Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This Quarterly Report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as "may," "will," "can," "anticipate," "assume," "should," "indicate," "would," "believe," "contemplate," "expect," "seek," "estimate," "continue," "plan," "point to," "project," "predict," "could," "intend," "target," "potential" and other similar words and expressions of the future. Accordingly, factors that may affect our results include, but are not limited to:

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our ability to commercialize our product candidates and the growth of the markets for those product candidates;

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our ability to develop and commercialize products before competitors that are superior to the alternatives developed by such competitors; and

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a decline in economic conditions, including the impact of an inflationary environment and tariffs.

All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the filing date of this Quarterly Report on Form 10-Q or the date of the document incorporated by reference into this Quarterly Report on Form 10-Q. We have no obligation, and expressly disclaim any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and projections in good faith, and we believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs or projections will result or be achieved or accomplished.

The following discussion and analysis of our financial condition and results of operations for the three and nine months ended September 30, 2025 and 2024 should be read in conjunction with our condensed consolidated financial statements and related notes to those condensed consolidated financial statements that are included elsewhere in this Quarterly Report on Form 10-Q.

Overview

We are developer of precision diagnostic consumer products and the advancement of intellectual property in cellular therapy. We are currently marketing the KetoAir™ breathalyzer device, which is owned and manufactured by Qi Diagnostics Limited, and plan to develop additional diagnostic uses of the breathalyzer technology. The KetoAir^TM is registered with the U.S. Food and Drug Administration as a Class I medical device. We also continue to focus on advancing our intellectual property portfolio through existing patent applications. In addition, we own and operate commercial real estate at our headquarters in Freehold, NJ.

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

Research and Development

We are focused on bringing forward the existing patent applications previously filed with the Massachusetts Institute of Technology ("MIT"). We completed a sponsored research and co-development project with MIT led by Professor Shuguang Zhang as Principal Investigator. Using the unique QTY code protein design platform, six water-soluble variant cytokine receptors have been successfully designed and tested in a laboratory to show binding affinity to the respective cytokines. We currently are focused on bringing forward the existing patent applications previously filed as part of this program. We also continue to bring forward the existing patent application previously filed with Arbele related to CAR-T cellular therapy technologies.

Product Commercialization

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

We were granted exclusive distributorship rights for the KetoAir from Qi Diagnostics for the following territories: North America, South America, the EU and the UK. For our commercialization strategy, we intend to target the diabetes and obesity markets. We sell the product through the KetoAir website and social media. We believe the KetoAir device has some competitive advantages to other methods for measuring ketosis.

The KetoAir is a handheld device that allows the user to detect acetone levels in exhaled breath. The acetone level is in concentration units (ppm, part-per-million) such that the user will know his/her real-time ketosis status: inadequate ketosis (0-3.99 ppm), mild ketosis (4-9.99 ppm), optimal ketosis (10-40 ppm), or alarming level (> 40 ppm). The KetoAir is registered with the United States Food and Drug Administration as a Class I medical device. The device is also paired with an "AI Nutritionist" software program (via Bluetooth connection) which is downloadable from Google Play (for Android mobile phones, approved) and iPhone (the app is currently being reviewed by Apple iOS AppStore). It helps users monitor and manage their ketogenic diet and related programs. We believe the KetoAir can be an essential tool to help diabetic patients adhere to their therapeutic programs and optimize their ketogenic dietary management.

Cessation of Laboratory Services

During the first quarter of 2025, to preserve cash, the Company entered into discussions with Lab Services MSO for the potential redemption of our investment and on February 26, 2025, we and Lab Services MSO entered into a Redemption and Abandonment Agreement, whereby Lab Services MSO redeemed the 40% equity interest in Lab Services MSO held by us. Accordingly, beginning in February 2025, we no longer offer laboratory services.

Other Areas

In order to preserve cash and focus on product commercialization, we have suspended all research and development efforts related to cellular therapy. We are redirecting our funding efforts to our core business strategies outlined above.

Going Concern

Our condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business.

As reflected in the accompanying condensed consolidated financial statements, we had working capital deficit of approximately $11,515,000 at September 30, 2025 and had incurred recurring net losses and generated negative cash flow from operating activities of approximately $16,195,000 and $4,389,000 for the nine months ended September 30, 2025, respectively.

We have a limited operating history and our continued growth is dependent upon the continuation of generating rental revenue from our income-producing real estate property in New Jersey, generating revenue for selling of Keto Air, and obtaining additional financing to fund future obligations and pay liabilities arising from ordinary course business operations. In addition, the current cash balance cannot be projected to cover our operating expenses for the next twelve months from the release date of this Quarterly Report on Form 10-Q. These matters raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise additional capital, implement our business plan, and generate sufficient revenues. There are no assurances that we will be successful in our efforts to generate sufficient revenues, maintain sufficient cash balance or report profitable operations or to continue as a going concern. We plan on raising capital through the sale of equity to implement our business plan. However, there is no assurance these plans will be realized and that any additional financings will be available to us on satisfactory terms and conditions, or at all.

The accompanying condensed consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should we be unable to continue as a going concern.

Critical Accounting Policies

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America ("U.S. GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Changes in these estimates and assumptions may have a material impact on the condensed consolidated financial statements and accompanying notes. 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 and nine months ended September 30, 2025 and 2024 include the useful life of investment in real estate and intangible assets, the assumptions used in assessing impairment of long-term assets, the allowance for credit loss, the valuation of deferred tax assets and the associated valuation allowances, the valuation of stock-based compensation, and the assumptions used to determine fair value of warrants and embedded conversion features of convertible note payable.

Real Property Rental

We have determined that the Financial Accounting Standards Board's ("FASB") Accounting Standards Codification ("ASC") 606 does not apply to rental contracts, which are within the scope of other revenue recognition accounting standards.

Rental income from operating leases is recognized on a straight-line basis under the guidance of ASC 842. Lease payments under tenant leases are recognized on a straight-line basis over the term of the related leases. The cumulative difference between lease revenue recognized under the straight-line method and contractual lease payments are included in rent receivable on the condensed consolidated balance sheets.

Income Taxes

We are governed by the income tax laws of China and the United States. Income taxes are accounted for pursuant to ASC 740 "Accounting for Income Taxes," which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. The charge for taxes is based on the results for the period as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date.

Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized.

Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is changed to equity. Deferred tax assets and liabilities are offset when they related to income taxes levied by the same taxation authority and we intend to settle its current tax assets and liabilities on a net basis.

Recent Accounting Standards

For details of applicable new accounting standards, please, refer to Recent Accounting Standards in Note 3 of our condensed consolidated financial statements accompanying this Quarterly Report on Form 10-Q.

RESULTS OF OPERATIONS

Comparison of Results of Operations for the Three and Nine Months Ended September 30, 2025 and 2024

Real Property Rental Revenue

For the three months ended September 30, 2025, we had real property rental revenue of $350,099, as compared to $345,159 for the three months ended September 30, 2024, representing an increase of $4,940, or 1.4%. For the nine months ended September 30, 2025, we had real property rental revenue of $1,050,305, as compared to $987,634 for the nine months ended September 30, 2024, representing an increase of $62,671, or 6.3%. The increase was primarily attributable to the increase in the number of tenants occupying the building in the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024. We expect that our revenue from real property rental will remain at its current level with minimal increase in the near future.

Real Property Operating Expenses

Real property operating expenses consist of property management fees, property insurance, real estate taxes, depreciation, repairs and maintenance fees, utilities and other expenses related to our rental properties.

For the three months ended September 30, 2025, our real property operating expenses amounted to $234,366, as compared to $245,528 for the three months ended September 30, 2024, representing a decrease of $11,162, or 4.5%. The decrease was primarily attributable to a decrease in repairs and maintenance of approximately $19,000, offset by an increase in other miscellaneous items of approximately $8,000.

For the nine months ended September 30, 2025, our real property operating expenses amounted to $765,833, as compared to $794,142 for the nine months ended September 30, 2024, representing a decrease of $28,309, or 3.6%. The decrease was primarily attributable to a decrease in repairs and maintenance of approximately $66,000, offset by an increase in utilities of approximately $10,000, an increase in building cleaning fee of approximately $11,000, and an increase in other miscellaneous items of approximately $17,000.

Real Property Operating Income

Our real property operating income for the three months ended September 30, 2025 was $115,733, representing an increase of $16,102, or 16.2%, as compared to $99,631 for the three months ended September 30, 2024. Our real property operating income for the nine months ended September 30, 2025 was $284,472, representing an increase of $90,980, or 47.0%, as compared to $193,492 for the nine months ended September 30, 2024. The increase was primarily attributable to the increase in real property rental revenue and the decrease in real property operating expenses as described above. We expect our real property operating income will remain at its current level with minimal increase in the near future.

(Loss) income from Equity Method Investment - Lab Services MSO

As a result of the sale of our ownership of 40% of Lab Services MSO on February 26, 2025, for the three months ended September 30, 2025, we had no income from our investment in Lab Services MSO.

For the nine months ended September 30, 2025, we had income from our investment in Lab Services MSO of $392,677, which consisted of our share of Lab Services MSO's net income of $503,833 and amortization of identifiable intangible assets acquired from Lab Services MSO acquisition of $111,156. We sold our ownership of 40% of Lab Services MSO on February 26, 2025.

For the three months ended September 30, 2024, we had loss from our investment in Lab Services MSO of $447,909, which consists of our share of Lab Services MSO's net loss of $21,597, and amortization of identifiable intangible assets acquired from Lab Services MSO acquisition of $166,733, and impairment of goodwill acquired from Lab Services MSO acquisition of $259,579, which was primarily attributable to Lab Services MSO's lower revenues and net incomes than anticipated and the decline in our stock price and market capitalization.

For the nine months ended September 30, 2024, we had loss from our investment in Lab Services MSO of $669,777, which consists of our share of Lab Services MSO's net income of $90,001, and amortization of identifiable intangible assets acquired from Lab Services MSO acquisition of $500,199, and impairment of goodwill acquired from Lab Services MSO acquisition of $259,579, which was primarily attributable to Lab Services MSO's lower revenues and net incomes than anticipated and the decline in our stock price and market capitalization.

Other Operating Expenses

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

		Three Months Ended September 30,								Nine Months Ended September 30,
		2025				2024				2025				2024
Advertising and marketing expenses		$	249,021			$	144,734			$	642,723			$	252,394
Professional fees			1,248,482				303,332				4,416,074				1,190,125
Compensation and related benefits			230,384				343,360				894,831				1,054,164
Credit loss recovery			(1,650,000	)			-				-				-
Miscellaneous taxes			43,600				12,000				128,713				266,498
Directors' and officers' liability insurance premium			34,227				38,768				105,712				177,381
Travel and entertainment			21,109				33,789				104,091				78,198
Rent and related utilities			1,996				15,764				27,992				46,770
Other general and administrative			13,107				29,936				127,968				75,571
		$	191,926			$	921,683			$	6,448,104			$	3,141,101

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For the three months ended September 30, 2025, advertising and marketing expenses increased by $104,287, or 72.1%, as compared to the three months ended September 30, 2024. For the nine months ended September 30, 2025, advertising and marketing expenses increased by $390,329, or 154.7%, as compared to the nine months ended September 30, 2024. The increase was primarily due to increased advertising activities in the three and nine months ended September 30, 2025. We expect that our advertising and marketing expenses will likely remain at its current quarterly level with minimal increase in the near future.

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Professional fees primarily consisted of accounting fees, audit fees, legal service fees, consulting fees, investor relations service charges, fairness opinion charge, valuation service fees and other fees. For the three months ended September 30, 2025, professional fees increased by $945,150, or 311.6%, as compared to the three months ended September 30, 2024, which was primarily attributable to an increase in consulting fees of approximately $782,000, mainly due to the increase in use of consulting service providers related to our potential merger with YOOV Group Holding Limited, a business company incorporated in the British Virgin Islands ("YOOV"), and an increase in legal service fees of approximately $253,000, mainly due to the increased legal services related to our potential merger with YOOV, offset by a decrease in other miscellaneous items of approximately $90,000. For the nine months ended September 30, 2025, professional fees increased by $3,225,949, or 271.1%, as compared to the nine months ended September 30, 2024, which was primarily attributable to an increase in consulting fees of approximately $1,998,000, mainly due to the increase in use of consulting service providers related to our potential merger with YOOV, an increase in accounting fees of approximately $383,000, mainly due to the increased accounting services related to our potential merger with YOOV, an increase in legal service fees of approximately $917,000, mainly due to the increased legal services related to our potential merger with YOOV, and an increase in fairness opinion charge of approximately $129,000 resulting from the increased fairness opinion services related to our potential merger with YOOV, offset by a decrease in audit fees of approximately $142,000, mainly due to our switching to a different audit service provider, resulting in a lower audit fee, and a decrease in other miscellaneous items of approximately $59,000. We expect that our professional fees will decrease in the near future.

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For the three months ended September 30, 2025, compensation and related benefits decreased by $112,976, or 32.9%, as compared to the three months ended September 30, 2024. For the nine months ended September 30, 2025, compensation and related benefits decreased by $159,333, or 15.1%, as compared to the nine months ended September 30, 2024. The decrease was primarily attributable to the decreased compensation for our executive officer, David Jin. We expect that our compensation and related benefits will likely remain at its current quarterly level with minimal increase in the near future.

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For the three months ended September 30, 2025, we recorded credit loss recovery of $1,650,000. Based on our periodic review of receivable from sale of equity method investment balance, we adjusted the allowance for credit loss after considering management's evaluation of the collectability of the receivable balance, including the analysis of subsequent collection, age of the balance, Lab Services MSO's collection history, and recent economic events.After unsuccessful collection efforts during the second quarter of 2025, management had decided to write off the receivable. On or about July 22, 2025, we filed a lawsuit against Lab Services MSO. We and Lab Services MSO entered into a Confidential Settlement Agreement and Mutual Release dated August 26, 2025 whereby Lab Services MSO agreed to pay us in the aggregate of $1,722,000, of which $600,000 was paid on August 29, 2025 and $1,122,000 to be paid on or before the first business day of each month, beginning September 2025 and ending August 2026, in monthly installments of $93,500. The parties provided a mutual release, as well. The suit was dismissed in August 2025. As a result, for the three months ended September 30, 2025, we recorded a credit loss recovery of $1,650,000 to reinstate the receivable which was written-off in the second quarter of 2025. For the nine months ended September 30, 2025, our credit loss recovery, net, was $0. For the three and nine months ended September 30, 2024, we did not record any credit loss recovery.

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For the three months ended September 30, 2025, miscellaneous taxes increased by $31,600, or 263.3%, as compared to the three months ended September 30, 2024, which was primarily attributable to the increase in Delaware state franchise tax in the third quarter of 2025. For the nine months ended September 30, 2025, miscellaneous taxes decreased by $137,785, or 51.7%, as compared to the nine months ended September 30, 2024. The decrease was primarily attributable to decreased Delaware state franchise tax. We expect that our miscellaneous taxes will remain relatively steady, with minimal increase, in the near future.

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For the three months ended September 30, 2025, directors' and officers' liability insurance premium decreased by $4,541, or 11.7%, as compared to the three months ended September 30, 2024. For the nine months ended September 30, 2025, directors' and officers' liability insurance premium decreased by $71,669, or 40.4%, as compared to the nine months ended September 30, 2024. The decrease was mainly due to our switching to a different insurance provider, resulting in a lower premium.

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For the three months ended September 30, 2025, travel and entertainment expense decreased by $12,680, or 37.5%, as compared to the three months ended September 30, 2024, which was primarily attributable to decreased business travel activities in the third quarter of 2025. For the nine months ended September 30, 2025, travel and entertainment expense increased by $25,893, or 33.1%, as compared to the nine months ended September 30, 2024, which was primarily attributable to increased business travel activities in the nine months ended September 30, 2025 as compared to the corresponding period in 2024.

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For the three months ended September 30, 2025, rent and related utilities expenses decreased by $13,768, or 87.3%, as compared to the three months ended September 30, 2024. For the nine months ended September 30, 2025, rent and related utilities expenses decreased by $18,778, or 40.1%, as compared to the nine months ended September 30, 2024. The decrease was mainly due to the decreased monthly rent driven by decreased office space.

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Other general and administrative expenses mainly consisted of NASDAQ listing fee, SEC registration fees, office supplies, and other miscellaneous items. For the three months ended September 30, 2025, other general and administrative expenses decreased by $16,829, or 56.2%, as compared to the three months ended September 30, 2024, which was mainly attributable to a decrease in NASDAQ listing fee of approximately $3,000, and a decrease in other miscellaneous items of approximately $14,000. For the nine months ended September 30, 2025, other general and administrative expenses increased by $52,397, or 69.3%, as compared to the nine months ended September 30, 2024, which was mainly attributable to an increase in SEC registration fees of approximately $48,000 related to our registration statements on Form S-4 and Form S-3, and an increase in other miscellaneous items of approximately $4,000.

Loss from Operations

As a result of the foregoing, for the three months ended September 30, 2025, loss from operations amounted to $76,193, as compared to $1,269,961 for the three months ended September 30, 2024, representing a decrease of $1,193,768, or 94.0%. As a result of the foregoing, for the nine months ended September 30, 2025, loss from operations amounted to $5,770,955, as compared to $3,617,386 for the nine months ended September 30, 2024, representing an increase of $2,153,569, or 59.5%.

Other (Expense) Income

Other (expense) income mainly includes third party and related party interest expense, change in fair value of derivative liability, loss on extinguishment of debt, and other miscellaneous income (expense).

Other expense, net, totaled $178,075 for the three months ended September 30, 2025, as compared to $409,239 for the three months ended September 30, 2024, representing a decrease of $231,164, or 56.5%, which was primarily attributable to a decrease in third party interest expense of approximately $269,000, mainly driven by the decrease in amortization of debt discount and debt issuance costs of approximately $247,000 mainly due to the maturity of our June 2024 Convertible Note in June 2025 and the decreased interest expense of approximately $22,000 from third party debts, a decrease in interest expense - related party of approximately $11,000, and a decrease in other expense of approximately $95,000 mainly due to the gain from litigation settlement, offset by a decrease in gain from change in fair value of derivative liability of approximately $144,000.

Other expense, net, totaled $10,424,022 for the nine months ended September 30, 2025, as compared to $1,561,353 for the nine months ended September 30, 2024, representing an increase of $8,862,669, or 567.6%, which was primarily attributable to an increase in third party interest expense of approximately $43,000, mainly driven by the increase in amortization of debt discount and debt issuance costs of approximately $40,000 and the increased interest expense of approximately $3,000 from third party debts, and an increase in loss on extinguishment of debt of approximately $9,077,000 resulted from the reduction in the conversion price of our June 2024 Convertible Note, offset by an increase in gain from change in fair value of derivative liability of approximately $91,000, a decrease in interest expense - related party of approximately $32,000, and a decrease in other expense of approximately $134,000 mainly due to the gain from litigation settlement.

Income Taxes

We did not have any income taxes expense for the three and nine months ended September 30, 2025 and 2024 since we incurred losses in these periods.

Net Loss

As a result of the factors described above, our net loss was $254,268 for the three months ended September 30, 2025, as compared to $1,679,200 for the three months ended September 30, 2024, representing a decrease of $1,424,932, or 84.9%.

As a result of the factors described above, our net loss was $16,194,977 for the nine months ended September 30, 2025, as compared to $5,178,739 for the nine months ended September 30, 2024, representing an increase of $11,016,238, or 212.7%.

Net Loss Attributable to Avalon GloboCare Corp. Common Shareholders

The net loss attributable to our common shareholders was $254,268, or $0.06 per share (basic and diluted), for the three months ended September 30, 2025, as compared to $1,679,200, or $1.82 per share (basic and diluted), for the three months ended September 30, 2024, representing a decrease of $1,424,932, or 84.9%.

The net loss attributable to our common shareholders (after taking into effect $162,473 in deemed contribution) was $16,032,504, or $6.10 per share (basic and diluted), for the nine months ended September 30, 2025, as compared to $5,178,739, or $6.45 per share (basic and diluted), for the nine months ended September 30, 2024, representing an increase of $10,853,765, or 209.6%.

Foreign Currency Translation Adjustment

Our reporting currency is the U.S. dollar. The functional currency of our parent company, AHS, Avalon RT 9, Avalon Lab, and Q&A Distribution is the U.S. dollar and the functional currency of Avalon Shanghai is the Chinese Renminbi ("RMB"). The financial statements of our subsidiary whose functional currency is the RMB are translated to U.S. dollars using period end rate of exchange for assets and liabilities, average rate of exchange for revenues, costs, and expenses and cash flows, and at historical exchange rate for equity. Net gains and losses resulting from foreign exchange transactions are included in the results of operations. As a result of foreign currency translations, which are a non-cash adjustment, we reported a foreign currency translation gain of $271 and $3,043 for the three months ended September 30, 2025 and 2024, respectively. As a result of foreign currency translations, which are a non-cash adjustment, we reported a foreign currency translation gain of $654 and $2,829 for the nine months ended September 30, 2025 and 2024, respectively. This non-cash gain had the effect of decreasing our reported comprehensive loss in each respective period.

Comprehensive Loss

As a result of our foreign currency translation adjustment, we had comprehensive loss of $253,997 and $1,676,157 for the three months ended September 30, 2025 and 2024, respectively.

As a result of our foreign currency translation adjustment, we had comprehensive loss of $16,194,323 and $5,175,910 for the nine months ended September 30, 2025 and 2024, respectively.

Liquidity and Capital Resources

We have a limited operating history and our continued growth is dependent upon the continuation of generating rental revenue from our income-producing real estate property in New Jersey, generating revenue for selling of Keto Air, as well as obtaining additional financing to fund future obligations and pay liabilities arising from ordinary course business operations. In addition, the current cash balance cannot be projected to cover our operating expenses for the next twelve months from the release date of this report. These matters raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise additional capital, implement our business plan, and generate sufficient revenues. There are no assurances that we will be successful in our efforts to generate sufficient revenues, maintain sufficient cash balance or report profitable operations or to continue as a going concern. We plan to raise capital in the future through the sale of equity or debt to implement our business plan. However, there is no assurance these plans will be realized and that any additional financings will be available to us on satisfactory terms and conditions, if at all.

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations as they come due and otherwise operate on an ongoing basis. At September 30, 2025 and December 31, 2024, we had a cash balance of approximately $334,000 and $2,856,000, respectively. These funds are kept in financial institutions located as follows:

Country:		September 30, 2025								December 31, 2024
United States		$	333,458				99.9	%		$	2,844,522				99.6	%
China			473				0.1	%			11,787				0.4	%
Total cash		$	333,931				100.0	%		$	2,856,309				100.0	%

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

		September 30,				December 31,				Changes in
		2025				2024				Amount				Percentage
Working capital deficit:
Total current assets		$	2,089,033			$	3,236,498			$	(1,147,465	)			(35.5	)%
Total current liabilities			13,603,675				13,882,555				(278,880	)			(2.0	)%
Working capital deficit		$	(11,514,642	)		$	(10,646,057	)		$	(868,585	)			8.2	%

Our working capital deficit increased by $868,585 to $11,514,642 at September 30, 2025 from $10,646,057 at December 31, 2024. The increase in working capital deficit was primarily attributable to a decrease in cash of approximately $2,522,000, an increase in accrued professional fees of approximately $709,000 which was mainly attributable to the increase in professional services related to our potential merger with YOOV, an increase in accrued payroll liability and compensation of approximately $326,000, and an increase in stock subscription liability of $150,000 resulting from the securities purchase agreement signed in June 2025, offset by an increase in receivable from sale of equity method investment of approximately $1,029,000 resulting from execution of the Redemption Agreement signed on February 26, 2025 and the Confidential Settlement Agreement and Mutual Release signed on August 26, 2025 as described elsewhere in this report, an increase in prepaid expense and other current assets of approximately $340,000 mainly due to the increase in prepaid professional fees of approximately $351,000, a decrease in accrued liabilities and other payables of approximately $233,000 driven by payments made to our vendors in the nine months ended September 30, 2025, a decrease in accrued liabilities and other payables - related parties of approximately $633,000 which was extinguished upon our sale of equity method investment in the first quarter of 2025, and a decrease in convertible note payable, net, of approximately $754,000 mainly due to the conversion of our June 2024 Convertible Note in the principal amount of approximately $1,379,000 into our common stock in the nine months ended September 30, 2025 and the increase in debt discount of approximately $27,000 resulting from our issuance of the July 2025 Convertible Note in the third quarter of 2025, which was offset by our issuance of the July 2025 Convertible Note with principal of $200,000 in the third quarter of 2025 and the amortization of debt discount and debt issuance costs for our convertible note of approximately $452,000 (excluding the initial fair value of the Second Warrant of $621,353) in the nine months ended September 30, 2025.

Because the exchange rate conversion is different for the condensed consolidated balance sheets and the condensed consolidated statements of cash flows, the changes in assets and liabilities reflected on the condensed consolidated statements of cash flows are not necessarily identical with the comparable changes reflected on the condensed consolidated balance sheets.

Cash Flows for the Nine Months Ended September 30, 2025 Compared to the Nine Months Ended September 30, 2024

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

		Nine Months Ended September 30,
		2025				2024
Net cash used in operating activities		$	(4,388,557	)		$	(3,890,993	)
Net cash provided by (used in) investing activities			752,635				(100,000	)
Net cash provided by financing activities			1,112,871				4,726,942
Effect of exchange rate on cash			673				2,848
Net (decrease) increase in cash		$	(2,522,378	)		$	738,797

Net cash flow used in operating activities for the nine months ended September 30, 2025 was $4,388,557, which primarily reflected our consolidated net loss of approximately $16,195,000, and the non-cash item adjustments, consisting of income from equity method investment of approximately $393,000, and change in fair market value of derivative liability of approximately $472,000, and the changes in operating assets and liabilities, primarily consisting of an increase in prepaid expense and other assets of approximately $185,000 mainly due to the increase in prepaid professional fees which were paid by cash of approximately $175,000, offset by an increase in accrued liabilities and other payables of approximately $985,000 which was mainly driven by the increase in professional services related to our potential merger with YOOV in the nine months ended September 30, 2025, and the non-cash item adjustments, primarily consisting of depreciation of approximately $133,000, stock-based compensation and service expense of approximately $1,423,000, amortization of debt issuance costs and debt discount of approximately $1,155,000, and loss on extinguishment of debt of approximately $9,077,000 resulted from the reduction in the conversion price of our June 2024 Convertible Note.

Net cash flow used in operating activities for the nine months ended September 30, 2024 was $3,890,993, which primarily reflected our consolidated net loss of approximately $5,179,000, and the non-cash item adjustments, primarily consisting of change in fair market value of derivative liability of approximately $381,000, and the changes in operating assets and liabilities, primarily consisting of a decrease in accrued liabilities and other payables of approximately $1,176,000 resulting from payments made to our vendors in the nine months ended September 30, 2024, offset by a decrease in rent receivable of approximately $132,000 driven by our collection efforts, and the non-cash item adjustments, primarily consisting of depreciation of approximately $133,000, stock-based compensation and service expense of approximately $255,000, loss from equity method investment of approximately $670,000 which was mainly attributable to the amortization of identifiable intangible assets acquired from Lab Services MSO acquisition of approximately $500,000 and the impairment of goodwill acquired from Lab Services MSO acquisition of approximately $260,000, resulting from Lab Services MSO's lower revenues and net incomes than anticipated and the decline in our stock price and market capitalization, distribution of earnings from equity method investment of approximately $612,000, and amortization of debt issuance costs and debt discount of approximately $1,115,000.

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

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the development and commercialization of new products; and

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

Net cash flow provided by investing activities was $752,635 for the nine months ended September 30, 2025, as compared to net cash flow used in investing activities of $100,000 for the nine months ended September 30, 2024. During the nine months ended September 30, 2025, we received proceeds from sale of equity method investment of approximately $789,000, offset by payments made for improvement of commercial real estate of approximately $36,000. During the nine months ended September 30, 2024, we paid $100,000 for the acquisition of a 40% interest in Lab Services MSO.

Net cash flow provided by financing activities was $1,112,871 for the nine months ended September 30, 2025, as compared to $4,726,942 for the nine months ended September 30, 2024. During the nine months ended September 30, 2025, we received proceeds from issuance of July 2025 Convertible Note of $200,000, proceeds from stock subscription of $150,000, an advance from pending sale of noncontrolling interest in subsidiary of approximately $50,000, net proceeds from the issuance of convertible preferred stock of $290,000 (net of cash paid for convertible preferred stock issuance costs of $10,000), and proceeds from issuance of common stock and warrants approximately $476,000, offset by payments made for offering costs of approximately $53,000. During the nine months ended September 30, 2024, we received net proceeds from the issuance of convertible debts and warrants of approximately $3,085,000 (net of original issue discount of approximately $177,000 and cash paid for convertible note issuance costs of approximately $283,000), an advance from the pending sale of a noncontrolling interest in a subsidiary of approximately $2,022,000, and net proceeds from equity offering of approximately $2,719,000 (net of cash paid for commission and other offering costs of approximately $138,000), offset by repayments made for convertible debt of $3,100,000.

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

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an increase in working capital requirements to finance our current business;

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the use of capital for acquisitions and the development of business opportunities; and

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the cost of being a public company.

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

We estimate that, based on current plans and assumptions, our available cash will be insufficient to satisfy our cash requirements under our present operating expectations through cash flow provided by operations and sales of equity. Other than funds received as described above and cash resources generated from our operations, we presently have no other significant alternative source of working capital. We have used these funds to fund our operating expenses, pay our obligations and grow our company. We will need to raise significant additional capital to fund our operations and to provide working capital for our ongoing operations and obligations. Therefore, our future operation is dependent on our ability to secure additional financing. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, there can be no assurance that financing will be available in amounts or on terms acceptable to the Company. Additionally, the trading price of our common stock and a downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital may restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will be required to cease our operations. To date, we have not considered this alternative, nor do we view it as a likely occurrence.

Foreign Currency Exchange Rate Risk

We ceased all operations in China in 2022, with the exception of a small administrative office. We did not during the three and nine months ended September 30, 2025, and do not expect in the foreseeable future, to generate any additional revenue from PRC operations. Thus, exchange rate fluctuations between the RMB and the U.S. dollar do not, and are not expected to, have a material effect on us. For the three months ended September 30, 2025 and 2024, we had an unrealized foreign currency translation gain of approximately $300 and $3,000, respectively, because of changes in the exchange rate. For the nine months ended September 30, 2025 and 2024, we had an unrealized foreign currency translation gain of approximately $700 and $2,800, respectively, because of changes in the exchange rate.

Inflation

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