GAXOS.AI INC.

Previous wording

In addition to launching our own proprietary games, Gaxos Gaming is developing an artificial intelligence solution for game developers and studios. The solution is intended to offer a transformative generative AI service that empowers the gaming industry to create without limits through dynamic content generation, seamless integration, and personalized solutions. Key features of the product will be:

Current wording

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

Previous wording

Our flagship product is our gaming platform called “Gaxos” (the “Platform” or “Gaxos Gaming”), 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.

Current wording

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.

Previous wording

Recently, we launched 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 to 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.

Current wording

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.

Previous wording

We expect to launch the AI-powered health optimization product in the second half of 2024.

Current wording

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

Previous wording

Intangible assets, consisting of software licenses and technology licenses, 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. During the years ended December 31, 2023 and 2022, the Company recorded an impairment loss of $52,363 and $0, respectively.

Current wording

Intangible assets, consisting of software licenses and technology licenses, 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.

Previous wording

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.

Current wording

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.

Previous wording

During the year ended December 31, 2023, we generated revenue of $256. During the year ended December 31, 2022, we did not generate any revenues from operations. 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.

Current wording

During the year ended December 31, 2024, we generated revenues of $4,027 primarily from the sale of health coaching packages to its customers. Health coaching packages consist of a series of lab tests and personal health coaching sessions. During the year ended December 31, 2023, we generated revenue of $256. 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.

Previous wording

During the years ended December 31, 2023 and 2022, we incurred operating expenses of $4,015,541 and $1,424,096, respectively, an increase of $2,591,445, or 182.0%. Operating consisted of the following:

Current wording

During the years ended December 31, 2024 and 2023, we incurred operating expenses of $3,707,632 and $4,015,541, respectively, a decrease of $307,909, or 7.7%. Operating consisted of the following:

Previous wording

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 years ended December 31, 2023 and 2022, we reported research and development fees of $915,818 and $824,523, respectively, an increase of $91,295, or 11.1%, primarily due to an increase in labor and outside development costs incurred in connection with the development of games and our platform. We expect research and development fees to increase in the future as development of games accelerates.

Current wording

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 years ended December 31, 2024 and 2023, we reported research and development fees of $996,487 and $915,818, respectively, an increase of $80,669, or 8.8%. 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.

Previous wording

During the years ended December 31, 2023 and 2022, compensation and related benefits amounted to $1,432,427 and $369,914, respectively, an increase of $1,062,513, or 287.2%. The increase during the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily attributable to the accretion of stock-based compensation related to issuance of stock options to executive officers, directors and employees of $722,079 and the hiring of executive officers and employees beginning in February 2023, which increased wages by approximately $274,000 over fiscal 2022.

Current wording

During the years ended December 31, 2024 and 2023, compensation and related benefits amounted to $872,899 and $1,432,427, respectively, a decrease of $559,528, or 39.1%. The decrease during the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily attributable to the decrease in accretion of stock-based compensation related to issuance of stock options to executive officers, directors and employees of $640,560, offset by an increase in executive officer and employee compensation and related benefits of $81,032.

Previous wording

During the years ended December 31, 2023 and 2022, we incurred professional fees of $1,066,969 and $164,495, respectively, an increase of $902,474, or 548.6%, attributable to 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 $214,275, an increase in investor relations fees of $374,970, an increase in legal fees of $138,912, an increase in accounting fees of $24,688, an increase in advisory fees of $147,500, and an increase in director fees of $39,375, offset by a decrease in other professional fees of $37,246.

Current wording

During the years ended December 31, 2024 and 2023, we incurred professional fees of $946,200 and $1,066,969, respectively, a decrease of $120,769, or 11.3%, primarily attributable to a decrease in stock-based consulting fees attributable to the accretion of stock-based consulting fees related to issuance of stock options to consultants of $176,351, a decrease in investor relations fees of $323,620 and a decrease in other professional fees of $16,152, offset by an increase in legal fees of $33,213, an increase in accounting fees of $47,755, an increase in advisory fees of $281,761, and an increase in director fees of $32,625.

Previous wording

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 years ended December 31, 2023 and 2022, we incurred general and administrative expenses of $547,964 and $65,164, respectively, an increase of $482,800, or 741.0%. Generally, the increase in other general and administrative expenses during the year ended December 31, 2023 as compared to the year ended December 31, 2022 was attributable to a ramp up of operations which began in February 2023 following the Company’s IPO.

Current wording

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 years ended December 31, 2024 and 2023, we incurred other general and administrative expenses of $892,046 and $547,964, respectively, an increase of $344,082, or 62.8%. This increase was primarily attributable to an increase in advertising and marketing fees of $156,254 and an increase in other general and administrative expenses of $187,828.

Previous wording

On August 9, 2023 and effective August 1, 2023, the Company and Columbia University agreed to the termination of the Software and Patent License Agreement between the Company and The Trustees of Columbia University in the City of New York, dated August 29, 2022. Accordingly, as of December 31, 2023, we wrote off the remaining unamortized book value of the intangible asset of $52,363, and during the year ended December 31, 2023, we recorded an impairment loss of $52,363, which is included in operating expenses on the accompanying statement of operations and comprehensive loss.

Current wording

On August 9, 2023 and effective August 1, 2023, the Company and Columbia University agreed to the termination of the Software and Patent License Agreement between the Company and The Trustees of Columbia University in the City of New York, dated August 29, 2022. Accordingly, as of December 31, 2023, we wrote off the remaining unamortized book value of the intangible asset of $52,363, and during the year ended December 31, 2023, we recorded an impairment loss of $52,363, which is included in operating expenses on the accompanying statement of operations and comprehensive loss. We did not record any impairment loss during the year ended December 31, 2024.

Previous wording

During the years ended December 31, 2023 and 2022, we reported a loss from operations of $4,015,285 and $1,424,096, respectively, an increase of $2,591,189, or 182.0%. The increase in loss from operations was due to the increases in research and development and general and administrative expenses discussed above.

Current wording

During the years ended December 31, 2024 and 2023, we reported a loss from operations of $3,703,605 and $4,015,285, respectively, a decrease of $311,680, or 7.8%. The decrease in loss from operations was due to a decrease in general and administrative expenses and a decrease in impairment loss, offset by an increase in research and development as discussed above.

Previous wording

During the years ended December 31, 2023 and 2022, we reported other income of $67,188 and $2,924, respectively, which consisted of interest income in both years and a realized gain on short-term investments in 2023. The increase is primarily due to the short-term investments acquired by the Company during the year ended December 31, 2023.

Current wording

During the years ended December 31, 2024 and 2023, we reported other income of $279,322 and $67,188, respectively, which consisted of interest income and a realized gain on short-term investments in both years.

Previous wording

During the years ended December 31, 2023 and 2022, our net loss amounted to $3,948,097 and $1,421,172, respectively, an increase of $2,526,925, OR 177.8%. During the years ended December 31, 2023 and 2022, our comprehensive loss amounted to $3,852,312, or a net loss per common share of $0.33 (basic and diluted) and $1,421,172, or a net loss per common share of $0.14 (basic and diluted), respectively, an increase of $2,431,140, or 171.1%.

Current wording

During the years ended December 31, 2024 and 2023, our net loss amounted to $3,424,283 and $3,948,097, respectively, a decrease of $523,814, or 13.3%. During the years ended December 31, 2024 and 2023, our comprehensive loss amounted to $3,508,375, or a net loss per common share of $1.93 (basic and diluted) and $3,852,312, or a net loss per common share of $4.00 (basic and diluted), respectively, a decrease of $343,937, or 8.9%.

Previous wording

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 December 31, 2023, we had a cash balance of $1,024,710, had short-term investments of $2,592,689, and had working capital of $3,372,503. On February 17, 2023, we completed an initial public offering (“IPO”) and sold 140,563 shares of its common stock at a price to the public of $49.80 per share for gross proceeds of $7,000,000. We received net proceeds of $5,958,470 which is net of offering related expenses paid with proceeds of $1,041,530. We also reclassified $202,559 of deferred offering costs as of December 31, 2022 to additional paid in capital upon completing the IPO which resulted in total net proceeds, after equity issuance costs, of $5,755,871. During the year ended December 31, 2023, we used net cash in operations of $2,980,592 and purchased liquid short-term investments of $3,491,242.

Current wording

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 December 31, 2024, we had a cash balance of $14,398,099, had short-term investments of $2,167,419, and had working capital of $16,427,618. During the year ended December 31, 2024, we used net cash in operations of $3,280,397.

Previous wording

For the year ended December 31, 2022, net cash used in operations was $1,260,425, which primarily resulted from our net loss of $1,421,172, adjusted for the add back of amortization expense of $4,189 and changes in operating asset and liabilities such as an increase in accounts payable of $148,761 and an increase in accrued expenses of $8,197, offset by a decrease of $400 in prepaid expenses and other current assets.

Current wording

For the year ended December 31, 2024, net cash used in operations was $3,280,397, which primarily resulted from our net loss of $3,424,283, adjusted for the add back of amortization expense of $52,442, stock-based compensation to employees and consultants of $119,443, and a realized gain on short-term investments of $(121,765), and changes in operating asset and liabilities such as an increase in prepaid expenses and other current assets of $38,477, an increase in accounts payable of $122,909, an increase in accrued expenses of $7,436 and an increase in deferred revenues of $1,126.

Previous wording

For the year ended December 31, 2023, net cash provided by financing activities was $5,858,734. On February 17, 2023, we closed an IPO pursuant to which we issued 1,686,755 of our common stock for gross proceeds of approximately $7 million and net proceeds of $5,958,470, after deducting underwriting discounts and commissions, and offering expenses. Additionally, during the year ended December 31, 2023, we purchased and cancelled 244,184 treasury shares for $99,736, or at an average price of $0.408 per share.

Current wording

For the year ended December 31, 2023, net cash provided by financing activities was $5,858,734. On February 17, 2023, we closed an IPO pursuant to which we issued 1,686,755 of our common stock for gross proceeds of approximately $7 million and net proceeds of $5,958,470, after deducting underwriting discounts and commissions, and offering expenses. Additionally, during the year ended December 31, 2023, we purchased and cancelled 20,349 treasury shares for $99,736, or at an average price of $4.90 per share.

Previous wording

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 in the IPO that closed in February 2023 will be sufficient to meet our financial obligations for at least the next 12 months.

Current wording

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 in the IPO that closed in February 2023 and the capital raised during 2024 will be sufficient to meet our financial obligations for at least the next 12 months.