) ( 18,956 ) NET CASH USED IN OPERATING ACTIVITIES FROM CONTINUING OPERATIONS ( 2,860,379 ) ( 1,691,135 ) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of equity method investment 280,500 95,000 NET CASH PROVIDED BY INVESTING ACTIVITIES FROM CONTINUING OPERATIONS 280,500 95,000 CASH FLOWS FROM FINANCING ACTIVITIES Repayments of bridge loan ( 250,000 ) - Repayments of convertible debt ( 200,000 ) - Proceeds from issuance of debt 1,164,000 - Payments of debt issuance costs ( 34,000 ) - Advance from pending sale of subsidiary - 219,972 Proceeds received from the February 2026 private offering 3,249,412 - Disbursements for the February 2026 private offering costs ( 492,600 ) - NET CASH PROVIDED BY FINANCING ACTIVITIES FROM CONTINUING OPERATIONS 3,436,812 219,972 DISCONTINUED OPERATIONS Net cash used in operating activities from discontinued operations ( 231,956 ) ( 209,688 ) NET CASH FLOWS USED IN DISCONTINUED OPERATIONS ( 231,956 ) ( 209,688 ) EFFECT OF EXCHANGE RATE ON CASH - CONTINUING OPERATIONS 41,927 231 NET INCREASE (DECREASE) IN CASH 666,904 ( 1,585,620 ) CASH - beginning of period 109,091 2,658,182 CASH - end of period $ 775,995 $ 1,072,562 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for: Interest $ 106,025 $ 164,500 NON-CASH INVESTING AND FINANCING ACTIVITIES: Common stock issued for future services $ 106,381 $ 51,635 Common stock issued for accrued liabilities $ 96,600 $ 42,385 Receivable related to sale of equity method investment $ - $ 1,745,000 Related party payable extinguished upon sale of equity method investment $ - $ 632,916 Series B Convertible Preferred Stock extinguished related to sale of equity method investment $ - $ 11,000,000 Series D Convertible Preferred Stock issued in exchange of Series A Convertible Preferred Stock $ - $ 9,000,000 Stock warrants issued as placement agent fee $ 294,001 $ - Settlement of derivative liability $ 1,281,603 $ 18,853 Issuance of common stock upon cashless exercise of stock warrants $ 127 $ 19 Issuance of common stock upon cashless exercise of pre-funded stock warrants $ 35 $ - Initial ROU asset and lease liability $ 169,743 $ 127,486 Conversion of convertible note payable and accrued interest into common stock $ 551,474 $ - Series C Convertible Preferred Stock converted into common stock $ 723,000 $ - Related party gain on deconsolidation of Avalon RT 9 $ 1,861,266 $ - See accompanying notes to the condensed consolidated financial statements. - 5 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS Avalon GloboCare Corp. (the “Company” or “ALBT”) was incorporated under the laws of the State of Delaware on July 28, 2014 . 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. (“AHS”) was incorporated under the laws of the State of Delaware. AHS owns 100 % of the capital stock of Avalon (Shanghai) 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 was incorporated on April 29, 2016, and was engaged in medical related consulting services for customers. Due to the winding down of the medical related consulting services in 2022, the Company decided to cease all operations of Avalon Shanghai and no longer has any material revenues or expenses in Avalon Shanghai. As a result, Avalon Shanghai is no longer an operating entity. 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, NJ 07728. 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 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 owned subsidiary, Avalon Laboratory Services, Inc. (“Avalon Lab”), a Delaware company. On February 9, 2023, Avalon Lab purchased 40 % of the issued and outstanding equity interests of Laboratory Services MSO, LLC, a private limited company formed under the laws of the State of Delaware on September 6, 2019 (“Lab Services MSO”), and its subsidiaries. Lab Services MSO, through its subsidiaries, is engaged in providing laboratory testing 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, Lab Services MSO redeemed the 40 % equity interest in Lab Services MSO held by Avalon Lab. Accordingly, beginning in February 2025, we no longer offer laboratory services. On May 1, 2024, the Company formed a wholly owned subsidiary, Q&A Distribution LLC (“Q&A Distribution”), a Texas company. Q&A Distribution is engaged in distribution of KetoAir device. On February 21, 2025, the Company formed a wholly owned subsidiary, Nexus MergerSub Limited (“Nexus”), a British Virgin Islands (“BIV”) company. There was no activity for the subsidiary since its incorporation through March 31, 2026. On December 5, 2025, the Company formed a wholly owned subsidiary, Avalon Quantum AI, LLC (“Avalon Quantum AI”), a Nevada company. On December 12, 2025, the Company acquired RPM Interactive, Inc., a Nevada corporation (“RPM”), in accordance with the terms of the Agreement and Plan of Merger, dated December 12, 2025, as amended by Amendment No. 1 dated December 14, 2025 (as amended, the “Merger Agreement”), by and among the Company, Avalon Quantum AI, LLC, a Nevada limited liability company and a wholly owned subsidiary of the Company (the “Merger Sub”), 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”). As 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. - 6 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 – ORGANIZATION AND NATURE OF OPERATIONS (continued) Details of the Company’s subsidiaries which 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 (Shanghai) Healthcare Technology Co., Ltd. (“Avalon Shanghai”) PRC April 29, 2016 100 % held by AHS Not considered an operating entity Genexosome Technologies Inc. (“Genexosome”) Nevada July 31, 2017 60 % held by ALBT No current activities to report; dormant Avalon Laboratory Services, Inc. (“Avalon Lab”) Delaware October 14, 2022 100 % held by ALBT No current activities to report; dormant Q&A Distribution LLC (“Q&A Distribution”) Texas May 1, 2024 100 % held by ALBT Distributes KetoAir device Nexus MergerSub Limited (“Nexus”) BVI February 21, 2025 100 % held by ALBT No current activities to report Avalon Quantum AI, LLC (“Avalon Quantum AI”) Nevada December 5, 2025 100 % held by ALBT Is advancing next-generation agentic AI systems targeted to consumers and small businesses, starting with an SaaS automated video production platform NOTE 2 – BASIS OF PRESENTATION AND GOING CONCERN CONDITION Basis of Presentation These interim condensed consolidated financial statements of the Company and its subsidiaries are unaudited. In the opinion of management, all adjustments (consisting of normal recurring accruals) and disclosures necessary for a fair presentation of these interim condensed consolidated financial statements have been included. The results reported in the condensed consolidated financial statements for any interim periods are not necessarily indicative of the 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. GAAP”). 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. 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, 2025 filed with the SEC on March 30, 2026. As 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. - 7 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 2 – BASIS OF PRESENTATION AND GOING CONCERN CONDITION (continued) Basis of Presentation (continued) Certain 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 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 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 revenue. There are no assurances that the Company will be successful in its efforts to generate significant revenue, maintain sufficient cash balance or report profitable operations or to continue as a going concern. The Company plans on raising capital through the sale of equity to implement its business plan. However, there is no assurance these plans will be realized and that any additional financings will be available to the Company on satisfactory terms and conditions, if any. The accompanying 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 OF SIGNIFICANT ACCOUNTING POLICIES Use of Estimates The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Changes in these estimates and assumptions may have a material impact on the condensed consolidated financial statements and accompanying notes. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates. 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. - 8 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Cash and Cash Equivalents At March 31, 2026 and December 31, 2025, the C ompany’s cash balances by geographic area were as follows: Country: March 31, 2026 December 31, 2025 United States $ 775,917 99.99 % $ 108,599 99.5 % China 78 0.01 % 492 0.5 % Total cash $ 775,995 100.0 % $ 109,091 100.0 % 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 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. 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. Assets 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. 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 three months ended March 31, 2026: Significant Unobservable Inputs (Level 3) Balance of derivative liability as of January 1, 2026 $ 34,156 Loss from change in the fair value of derivative liability 1,276,889 Reclassification of additional paid-in capital upon conversion ( 1,281,603 ) Balance of derivative liability as of March 31, 2026 $ 29,442 ASC 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 instruments. - 9 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Credit Risk and Uncertainties The Company maintains a portion of its cash on deposits with bank and financial institution within the U.S. that at times may exceed federally-insured limits of $ 250,000 . 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 Software. Costs incurred to develop internal-use software are expensed as incurred during the preliminary project stage. Internal-use 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. As of March 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 ASC 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. 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. - 10 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 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 March 31, 2026 2025 Options to purchase common stock 41,169 1,451,425 Warrants to purchase common stock 13,148,459 171,163 Series C convertible preferred stock (*) 1,276,763 1,452,282 Series D convertible preferred stock (**) 2,074,689 2,074,689 Series E convertible preferred stock (***) 13,000,000 - Convertible notes and related accrued interest (****) - 234,554 Potentially dilutive securities 29,541,080 5,384,113 (*) 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 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. 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 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. 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 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. - 11 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Segment Reporting (continued) The 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. On February 18, 2026, the Company and Wenzhao Lu, the Company’s chairman of the Board of Directors, entered into an Amended and Restated Membership Interest Purchase Agreement, pursuant to which the Company sold to Mr. Lu 100 % of the membership interests of Avalon RT 9. The Company determined that the assets and operations that had been disposed of met the criteria for discontinued operations presentation. For all periods presented, the operating results associated with the assets disposed of have been reclassified into net loss from discontinued operations in the 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 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. The amendments in ASU 2023-09 addressed investor requests for enhanced income tax information primarily through changes to disclosure regarding rate reconciliation and income taxes paid both in the U.S. and in foreign jurisdictions. ASU 2023-09 was effective for fiscal years beginning after December 15, 2024 on a prospective basis, with the option to apply the standard retrospectively. Early adoption was permitted. The adoption of ASU 2023-09 did not have a material effect on the Company’s 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. In January 2025, the FASB issued ASU No. 2025-01, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40), Clarifying the Effective Date. ASU 2024-03 requires public companies to disclose, in interim and reporting periods, additional information about certain expenses in the financial statements. ASU 2024-03, as clarified by ASU 2025-01, is effective for public entities for annual periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted and is effective on either a prospective basis or retrospective basis. The Company is currently evaluating the impact that the updated standard will have on the Company’s disclosures within the condensed consolidated financial statements. In September 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 intended. 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. The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements. - 12 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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 At March 31, 2026 and December 31, 2025, prep aid expense and other current assets consisted of the following: March 31, 2026 December 31, 2025 Prepaid professional fees $ 261,155 $ 67,139 Prepaid directors’ and officers’ liability insurance premium 12,335 10,932 Prepaid NASDAQ listing fee 42,000 - Deferred offering costs - 84,652 Finished goods 71,862 74,841 Recoverable value-added tax 11,023 10,863 Others 28,272 33,743 Total $ 426,647 $ 282,170 NOTE 5 – DISCONTINUED OPERATIONS AND DISPOSALS On February 18, 2026, the Company and Wenzhao Lu, the Company’s chairman of the Board of Directors, entered into an Amended and Restated Membership Interest Purchase Agreement (the “Amended MIPA”), pursuant to which the Company sold to Mr. Lu 100 % of the membership interests of Avalon RT 9 for $ 9,000,000 . The subsidiary comprises our real property operations segment. As a result of the planned disposition of the subsidiary, the real property operations segment 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: 2026 2025 REAL PROPERTY RENTAL REVENUE $ 253,839 $ 349,800 REAL PROPERTY OPERATING EXPENSES ( 153,903 ) ( 280,390 ) REAL PROPERTY OPERATING INCOME 99,936 69,410 OTHER OPERATING EXPENSES: Professional fees 45,617 59,364 Compensation and related benefits 20,932 31,398 Total Other Operating Expenses 66,549 90,762 INCOME (LOSS) FROM OPERATIONS 33,387 ( 21,352 ) OTHER (EXPENSE) INCOME Interest expense - amortization of debt discount and debt issuance costs - ( 29,807 ) Interest expense - other ( 136,402 ) ( 164,500 ) Other income - 228 Total Other Expense, net ( 136,402 ) ( 194,079 ) LOSS BEFORE INCOME TAXES ( 103,015 ) ( 215,431 ) INCOME TAXES - - NET LOSS $ ( 103,015 ) $ ( 215,431 ) - 13 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 5 – DISCONTINUED OPERATIONS AND DISPOSALS (continued) The following table summarizes the ass ets and liabilities of the discontinued operations: March 31, 2026 December 31, 2025 ASSETS CURRENT ASSETS Cash $ - $ 258,999 Rent receivable - 84,898 Prepaid expense and other current assets - 12,719 Total Current Assets - 356,616 NON-CURRENT ASSETS: Property and equipment, net - 3,478 Investment in real estate, net - 6,925,768 Deferred leasing costs and other non-current assets - 8,523 Total Non-current Assets - 6,937,769 Total Assets $ - $ 7,294,385 LIABILITIES CURRENT LIABILITIES: Accrued liabilities and other payables $ - $ 261,077 Note payable, net - 5,800,000 Total Current Liabilities - 6,061,077 NON-CURRENT LIABILITIES: Deferred rental income - 23,515 Total Non-current Liabilities - 23,515 Total Liabilities $ - $ 6,084,592 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 to goodwill. 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. During 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. - 14 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 6 – INTANGIBLE ASSETS (continued) At March 31, 2026 and December 31, 2 025, intangible assets consisted of the following: Useful Life March 31, 2026 December 31, 2025 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 Less: 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. Amortization 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: Amortization Amount 2027 $ 1,595,167 2028 and thereafter - $ 1,595,167 NOTE 7 – CONVERTIBLE NOTE PAYABLE June 2024 Convertible Note On June 5, 2024, the Company entered into securities purchase agreements with Mast Hill for the issuance of 13.0 % senior secured promissory notes in the aggregate principal amount of $ 2,845,000 (collectively, the “June 2024 Convertible Note”) convertible into shares of the Company’s common stock, as well as the issuance of 26,800 shares of common stock as a commitment fee and warrants for the purchase of 146,667 shares of common stock of the 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). 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. 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. On December 15, 2024, the Company and Mast Hill entered into that certain consent, acknowledgement, and waiver agreement, pursuant to which Mast Hill waived all amortization payments required to be made under the June 2024 Convertible Note, the Company paid a waiver fee of $ 150,000 to Mast Hill, and the Company issued to Mast Hill a common stock purchase warrant for the purchase of up to 150,000 shares of the Company’s common stock (“Pre-Funded Warrants”). The Pre-Funded Warrants are immediately exercisable at issuance and until the Pre-Funded Warrants are exercised in full and have an exercise price of $ 0.01 per share. On May 29, 2025, the Company and Mast Hill entered into that certain waiver (the “Waiver”), pursuant to which Mast Hill will retain all related dilutive issuance rights under Section 1.6(e) of the June 2024 Convertible Note, provided that any adjustment under Section 1.6(e) of the June 2024 Convertible Note shall be subject to a per share floor price equal to $ 1.00 . - 15 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 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. During the period from June 1, 2025 through December 31, 2025, Mast Hill converted its June 2024 Convertible Note in the principal amount of $ 2,010,827 into 2,010,827 shares of common stock of the Company at a per share price of $ 1.00 . 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 On July 3, 2025, the Company issued two convertible promissory notes (“July 2025 Convertible Note”) to two accredited investors on identical terms. The July 2025 Convertible Note has a principal amount of $ 200,000 , bears a one-time interest charge of $ 60,000 , and matures nine months from the date of issuance. Pursuant to the terms of the July 2025 Convertible Note, beginning six months after the issue date, the two investors may convert the outstanding principal and accrued interest into shares of the Company’s common stock at a fixed conversion price of $ 1.00 per share, subject to certain adjustments as provided for in the July 2025 Convertible Note for stock splits, dividends, combinations, or reclassifications. The Company may prepay the July 2025 Convertible Note at any time without penalty. As consideration for the two investors’ purchase of the July 2025 Convertible Note, the Company issued 5,000 shares of restricted common stock to each investor as a commitment fee. The Company recorded a total debt discount of $ 26,800 related to the common stock issued to the two investors, which was amortized over the term of the July 2025 Convertible Note. In March 2026, the Company repaid in full the July 2025 Convertible Note. The convertible notes payable as of Marc h 31, 2026 and December 31, 2025 was as follows: March 31, 2026 December 31, 2025 Principal amount $ - $ 745,950 Less: unamortized debt discount - ( 8,932 ) Convertible note payable, net $ - $ 737,018 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 loss. - 16 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NO TE 8 – BRIDGE LOAN PAYABLE, NET On 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. The bridge loan payable as of March 31, 2026 an d December 31, 2025 was as follows: March 31, 2026 December 31, 2025 Principal amount $ 125,000 $ 375,000 Less: unamortized debt issuance costs ( 748 ) ( 14,441 ) Less: unamortized debt discount ( 8,452 ) ( 163,218 ) Convertible note payable, net $ 115,800 $ 197,341 For 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. - 17 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 9 – NOTE PAYABLE, NET In 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. On 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: March 31, 2026 Principal amount $ 1,255,320 Less: unamortized debt issuance costs ( 29,823 ) Less: unamortized debt discount ( 83,470 ) Note payable, net $ 1,142,027 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 loss. 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. NOTE 10 – DERIVATIVE LIABILITY On May 23, 2023, the Company issued 667 warrants 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 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: stock price of $ 0.53 , volatility of 137.76 %, risk-free rate of 3.79 %, annual dividend yield of 0 % and expected life of 2.1 years. On July 6, 2023, the Company issued 222 warrants with an exercise price of $ 67.50 exercisable until July 6, 2028 to a third party as a finder’s fee. Upon evaluation, the warrants meet the definition of a derivative liability under ASC 815, as the Company cannot avoid a net cash settlement under certain circumstances. Accordingly, the fair value of the 222 warrants was classified as a derivative liability on July 6, 2023. On March 31, 2026, the estimated fair value of the 222 warrants was $ 5 . 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 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. - 18 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NO TE 10 – DERIVATIVE LIABILITY (continued) 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. On 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 Note 7). 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. On 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 exercised. 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 loss. 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 Services 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 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 sheets. - 19 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 11 – RELATED PARTY TRANSACTIONS (continued) Membership Interest Purchase Agreement On November 17, 2023, the Company entered into a Membership Interest Purchase Agreement with Mr. Lu, the Company’s chairman of the Board of Directors, pursuant to which (i) Mr. Lu will acquire from the Company 30 % of the total outstanding membership interests of Avalon RT 9, a wholly owned subsidiary of the Company, for a cash purchase price of $ 3,000,000 (the “Acquisition”), and (ii) for a period of twelve months following the closing of the Acquisition, Mr. Lu shall have the option to purchase from the Company up to an additional 70 % of the outstanding membership interests of Avalon RT 9 for a purchase price of up to $ 7,000,000 (the “Option”), subject to the terms and conditions of a membership interest purchase agreement to be negotiated and entered into between Mr. Lu and the Company at such time that Mr. Lu desires to exercise the Option. On 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. The 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 was $0 . Exchange Agreement On February 18, 2926, the Company entered into an Exchange Agreement with its Chairman, Wenzhao Lu, under which it agreed to issue Mr. 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. Lu on May 6, 2026 following shareholder approval at which time the shares of Series D Preferred Stock were cancelled. NOTE 12 – EQUITY The 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 Preferred Stock On December 13, 2024, the Company filed a certificate of designations of preferences, rights, and limitations of Series C Preferred Stock (the “Series C Certificate of Designations”) with the Department of State, Division of Corporations, of the State of Delaware, which provides for the designation of 10,000 shares of Series C Preferred Stock of the Company, par value $ 0.0001 per share. Each share of Series C Preferred Stock has a stated value of $ 1,000 . The Series C Preferred Stock shall rank (i) senior to the Company’s common stock 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. - 20 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 12 – EQUITY (continued) Series C Convertible Preferred Stock (continued) Each share of Series C Preferred Stock shall be convertible into common stock (the “Series C Conversion Shares”) at a conversion per share equal to $ 2.41 , at the option of the holder, at any time after the later of (i) the date of the shareholder approval of the issuance of the Series C Conversion Shares pursuant to the rules of the Nasdaq Stock Market and (ii) the one year anniversary of the date of the first issuance of any shares of the Series C Preferred Stock. In addition, the holder shall not have the right to convert any portion of the Series C Preferred Stock if, after giving effect to the conversion, such holder (together with its affiliates) would beneficially own in excess of 19.99 % of the number of shares of the common stock outstanding immediately after giving effect to the issuance of the respective 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 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. 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 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. Lu would have been entitled to receive upon conversion of his Series D Preferred Stock. Series E Convertible Preferred Stock On December 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 . - 21 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 12 – EQUITY (continued) Series E Convertible Preferred Stock (continued) The 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. Holders 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 . In addition, 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. In addition, the Company shall not issue any shares of Common Stock upon conversion of the Series E Preferred Stock or otherwise pursuant to the terms of the Series E Certificate of Designation if the issuance of such shares of Common Stock would exceed the aggregate number of shares of Common Stock which the Company may issue upon exercise or conversion (as the case may be) of the Series E Preferred Stock without breaching the Company’s obligations under the rules and regulations the listing rules of the Company’s Principal Market (the maximum number of shares of Common Stock which may be issued without violating such rules and regulations, the “Exchange Cap”), except that such limitation shall not apply in the event that the Company (A) obtains the approval of its stockholders as required by the applicable rules and regulations of the Principal Market for issuances of shares of Common Stock in excess of such amount (the “Stockholder Approval Date”) or (B) obtains a written opinion from outside counsel to the Company that such approval is not 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. - 22 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 12 – EQUITY (continued) Common Shares and Warrants Sold for Cash from the February 2026 Private Offering In 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 . Each 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. The Company 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 Shares”). 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 %; expected life of 5.0 years; and expected dividend yield of 0 %. 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 %. - 23 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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. Common 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. Common 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 . Options The 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 Range of Exercise Price Number Outstanding at March 31, 2026 Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Number Exercisable at March 31, 2026 Weighted Average Exercise Price $ 2.93 – 31.20 15,419 2.57 $ 6.49 15,419 $ 6.49 $ 48.75 – 123.00 18,117 0.98 $ 79.87 18,117 $ 79.87 $ 154.50 – 228.00 7,633 3.75 $ 225.72 7,633 $ 225.72 $ 2.93 – 228.00 41,169 2.09 $ 79.43 41,169 $ 79.43 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 . - 24 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 12 – EQUITY (continued) Warrants (Except Pre-Funded Warrants) The following table summ arizes the shares of the Company’s common stock issuable upon exercise of warrants outstanding at March 31, 2026: Warrants Outstanding Warrants Exercisable Range of Exercise Price Number Outstanding at March 31, 2026 Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Number Exercisable at March 31, 2026 Weighted Average Exercise Price $ 0.37 – 0.64 13,132,713 3.20 $ 0.51 68,985 $ 0.37 $ 9.75 – 37.50 6,593 3.10 $ 14.26 6,593 $ 14.26 $ 67.50 889 2.18 $ 67.50 889 $ 67.50 $ 187.50 8,264 1.06 $ 187.50 8,264 $ 187.50 $ 0.37 – 187.50 13,148,459 3.20 $ 0.64 84,731 $ 20.40 Stock warrant activity for the three months ended March 31, 2026 was as follows : Number of Warrants Weighted Average Exercise Price Outstanding at January 1, 2026 95,746 $ 24.06 Repricing adjustment 1,722,556 $ 0.33 Granted 13,063,728 $ 0.51 Exercised ( 1,733,571 ) $ ( 0.33 ) Outstanding at March 31, 2026 13,148,459 $ 0.64 Exercisable at March 31, 2026 84,731 $ 20.40 The aggregate intrinsic value of stock warrants outstanding and stock warrants exercisable at March 31, 2026 was approximately $ 281,000 and $ 11,000 , respectively . Warrants Issued in February 2026 In 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 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. - 25 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 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. The Company 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 Shares”). 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 February 2026 In February 2026, pursuant to the terms of related warrant agreements, 1,733,571 warrants were cashless exercised . Pre-Funded Warrants The number of pre-funded warr ants outstanding as of March 31, 2026 is as follows: Description Number Outstanding Weighted Average Exercise Price Pre-funded warrants issued in December 2024 150,000 $ 0.01 Pre-funded warrants issued in February 2026 5,882,353 $ 0.0001 Outstanding at March 31, 2026 6,032,353 $ 0.0003 A summary of pre-funded warrant activity during the three months ended March 31, 2026 is as follows: Number of Pre-Funded Warrants Weighted Average Exercise Price Outstanding at January 1, 2026 504,300 $ 0.0030 Pre-funded warrants granted 5,882,353 $ 0.0001 Pre-funded warrants exercised ( 354,300 ) $ ( 0.0001 ) Outstanding at March 31, 2026 6,032,353 $ 0.0003 - 26 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 12 – EQUITY (continued) Pre-Funded Warrants (continued) Pre-funded Warrants Is sued in February 2026 In 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 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 the periods. As of both March 31, 2026 and December 31, 2025, 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. 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 . NOTE 14 – CONDENSED FINANCIAL INFORMATION OF THE PARENT COMPANY Pursuant to the requirements of Rule 12-04(a), 5-04(c) and 4-08(e)(3) of Regulation S-X, the condensed financial information of the parent company shall be filed when the restricted net assets of consolidated subsidiary exceed 25 % of consolidated net assets as of the end of the most recently completed 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. The 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 Suppliers No supplier accounted for 10 % or more of the Company’s purchase during the three months ended March 31, 2026 and 2025. - 27 - AVALON GLOBOCARE CORP. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 16 – COMMITMENTS AND CONTINGENCIES Litigation From time to time, the Company is subject to ordinary routine litigation incidental to its normal business operations. The Company is not currently a party to, and its property is not subject to, any material legal proceedings, except as set forth below. On October 28, 2019, Research 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 with various claims against the Company and Genexosome including misappropriation of trade secrets in violation of the Defend Trade Secrets Act of 2016 and violation of Ohio Uniform Trade Secrets Act. The Company, Genexosome and the Research Institute entered into a Settlement Agreement dated June 7, 2022 (the “Settlement Date”) whereby the Company agreed to pay the Research Institute $ 450,000 on each of the sixty-day, one year and two-year anniversaries of the Settlement Date. In addition, the Company agreed to pay the Research Institute 30 % of the Company’s initial pre-tax profit of $ 3,333,333 , 20 % of the Company’s second pre-tax profit of $ 3,333,333 and 10 % of the Company’s third pre-tax profit of $ 3,333,333 . The parties provided a mutual release as well. As of both 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 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 March 31, 2026 2025 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows paid for operating lease $ 18,500 $ 27,535 Right-of-use assets obtained in exchange for lease obligation: Operating lease $ 169,743 $ 127,486 The following table summarizes the lease term and discount rate for the Company’s operating leases as of March 31, 2026 : Operating Lease 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 leases as of March 31, 2026 : For the Twelve-month Period Ending March 31: Operating Lease 2027 $ 97,000 2028 70,500 2029 11,000 2030 and thereafter - Total lease payments 178,500 Amount of lease payments representing interest ( 18,155 ) Total present value of operating lease liabilities $ 160,345 Current portion $ 83,508 Long-term portion 76,837 Total $ 160,345 NOTE 17 – SUBSEQUENT EVENTS 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 . Exercise of Pre-funded Warrants In 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. - 28 -