10-Q: Avalon GloboCare Reports Deepening Losses, CEO Resigns

Avalon GloboCare Corp. reported a significant increase in net loss for the nine months ended September 30, 2025, alongside a going concern warning and a CEO resignation.

Summary

• Avalon GloboCare Corp. (ALBT) reported a net loss of $16,194,977 for the nine months ended September 30, 2025, a substantial increase from $5,178,739 in the same period of 2024.
• The company's working capital deficit increased to $11,514,642 at September 30, 2025, from $10,646,057 at December 31, 2024.
• Cash balance significantly decreased to $333,931 at September 30, 2025, from $2,856,309 at December 31, 2024.
• Net cash used in operating activities increased to $4,388,557 for the nine months ended September 30, 2025, compared to $3,890,993 in the prior year.
• The company ceased laboratory testing services (Lab Services MSO) in February 2025 to preserve cash, resulting in income from equity method investment of $392,677 for the nine months ended September 30, 2025, compared to a loss of $669,777 in 2024.
• Real property rental revenue increased by 6.3% to $1,050,305 for the nine months ended September 30, 2025, with operating income up 47.0% to $284,472.
• Other operating expenses more than doubled, increasing by 105.3% to $6,448,104, primarily due to a 271.1% surge in professional fees ($4,416,074) related to a potential merger with YOOV Group Holding Limited.
• A loss on extinguishment of debt of $9,076,587 was recorded due to a reduction in the conversion price of the June 2024 Convertible Note.
• David Jin, M.D., Ph.D., resigned as CEO and Board member, effective November 30, 2025, due to a personal health issue; Meng Li was appointed interim CEO.
• Management concluded that disclosure controls and procedures were not effective as of September 30, 2025, due to un-remediated material weaknesses.

Sentiment

Score: 2

Explanation: The company faces significant financial challenges, including a substantial net loss, worsening working capital deficit, and a critical 'going concern' warning. While there are minor positives in real estate operations and a successful litigation settlement, these are overshadowed by increased operating expenses, a large debt extinguishment loss, and a precarious cash position. The CEO's resignation and ineffective internal controls add to the negative sentiment, indicating high operational and financial risk.

Positives

• Real property rental revenue increased by 6.3% to $1,050,305 for the nine months ended September 30, 2025, compared to $987,634 in the prior year.
• Real property operating income increased by 47.0% to $284,472 for the nine months ended September 30, 2025, compared to $193,492 in the prior year.
• The company recorded income from equity method investment of $392,677 for the nine months ended September 30, 2025, a positive shift from a loss of $669,777 in the same period of 2024, following the redemption of its Lab Services MSO investment.
• A credit loss recovery of $1,650,000 was recorded in Q3 2025 after successfully settling a lawsuit against Lab Services MSO for $1,722,000.
• Compensation and related benefits decreased by 15.1% to $894,831 for the nine months ended September 30, 2025, primarily due to decreased compensation for the executive officer.

Negatives

• Net loss significantly increased by 212.7% to $16,194,977 for the nine months ended September 30, 2025, from $5,178,739 in the prior year.
• The company reported a working capital deficit of $11,514,642 at September 30, 2025, an increase from $10,646,057 at December 31, 2024.
• Cash balance decreased by 88.3% to $333,931 at September 30, 2025, from $2,856,309 at December 31, 2024.
• Net cash used in operating activities increased to $4,388,557 for the nine months ended September 30, 2025, indicating higher cash burn.
• Total other operating expenses increased by 105.3% to $6,448,104, driven by a 271.1% increase in professional fees ($4,416,074) related to a potential merger.
• A substantial loss on extinguishment of debt of $9,076,587 was recognized due to a reduction in the conversion price of the June 2024 Convertible Note.
• The company's current cash balance is insufficient to cover operating expenses for the next twelve months, raising substantial doubt about its ability to continue as a going concern.
• Disclosure controls and procedures were deemed not effective as of September 30, 2025, due to un-remediated material weaknesses.

Risks

• Substantial doubt about the company's ability to continue as a going concern due to a working capital deficit of $11,515,000, recurring net losses of $16,195,000, negative cash flow from operating activities of $4,389,000 for the nine months ended September 30, 2025, and insufficient cash for the next twelve months.
• Dependence on generating rental revenue from real estate and revenue from KetoAir sales, and obtaining additional financing to fund future obligations and liabilities.
• Uncertainty regarding the ability to raise additional capital through equity or debt on satisfactory terms, or at all.
• Potential for significant dilution to stockholders if additional equity or debt securities are issued.
• Inability to commercialize product candidates and grow markets for those candidates.
• Challenges in developing and commercializing products superior to competitors' alternatives.
• Adverse impact from a decline in economic conditions, including inflation and tariffs.
• Ineffective disclosure controls and procedures due to un-remediated material weaknesses, which could adversely affect the ability to record, process, summarize, and report financial information.

Future Outlook

The company expects real property rental revenue and operating income to remain at current levels with minimal increases. Advertising and marketing expenses are expected to remain at current quarterly levels with minimal increases. Professional fees are expected to decrease in the near future. Compensation and related benefits are expected to remain at current quarterly levels with minimal increases. Miscellaneous taxes are expected to remain relatively steady with minimal increases. Cash used in operating activities is expected to increase in the next 12 months due to new product development and commercialization, and increased public relations/sales promotions. The company plans to raise additional capital through equity or debt to fund operations and implement its business plan, but there is no assurance such financing will be available.

Management Comments

• "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."
• "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."
• "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."
• "We expect that our revenue from real property rental will remain at its current level with minimal increase in the near future."
• "We expect that our advertising and marketing expenses will likely remain at its current quarterly level with minimal increase in the near future."
• "We expect that our professional fees will decrease in the near future."
• "We expect that our compensation and related benefits will likely remain at its current quarterly level with minimal increase in the near future."
• "We expect that our miscellaneous taxes will remain relatively steady, with minimal increase, in the near future."
• "We expect our cash used in operating activities to increase in the next 12 months due to the following: the development and commercialization of new products; and 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."
• "To date, we have not considered this alternative [ceasing operations], nor do we view it as a likely occurrence."

Industry Context

Avalon GloboCare is shifting its strategic focus from cellular therapy R&D to the commercialization of precision diagnostic consumer products, specifically the KetoAir breathalyzer, targeting the diabetes and obesity markets. This pivot, driven by a need to preserve cash, aligns with a broader trend in the life sciences sector where companies may streamline operations and focus on more immediate revenue-generating products amidst funding challenges. The cessation of laboratory services and dormancy of cellular therapy subsidiaries indicate a significant de-emphasis on its previous biotech ventures, concentrating on its real estate and diagnostic device distribution segments. The KetoAir device's FDA Class I registration and AI Nutritionist software integration position it within the growing digital health and personalized wellness industry.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or results to assess the company's performance against global benchmarks. The company's diverse business segments (real estate, diagnostic products, former cellular therapy R&D) make direct comparisons challenging without more specific industry data.

Management Changes

Corporate Governance

Legal Proceedings

• The company filed a lawsuit against Laboratory Services MSO, LLC and certain affiliates on July 22, 2025, asserting claims including breach of contract related to the Redemption and Abandonment Agreement.
• A Confidential Settlement Agreement and Mutual Release was entered into on August 26, 2025, whereby Laboratory Services MSO, LLC agreed to pay the company $1,722,000 ($50,000 for attorneys' fees, $22,000 interest).
• $600,000 of the settlement was paid on August 29, 2025, with the remaining $1,122,000 to be paid in monthly installments of $93,500 from September 2025 to August 2026.
• The lawsuit was dismissed in August 2025 as a result of the settlement.

Related Party Transactions

• Rental revenue of $37,800 for the nine months ended September 30, 2025, from D.P. Capital Investments LLC, controlled by Chairman Wenzhao Lu.
• Consulting expenses of $45,794 for the nine months ended September 30, 2025, paid to Wilbert Tauzin (director) and his son.
• Unpaid acquisition consideration of $100,000 to Dr. Yu Zhou (former director and co-chief executive officer of Genexosome).
• Advance of $3,158,078 from Mr. Lu for the pending sale of a noncontrolling interest in Avalon RT 9, expected to close in Q1 2026.
• Exchange of 9,000 shares of Series A Preferred Stock (carrying value $9,000,000) for 5,000 shares of Series D Preferred Stock with Wenzhao Lu, resulting in a deemed contribution of $162,473.

Stakeholder Impact

• **Shareholders**: Significant dilution risk from planned equity raises, substantial net losses, and the 'going concern' warning could negatively impact share value. The CEO change introduces leadership uncertainty.
• **Employees**: Reduced compensation for executive officers and a strategic shift away from cellular therapy R&D may impact employee morale and future employment opportunities in those areas.
• **Customers**: Continued focus on KetoAir distribution suggests stability for customers of this product. Cessation of laboratory services means former lab service customers will need to find alternative providers.
• **Creditors**: The 'going concern' warning and working capital deficit indicate increased risk for creditors, although debt extensions have been secured for some obligations. The conversion of convertible notes into common stock reduces debt burden but increases equity dilution.
• **Suppliers**: No specific impact mentioned, but the company's financial instability could pose risks to supplier relationships if obligations are not met.

Next Steps

• Raise additional capital through the sale of equity or debt to fund future obligations and operations.
• Implement the business plan, focusing on generating revenue from real estate and KetoAir sales.
• Continue commercialization and development of the KetoAir breathalyzer device and additional diagnostic uses.
• Address and remediate the material weaknesses in disclosure controls and procedures.
• Meng Li will assume the role of interim Chief Executive Officer effective November 30, 2025.

Key Dates

Recommendation

Avalon GloboCare's financial position is highly precarious, marked by a substantial net loss of over $16 million for the nine months, a worsening working capital deficit, and a critically low cash balance of $333,931. The explicit 'going concern' warning from management, coupled with increasing cash burn from operations, signals severe liquidity issues. While the company is attempting to raise capital through equity and debt, the success and terms of such efforts are uncertain, and any equity issuance will lead to significant dilution. The strategic pivot away from cellular therapy R&D, while aimed at cash preservation, indicates a failure in previous growth areas. The CEO's resignation and the acknowledged ineffectiveness of disclosure controls further erode investor confidence. Given these compounding negative factors and the high risk of business continuity, a seasoned investor would likely recommend a strong sell.

Keywords

KetoAir, breathalyzer, diagnostic products, real estate, cellular therapy, SEC filing, 10-Q, financial results, net loss, going concern, capital raise, management change, corporate governance, debt extinguishment, working capital deficit, Nasdaq