Executive Summary / Key Takeaways

• Avalon GloboCare ($ALBT) is undergoing a significant strategic pivot, divesting its laboratory services segment to focus on its income-generating real estate asset and the commercialization of its precision diagnostic product, the KetoAir breathalyzer, alongside the advancement of its QTY code protein design intellectual property.
• The company faces substantial financial challenges, including a working capital deficit of $11.65 million as of March 31, 2025, recurring net losses ($2.48 million in Q1 2025), and negative operating cash flow ($1.80 million used in Q1 2025), which raise substantial doubt about its ability to continue as a going concern without securing additional financing.
• Recent financial performance reflects this transition and increased strategic activity, with real property rental revenue showing modest growth (11.2% increase in Q1 2025) but overall operating expenses surging (114.3% increase in loss from operations in Q1 2025) primarily due to professional fees related to a potential merger with YOOV Group Holding Limited.
• The successful commercialization of the KetoAir device and potential future monetization of the QTY code IP represent key opportunities, but require significant capital investment, which is currently constrained.
• The company's ability to execute its focused business plan and address its liquidity needs is paramount and dependent on raising additional capital through equity or debt financing, the availability of which is not assured.

A Tale of Two Assets: Strategic Focus Amidst Transformation

Avalon GloboCare Corp. ($ALBT) presents a complex narrative for investors, characterized by a recent strategic pivot aimed at sharpening its focus amidst persistent financial challenges. Incorporated in 2014, ALBT initially positioned itself across diverse areas including cellular therapy, laboratory services, and real estate. However, the company is currently undergoing a significant transformation, streamlining its operations to concentrate primarily on two core areas: its income-generating commercial real estate property and the commercialization of precision diagnostic consumer products, specifically the KetoAir breathalyzer, alongside the advancement of its intellectual property in protein design.

This strategic shift became particularly evident in the first quarter of 2025 with the divestiture of the company's 40% equity interest in Laboratory Services MSO, LLC on February 26, 2025. This move, undertaken explicitly to preserve cash, marked the end of ALBT's foray into laboratory testing services, a segment that had contributed income from equity method investment ($392,677 in Q1 2025, up significantly from $107,469 in Q1 2024, reflecting income up to the sale date). By exiting this segment, ALBT aims to redirect resources and management attention towards its remaining business lines and critical liquidity needs.

The company's real property segment, centered around its New Jersey headquarters, provides a foundational, albeit modest, revenue stream. In the first quarter of 2025, this segment generated $349,800 in rental revenue, an 11.2% increase compared to $314,588 in the same period last year, driven by an increase in tenant occupancy (96.2% as of March 31, 2025). Real property operating income also saw a healthy 34.9% increase, rising from $51,462 to $69,410. While stable and income-producing, management expects this revenue to remain at its current level with minimal future increase, indicating it serves more as a base than a significant growth driver.

The company's other primary focus is the commercialization of the KetoAir breathalyzer device and its accompanying AI Nutritionist software. Positioned within the precision diagnostic consumer products market, KetoAir is designed to detect acetone levels in exhaled breath, providing users with real-time ketosis status. Registered with the U.S. FDA as a Class I medical device, ALBT holds exclusive distributorship rights for KetoAir in key territories including North America, South America, the EU, and the UK, targeting the diabetes and obesity markets. The company believes KetoAir offers competitive advantages over other methods for measuring ketosis, although specific quantitative performance metrics or direct competitor comparisons are not detailed. This product represents a potential growth avenue, but its contribution to current revenue is not separately disclosed in the financial statements, likely falling under the broader "Corporate/Other" category which currently contributes to overall operating expenses rather than revenue.

Beyond commercial products, ALBT maintains a focus on intellectual property advancement, notably through a collaboration with the Massachusetts Institute of Technology (MIT) on the QTY code protein design platform. This research has successfully designed and tested water-soluble variant cytokine receptors. While R&D efforts related to cellular therapy, a previous focus area (Avactis subsidiary), have been suspended to preserve cash, the company aims to bring forward the intellectual property associated with the MIT collaboration through joint patent submissions. The potential impact of this IP is currently speculative, as no specific timelines for commercialization or quantifiable performance targets are provided, and the underlying R&D is paused.

Financial Realities and the Going Concern Question

Despite the strategic streamlining, ALBT's financial position remains precarious. The company reported a net loss of $2.48 million for the three months ended March 31, 2025, an 81.5% increase from the $1.37 million net loss in the prior-year period. This expanded loss was significantly influenced by a surge in other operating expenses, which more than doubled from $1.00 million in Q1 2024 to $2.27 million in Q1 2025. A major contributor to this increase was professional fees, which ballooned by $1.25 million, or 282.4%, primarily due to consulting, legal, and fairness opinion services related to a potential merger with YOOV Group Holding Limited. While management expects professional fees to decrease in the near future, this highlights the significant costs associated with pursuing strategic transactions.

The company's financial statements explicitly state that its recurring net losses and negative cash flow from operating activities ($1.80 million used in Q1 2025 compared to $915,709 used in Q1 2024) raise substantial doubt about its ability to continue as a going concern. As of March 31, 2025, ALBT had a working capital deficit of $11.65 million and a cash balance of only $1.37 million, which management projects is insufficient to cover operating expenses for the next twelve months.

The company's liquidity is heavily reliant on generating revenue from its limited operations and, critically, obtaining additional financing. While the sale of the Lab Services MSO investment resulted in a receivable of $1.65 million (with $95,000 cash received in Q1 2025), and the company received a $219,972 advance from a related party towards the pending sale of a noncontrolling interest in its real estate subsidiary (totaling $3.33 million received as of March 31, 2025), these inflows are offset by ongoing expenses and liabilities, including significant debt obligations ($5.75 million note payable and $2.40 million convertible note payable, net, as of March 31, 2025).

Management acknowledges the need to raise additional capital, likely through the sale of equity or debt. However, they provide no assurance that such financing will be available on satisfactory terms, or at all. The risk of dilution from future equity issuances is significant, and a downturn in capital markets could exacerbate financing challenges. The inability to secure funding would severely restrict the company's ability to implement its business plan and could ultimately force it to cease operations.

Competitive Landscape and Strategic Positioning

ALBT operates in markets with varying degrees of competition. In the commercial real estate sector, its single property competes with other local office buildings. Its competitive position here is primarily based on location, occupancy rate (currently high at 96.2%), and rental terms.

In the precision diagnostics market, the KetoAir breathalyzer competes with other methods for measuring ketosis, including blood and urine tests, and potentially other breath analysis devices. While ALBT highlights perceived competitive advantages for KetoAir, the market is fragmented, and larger diagnostic companies could leverage scale and distribution networks.

Historically, in the cellular therapy space, ALBT's now-suspended R&D efforts faced competition from major players like CRISPR Therapeutics (CRSP), Bluebird Bio (BLUE), Gilead Sciences (TICKER:GILD, via Kite Pharma), and Novartis (NVS). These companies possess significantly greater financial resources, established R&D pipelines, approved products, and extensive commercialization capabilities. While ALBT's past work and IP focus (QTY code) suggested potential technological differentiators (e.g., aiming for multi-target modalities or specific protein design capabilities), these were early-stage and lacked the quantifiable performance metrics or clinical validation of its larger competitors. The company appears to lack proprietary, quantifiable technology differentiators, and the competitive landscape shows major players demonstrate higher efficacy rates and faster manufacturing scalability compared to ALBT's inferred benchmarks before R&D suspension. ALBT's competitive edge, if R&D were to resume, would likely lie in niche technological applications or cost efficiency, but its current lack of scale and financial strain are significant disadvantages against these industry giants.

The potential merger with YOOV Group Holding Limited suggests a possible strategic pivot into a new business area, potentially related to YOOV's operations (described as a "business company"). The significant professional fees incurred in Q1 2025 underscore the resources being directed towards this potential transaction, which could fundamentally alter ALBT's business model and competitive landscape if completed.

Outlook and Critical Factors

ALBT's near-term outlook is dominated by its urgent need to secure financing. Without it, the going concern risk is paramount. Assuming financing is obtained, the company's future hinges on several critical factors:

• KetoAir Commercialization Success: Can ALBT effectively market and distribute the KetoAir device to generate meaningful revenue in its target markets? Increased advertising and marketing expenses in Q1 2025 (up 58.1%) suggest initial efforts are underway, but significant investment will be required to compete effectively.
• Outcome of the YOOV Merger: Will the potential merger be completed, and if so, how will the combined entity's business model, financial health, and strategic direction position ALBT for future growth? The current increase in professional fees indicates this is a major focus.
• Future of IP Monetization: Will the QTY code IP collaboration with MIT yield commercially viable applications, and can ALBT secure the funding required to resume and advance its R&D efforts in this or other areas?
• Real Estate Stability: Can the company maintain high occupancy and stable income from its real property asset to provide a consistent, albeit limited, revenue base?

Management's guidance points to stable real estate income and decreasing professional fees, but also anticipates increased cash used in operating activities over the next 12 months as it invests in product commercialization. This underscores the precarious balance between investing for future growth and managing immediate liquidity constraints.

Conclusion

Avalon GloboCare is at a critical juncture, having streamlined its operations to focus on real estate and precision diagnostics/IP while grappling with severe financial limitations. The company's narrative is one of potential upside from its core assets and strategic initiatives, juxtaposed with the stark reality of a going concern risk. The success of the KetoAir commercialization, the outcome of the potential YOOV merger, and the ability to secure essential financing are the dominant factors that will determine ALBT's trajectory. For investors, ALBT represents a high-risk, potentially high-reward opportunity, where the execution of its focused strategy and the successful resolution of its liquidity challenges are non-negotiable prerequisites for long-term viability and value creation. The competitive landscape, particularly in the more technologically advanced areas ALBT has historically pursued, highlights the scale and resource gap with industry leaders, making strategic focus and efficient capital deployment essential.