GAXOS.AI INC.

Previous wording

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 Annual Report on Form 10-K. 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 elsewhere in this Annual Report on Form 10-K. All amounts in this report are in U.S. dollars, unless otherwise noted.

Current wording

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 Annual Report on Form 10-K. 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.

Previous 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:

Current wording

In September 2024, we launched a transformative generative AI service that empowers game developers and publishers. Key features of the product include AI-powered creativity that reduces creative asset development time from hours to minutes, enabling rapid prototyping and fast experimentation with different designs; monetization tools that allow publishers to offer AI-generated assets for player customization; seamless plug-and-play integration with Unity and Godot for effortless adoption into existing workflows; a flexible API that connects to any game development engine and supports builds for any platform, including mobile and PC; dynamic content generation through our User-Generated-AI-Content (UGAiC) feature, which lets gamers use AI in real time to create fresh experiences with every playthrough; and customized solutions ranging from personalized AI models for image and sound generation to expert consulting services tailored to the unique needs of each developer.

Previous wording

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 GLP-1 medications such as injectable and oral Semaglutide and Terzepatide, and intends to add other products such as testosterone replacement therapy (TRT)

Current wording

On September 23, 2024, we formed a wholly-owned subsidiary, RNK Health LLC (“RNK Health”), to form a partnership and relationship with Nekwellness, LLC (“Nekwellness”) to engage in the business of marketing certain health-related products including peptides and supplements. 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.

Previous wording

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 December 31, 2023, 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.

Current wording

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 December 31, 2025, we have launched five games, Space Striker AI, Brawl Bots, BattleFleet AI, Jigsaw Puzzle AI and Gaxos AI Puzzle. 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. Gaxos AI Puzzle and Jigsaw Puzzle AI lets gamers solve preloaded jigsaw puzzles as well as design and solve new jigsaw puzzles using AI.

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. 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.

Current wording

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.

Previous 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.

Current wording

During the year ended December 31, 2025, we generated revenues of $1,933,030 primarily from revenues generated through RNK Health for providing non-clinical services to support patient care of $1,509,886. Additionally, during the year ended December 31, 2025, we generated revenues of $1,124 from the sale of health coaching packages to our customers, revenue of $421,995 from subscription services from our Art-Gen.ai, unGPT,ai and Bible.ai applications, and revenue of $25 from in-app games items. Health coaching packages consist of a series of lab tests and personal health coaching sessions. During the year ended December 31, 2024, we generated revenue of $4,027 consisting of $3,952 from the sale of health coaching packages to our customers, revenue of $42 from subscription services, and revenue of $33 from in-app games items. Once we achieve a critical mass of users, we plan to offer new features and to charge fees in order to generate revenues from added features.

Previous 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:

Current wording

During the year ended December 31, 2025 and 2024, we incurred operating expenses of $6,849,556 and $3,707,632, respectively, an increase of $3,141,924, or 84.7%. Operating expenses consisted of the following:

Previous wording

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.

Current wording

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 titles and AI 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.

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, 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.

Current wording

The decreases are primarily due to a decrease in outside development costs incurred in connection with the development of Gaxos Games, offset by an increase in outside development costs incurred in connection with the development of Gaxos Labs, Gaxos Health and RNK Health platforms. We expect research and development expenses to increase in the future as development of Gaxos Labs, Gaxos Health and RNK Health accelerates.

Previous 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.

Current wording

During the year ended December 31, 2025 and 2024, compensation and related benefits amounted to $1,269,843 and $872,899, respectively, an increase of $396,944, or 45.5%. The increase during the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily attributable to the increase in executive officer bonuses paid of $250,000, an increase in stock-based compensation of $30,070 from accretion of stock option expense, and an increase in other employee compensation and related benefits of $116,874.

Previous 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.

Current wording

During the year ended December 31, 2025 and 2024, we incurred professional fees of $722,136 and $946,200, respectively, a decrease of $224,064, or 23.7%, primarily attributable to a decrease in advisory fees of $240,261, a decrease in legal fees of $39,999, and 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 $12,621, offset by an increase in accounting fees of $23,546 and an increase in investor relations and recruiting fees of $45,271.

Previous 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.

Current wording

During the year ended December 31, 2025 and 2024, we incurred other general and administrative expenses of $781,122 and $524,695, respectively, an increase of $256,427, or 48.9%. This increase was primarily attributable to an increase in amortization expense of $152,256 and an increase in other general and administrative expenses of $104,171.

Previous 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.

Current wording

During the years ended December 31, 2025 and 2024, we reported a loss from operations of $4,916,526 and $3,703,605, respectively, an increase of $1,212,921, or 32.7%. The increase in loss from operations was due to an increase in compensation and related benefits, an increase in advertising and marketing expense and an increase in general and administrative expenses, offset by a decrease in professional fees and an increase in revenues, as discussed above.

Previous 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.

Current wording

During the years ended December 31, 2025 and 2024, we reported other income, net of $634,279 and $279,322, respectively, which primarily consisted of interest income and realized and unrealized gains on short-term investments in both years.

Previous 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%.

Current wording

During the years ended December 31, 2025 and 2024, our net loss amounted to $4,282,247 and $3,424,283, respectively, an increase of $857,964, or 25.1%. During the years ended December 31, 2025 and 2024, our net loss attributable to common shareholders amounted to $3,900,583, or a net loss per common share of $0.55 (basic and diluted) and $3,418,197, or a net loss per common share of $1.92 (basic and diluted), respectively, an increase of $482,386, or 14.1%.

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, 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.

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, 2025, we had a cash balance of $840,799, had short-term investments of $11,345,187, and had working capital of $11,919,230. During the year ended December 31, 2025, we used net cash in operations of $3,853,757.

Previous wording

For the year ended December 31, 2023, net cash used in operations was $2,980,592, which primarily resulted from our net loss of $3,948,097, adjusted for the add back of amortization expense of $10,649, stock-based compensation to employees and consultants of $936,354, a realized gain on short-term investments of $(20,662), and impairment loss of $52,363, and changes in operating asset and liabilities such as an increase in prepaid expenses and other current assets of $24,732, a decrease in accounts payable of $29,930, and an increase in accrued expenses of $43,471.

Current wording

For the year ended December 31, 2025, net cash used in operations was $3,853,757, which primarily resulted from our net loss of $4,282,247, adjusted for the add back of amortization expense of $204,698, stock-based compensation to employees and consultants of $136,891, a realized and unrealized gain on short-term investments of $51,992, and a realized loss on exchange of equity securities of $29,998, and changes in operating asset and liabilities such as an increase in accounts receivable of $76,247, an increase in prepaid expenses and other current assets of $93,940, a decrease in accounts payable of $68,686, an increase in accrued expenses of $218,840, and an increase in deferred revenues of $128,928.

Previous wording

For the year ended December 31, 2023, net cash used in investing activities was $2,533,213, which resulted from the purchase of short-term investments of $3,491,242 and an increase in capitalized internal-use software development costs of $56,971, offset by proceeds received from the sale of short-term investments of $1,015,000.

Current wording

For the year ended December 31, 2025, net cash used in investing activities was $9,703,543, which resulted from the purchase of short-term investments of $15,685,545 primarily consisting of corporate bonds and other equity securities, the purchase of software intangible assets of $500,000, an increase in capitalized internal-use software development costs of $83,050, and an increase in note receivable of $10,000, offset by proceeds received from the sale of short-term investments of $6,575,052.

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 and the capital raised during 2024 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 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.

Previous wording

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

Current wording

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.