Avalon GloboCare (ALBT) - 2025 Q1 - Quarterly Report

Part I – Financial Information Financial Statements Q1 2025 net loss was $2.48 million, total assets decreased to $10.6 million, and a $11.7 million working capital deficit raises substantial doubt about going concern Condensed Consolidated Balance Sheets Total assets decreased by 49.4% to $10.6 million as of March 31, 2025, primarily due to the disposition of equity method investments, resulting in a $3.9 million equity deficit Condensed Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | March 31, 2025 ($) | December 31, 2024 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Total Assets | 10,609,789 | 20,985,178 | -49.4% | | Cash | 1,369,586 | 2,856,309 | -52.0% | | Equity method investments, net | - | 10,636,544 | -100.0% | | Total Liabilities | 14,501,059 | 13,882,555 | +4.5% | | Total Current Liabilities | 14,449,353 | 13,882,555 | +4.1% | | Total (Deficit) Equity | (3,891,270) | 7,102,623 | -154.8% | | Accumulated deficit | (90,155,236) | (87,673,125) | +2.8% | - The company disposed of its 40% equity interest in Lab Services MSO during the first quarter of 2025, resulting in the elimination of the 'Equity method investments' asset from the balance sheet[9][27][54] Condensed Consolidated Statements of Operations and Comprehensive Loss Net loss for Q1 2025 increased to $2.48 million from $1.37 million in Q1 2024, primarily due to a significant rise in professional fees Consolidated Statement of Operations Highlights (Unaudited, For the Three Months Ended March 31) | P&L Item | 2025 ($) | 2024 ($) | Change (%) | | :--- | :--- | :--- | :--- | | Real Property Rental Revenue | 349,800 | 314,588 | +11.2% | | Income from Equity Method Investment | 392,677 | 107,469 | +265.4% | | Total Other Operating Expenses | 2,268,862 | 1,001,993 | +126.4% | | - Professional fees | 1,691,579 | 442,335 | +282.4% | | Loss from Operations | (1,806,775) | (843,062) | +114.3% | | Net Loss | (2,482,111) | (1,367,513) | +81.5% | | Net Loss per Share (Basic & Diluted) | (1.43) | (1.86) | -23.1% | Condensed Consolidated Statements of Changes in (Deficit) Equity Total equity shifted from $7.1 million positive to a $3.9 million deficit due to net loss and preferred stock changes - Series B Convertible Preferred Stock with a carrying value of $11,000,000 was extinguished as part of the consideration for the redemption of the company's investment in Lab Services MSO[14][170] - 9,000 shares of Series A Convertible Preferred Stock ($9,000,000 carrying value) were exchanged for 5,000 shares of newly created Series D Convertible Preferred Stock[14][167] - The net loss for the quarter was $2,482,111, which directly reduced the accumulated deficit[14] Condensed Consolidated Statements of Cash Flows Net cash used in operations increased to $1.8 million in Q1 2025, leading to a $1.49 million cash decrease to $1.37 million Consolidated Cash Flow Highlights (Unaudited, For the Three Months Ended March 31) | Cash Flow Item | 2025 ($) | 2024 ($) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (1,801,926) | (915,709) | | Net Cash Provided by Investing Activities | 95,000 | - | | Net Cash Provided by Financing Activities | 219,972 | 936,772 | | Net (Decrease) Increase in Cash | (1,486,723) | 20,068 | | Cash - End of Period | 1,369,586 | 305,468 | Notes to Unaudited Condensed Consolidated Financial Statements Notes detail KetoAir focus, lab services cessation, a $11.7 million working capital deficit, and ongoing litigation settlement obligations - The company is a commercial-stage company focused on developing and delivering precision diagnostic consumer products, primarily the KetoAir™ breathalyzer device, and owns income-producing real estate[23][25] - On February 26, 2025, the company's 40% equity interest in Lab Services MSO was redeemed, effectively ending its laboratory testing services segment, with the company receiving $1.745 million in cash consideration (payable over time) and all of its Series B Preferred Stock surrendered[27][54][170] - The company had a working capital deficit of approximately $11.7 million and recurring net losses, which raises substantial doubt about its ability to continue as a going concern, with its continuation dependent on raising additional capital[37][38] - On January 9, 2025, the company's chairman exchanged 9,000 shares of Series A Preferred Stock for 5,000 shares of new Series D Preferred Stock[124][137][167] - The company has an outstanding litigation settlement obligation with accrued payments of $373,450 as of March 31, 2025[202] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses KetoAir, Q1 2025 net loss of $2.5 million from professional fees, and going concern doubts due to a $11.7 million working capital deficit - The company's primary focus is on commercializing the KetoAir™ breathalyzer device and developing its intellectual property through a partnership with MIT[214][215][217] - To preserve cash, the company sold its 40% interest in Lab Services MSO on February 26, 2025, and has suspended R&D efforts related to cellular therapy[220][221] - A significant increase in professional fees of $1.25 million was mainly due to consulting and legal services for a potential merger with YOOV Group Holding Limited[241] - Management explicitly states that there is substantial doubt about the company's ability to continue as a going concern due to a working capital deficit of $11.7 million, recurring losses, and a cash balance insufficient for the next 12 months[224][225][251] Key Operational Results (For the Three Months Ended March 31) | Metric | 2025 ($) | 2024 ($) | Change (%) | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | Real Property Rental Revenue | 349,800 | 314,588 | +11.2% | Increase in number of tenants | | Loss from Operations | (1,806,775) | (843,062) | +114.3% | Primarily due to higher professional fees | | Net Loss | (2,482,111) | (1,367,513) | +81.5% | Increased operating loss and other expenses | Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Avalon GloboCare Corp. is not required to provide the information for this item - The company is exempt from this disclosure requirement because it qualifies as a smaller reporting company[263] Controls and Procedures Management evaluated the company's disclosure controls and procedures as of March 31, 2025, and concluded they were not effective due to un-remediated material weaknesses previously identified in the 2024 Annual Report on Form 10-K - Management concluded that disclosure controls and procedures were not effective as of March 31, 2025[266] - The ineffectiveness is due to material weaknesses previously reported in the Form 10-K for the year ended December 31, 2024, which have not yet been remediated[266] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[267] Part II – Other Information Legal Proceedings The company is subject to a 2019 lawsuit settlement requiring fixed and contingent payments, with $373,450 accrued as of March 31, 2025 - The company is party to a settlement agreement stemming from a 2019 lawsuit involving allegations of trade secret misappropriation against its subsidiary Genexosome and former Co-CEO Dr. Zhou[270] - The settlement terms include fixed payments and future profit-sharing arrangements with the Research Institute[270] Risk Factors The company, as a smaller reporting company, is not required to disclose material changes to its risk factors in the 10-Q, referring investors to its Annual Report on Form 10-K - The company directs investors to its most recent Form 10-K for a comprehensive discussion of risk factors[271] - As a smaller reporting company, disclosure of material changes to risk factors in the quarterly report is not required[272] Unregistered Sales of Equity Securities and Use of Proceeds Q1 2025 saw the issuance of 22,278 common shares for services and 186,877 shares from cashless warrant exercises, all exempt from registration - Issued 22,278 common shares for services rendered and to be rendered, valued at $111,232[274] - Issued 186,877 common shares upon the cashless exercise of outstanding warrants[275] Other Information The company reported no material information under this item for the quarter, and confirmed no material changes to board nominee procedures or Rule 10b5-1 trading plans - No material information was reported under Item 5(a)[279] - No directors or officers adopted or terminated Rule 10b5-1 trading arrangements during the quarter ended March 31, 2025[280] Exhibits This section lists all Form 10-Q exhibits, including the YOOV Group Holding merger agreement, redemption agreement, and officer certifications - Key exhibits filed include the merger agreement with YOOV Group Holding, the redemption agreement for the Lab Services MSO investment, and certifications by the CEO and CFO[284]