Gaxos.AI Inc. (GXAI) pivots to AI health, logs Q2 profit and strong cash
Gaxos.AI Inc. reported sharply higher revenues and a strategic portfolio shift for the quarter ended June 30, 2026. Revenue rose to $2,457,357 from $170,971 a year earlier, driven mainly by RNK Health administrative services and subscriptions from Gaxos Labs products such as Art-Gen.ai, UnGPT.ai and Bible Pray AI.
Operating expenses increased significantly as the company scaled, with research and development at $506,971 and selling, general and administrative at $3,815,141, largely from marketing RNK Health and subscription apps. This produced an operating loss of $1,864,755, but a $1,749,890 gain on the sale of gaming assets and investment income led to net income attributable to common shareholders of $241,056 for the quarter.
The company sold substantially all gaming assets to Game Foundry AI for shares valued at $1,760,000 and separately invested $200,000 in Game Foundry, while also acquiring a 19.99% stake in America First Defense.AI for $2,915,000. Liquidity remains solid with cash of $1,089,449, short-term investments of $10,353,040 and working capital of $10,769,048. Shares outstanding increased to 10,744,634 following ATM equity sales.
Positive
- Revenue expanded to $2,457,357 in Q2 2026 from $170,971 a year earlier, reflecting rapid growth in RNK Health services and subscription-based AI products.
- Net income attributable to common shareholders reached $241,056 in Q2 2026 versus a prior-year loss, aided by the gain on sale of gaming assets.
- Liquidity is strong with $1,089,449 in cash, $10,353,040 in short-term investments and working capital of $10,769,048 as of June 30, 2026.
- The company monetized non-core gaming assets for an estimated $1,760,000 in Game Foundry AI stock, simplifying its focus toward AI and health offerings.
- A $2,915,000 cost-method investment in America First Defense.AI adds exposure to the defense AI sector, potentially broadening future revenue sources.
Negative
- Operating loss widened to $1,864,755 in Q2 2026 and $4,411,877 for the first half, reflecting heavy spending ahead of scale.
- Advertising and marketing expenses surged to $3,141,273 in Q2 2026 and $5,908,097 year-to-date, pressuring margins while customer acquisition efforts ramp.
- Net cash used in operating activities was $3,581,332 for the six months ended June 30, 2026, indicating the business is still consuming cash.
- Accumulated deficit increased to $14,631,773, and the business remains loss-making on a year-to-date basis despite one-time gains.
- Share count rose from 7,123,453 to 10,744,634 common shares outstanding, introducing equity dilution through ATM issuances.
Key Figures
Key Terms
noncontrolling interest financial
short-term investments financial
available-for-sale financial
investment in cost method investees financial
at the market offering financial
Accumulated other comprehensive (loss) income financial
Earnings Snapshot
AI-generated analysis. How Rhea-AI works. Not financial advice.
FAQ
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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FORM
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GAXOS.AI INC.
FORM 10-Q
JUNE 30, 2026
TABLE OF CONTENTS
| Page | ||||
| PART I - FINANCIAL INFORMATION | ||||
| Item 1. | Financial Statements | 1 | ||
| Consolidated Balance Sheets as of June 30, 2026 (Unaudited) and December 31, 2025 | 1 | |||
| Consolidated Statements of Operations and Comprehensive Loss - For the Three and Six Months Ended June 30, 2026 and 2025 (Unaudited) | 2 | |||
| Consolidated Statements of Changes in Stockholders’ Equity - For the Six Months Ended June 30, 2026 and 2025 (Unaudited) | 3 | |||
| Consolidated Statements of Cash Flows - For the Six Months Ended June 30, 2026 and 2025 (Unaudited) | 4 | |||
| Notes to Consolidated Financial Statements (Unaudited) | 5 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 18 | ||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 26 | ||
| Item 4. | Controls and Procedures | 26 | ||
| PART II - OTHER INFORMATION | ||||
| Item 1. | Legal Proceedings | 27 | ||
| Item 1A. | Risk Factors | 27 | ||
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 27 | ||
| Item 3. | Defaults Upon Senior Securities | 27 | ||
| Item 4. | Mine Safety Disclosures | 27 | ||
| Item 5. | Other Information | 27 | ||
| Item 6. | Exhibits | 27 | ||
| SIGNATURE | 28 | |||
i
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Any statements in this Quarterly Report on Form 10-Q about our expectations, beliefs, plans, objectives, assumptions or future events or performance are not historical facts and are forward-looking statements. These statements are often, but not always, made through the use of words or phrases such as “believe,” “will,” “expect,” “anticipate,” “estimate,” “intend,” “plan” and “would.” For example, statements concerning financial condition, possible or assumed future results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for our common stock and future management and organizational structure are all forward-looking statements. Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties and assumptions that may cause actual results, levels of activity, performance or achievements to differ materially from any results, levels of activity, performance or achievements expressed or implied by any forward-looking statement.
Any forward-looking statements are qualified in their entirety by reference to the risk factors discussed throughout this Quarterly Report on Form 10-Q. Some of the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, but are not limited to:
| ● | our ability to obtain additional funds for our operations; | |
| ● | our financial performance, including our revenues, cost of revenues, operating expenses, and our ability to attain and sustain profitability; | |
| ● | our ability to attract and retain users; | |
| ● | our ability to attract and retain advertisers; | |
| ● | our ability to compete effectively with existing competitors and new market entrants; | |
| ● | our ability to successfully expand in our existing markets and penetrate new markets; | |
| ● | our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act, or JOBS Act; | |
| ● | our ability to effectively manage our growth, and future expenses; | |
| ● | our ability to maintain, protect, and enhance our intellectual property; | |
| ● | our ability to comply with modified or new laws and regulations applying to our business, competitors and industry; | |
| ● | our ability to attract and retain qualified key management and technical personnel; | |
| ● | other risks and uncertainties, including those listed under the caption “Risk Factors.” |
The foregoing list sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forward-looking statements. You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed as exhibits to the Quarterly Report on Form 10-Q, completely and with the understanding that our actual future results may be materially different from what we expect. You should assume that the information appearing in this Quarterly Report on Form 10-Q is accurate as of the date hereof. Because the risk factors referred to on page 4 of our Annual Report on Form 10-K for the year ended December 31, 2025 could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of the information presented in this Quarterly Report on Form 10-Q, and particularly our forward-looking statements, by these cautionary statements.
ii
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GAXOS.AI INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Short-term investments, at fair value | ||||||||
| Investment in non-traded equity securities, at fair value | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total Current Assets | ||||||||
| LONG-TERM ASSETS: | ||||||||
| Property and equipment, net | ||||||||
| Intangible assets, net | ||||||||
| Investment in cost method investees | - | |||||||
| Total Long-Term Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Deferred revenue | ||||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (See Note 7) | ||||||||
| STOCKHOLDERS’ EQUITY: | ||||||||
| Preferred stock; par value $ | - | - | ||||||
| Common stock; par value $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive (loss) income | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Gaxos.AI Stockholders’ Equity | ||||||||
| Noncontrolling interest | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
See accompanying notes to unaudited consolidated financial statements.
1
GAXOS.AI INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| REVENUES | $ | $ | $ | $ | ||||||||||||
| OPERATING EXPENSES: | ||||||||||||||||
| Research and development | ||||||||||||||||
| Selling, general and administrative | ||||||||||||||||
| Total Operating Expenses | ||||||||||||||||
| LOSS FROM OPERATIONS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| OTHER INCOME (EXPENSES): | ||||||||||||||||
| Interest income | ||||||||||||||||
| Unrealized gain (loss) on short-term investments | - | ( | ) | |||||||||||||
| Unrealized loss on non-traded equity securities | ( | ) | - | ( | ) | - | ||||||||||
| Realized gain on short-term investments | ||||||||||||||||
| Gain on sale of gaming assets | - | - | ||||||||||||||
| Total other income, net | ||||||||||||||||
| NET LOSS | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss of subsidiary attributable to noncontrolling interest | ||||||||||||||||
| NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| COMPREHENSIVE LOSS: | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income (loss): | ||||||||||||||||
| Unrealized gain (loss) on short-term debt investments | ( | ) | ||||||||||||||
| Comprehensive income (loss) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| NET INCOME (LOSS) PER COMMON SHARE ATTRIBUTABLE TO COMMON SHAREHOLDERS: | ||||||||||||||||
| Basic | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| Diluted | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||
| WEIGHTED AVERAGE COMMON SHARE OUTSTANDING: | ||||||||||||||||
| Basic | ||||||||||||||||
| Diluted | ||||||||||||||||
See accompanying notes to unaudited consolidated financial statements.
2
GAXOS.AI INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2026 AND 2025
(Unaudited)
| Additional | Accumulated Other | Total | ||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Comprehensive | Accumulated | Noncontrolling | Stockholders’ | ||||||||||||||||||||||||||||||
| # of Shares | Amount | # of Shares | Amount | Capital | Income (Loss) | Deficit | Interest | Equity | ||||||||||||||||||||||||||||
| Balance, December 31, 2025 | — | $ | — | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||
| Common shares issued for cash, net | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Accretion of stock option expense | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Accumulated other comprehensive loss - short-term investments | — | — | — | — | — | ( | ) | — | — | ( | ) | |||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance, March 31, 2026 | — | — | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Common shares issued for cash, net | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Accretion of stock option expense | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Accumulated other comprehensive gain - short-term investments | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | ( |
) | ( |
) | ||||||||||||||||||||||||||
| Balance, June 30, 2026 | — | $ | — | $ | $ | $ | ( |
) | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||
| Additional | Accumulated Other | Total | ||||||||||||||||||||||||||||||||||
| Preferred Stock | Common Stock | Paid-in | Comprehensive | Accumulated | Noncontrolling | Stockholders’ | ||||||||||||||||||||||||||||||
| # of Shares | Amount | # of Shares | Amount | Capital | Income (Loss) | Deficit | Interest | Equity | ||||||||||||||||||||||||||||
| Balance, December 31, 2024 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||
| Common shares issued for intangible asset | - | - | - | - | - | |||||||||||||||||||||||||||||||
| Accretion of stock option expense | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Accumulated other comprehensive loss - short-term investments | - | - | - | - | - | ( | ) | - | - | ( | ) | |||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||
| Balance, March 31, 2025 | - | - | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||
| Accretion of stock option expense | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Accumulated other comprehensive gain - short-term investments | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | ( |
) | ( |
) | ( |
) | ||||||||||||||||||||||||
| Balance, June 30, 2025 | - | $ | - | $ | $ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||||||||||
See accompanying notes to unaudited consolidated financial statements.
3
GAXOS.AI INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Six Months Ended | ||||||||
| June 30, | ||||||||
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Amortization expense | ||||||||
| Stock-based compensation | ||||||||
| Realized gain on short-term investments | ( | ) | ( | ) | ||||
| Unrealized loss on short-term investments | ( | ) | ||||||
| Unrealized loss on non-traded equity securities | - | |||||||
| Accretion of bond discounts | - | |||||||
| Gain on sale of gaming assets | ( |
) | - | |||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ( | ) | ||||
| Prepaid expenses and other current assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses | ||||||||
| Deferred revenue | ( | ) | ||||||
| NET CASH USED IN OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Purchase of short-term investments | ( | ) | ( | ) | ||||
| Proceeds from sale of short-term investments | ||||||||
| Cash paid for investment in cost method investees | ( | ) | - | |||||
| Increase in capitalized internal-use software development costs | ( | ) | ( | ) | ||||
| Purchase of intangible asset | - | ( | ) | |||||
| NET CASH USED IN INVESTING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Proceeds from the sale of common stock, net | - | |||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | - | |||||||
| NET INCREASE (DECREASE) IN CASH | ( | ) | ||||||
| CASH, beginning of period | ||||||||
| CASH, end of period | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||||||||
| Cash paid for: | ||||||||
| Interest | $ | - | $ | - | ||||
| Income taxes | $ | - | $ | - | ||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
| Unrealized loss on short-term investments | $ | $ | ||||||
| Common stock issued for intangible asset | $ | - | $ | |||||
See accompanying notes to unaudited consolidated financial statements.
4
GAXOS.AI INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2026
(Unaudited)
NOTE 1 – NATURE OF OPERATIONS
Gaxos.ai Inc. (the “Company”) was incorporated in the state of Wyoming on
On September 23, 2024, the Company formed a subsidiary, RNK Health, LLC (“RNK Health”), a company incorporated under the laws of the State of Delaware as a limited liability company. RNK Health was formed in order to form a partnership and potential relationship with Nekwellness, LLC (“Nekwellness”) to engage in the proposed business of marketing certain products. On October 10, 2024, the Company, RNK Health, and Nekwellness entered into an operating agreement (the “Operating Agreement”) for the regulation and management of the affairs of RNK Health and, as of such date, the Company owns a
On June 18, 2026, the Company entered into and simultaneously consummated the closing of an Asset Purchase Agreement (the “APA”), by and among the Company and Game Foundry AI (the “Buyer”) for the sale and divestiture of substantially all of the Company’s gaming assets, including its portfolio of mobile games and Gaxos Gaming in exchange for the issuance of
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
This summary of significant account policies of the Company is presented to assist in understanding the Company’s consolidated financial statements. The consolidated financial statements and the notes are the representation of the Company’s management, who are responsible for their integrity and objectivity.
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S. GAAP”) for interim financial information and with the instructions Article 8-03 of Regulation S-X. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole. Certain information and note disclosure normally included in financial statements prepared in accordance with U.S. GAAP has been condensed or omitted from these consolidated statements pursuant to such accounting principles and, accordingly, they do not include all the information and notes necessary for comprehensive financial statements. Management acknowledges its responsibility for the preparation of the accompanying unaudited consolidated financial statements which reflect all adjustments, consisting of normal recurring and non-recurring adjustments, considered necessary in its opinion for a fair statement of its financial position and the results of its operations for the periods presented. These unaudited consolidated financial statements should be read in conjunction with the summary of significant accounting policies and notes to the consolidated financial statements for the year ended December 31, 2025 included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 17, 2026.
The accompanying unaudited consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the ordinary course of business.
The Company’s unaudited consolidated financial statements include the accounts of the parent entity, Gaxos.AI, Inc. and RNK Health, which is a majority-owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.
The Company accounts for its noncontrolling interest in RNK Health in accordance with ASC Topic 810-10-45, which requires the Company to present noncontrolling interests as a separate component of total shareholders’ equity on the consolidated balance sheets and the consolidated net loss attributable to its noncontrolling interest be clearly identified and presented on the face of the consolidated statements of operations and comprehensive loss.
5
GAXOS.AI INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2026
(Unaudited)
Liquidity
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 June 30, 2026, the Company had a cash balance of $
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates in the accompanying unaudited consolidated financial statements include the valuation of investments, valuation of intangible assets and other long-lived assets, the estimate of the sales returns reserve liability, the valuation of common shares issued to purchase intangible assets, estimates of deferred tax valuation allowances and the fair value of stock options issued for services.
Fair Value Measurements and Fair Value of Financial Instruments
The Company analyzes all financial instruments with features of both liabilities and equity under the Financial Accounting Standard Board’s (the “FASB”) accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company identified the following assets or liabilities that are required to be presented on the balance sheet at fair value in accordance with Accounting Standards Codification (“ASC”) Topic 820.
The three levels of the fair value hierarchy are as follows:
| ● | Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date. | |
| ● | Level 2 - Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data. | |
| ● | Level 3 - Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information. |
The carrying amounts reported in the balance sheets for cash, accounts receivable, prepaid expenses and other current assets, accounts payable, and accrued expenses approximate their fair market value based on the short-term maturity of these instruments.
The following table represents the Company’s fair value hierarchy of its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2026 and December 31, 2025.
| June 30, 2026 | December 31, 2025 | |||||||||||||||||||||||
| Description | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||
| Short-term investments | $ | $ | - | $ | - | $ | $ | - | $ | - | ||||||||||||||
| Non-traded equity securities | $ | - | $ | - | $ | $ | - | $ | - | $ | ||||||||||||||
The Company’s short-term investments are level 1 measurements and are based on the quoted fair value on each date.
6
GAXOS.AI INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2026
(Unaudited)
Investment in Non-Traded Equity Securities, at Fair Value
The following table summarizes activity in the Company’s investment in non-traded equity securities, at fair value for the periods presented:
| Six Months Ended June 30, | Six Months Ended June 30, | |||||||
| 2026 | 2025 | |||||||
| Balance, beginning of period | $ | $ | ||||||
| Unrealized loss on non-traded equity securities | ( | ) | - | |||||
| Balance, end of period | $ | $ | ||||||
On June 30, 2025, non-traded equity securities, at fair value, consisted of
Cash and Cash Equivalents
For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents. The Company has no cash equivalents as of June 30, 2026 and December 31, 2025.
The Company’s cash is held at major commercial banks, which may at times exceed the Federal Deposit Insurance Corporation (“FDIC”) limit. To date, the Company has not experienced any losses on its invested cash. Any loss incurred or a lack of access to such funds could have a significant adverse impact on the Company’s financial condition, results of operations, and cash flows.
On June 30, 2026, the Company had approximately $
Accounts Receivable
The Company follows ASC 326, “Financial Instruments - Credit Losses” and recognizes an allowance for losses on accounts and notes receivable in an amount equal to the estimated probable losses net of recoveries under the current expected credit loss method. The allowance is based on an analysis of historical credit loss experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. The credit loss expense associated with the allowance for doubtful accounts related to accounts receivable is recognized in general and administrative expenses. As of June 30, 2026 and December 31, 2025, accounts receivable amounted to $
Short-Term Investments
The Company’s portfolio of short-term investments consists of marketable debt securities which are comprised of corporate bonds with maturities of more than three months, but less than one year. The Company classifies these as available-for-sale at purchase date and will reevaluate such designation at each period end date. The Company may sell these marketable debt securities prior to their stated maturities depending upon changing liquidity requirements. The debt securities are classified as current assets in the consolidated balance sheets and recorded at fair value, with unrealized gains or losses included in accumulated other comprehensive income (loss) on the consolidated balance sheets and as a component of the consolidated statements of comprehensive loss. The Company also invests in exchange-traded and closed end equity securities. The equity securities are classified as current assets in the consolidated balance sheets and recorded at fair value, with unrealized gains or losses included in other income (expense) on the consolidated statement of operation and comprehensive loss. Gains and losses are recognized when realized. Gains and losses are determined using the specific identification method and are reported in other income (expense), net in the consolidated statements of operations and comprehensive loss.
7
GAXOS.AI INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2026
(Unaudited)
An impairment loss may be recognized when the decline in fair value of the debt securities is determined to be other-than-temporary. The Company evaluates its investments for other-than-temporary declines in fair value below the cost-basis each quarter, or whenever events or changes in circumstances indicate that the cost basis of the short-term investments may not be recoverable. The evaluation is based on a number of factors, including the length of time and the extent to which the fair value has been below the cost basis, as well as adverse conditions related specifically to the security, such as any changes to the credit rating of the security and the intent to sell or whether the Company will more likely than not be required to sell the security before recovery of its amortized cost basis.
The Company recorded $
During the three months ended June 30, 2026 and 2025, the Company recognized a realized gain on sale of short-term equity investments of $
During the three months ended June 30, 2026 and 2025, the Company recognized an unrealized gain on short-term equity investments of $0 and $
Investment in Non-Traded Equity Securities, at Fair Value
Equity investments are carried at fair value with unrealized gains or losses which are recorded as net unrealized gain (loss) on equity investments in the accompanying consolidated statement of operations and comprehensive loss. Realized gains and losses are determined on a specific identification basis which is recorded in earnings or loss as a net realized gain (loss) on equity investments in the unaudited consolidated statement of operations and comprehensive loss. The Company reviews investments in non-traded equity securities, at fair value, for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered. During the three and six months ended June 30, 2026, the Company recognized an unrealized loss on investments in non-traded equity securities of $
Investment in Cost Method Investees
The Company accounts for its interest in an entity where the Company has virtually no influence over operating and financial policies under the cost method of accounting. In such cases, the Company’s original investment is recorded at the cost to acquire the interest and any distributions received are recorded as income. This investment is subject to the Company’s impairment review policy. The Company reviews investment in cost method investee for impairment whenever circumstances and situations change such that there is an indication that the carrying amounts may not be recovered.
Property and Equipment
Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives. Maintenance and repairs are charged to expense as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.
Property and equipment includes capitalized internal-use software development costs. Costs incurred to develop internal-use software, including game development, are expensed as incurred during the preliminary project stage. Internal-use software development costs are capitalized during the application development stage, which is after: (i) the preliminary project stage is completed; and (ii) management authorizes and commits to funding the project and it is probable the project will be completed and used to perform the intended function. Capitalization ceases at the point where the software project is substantially complete and ready for its intended use, and after all substantial testing is completed. Upgrades and enhancements are capitalized if it is probable that those expenditures will result in additional functionality. Amortization is provided for on a straight-line basis over the expected useful life of the internal-use software development costs and related upgrades and enhancements, which currently is three years. When existing software is replaced with new software, the unamortized costs of the old software are expensed when the new software is ready for its intended use.
8
GAXOS.AI INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2026
(Unaudited)
Intangible Assets
Intangible assets, consisting of acquired software licenses, technology licenses and acquired software, are carried at cost less accumulated amortization, computed using the straight-line method over the estimated useful life of
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.
Income Taxes
Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates of the date of enactment.
When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than
Revenue Recognition
The Company follows Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). This standard establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. ASC 606 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and requires certain additional disclosures.
In accordance with ASU Topic 606 - Revenue from Contracts with Customers, the Company recognizes revenue in accordance with that core principle by applying the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
9
GAXOS.AI INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2026
(Unaudited)
The Company generates revenue from the following sources:
| ● | Through June 2026, the Company generated revenue from the sale of our in-game items to our customers. Revenue generated from such sales, primarily through the app stores, such as Google Play Store or Apple App Store, was recognized at a point in time, which was upon delivery of the in-game items to the customer, which was when the Company completed its sole performance obligation. Fees incurred by the Company, such as commissions to the app stores, were recognized in operating expenses. |
| ● | The Company generates revenue 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. Revenues generated from such sales are recognized at a point in time, which is upon the completion of lab testing and the utilization of health coaching sessions, which is when the Company completes its performance obligation. Any fees paid in advance by the customer are reflected as contract liabilities until such time as the performance obligation is completed. Fees incurred by the Company, such as the lab testing charges, are recognized in operating expenses. |
| ● | Gaxos Labs sells subscriptions to its customers for the use of its software under a software as a service subscription model (“SaaS”), which allows game developers and publishers to create content using AI which reduces creative asset development time. The Company’s SaaS offerings are sold under a prepaid or postpaid, usage-based pricing system pursuant to a tiers model, allowing customers to choose the subscription level to be charged based upon their intended usage. The subscription tiers utilize declining prices as the volume grows. Under prepaid pay-as-you-go plans, revenues related to contracts that do not include a specified contract period are recognized over a period of time, which is upon usage by the customer and satisfaction of the Company’s performance obligation. If professional services are deemed to be distinct, revenue is recognized over a period of time as services are performed. The Company does not view the signing of the contract or the provision of initial setup services as discrete earnings events that are distinct. Fees incurred by the Company, such as the merchant fees, are recognized in operating expenses. |
| ● | In connection with RNK Health, the Company is generating revenues from 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 Medical Partner provides and makes available health care professionals to perform telehealth services within their respective scope of practice, provides and maintains applicable professional licensure, provides medication management services and provides RNK Health and patients access to the Medical Partner’s telehealth optimized technology platform. RNK Health provides services to patients to support the delivery of various medical services, including virtual rooming of patients, patient pathway advisory services, patient scheduling and interface connected to the Medical Partners central calendar, patient pathway monitoring and service, nonclinical patient customer service, care navigation service, software-based care optimization services, patient education services, patient intake system and data collection (the “Administrative Services”). The Company evaluates the presentation of revenue on a gross vs. net basis based on whether it acts as a principal by controlling the product or service sales to customers. The Company records these revenues on a net basis as an agent since Medical Partner is primarily responsible for fulfilling the contract with the customer, the Company does not have inventory risk before or after the goods have been ordered by a customer, during shipping, or on return, the Company’s consideration is in the form of a commission for its Administrative Services, and the Company is not exposed to credit risk for the amount receivable from a customer in exchange for the Medical Partner’s goods or services. The Medical Partner performs all medical management and patient support care services and the Medical Partner pays the Company its share of revenue. The Medical Partner has the right to refuse services to the Patient. The Company is obligated to fulfill the non-clinical administrative services and is reliant on the Medical Partner to accept the Patient, deliver all medication management and patient support services, and the collect and remit the Company’s commission to the Company. Revenues from non-clinical administrative services are recognized at a point in time, upon satisfaction of the performance obligation, which occurs when the non-clinical administrative services have been completed and collection of the fee is probable. RNK Health pays a monthly fee to the Medical Partner for access to the Medical Partners telehealth optimized technology platform, which is included in operating expenses on the accompanying consolidated statements of operations and comprehensive loss. |
10
GAXOS.AI INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2026
(Unaudited)
During the three and six months ended June 30, 2026 and 2025, revenues consisted of the following:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Revenue from administrative services | $ | $ | $ | $ | ||||||||||||
| Revenue from the sale of health coaching packages | - | - | - | |||||||||||||
| Revenue from the sale of subscriptions | ||||||||||||||||
| Revenue from sale of in-game items | - | - | ||||||||||||||
| Total revenues | $ | $ | $ | $ | ||||||||||||
For RNK Health, revenue refunds and credits are recorded as a reduction to revenues, and a return reserve liability is included in accrued expenses on the accompanying unaudited consolidated statement of operations and comprehensive loss. As of June 30, 2026 and December 31, 2025, the return reserve liability amounted to $
For the six months ended June 30, 2026 and 2025, deferred revenue activity consisted of the following:
| For the Six Months Ended June 30, 2026 | For the Six Months Ended June 30, 2025 | |||||||
| Balance – beginning of period | $ | $ | ||||||
| Additions | ||||||||
| Recognized as revenue | ( | ) | ( | ) | ||||
| Balance – end of period | $ | $ | ||||||
During the six months ended June 30, 2026, $
Research and Development
Research and development costs incurred in the development of the Company’s products are expensed as incurred and include costs such as labor and outside development costs, software license fees, materials, and other allocated costs incurred.
Net Loss per Share
The Company computes net loss per share in accordance with ASC 260-10, “Earnings Per Share.” The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per share gives effect to all dilutive potential common shares outstanding during the period using the “as if converted” basis.
Pursuant to ASC 260-10-45, basic loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period presented. Diluted loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.
During the three and six months ended June 30, 2026 and 2025, the following common stock equivalents were excluded from the computation of diluted shares outstanding as they would have had an anti-dilutive impact on the Company’s net loss.
| June 30, | ||||||||
| 2026 | 2025 | |||||||
| Common stock equivalents: | ||||||||
| Warrants | ||||||||
| Stock options | ||||||||
| Total | ||||||||
11
GAXOS.AI INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2026
(Unaudited)
Noncontrolling Interests
The Company follows ASC Topic 810, “Consolidation,” governing the accounting for and reporting of noncontrolling interests (“NCI”) in its partially owned consolidated subsidiary. Certain provisions of this standard indicate, among other things, that NCI be treated as a separate component of equity, not as a liability, that increases and decreases in the parent’s ownership interest that leave control intact be treated as equity transactions rather than as step acquisitions or dilution gains or losses, and that losses of a partially-owned consolidated subsidiary be allocated to noncontrolling interests even when such allocation might result in a deficit balance. The net loss attributed to NCI was separately designated in the accompanying unaudited consolidated statements of operations and comprehensive loss. Losses attributable to NCI in a subsidiary may exceed a NCI’s interests in the subsidiary’s equity. The excess attributable to NCI is attributed to those interests. NCI shall continue to be attributed to their share of losses even if that attribution results in a deficit NCI balance.
Segment Reporting
Recent Accounting Pronouncements
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.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270), Narrow-Scope Improvements, to provide clarity about the current requirements, rather than evaluate whether to expand or reduce interim disclosure requirements. The amendments in ASU 2025-11 result in a comprehensive list of interim disclosures that are required by GAAP. The amendments in ASU 2025-11 also include a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The amendments in ASU 2025-11 are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027 and early adoption is permitted. The amendments in ASU 2025-11 can be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the disclosure impact that ASU 2025-11 may have on its financial statement presentation and disclosures.
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.
12
GAXOS.AI INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2026
(Unaudited)
NOTE 3 – SHORT-TERM INVESTMENTS, INVESTMENT IN NON-TRADED EQUITY SECURITIES AND COST-METHOD INVESTMENTS
Short-Term Investments
On June 30, 2026, the Company’s short-term investments consisted of the following:
| Cost | Unrealized Loss | Fair Value | ||||||||||
| Corporate bonds | $ | $ | ( | ) | $ | |||||||
| Total short-term investments | $ | $ | ( | ) | $ | |||||||
On December 31, 2025, the Company’s short-term investments consisted of the following:
| Cost | Unrealized Gain | Fair Value | ||||||||||
| Corporate bonds | $ | $ | $ | |||||||||
| Exchange-traded and closed end equity funds | ||||||||||||
| Total short-term investments | $ | $ | $ | |||||||||
During the six months ended June 30, 2026 and 2025, the realized gain or loss on short-term investments consisted of the following:
| For the Six Months Ended June 30, 2026 | For the Six Months Ended June 30, 2025 | |||||||
| Proceeds from the sale of short-term investments | $ | $ | ||||||
| Cost of short-term investments | ( | ) | ( | ) | ||||
| Realized gain on short-term investments | $ | $ | ||||||
Investment in Non-Traded Equity Securities, at Fair Value
The following table summarizes activity in the Company’s investment in non-traded equity securities, at fair value for the periods presented:
| For the Six Months Ended June 30, 2026 | For the Six Months Ended June 30, 2025 | |||||||
| Balance, beginning of period | $ | $ | ||||||
| Unrealized loss on non-traded equity securities | ( | ) | - | |||||
| Balance, end of period | $ | $ | ||||||
On June 30, 2025, non-traded equity securities, at fair value, consisted of
13
GAXOS.AI INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2026
(Unaudited)
Investment in Cost Method Investees
On March 2, 2026, the Company entered into a Membership Interest Purchase Agreement (the “Purchase Agreement”) with America First Defense.AI LLC, a New Mexico limited liability company (“AFD”), pursuant to which the Company agreed to purchase, and AFD agreed to sell,
On June 18, 2026, the Company entered into and simultaneously consummated the closing of an Asset Purchase Agreement, by and among the Company and Game Foundry AI (the “Buyer”) for the sale of substantially all of the Company’s gaming assets, including its portfolio of mobile games and Gaxos Gaming in exchange for the issuance of
In connection with the sale of the Company’s gaming assets, for the three and six months ended June 30, 2026, the Company recorded a gain on sale of assets of $
NOTE 4 – PROPERTY AND EQUIPMENT
On June 30, 2026 and December 31, 2025, property and equipment consisted of the following:
| Useful life | June 30, 2026 | December 31, 2025 | ||||||||
| Capitalized internal-use software development costs | $ | $ | ||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||||
| $ | $ | |||||||||
For the six months ended June 30, 2026 and 2025, amortization of capitalized internal-use software development costs amounted to $
NOTE 5 – INTANGIBLE ASSETS
On June 30, 2026 and December 31, 2025, intangible assets consisted of the following:
| Useful life | June 30, 2026 | December 31, 2025 | ||||||||
| License | $ | $ | ||||||||
| Acquired internal-use software | ||||||||||
| Subtotal | ||||||||||
| Less: accumulated amortization | ( | ) | ( | ) | ||||||
| Intangible assets, net | $ | $ | ||||||||
On February 24, 2025, the Company consummated a Software Purchase Agreement with a third party, whereby the Company purchased software and related technologies for $
14
GAXOS.AI INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2026
(Unaudited)
For the six months ended June 30, 2026 and 2025, amortization of intangible assets amounted to $
Amortization of the intangible asset attributable to future periods is as follows:
| Year ending June 30: | Amount | |||
| 2027 | $ | |||
| 2028 | ||||
| 2029 | ||||
| 2030 | ||||
| $ | ||||
NOTE 6 – STOCKHOLDERS’ EQUITY
Preferred Stock
The Company is authorized to issue
Common Stock
Common Stock Issued for Intangible Asset
On February 24, 2025, the Company consummated a Software Purchase Agreement with a third party, whereby the Company purchased software and related technologies for $
Common Stock Issued for Cash
On January 23, 2026, the Company entered into the At The Market Offering Agreement (“ATM Agreement”) with H. C. Wainwright and Co., LLC (“Wainwright”) under which the Company could offer and sell shares of its common stock having an aggregate sales price of up to $
15
GAXOS.AI INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2026
(Unaudited)
Stock Warrants
Warrant activity for the six months ended June 30, 2026 is summarized as follows:
| Number of Warrants | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||||||
| Balance Outstanding, December 31, 2025 | $ | - | ||||||||||||||
| Granted | - | - | - | - | ||||||||||||
| Balance Outstanding, June 30, 2026 | - | |||||||||||||||
| Exercisable, June 30, 2026 | $ | $ | - | |||||||||||||
2022 Equity Incentive Plan
On March 30, 2022, the Company’s Board of Directors authorized and adopted the 2022 Equity Incentive Plan (the “2022 Plan”) and reserved an initial
Stock Options
On March 20, 2026, the Company granted stock options to purchase an aggregate of
The stock options were valued at the grant date using a Black-Scholes option pricing model with the following assumptions:
| Six Months Ended June 30, 2026 | ||||
| Dividend rate | — | |||
| Expected term (in years) | ||||
| Volatility | % | |||
| Risk—free interest rate | % | |||
16
GAXOS.AI INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2026
(Unaudited)
The expected terms of the options are based on evaluations of historical and expected future employee exercise behavior using the simplified method. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at grant date. Volatility is based on historical and expected future volatility of the Company’s common stock. The Company has not historically issued any dividends and does not expect to in the future.
During the six months ended June 30, 2026 and 2025, the Company recognized total stock-based expenses related to stock options of $
Stock option activity during the six months ended June 30, 2026 is summarized as follows:
| Number of Options | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (Years) | Aggregate Intrinsic Value | |||||||||||||
| Balance Outstanding, December 31, 2025 | $ | $ | - | |||||||||||||
| Granted | - | - | ||||||||||||||
| Cancelled | ( | ) | - | - | ||||||||||||
| Balance Outstanding, June 30, 2026 | $ | $ | ||||||||||||||
| Exercisable, June 30, 2026 | $ | $ | ||||||||||||||
NOTE 7 – COMMITMENTS AND CONTINGENCIES
Employment Agreement
On February 17, 2023, the Company entered into an executive employment agreement with Vadim Mats, the Company’s Chief Executive Officer (CEO) in connection with the Company’s initial public offering. The term of the agreement will continue for one (1) year from the date of execution and automatically renews for successive one (1) year periods at the end of each term until either party delivers written notice of their intent not to review at least 90 days prior to the expiration of the then effective term. Pursuant to the agreement, Mr. Mats shall receive a base salary at the annual rate of $
NOTE 8 – SUBSEQUENT EVENTS
Stock Repurchase Plan
On July 29, 2026, the Company’s Board of Directors approved a stock repurchase program authorizing the purchase of up to $
17
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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, 2025 and 2024 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
Gaxos.AI is a technology company focused on reshaping the way people interact with artificial intelligence across everyday life and high-impact industries. More than a developer of applications, Gaxos.AI is building a portfolio of AI-powered solutions designed to make advanced technology more practical, accessible, and transformative. The company’s growing portfolio spans defense, health and wellness, entertainment, and productivity—bringing intelligent tools to markets where innovation can drive meaningful real-world outcomes.
Gaxos Labs
Gaxos Labs, launched in September 2024, is the Gaxos.AI product studio developing and launching AI applications across fast-moving sectors.
In May 2025, we launched UnGPT.ai, a new tool designed to enhance text generated by artificial intelligence, making it sound more natural and human-like. UnGPT features a real-time rewriting engine that transforms machine-generated content while preserving meaning and context. The tool employs a proprietary multi-pass transformation model that surpasses existing AI detection tools, addressing the growing demand for high-quality, undetectable output, especially in sensitive industries.
In August 2025, we launched Art-Gen.AI, an AI image and video creation platform that makes pro-grade content effortless for anyone, anywhere. Art-Gen combines state-of-the-art AI models from industry leaders including Google, Stability AI, and PixVerse with Gaxos’ proprietary enhancements to deliver unmatched creative speed, detail, and flexibility. With just a simple text prompt or reference image, users can instantly produce cinematic visuals, hyper-realistic imagery, or animated video content at a fraction of traditional production time and cost.,
In December 2025, we launched Bible Pray AI, a personalized, AI-powered spiritual growth platform designed to help users deepen faith, strengthen daily devotion, and apply scripture for greater peace, clarity, and purpose. Bible Pray AI represents our strategic expansion into the rapidly growing digital faith, mental wellness, and personal development economy, a sector supported by hundreds of millions of engaged global users seeking guided spiritual content, daily motivation, and community-based worship experiences.
Gaxos Health
Gaxos Health is dedicated to transforming personal health and wellness by developing a suite of innovative AI-powered health optimization solutions. Gaxos Health integrates AI-driven insights with individual biometric data and health goals to create web and application based personalized wellness strategies for users. 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, 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.
18
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 allows users to have unique experiences and more control over in-game assets.
In 2023, we launched our own proprietary games that were simple and fun to play, and that offered 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 could be utilized across the network of games and platform that we were building. As of December 31, 2025, we had launched five games, Space Striker AI, Brawl Bots, BattleFleet AI, Jigsaw Puzzle AI and Gaxos AI Puzzle.
On June 18, 2026, we entered into and simultaneously consummated the closing of an Asset Purchase Agreement, by and among the Company and Game Foundry AI (the “Buyer”) for the sale and divestiture of substantially all of our gaming assets, including our portfolio of mobile games and Gaxos Gaming Labs in exchange for the issuance of 2,200,000 shares of the Buyer’s common stock, for an estimated consideration of $1,760,000.
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.
Revenue recognition
The Company follows Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). This standard establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. ASC 606 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and requires certain additional disclosures.
In accordance with ASU Topic 606 - Revenue from Contracts with Customers, the Company recognizes revenue in accordance with that core principle by applying the following steps:
Step 1: Identify the contract(s) with a customer.
Step 2: Identify the performance obligations in the contract.
Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.
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The Company generates revenues from the following sources:
| ● | Through June 2026, the Company generated revenue from the sale of our in-game items to our customers. Revenue generated from such sales, primarily through the app stores, such as Google Play Store or Apple App Store, was recognized at a point in time, which was upon delivery of the in-game items to the customer, which is when the Company completed its sole performance obligation. Fees incurred by the Company, such as commissions to the app stores, were recognized in operating expenses. | |
| ● | The Company generates revenue 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. Revenues generated from such sales are recognized at a point in time, which is upon the completion of lab testing and the utilization of health coaching sessions, which is when the Company completes its performance obligation. Any fees paid in advance by the customer are reflected as contract liabilities until such time as the performance obligation is completed. Fees incurred by the Company, such as the lab testing charges, are recognized in operating expenses. |
| ● | Gaxos Labs sells subscriptions to its customers for the use of its software under a software as a service subscription model (“SaaS”), which allows game developers and publishers to create content using AI which reduce creative asset development time. The Company’s SaaS offerings are sold under a prepaid or postpaid, usage-based pricing system pursuant to a tiers model, allowing customers to choose the subscription level to be charged based upon their intended usage. The subscription tiers utilize declining prices as the volume grows. Under prepaid pay-as-you-go plans, revenues related to contracts that do not include a specified contract period are recognized over a period of time, which is upon usage by the customer and satisfaction of the Company’s performance obligation. These usage-based revenues are constrained to the amount the Company expects to be entitled to and receive in exchange for providing access to its platform. If professional services are deemed to be distinct, revenue is recognized over a period of time as services are performed. The Company does not view the signing of the contract or the provision of initial setup services as discrete earnings events that are distinct. Fees incurred by the Company, such as the merchant fees are recognized in operating expenses. |
| ● | In connection with RNK Health, the Company is generating revenues from 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 Medical Partner provides and makes available health care professionals to perform telehealth services within their respective scope of practice, provides and maintains applicable professional licensure, provides medication management services and provides RNK Health and patients access to the Medical Partner’s telehealth optimized technology platform. RNK Health provides services to patients to support the delivery of various medical services, including virtual rooming of patients, patient pathway advisory services, patient scheduling and interface connected to the Medical Partners central calendar, patient pathway monitoring and service, nonclinical patient customer service, care navigation service, software-based care optimization services, patient education services, patient intake system and data collection (the “Administrative Services”). The Company evaluates the presentation of revenue on a gross vs. net basis based on whether it acts as a principal by controlling the product or service sales to customers. The Company records these revenues on a net basis as an agent since Medical Partner is primarily responsible for fulfilling the contract with the customer, the Company does not have inventory risk before or after the goods have been ordered by a customer, during shipping, or on return, the Company’s consideration is in the form of a commission for its Administrative Services, and the Company is not exposed to credit risk for the amount receivable from a customer in exchange for the Medical Partner’s goods or services. The Medical Partner performs all medical management and patient support care services and the Medical Partner pays the Company its share of revenue. The Medical Partner has the right to refuse services to the Patient. The Company is obligated to fulfill the non-clinical Administrative Services and is reliant on the Medical Partner to accept the Patient, deliver all medication management and patient support services, and the collect and remit the Company’s commission to the Company. Revenues from non-clinical Administrative Services are recognized at a point of time, upon satisfaction of the performance obligation, which occurs when the non-clinical Administrative Services have been completed and collection of the fee is probable. RNK Health pays a monthly fee to the Medical Partner for access to the Medical Partners telehealth optimized technology platform, which is included in operating expenses on the accompanying consolidated statements of operations and comprehensive loss. |
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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 and Six Months Ended June 30, 2026 and 2025.
Revenues
During the three months ended June 30, 2026, we generated revenues of $2,457,357, primarily from revenues generated through RNK Health for providing non-clinical services to support patient care of $1,737,052. Additionally, during the three months ended June 30, 2026, we generated revenues of $720,305 from subscription services from our Art-Gen.ai, unGPT,ai and Bible.ai applications. During the three months ended June 30. 2025, we generated revenue of $170,971, primarily from revenues generated through RNK Health for providing non-clinical services to support patient care of $170,398. Additionally, during the three months ended June 30, 2025, we generated revenues of $556 from subscription services and revenue of $17 from in-app games items.
During the six months ended June 30, 2026, we generated revenues of $4,266,724, primarily from revenues generated through RNK Health for providing non-clinical services to support patient care of $2,982,961. Additionally, during the six months ended June 30, 2026, we generated revenues of $1,283,763 from subscription services from our Art-Gen.ai, unGPT,ai and Bible.ai applications. During the six months ended June 30. 2025, we generated revenue of $194,703, primarily from revenues generated through RNK Health for providing non-clinical services to support patient care of $192,950. Additionally, during the six months ended June 30, 2025, we generated revenues of $1,124 from the sale of health coaching packages, $607 from subscription services, and revenue of $22 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.
During the three and six months ended June 30, 2026 and 2025, revenues consisted of the following:
| For the Three Months ended June 30, 2026 | For the Three Months ended June 30, 2025 | For the Six Months ended June 30, 2026 | For the Six Months ended June 30, 2025 | |||||||||||||
| Revenue from administrative services | $ | 1,737,052 | $ | 170,398 | $ | 2,982,961 | $ | 192,950 | ||||||||
| Revenue from the sale of health coaching packages | - | - | - | 1,124 | ||||||||||||
| Revenue from the sale of subscriptions | 720,305 | 556 | 1,283,763 | 607 | ||||||||||||
| Revenue from sale of in-game items | - | 17 | - | 22 | ||||||||||||
| Total revenues | $ | 2,457,357 | $ | 170,971 | $ | 4,266,724 | $ | 194,703 | ||||||||
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Operating Expenses
During the three months ended June 30, 2026 and 2025, we incurred operating expenses of $4,322,112 and $1,153,665, respectively, an increase of $3,168,447 or 274.6%. During the six months ended June 30, 2026 and 2025, we incurred operating expenses of $8,678,601 and $2,569,092, respectively, an increase of $6,109,509 or 237.8%. 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 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.
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 June 30, 2026 and 2025, we reported research and development fees of $506,971 and $243,020, respectively, an increase of $263,951, or 108.6%. During the six months ended June 30, 2026 and 2025, we reported research and development fees of $953,393 and $464,009, respectively, an increase of $489,384, or 105.5%. The increases are primarily due to 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.
General and administrative expenses
For the three and six months ended June 30, 2026 and 2025, general and administrative expenses consisted of the following:
| For the Three Months ended June 30, 2026 | For the Three Months ended June 30, 2025 | For the Six Months ended June 30, 2026 | For the Six Months ended June 30, 2025 | |||||||||||||
| Compensation and related benefit | $ | 157,604 | $ | 184,753 | $ | 756,859 | $ | 773,738 | ||||||||
| Professional fees | 190,578 | 125,956 | 441,767 | 358,846 | ||||||||||||
| Advertising and marketing | 3,141,273 | 431,074 | 5,908,097 | 648,957 | ||||||||||||
| Other general and administrative expenses | 325,686 | 168,862 | 618,485 | 323,542 | ||||||||||||
| Total general and administrative expenses | $ | 3,815,141 | $ | 910,645 | $ | 7,725,208 | $ | 2,105,083 | ||||||||
Compensation and related benefits
During the three months ended June 30, 2026 and 2025, compensation and related benefits amounted to $157,604 and $184,753, respectively, a decrease of $27,149, or 14.7%. The decrease during the three months ended June 30, 2026 compared to the three months ended June 30, 2025 was primarily attributable to the decrease in stock-based compensation of $4,785 from accretion of stock option expense and a decrease in other employee compensation and related benefits of $22,364.
During the six months ended June 30, 2026 and 2025, compensation and related benefits amounted to $756,859 and $773,738, respectively, a decrease of $16,879, or 2.2%. The decrease during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was primarily attributable to a decrease in other employee compensation and related benefits of $26,725, offset by an increase in stock-based compensation of $9,846 from accretion of stock option expense of $4,361.
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Professional fees
During the three months ended June 30, 2026 and 2025, we incurred professional fees of $190,578 and $125,956, respectively, an increase of $64,622, or 51.3%, primarily attributable to an increase in investor relations fees of $8,750, 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 $19,513, an increase in advisory and recruiting fees of $7,569, an increase in accounting fees of $3,212, and an increase in legal fees of $25,578.
During the six months ended June 30, 2026 and 2025, we incurred professional fees of $441,767 and $358,847, respectively, an increase of $82,921, or 23.1%, primarily attributable to an increase in investor relations fees of $52,500, 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 $25,868, an increase in advisory and recruiting fees of $10,568, and an increase in accounting fees of $16,632, offset by a decrease in legal fees of $22,647.
Advertising and marketing
During the three months ended June 30, 2026 and 2025, advertising and marketing amounted to $3,141,273 and $431,074, respectively, an increase of $2,710.199, or 628.7%. The increase during the three months ended June 30, 2026 compared to the three months ended June 30, 2025 was primarily attributable to an increase in advertising and marketing fees of $1,853,798 in connection with the marketing of our RNK Health services and an increase in advertising and marketing fees of $856,401 in connection with the marketing of our Gaxos Labs subscription services.
During the six months ended June 30, 2026 and 2025, advertising and marketing amounted to $5,908,097 and $648,957, respectively, an increase of $5,259,140, or 810.4%. The increase during the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was primarily attributable to an increase in advertising and marketing fees of $3,647,925 in connection with the marketing of our RNK Health services and an increase in advertising and marketing fees of $1,611,215 in connection with the marketing of our Gaxos Labs subscription services.
Other general and administrative expenses
Other general and administrative expenses consist of office expenses, insurance, listing fees, computer and interest expenses, travel expenses, amortization expense, lab service fees, and other general business expenses.
During the three months ended June 30, 2026 and 2025, we incurred other general and administrative expenses of $325,686 and $168,862, respectively, an increase of $156,824, or 92.7%. This increase was primarily attributable to an increase in merchant fees incurred of $104,749, and an increase in software and application fees of $52,513, offset by a decrease in other general and administrative expenses of $438.
During the six months ended June 30, 2026 and 2025, we incurred other general and administrative expenses of $618,485 and $323,542, respectively, an increase of $294,943, or 91.2%. This increase was primarily attributable to an increase in amortization expense of $33,715, an increase in merchant fees incurred of $174,111, and an increase in software and application fees of $104,909, offset by a decrease in other general and administrative expenses of $17,792.
Loss from operations
During the three months ended June 30, 2026 and 2025, we reported a loss from operations of $1,864,755 and $982,694, respectively, an increase of $882,061, or 89.8%. The increase in loss from operations was due to an increase in advertising and marketing expense, an increase in general and administrative expenses, and an increase in professional fees, offset by an increase in revenues and a decrease in compensation and related benefits, as discussed above.
During the six months ended June 30, 2026 and 2025, we reported a loss from operations of $4,411,877 and $2,374,389, respectively, an increase of $2,037,488, or 85.8%. The increase in loss from operations was due to an increase in advertising and marketing expense, an increase in general and administrative expenses, and an increase in professional fees, offset by an increase in revenues and a decrease in compensation and related benefits, as discussed above.
Other income, net
During the three months ended June 30, 2026 and 2025, we reported other income, net of $1,842,522 and $158,122, respectively, an increase of $1,684,400. Other income, net consists of interest income and realized and unrealized gains or losses on short-term investments and non-traded equity securities. Additionally, during the three months ended June 30, 2026, we recorded a gain of $1,740,890 from the sale of our gaming assets.
During the six months ended June 30, 2026 and 2025, we reported other income, net of $1,915,398 and $317,755, respectively, an increase of $1,597,643. Other income, net consists of interest income and realized and unrealized gains or losses on short-term investments and equity securities. Additionally, during the six months ended June 30, 2026, we recorded a gain of $1,749,890 from the sale of our gaming assets.
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Net loss and net loss attributable to common shareholders
During the three months ended June 30, 2026 and 2025, our net loss amounted to $22,233 and $824,572, respectively, a decrease of $802,339, or 97.3%. During the three months ended June 30, 2026 and 2025, we adjusted net loss for the net loss of subsidiary attributable to noncontrolling interest by $263,289 and $75,184, respectively Accordingly, during the three months ended June 30, 2026 and 2025, our net income (loss) attributable to common shareholders amounted to $241,056, or net income per common share of $0.02 (basic and diluted) and $(749,388), or a net loss per common share of $(0.11) (basic and diluted), respectively, an positive change of $776,962, or 105.2%.
During the six months ended June 30, 2026 and 2025, our net loss amounted to $2,496,479 and $2,056,634, respectively, an increase of $439,845, or 21.4%. During the six months ended June 30, 2026 and 2025, we adjusted net loss for the net loss of subsidiary attributable to noncontrolling interest by $565,010 and $115,446, respectively Accordingly, during the six months ended June 30, 2026 and 2025, our net loss attributable to common shareholders amounted to $1,931,469, or net loss per common share of $0.20 (basic and diluted) and $1,941,188, or a net loss per common share of $0.27 (basic and diluted), respectively, a decrease of $9,719, or 0.50%.
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 June 30, 2026, we had a cash balance of $1,089,449, had short-term investments of $10,353,040, and had working capital of $10,769,048. During the six months ended June 30, 2026, we used net cash in operations of $3,581,332.
On January 26, 2026, we entered into the ATM Agreement with H. C. Wainwright and Co., LLC (“Wainwright”) under which the Company could offer and sell shares of its common stock having an aggregate sales price of up to $5,600,000 through Wainwright as the sales agent pursuant to the Company’s effective shelf registration statement on Form S-3 (File No. 333-283758), including an accompanying base prospectus dated December 18, 2024 and prospectus supplements dated January 23, 2026 and February 4, 2026. Sales of shares of our common stock through Wainwright, if any, will be made by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) under the Securities Act. Wainwright will use commercially reasonable efforts to sell shares of the Company’s common stock from time to time, based on instructions from us (including any price, time or size limits or other parameters or conditions the Company may impose). We will pay Wainwright a commission equal to 3.0% of the aggregate gross proceeds from the sales of shares of the Company’s common stock sold through Wainwright under the ATM Agreement and will also reimburse Wainwright for certain specified expenses in connection with the ATM Agreement. On March 20, 2026, the Company increased the maximum aggregate offering price of the shares of the Company’s common stock issuable under the ATM Agreement with Wainwright, dated January 23, 2026, to up to an additional aggregate of $1,065,001.
During the six months ended June 30, 2026, we issued 3,621,181 shares of our common stock for net proceeds of approximately $6.3 million pursuant to the ATM Agreement.
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 six months ended June 30, 2026, net cash used in operations was $3,581,332, which primarily resulted from our net loss of $2,496,479, adjusted for the add back of amortization expense of $120,026, stock-based compensation to employees and consultants of $99,067, a net realized and unrealized gain on short-term investments of $13,645, a gain on sale of gaming assets of $1,749,890, accretion of bond discounts of $52,904, and an unrealized loss on equity securities of $120,000, and changes in operating asset and liabilities such as an increase in accounts receivable of $41,817, an increase in prepaid expenses and other current assets of $116,471, an increase in accounts payable of $55,905, an increase in accrued expenses of $156,590, and an increase in deferred revenues of $232,478.
For the six months ended June 30, 2025, net cash used in operations was $2,014,345, which primarily resulted from our net loss of $2,056,634, adjusted for the add back of amortization expense of $86,311, stock-based compensation to employees and consultants of $63,353, and a realized and unrealized gain on short-term investments of $(22,665), and changes in operating asset and liabilities such as an increase in accounts receivable of $9,368, an increase in prepaid expenses and other current assets of $179,285, a decrease in accounts payable of $88,074, an increase in accrued expenses of $192,577, and a decrease in deferred revenues of $560.
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Cash Flows from Investing Activities
For the six months ended June 30, 2026, net cash used in investing activities was $2,489,491, which resulted from the purchase of short-term investments of $8,073,312 primarily consisting of corporate bonds, the purchase of an investment in a cost-method investee of $3,115,000, and an increase in capitalized internal-use software development costs of $2,650, offset by proceeds received from the sale of short-term investments of $8,701,471.
For the six months ended June 30, 2025, net cash used in investing activities was $10,664,790, which resulted from the purchase of short-term investments of $13,313,986 primarily consisting of corporate bonds and other equity securities, the purchase of software intangible assets of $500,000, and an increase in capitalized internal-use software development costs of $44,900, offset by proceeds received from the sale of short-term investments of $3,194,096.
Cash Flows from Financing Activities
For the six months ended June 30, 2026, net cash flow from financing activities amounted to $6,319,473, which consisted of net proceeds from sale of our common stock pursuant to the ATM agreement.
For the six months ended June 30, 2025, we did not have any cash flows from financing activities.
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
During the six months ended June 30, 2026 and 2025, 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. We do not expect the adoption of this new guidance to have a material impact on our consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270), Narrow-Scope Improvements, to provide clarity about the current requirements, rather than evaluate whether to expand or reduce interim disclosure requirements. The amendments in ASU 2025-11 result in a comprehensive list of interim disclosures that are required by GAAP. The amendments in ASU 2025-11 also include a disclosure principle that requires entities to disclose events since the end of the last annual reporting period that have a material impact on the entity. The amendments in ASU 2025-11 are effective for interim reporting periods within annual reporting periods beginning after December 15, 2027 and early adoption is permitted. The amendments in ASU 2025-11 can be applied either prospectively or retrospectively to any or all prior periods presented in the financial statements. We are currently evaluating the disclosure impact that ASU 2025-11 may have on our financial statement presentation and disclosures.
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.
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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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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.
ITEM 4. CONTROLS AND PROCEDURES
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 June 30, 2026, 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.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we may be subject to litigation and claims arising in the ordinary course of business. We are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.
ITEM 1A. RISK FACTORS
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, 2025 as filed with the SEC on March 17, 2026 (“Annual Report”). There have been no material changes in our risk factors from those previously disclosed in our Annual Report. 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.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Plans
During the fiscal quarter ended June 30, 2026, none of the Company’s directors or executive officers
ITEM 6. EXHIBITS
| Exhibit No. | Description of Exhibits | |
| 31.1* | Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2* | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1** | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2** | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101.INS* | Inline XBRL Instance Document. | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (the cover page from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2026 is formatted as Inline XBRL and contained in Exhibit 101). |
| * | Filed herewith. |
| ** | Furnished herewith. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| GAXOS.AI INC. | ||
| Dated: August 12, 2026 | By: | /s/ Vadim Mats |
| Name: | Vadim Mats | |
| Title: | Chief Executive Officer and Director (Principal Executive Officer) | |
| Dated: August 12, 2026 | By: | /s/ Steven Shorr |
| Name: | Steven Shorr | |
| Title: | Chief Financial Officer (Principal Financial and Accounting Officer) |
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