# Gaxos.Ai Inc.: Form 10-Q for the period ended Mar 31, 2025

- Company: [Gaxos.Ai Inc.](/companies/gxai.md) (CIK 1895618)
- Form: 10-Q
- Filed: 2025-05-15
- Accepted by EDGAR: May 15, 2025, 20:30 ET
- Period: 2025-03-31
- Accession: 0001213900-25-044276
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1895618/000121390025044276/ea0241464-10q_gaxosai.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1895618/000121390025044276/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-01-01 to 2025-03-31 | $23.7k | us-gaap:Revenues |
| Research and development | 3 months, 2025-01-01 to 2025-03-31 | $221.0k | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2025-01-01 to 2025-03-31 | −$1.4m | us-gaap:OperatingIncomeLoss |
| Net income | 3 months, 2025-01-01 to 2025-03-31 | −$1.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-01-01 to 2025-03-31 | −$0.17 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-01-01 to 2025-03-31 | −$0.17 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-01-01 to 2025-03-31 | 7,001,231 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2025-01-01 to 2025-03-31 | −$1.3m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Cash and equivalents | at 2025-03-31 | $2.6m | us-gaap:Cash |
| Current assets | at 2025-03-31 | $15.2m | us-gaap:AssetsCurrent |
| Total assets | at 2025-03-31 | $16.1m | us-gaap:Assets |
| Current liabilities | at 2025-03-31 | $500.7k | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2025-03-31 | $500.7k | us-gaap:Liabilities |
| Shareholders' equity | at 2025-03-31 | $15.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 26,226 characters.

*You should read the following discussion and analysis of our financial condition and plan of operations together with “Summary Financial Data” and our financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements and related notes for the years ended December 31, 2024 and 2023 included in our Annual Report on Form 10-K filed with the Securities Exchange Commission, or SEC. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those discussed below. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in our Annual Report on Form 10-K as filed with the SEC. All amounts in this report are in U.S. dollars, unless otherwise noted.*

### Overview

We are a technology-based company that is developing applications aimed at redefining the way we utilize artificial intelligence (“AI”) to optimize the user experience. We are committed to addressing the need for AI solutions in both health and entertainment.

#### Gaxos Labs

Gaxos Labs, launched in September 2024, is a transformative generative AI service that empowers game developers and publishers. Key features of the product include:

- AI-Powered Creativity: Reduces creative asset development time from hours to minutes, transforming artistic visions into reality with ease. Rapid prototyping abilities allows for experimentation with different designs quickly and easily.
- Monetization: Publishers have the ability to offer users AI-generated assets for player customization.
- Seamless Integration: With plug-and-play functionality for Unity and Godot, integration is effortless into existing workflows.
- API: Connect to any game development engine and build for any platform including mobile and PC.
- Dynamic Content Generation: User-Generated-Ai-Content (“UGAiC”) feature offers new experiences with each playthrough by letting gamers use AI in real time, fostering a dynamic gaming environment.
- Customized Solutions: From personalized AI models including images and sound capabilities to expert consulting services, our offering includes customizable solutions to meet the unique needs of any developer.

#### Gaxos Gaming

Gaxos Gaming (the “Platform”), created with a vision to develop, design, acquire, and manage conventional games and to combine these games with unconventional game mechanisms, such as the ability for gamers and developers to utilize artificial intelligence to create and design in-game features, as well as to mint unique in-game features, such as skins, characters, weapons, gear, levels, and virtual lands, in the form of non-fungible tokens, or “NFTs,” that will allow users to have unique experiences and more control over in-game assets.

In 2023, we launched our own proprietary games that are simple and fun to play, and that offer gamers the ability to utilize AI to personalize their gaming experience as well as to mint their own affordable NFTs, with unique and exclusive features, that can be utilized across the network of games and platform that we intend to build. As of March 31, 2025, we have launched four games, Space Striker AI, Brawl Bots, BattleFleet AI, and Jigsaw Puzzle AI. Space Striker AI allows players to engage in a captivating storyline and exciting retro shooting space action in the players AI-generated spaceship. Players can fuse crystals to upgrade their ship parts to craft, clash and conquer the galaxy all within a dynamic free-to-play economy. Brawl Bots immerses users in high-octane battles in real time against other players, in solo play or teams. Each player gets to control their own exclusive Bot character, ensuring a personalized gaming experience. BattleFleet AI is a take on the classic Battleship game with AI elements that allow gamers to design their ships. Jigsaw Puzzle AI lets gamers solve preloaded jigsaw puzzles as well as design and solve new jigsaw puzzles using AI.

#### Gaxos Health

Recently, we began to develop a new initiative, Gaxos Health, which is dedicated to revolutionizing personal health and wellness by developing a suite of innovative AI-powered health optimization solutions. Gaxos Health will integrate AI-driven insights with individual biometric data and health goals to create web and application based personalized wellness strategies for users. We believe that this cutting-edge approach will redefine preventative medicine, offering unparalleled personalization in health and wellness. Gaxos Health solutions will analyze a wide range of health data to provide tailored wellness plans and address the growing demand for personalized health solutions. We believe that this technology is not just a step but a leap forward in empowering individuals to take control of their health and longevity with AI’s precision and intelligence.

We launched the AI-powered health optimization product in the third quarter of 2024.

#### RNK Health

On September 23, 2024, the Company formed a wholly-owned subsidiary, RNK Health LLC (“RNK Health”), to form a partnership and potential relationship with Nekwellness, LLC (“Nekwellness”) to engage in the proposed business of marketing certain health-related products. On October 10, 2024, the Company, RNK Health and Nekwellness entered into an operating agreement with respect to the regulation and management of the affairs of RNK Health and, as of such date, the Company owns a 70% membership interest in RNK Health and Nekwellness owns a 30% membership interest in RNK Health. RNK Health is currently providing access to certain medications, supplements and other wellness products and services.

### Critical Accounting Estimates

Critical accounting estimates are those estimates made in accordance with generally accepted accounting principles that involve a significant level of estimation uncertainty and have had or are reasonably likely to have a material impact on our financial condition or results of operations. We consider the following to be critical accounting estimates.

### Intangible assets

Intangible assets, consisting of software licenses, technology licenses, and software, are carried at cost less accumulated amortization, computed using the straight-line method over the estimated useful life of 5 years, less any impairment charges. We test intangible assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable. Recoverability of assets is determined by comparing the estimated undiscounted future cash flows of the asset or asset group to their carrying amount. If the carrying value of the assets exceeds their estimated undiscounted future cash flows, an impairment loss would be determined as the difference between the fair value of the assets and its carrying value. Typically, the fair value of the assets would be determined using a discounted cash flow model which would be sensitive to judgments of what constitutes an asset group and certain assumptions such as estimated future financial performance, discount rates, and other assumptions that marketplace participants would use in their estimates of fair value. There have been no material changes in the underlying assumptions and estimates used in these calculations in the relevant period. The accounting estimate related to asset impairments is highly susceptible to change from period to period because it requires management to make assumptions about the existence of impairment indicators and cash flows over future years. These assumptions impact the amount of an impairment, which could materially adversely impact the consolidated statements of operations.

### Stock-based compensation

Stock-based compensation is accounted for based on the requirements of ASC 718 – “*Compensation–Stock Compensation”*, which requires recognition in the financial statements of the cost of employee, non-employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. The Company has elected to account for forfeitures as they occur. We recognize compensation costs resulting from the issuance of stock-based awards to employees, non-employees, and directors as an expense in the statements of operations over the requisite service period based on a measurement of fair value for each stock-based award. The fair value of each option granted is estimated as of the date of grant using the Black-Scholes-Merton option-pricing model, net of actual forfeitures. The fair value is amortized as compensation cost on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. The Black-Scholes-Merton option-pricing model includes various assumptions, including the fair market value of our common stock, expected life of stock options, the expected volatility, and the expected risk-free interest rate, among others. These assumptions reflect our best estimates, but they involve inherent uncertainties based on market conditions generally outside of our control. As a result, if other assumptions had been used, stock-based compensation expense, as determined in accordance with authoritative guidance, could have been materially impacted. Furthermore, if we use different assumptions on future grants, stock-based compensation expense could be materially affected in future periods.

### Capital Expenditures

We do not have any contractual obligations for ongoing capital expenditures at this time. We do, however, purchase equipment and software necessary to conduct our operations on an as needed basis.

### Results of Operations

**Comparison of Our Results of Operations for the Three Months Ended March 31, 2025 and 2024.**

### Revenues

During the three months ended March 31, 2025, we generated revenues of $23,732 primarily from revenues generated, through RNK Health, for providing non-clinical services to support patient care of $22,552. Additionally, during the three months ended March 31, 2025, we generated revenues of $1,124 from the sale of health coaching packages to our customers, revenue of $51 from subscription services, and revenue of $5 from in-app games items. Health coaching packages consist of a series of lab tests and personal health coaching sessions. During the three months ended March 31, 2024, we generated revenue of $19. Once we achieve a critical mass of users, we plan to offer new features and to charge fees in order to generate revenues from these added features.

### Operating Expenses

During the three months ended March 31, 2025 and 2024, we incurred operating expenses of $1,415,427 and $1,043,858, respectively, an increase of $371,569, or 35.6%. Operating expenses consisted of the following:

### Research and development fees

We enter into agreements with third-party developers that require us to make payments for game and software development services upon reaching the application development stage. In exchange for our payments, we receive the exclusive publishing and distribution rights to the finished game title and software. During the preliminary project stage and prior to the application development stage of the product, we record any costs incurred by third-party developers as research and development expenses.

We capitalize all development and production service payments to third-party developers as internal-use software development costs and licenses once we reach the application development stage. During the three months ended March 31, 2025 and 2024, we reported research and development fees of $220,989 and $182,329, respectively, an increase of $38,660, or 21.2%. The increase is primarily due to an increase in outside development costs incurred in connection with the development of Gaxos Health platforms offset by a decrease in outside development costs incurred in connection with the development of Gaxos Games. We expect research and development expenses to increase in the future as development of Gaxos Games, Gaxos Health and RNK Health accelerates.

### General and administrative expenses

For the three months ended March 31, 2025 and 2024, general and administrative expenses consisted of the following:

|  | For the Three Months Ended March 31, 2025 | For the Three Months Ended March 31, 2024 |
| --- | ---: | ---: |
| Compensation and related benefit | $588,985 | $363,484 |
| Professional fees | 232,890 | 274,688 |
| Other general and administrative expenses | 372,563 | 223,357 |
| Total general and administrative expenses | $1,194,438 | $861,529 |

21

### Compensation and related benefits

During the three months ended March 31, 2025 and 2024, compensation and related benefits amounted to $588,985 and $363,484, respectively, an increase of $225,501, or 62.0%. The increase during the three months ended March 31, 2025 compared to the three months ended March 31, 2024 was primarily attributable to the increase in executive officer bonuses paid of $250,000, offset by a decrease in employee compensation and related benefits of $24,499.

### Professional fees

During the three months ended March 31, 2025 and 2024, we incurred professional fees of $232,890 and $274,688, respectively, a decrease of $41,798, or 15.2%, primarily attributable to a decrease in advisory fees of $79,945 and a decrease in investor relations fees of $30,000, offset by an increase in legal fees of $32,679, an increase in accounting fees of $22,122, and an increase in stock-based consulting fees attributable to the accretion of stock-based consulting fees related to issuance of stock options to consultants of $13,348

### Other general and administrative expenses

Other general and administrative expenses consist of advertising and marketing expenses, office expenses, insurance, listing fees, computer and interest expenses, travel expenses, amortization expense, and other general business expenses. During the three months ended March 31, 2025 and 2024, we incurred other general and administrative expenses of $372,563 and $223,357, respectively, an increase of $149,206, or 66.8%. This increase was primarily attributable to an increase in advertising and marketing fees of $142,295 in connection with the marketing of our RNK Health services.

### Loss from operations

During the three months ended March 31, 2025 and 2024, we reported a loss from operations of $1,391,695 and $1,043,839, respectively, an increase of $347,856, or 33.3%. The increase in loss from operations was due to an increase in general and administrative expenses and an increase in research and development expenses as discussed above.

### Other income

During the three months ended March 31, 2025 and 2024, we reported other income of $159,633 and $131,694, respectively, which consisted of interest income and a realized gain on short-term investments in both years.

### Net loss and net loss attributable common shareholders

During the three months ended March 31, 2025 and 2024, our net loss amounted to $1,232,062 and $912,145, respectively, an increase of $319,917, or 35.1%. During the three months ended March 31, 2025 and 2024, we adjusted net loss for the net loss of subsidiary attributable to noncontrolling interest by $40,262 and $0, respectively Accordingly, during the three months ended March 31, 2025 and 2024, our net loss attributable to common shareholders was $1,191,800, or $0.17 per common share (basic and diluted) and $912,145, or $0.91 per common share (basic and diluted), respectively, a decrease of $279,655, or 30.7%.

### Liquidity, Capital Resources and Plan of Operations

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on an ongoing basis. On March 31, 2025, we had a cash balance of $2,571,340, had short-term investments of $12,116,298, and had working capital of $14,666,345. During the three months ended March 31, 2025, we used net cash in operations of $1,297,485.

On December 18, 2024, we entered into a securities purchase agreement (the “December 18, 2024 Purchase Agreement”) with certain institutional investors, pursuant to which we sold to such investors 1,449,277 common shares of the Company at a purchase price of $3.45 per share for net proceeds from $4,449,055, after deducting Placement Agent fees and offering expenses of $550,950 paid by the Company. Additionally, on December 26, 2024, we entered into a securities purchase agreement (the “December 26, 2024 Purchase Agreement”) with certain institutional and accredited investors, pursuant to which we sold to such investors 1,346,669 shares of the Company’s common stock at a purchase price of $3.00 per share (the “2nd Registered Direct Offering”). The net proceeds from the December 26, 2024 Purchase Agreement amounted to $3,600,656, after deducting Placement Agent fees and offering expenses of $439,351 paid by the Company pursuant to the September 2024 Engagement Letter with the Placement Agent.

Until such time that the Company implements its growth strategy, we expect to continue to generate operating losses in the foreseeable future, mostly due to corporate overhead, research and development, and costs of being a public company. We believe that our existing working capital and cash on hand will provide sufficient cash to enable the Company to meet its operating needs and debt requirements for the next twelve months from the issuance date of this report.

### Cash Flows from Operating Activities

For the three months ended March 31, 2025, net cash used in operations was $1,297,485, which primarily resulted from our net loss of $1,232,062, adjusted for the add back of amortization expense of $29,749, stock-based compensation to employees and consultants of $32,880, and a realized gain on short-term investments of $(11,445), and changes in operating asset and liabilities such as an increase in accounts receivable of $4,871, an increase in prepaid expenses and other current assets of $210,977, a decrease in accounts payable of $17,118, an increase in accrued expenses of $117,481, and a decrease in deferred revenues of $1,122.

For the three months ended March 31, 2024, net cash used in operations was $1,099,417, which primarily resulted from our net loss of $912,145, adjusted for the add back of amortization expense of $8,683, stock-based compensation to employees of $15,806, and a realized gain on short-term investments of $119,715, and changes in operating asset and liabilities such as an increase in prepaid expenses and other current assets of $335,781, an increase in accounts payable of $177,268, and an increase in accrued expenses of $66,469.

### Cash Flows from Investing Activities

For the three months ended March 31, 2025, net cash used in investing activities was $10,529,274, which resulted from the purchase of short-term investments of $12,171,293 primarily consisting of corporate bonds, the purchase of software intangible assets of $500,000, and an increase in capitalized internal-use software development costs of $22,800, offset by proceeds received from the sale of short-term investments of $2,164,819.

For the three months ended March 31, 2024, net cash provided by investing activities was $349,602, which resulted from proceeds received from the sale of short-term investments of $2,616,619, offset by cash used for the purchase of short-term investments of $2,095,707, an increase in capitalized internal-use software development costs of $21,310, and the purchase of an intangible asset of $150,000.

### Cash Flows from Financing Activities

For the three months ended March 31, 2025, we did not have any cash flows from financing activities.

For the three months ended March 31, 2024, net cash provided by financing activities was $3,037,382. On March 13, 2024, we entered into a securities purchase agreement with an institutional investor for the issuance and sale in a private placement of (i) 108,000 shares of the Company’s common stock (the “Common Stock”), (ii) pre-funded warrants to purchase 520,367 shares of Common Stock, (iii) series A warrants to purchase up to 628,367 shares of Common Stock, and (iv) series B warrants to purchase up to 628,367 shares Common Stock. The purchase price of each share of Common Stock and associated warrants was $5.57 and the purchase price of each pre-funded warrant and associated warrants was $5.569. The private placement closed on March 15, 2024 and the aggregate net proceeds of $3,056,984, after deducting placement agent fees and expenses and offering expenses payable by the Company. Additionally, during the three months ended March 31, 2024, we purchased and cancelled 6,846 treasury shares for $19,602, or at an average price of $2.86 per share.

Our ultimate success is dependent on our ability to obtain additional financing and generate sufficient cash flow to meet our obligations on a timely basis. We will require significant amounts of capital to sustain operations, and we will need to make the investments we need to execute our longer-term business plan to support new technologies and help advance innovation. Absent generation of sufficient revenue from the execution of our long-term business plan, we will need to obtain debt or equity financing, especially if we experience downturns in our business that are more severe or longer than anticipated, or if we experience significant increases in expense levels resulting from being a publicly-traded company or from operations. Such additional debt or equity financing may not be available to us on favorable terms, if at all. We plan to pursue our plans with respect to the research and development of our products which will require resources beyond those that we currently have, ultimately requiring additional capital from third party sources. However, we believe the net proceeds received from the December 2024 securities purchase agreements as discussed above will be sufficient to meet our financial obligations for at least the next 12 months.

### Off-Balance Sheet Arrangements

For the three months ended March 31, 2025 and 2024, we did not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K and did not have any commitments or contractual obligations.

### Recently Issued Accounting Standards Not Yet Effective or Adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires entities to provide more detailed disaggregation of expenses in the income statement, focusing on the nature of the expenses rather than their function. The new disclosures will require entities to separately present expenses for significant line items, including but not limited to, depreciation, amortization, and employee compensation. Entities will also be required to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, disclose the total amount of selling expenses and, in annual reporting periods, provide a definition of what constitutes selling expenses. This pronouncement is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company does not expect the adoption of this new guidance to have a material impact on the consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material effect on its consolidated financial statements.

### JOBS Act

On April 5, 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

We have chosen to take advantage of the extended transition periods available to emerging growth companies under the JOBS Act for complying with new or revised accounting standards until those standards would otherwise apply to private companies provided under the JOBS Act. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates for complying with new or revised accounting standards.

Subject to certain conditions set forth in the JOBS Act, as an “emerging growth company,” we intend to rely on certain of these exemptions, including, without limitation, (i) providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of Sarbanes-Oxley and (ii) complying with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements, known as the auditor discussion and analysis. We will remain an “emerging growth company” until the earliest of (i) the last day of the fiscal year in which we have total annual gross revenues of $1.07 billion or more; (ii) the last day of our fiscal year following the fifth anniversary of the date of our initial public offering; (iii) the date on which we have issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules of the SEC.

## Market risk

As filed, 155 characters.

We are not required to provide the information required by this Item as we are a “smaller reporting company,” as defined in Rule 12b-2 of the Exchange Act.

## Controls and procedures

As filed, 2,285 characters.

### Evaluation of Disclosure Controls and Procedures

Our principal executive officer and principal financial officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in Exchange Act Rule 13a-15 and 15d-15(e)) as of March 31, 2025, the end of the period covered by this Quarterly Report on Form 10-Q, have concluded that our disclosure controls and procedures were effective such that the information required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

### Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

## Risk factors

As filed, 5,139 characters.

Risk factors that affect our business and financial results are discussed in Part I, Item 1A “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2024 as filed with the SEC on March 28, 2025 (“Annual Report”). There have been no material changes in our risk factors from those previously disclosed in our Annual Report, except discussed below. You should carefully consider the risks described in our Annual Report, which could materially affect our business, financial condition or future results. The risks described in our Annual Report are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, and/or operating results. If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.

***Our Medial Partner’s telehealth business could be adversely affected by ongoing legal challenges to their business model or by new state actions restricting their ability to provide the full range of services in certain states.***

Our majority-owned subsidiary, RNK Health LLC (“RNK Health”), is currently providing non-clinical administrative services to support patient health. RNK Health has partnered with a third-party medical management company (the “Medical Partner”) that provides medication management and patient support care services via telehealth to patients located in all 50 states.

The ability of our Medical Partner’ telehealth operations in each state is dependent upon the state’s treatment of medicine under such state’s laws, rules and policies governing the practice of physician supervised services, which are subject to changing political, regulatory and other influences. In the event our contracted parties are unable to provide telehealth services for any reason, it would have a material adverse effect on our ability to sell products and in turn our revenues and operating results.

***Our and our Medical Partner’s activities are subject to laws governing the provision of telehealth services, which could be subject to changes that result in additional operational complexity or increased costs.***

Out Medical Partner and their providers are subject to laws governing the provision of telehealth services and the delivery of professional healthcare services more broadly. For example, some states limit the modality through which telehealth services are delivered, such as requiring synchronous (i.e. “live”) communication or curtailing asynchronous ( “store-and-forward”) communication for certain telehealth services (e.g. prescribing certain types of medications). Although we believe our contractual arrangement with the Medical Partner is structured to comply with laws governing the provision of telehealth services, these laws are evolving at a rapid pace and are subject to changing political, regulatory, and other influences. Due to the rapidly evolving regulatory climate, we cannot assure that our contractual arrangement, if challenged, will be deemed compliant, nor can we assure that a new or existing law will not be implemented, enforced, or changed, with little or no notice, in a manner that requires us to modify our business model at a material expense.

***Evolving government regulations and enforcement activities may require increased costs or adversely affect our results of operations.***

Our contractual arrangement with our Medical Partner is structured to comply with all applicable material laws, but, due to the uncertain regulatory environment and enforcement discretion, government regulators or enforcement agencies may determine that we or our Medical Partner are in violation of their laws and regulations. If we must remedy such violations, we or the Medical Partner may be required to modify business operations and services in a manner that undermines our ability to retain or acquire new customers, or we or our Medical Partner, may be subject to fines or other burdensome enforcement actions that may result in our termination of operations in certain jurisdictions. If so, our revenue may decline and our business, financial condition, and results of operations could be adversely affected.

Moreover, the laws applicable to our operations are subject to change or reinterpretation, and continued compliance may require us to change our practices at significant expense. Additional expenses may increase future overhead, which could have a material adverse effect on our results of operations. Additionally, modifications to the services we offer may require us to comply with additional laws and regulations, obtain necessary licenses or certifications, or materially alter our operations—any of which may require incurring significant expenses to ensure compliance. The failure to adequately comply with these future laws and regulations may delay or possibly prevent our services from being offered to customers, which could have a material adverse effect on our business, financial condition, and results of operations.

Filed May 15, 2025.
Source: SEC EDGAR, the filing index for accession 0001213900-25-044276. Last ingested by Listed: Oct 24, 2026, 15:06 ET. No prices; not investment advice.