CHGA 10-K & 10-Q changes, risk factors and insider trading
Change Agents Corporation. · Nasdaq · Services-Computer Programming Services · CIK 1630212 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We have a limited operating history in our current business segments, which makes it difficult to evaluate our business and future prospects.”
New heading “We have a history of net losses and an accumulated deficit, which raises substantial doubt about our ability to continue as a going concern.”
New heading “We may not be successful in commercializing our AI platform or our Keto Air product, either of which would materially harm our business.”
New heading “Our RPM platform is in an early stage of development and is based on new and evolving AI technologies, which are subject to significant uncertainty.”
New heading “We face intense competition in both of our business segments, and many of our competitors have substantially greater resources than we do.”
New heading “Our business is subject to rapid technological change, and if we fail to adapt, our business may be negatively impacted.”
New heading “We may encounter difficulties associated with early-stage companies that could adversely affect our operations.”
New heading “Our success depends on the continued services of our key personnel, the loss of whom could materially harm our business.”
New heading “Our strategy of continuing to evaluate additional possible acquisitions to supplement our operations involves significant risks, and we may not be able to identify, complete, or successfully integrate any such acquisitions.”
New heading “We depend on third parties for supplies and services critical to our Keto Air business, and any disruption could adversely affect our operations.”
New heading “The termination of our proposed merger with YOOV Group Holding Limited may continue to adversely affect our business, financial condition, and stock price.”
New heading “The use of AI in our platform may give rise to legal liability, reputational harm, and regulatory scrutiny.”
New heading “Our RPM platform's AI avatar feature, which replicates individual voices and likenesses, exposes us to significant legal risks under right of publicity, biometric privacy, and related laws.”
New heading “The content generated by our platform may infringe the intellectual property rights of third parties, which could expose us to significant liability.”
New heading “We may not be able to protect our intellectual property rights, which could impair our competitive position.”
New heading “Laws and regulations governing artificial intelligence are rapidly evolving, and compliance may be costly and uncertain.”
New heading “Our platform's content may be restricted or removed by major social media and content distribution platforms, which could significantly impair the utility and commercial appeal of our product.”
New heading “Our business depends on the reliable performance of third-party cloud and infrastructure providers, and any disruption to these services could adversely affect our operations.”
New heading “Cybersecurity breaches or incidents could damage our reputation and adversely affect our business.”
New heading “We are subject to data privacy and security laws that impose significant compliance obligations, and any failure to comply could result in material liability.”
New heading “We will need to raise additional capital to fund our operations and growth, and we may not be able to do so on acceptable terms, or at all.”
New heading “We have outstanding indebtedness that could adversely affect our financial condition and liquidity.”
New heading “Future issuances of our securities, including upon conversion of our outstanding preferred stock, will dilute the ownership interests of our existing stockholders and may depress the trading price of our common stock.”
New heading “Our Series E Non-Voting Convertible Preferred Stock is subject to an Exchange Cap and requires stockholder approval under Nasdaq Listing Rule 5635 prior to conversion, and there can be no assurance that we will obtain such approval.”
New heading “We must maintain compliance with Nasdaq continued listing standards, and there can be no assurance that we will be able to do so.”
New heading “Significant related party transactions, including the sale of our Route 9 property to a director, create conflicts of interest and could adversely affect stockholder confidence in our corporate governance.”
New heading “Our officers, directors, and significant stockholders collectively hold a significant percentage of our outstanding common stock, which may limit the ability of other stockholders to influence corporate decisions.”
New heading “Provisions in our charter documents and Delaware law may have anti-takeover effects that could prevent a change of control that stockholders may consider favorable.”
New heading “Our common stock price has been and may continue to be highly volatile, and stockholders could suffer substantial losses.”
New heading “Risks Relating to General Economic and Market Conditions”
New heading “Adverse economic conditions could reduce demand for our products and services and harm our business.”
New heading “Geopolitical developments and trade restrictions, including those affecting our supply chain for the Keto Air device, could adversely affect our operations.”
New heading “Changes in government spending priorities and regulatory policy could affect our business in ways we cannot predict.”
Removed heading “Summary of Risk Factors”
Removed heading “Risks Related to the Potential Merger with YOOV”
Removed heading “General Operating and Business Risks”
Removed heading “Risk Factors Related to Commercialization Activity”
Removed heading “Risks Related to the Potential Merger with YOOV”
Removed heading “Failure to complete the Merger could negatively impact the stock price and our future business and financial results.”
Removed heading “We and YOOV will be subject to business uncertainties and contractual restrictions while the Merger is pending.”
Removed heading “Third parties may terminate or alter existing contracts or relationships with us or YOOV.”
Removed heading “The Merger is subject to a number of closing conditions and, if these conditions are not satisfied, the Merger Agreement may be terminated in accordance with its terms and the Merger may not be completed. In addition, the parties have the right to terminate the Merger Agreement under other specified circumstances, in which case the Merger would not be completed.”
Removed heading “We or YOOV may waive one or more of the closing conditions to the Merger without re-soliciting stockholder approval.”
Removed heading “Our stockholders will have a reduced ownership and voting interest after the Merger and will exercise less influence over management.”
Removed heading “The Merger Agreement limits our ability to pursue alternatives to the Merger.”
Removed heading “Our executive officers and directors may have interests in the Merger that are different from, or in addition to, the rights of their respective stockholders.”
Removed heading “We, YOOV and, subsequently, the combined company may have difficulty attracting, motivating and retaining executives and other key employees in light of the proposed Merger.”
Removed heading “We will incur significant transaction and Merger-related transition costs in connection with the Merger.”
Removed heading “We may be the target of securities class action and stockholder lawsuits which could result in substantial costs and may delay or prevent the Merger from being completed.”
Removed heading “General Operating and Business Risks”
Removed heading “Our limited revenue makes it difficult for us to evaluate our future business prospects and make decisions based on those estimates of our future performance.”
Removed heading “There is substantial doubt about our ability to continue as a going concern, which will affect our ability to obtain future financing and may require us to curtail our operations.”
Removed heading “Our cash will only fund our operations for a limited time and we will need to raise additional capital in order to support our development.”
Removed heading “If we raise additional capital by issuing equity securities, our existing stockholders’ percentage ownership will be reduced and these stockholders may experience substantial dilution.”
Removed heading “Our business and operations may be further impacted by epidemics, outbreaks and other public health events.”
Removed heading “We depend upon key personnel and need additional personnel.”
Removed heading “Joint ventures, joint ownership arrangements and other projects pose unique challenges and we may not be able to fully implement or realize synergies, expected returns or other anticipated benefits associated with such projects.”
Removed heading “We must effectively manage the growth of our operations, or our company will suffer.”
Removed heading “Our revenue and results of operations may suffer if we are unable to attract new tenants.”
Removed heading “Potential liability claims may adversely affect our business.”
Removed heading “In accordance with our strategic development policy, we may invest in companies for strategic reasons and may not realize a return on our investments.”
Removed heading “Our strategic transactions involve risks, and we may not realize the expected benefits because of numerous uncertainties and risks.”
Removed heading “We face intense competition which could cause us to lose market share.”
Removed heading “If we fail to comply with our obligations in the agreements under which we license intellectual property rights from third parties or otherwise experience disruptions to our business relationships with our licensors, we could lose intellectual property rights that are important to our business.”
Removed heading “We may face uncertainty and difficulty in obtaining and enforcing our patents and other proprietary rights.”
Removed heading “We may not be able to protect our intellectual property rights throughout the world.”
Removed heading “Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.”
Removed heading “Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and any patent protection we may obtain in the future could be reduced or eliminated for non-compliance with these requirements.”
Removed heading “It is difficult and costly to protect our proprietary rights, and we may not be able to ensure their protection. If we fail to protect or enforce our intellectual property rights adequately or secure rights to patents of others, the value of our intellectual property rights would diminish.”
Removed heading “We may be subject to claims challenging the inventorship of patents and other intellectual property.”
Removed heading “If any of our trade secrets, know-how or other proprietary information is disclosed, the value of our trade secrets, know-how and other proprietary rights would be significantly impaired and our business and competitive position would suffer.”
Removed heading “We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights and we may be unable to protect our rights to, or use of, our technology.”
Removed heading “Breaches or compromises of our information security systems or our information technology systems or infrastructure could result in exposure of private information, disruption of our business and damage to our reputation, which could harm our business, results of operation and financial condition.”
Removed heading “We may be exposed to liabilities under the Foreign Corrupt Practices Act, and any determination that we violated the Foreign Corrupt Practices Act or Chinese anti-corruption law could have a material adverse effect on our business.”
Removed heading “Changes or disruption in services supplies, or transportation provided by third parties have impacted and could continue to impact or adversely affect our business.”
Removed heading “Some of our medical device products in the future may face significant government regulation, and there is no guarantee that our medical devices will receive regulatory approval.”
Removed heading “Even if our medical devices receive regulatory approval, we may still face future development and regulatory difficulties.”
Removed heading “If we or current or future collaborators, manufacturers, or service providers fail to comply with healthcare laws and regulations, we or they could be subject to enforcement actions and substantial penalties, which could affect our ability to develop, market and sell our products and may harm our reputation.”
Removed heading “Any medical devices we develop may become subject to unfavorable pricing regulations, third party coverage and reimbursement practices or healthcare reform initiatives, thereby harming our business.”
Removed heading “The healthcare industry is heavily regulated in the U.S. at the federal, state, and local levels, and our failure to comply with applicable requirements may subject us to penalties and negatively affect our financial condition.”
Removed heading “Our ability to obtain reimbursement or funding from the federal government may be impacted by possible reductions in federal spending.”
Removed heading “Our officers, directors and principal stockholders own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.”
Removed heading “If we are unable to maintain listing of our securities on The Nasdaq Capital Market or another reputable stock exchange, it may be more difficult for our stockholders to sell their securities.”
Removed heading “The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for our stockholders.”
Removed heading “You may experience dilution of your ownership interests because of the future issuance of additional shares of our common or preferred stock or other securities that are convertible into or exercisable for our common or preferred stock.”
Removed heading “The ability of our Board to issue additional stock may prevent or make more difficult certain transactions, including a sale or merger.”
Removed heading “If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.”
Removed heading “We do not anticipate paying dividends on our common stock, and investors may lose the entire amount of their investment.”
Removed heading “Applicable regulatory requirements, including those contained in and issued under the Sarbanes-Oxley Act of 2002, may make it difficult for us to retain or attract qualified officers and directors, which could adversely affect the management of our business and our ability to obtain or retain listing of our common stock on a national securities exchange.”
Removed heading “If we cannot satisfy the continued listing requirements and other rules of The Nasdaq Capital Market, our securities may be delisted, which could negatively impact the price of our securities and your ability to sell them.”
Removed heading “We could be subject to securities class action litigation.”
Largest changes
“We utilize information security and information technology systems and websites that allow for the secure storage and transmission of proprietary or private information regarding our clients, patients, employees, vendors and others, including individually identifiable health information. A security breach of our network, hosted service providers, or vendor systems, may expose us to a risk of loss or misuse of this information, litigation and potential liability. …”see in full comparison
“From time to time, we may make investments in companies. These investments may be for strategic objectives to support our key business initiatives but may also be standalone investments or acquisitions. Such investments or acquisitions could include equity or debt instruments in private companies, many of which may not be marketable at the time of our initial investment. These companies may range from early-stage companies that are often still defining their strategic direction to more mature companies with established revenue streams and business models. …”see in full comparison
“If we or current or future collaborators, manufacturers, or service providers fail to comply with healthcare laws and regulations, we or they could be subject to enforcement actions and substantial penalties, which could affect our ability to develop, market and sell our products and may harm our reputation.”see in full comparison
“Ensuring that our business arrangements with third-parties comply with applicable healthcare laws and regulations could involve substantial costs. If our operations are found to be in violation of any such requirements, we may be subject to penalties, including civil or criminal penalties, monetary damages, the curtailment or restructuring of our operations, or exclusion from participation in government contracting, healthcare reimbursement or other government programs, including Medicare and Medicaid, any of which could adversely affect our financial results. …”see in full comparison
“If our operations are found to be in violation of any of the federal and state healthcare laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including without limitation, civil, criminal and/or administrative penalties, damages, fines, disgorgement, exclusion from participation in government programs, such as Medicare and Medicaid, injunctions, private “qui tam” actions brought by individual whistleblowers in the name of the government, or refusal to allow us to enter into government contracts, contractual damages, reputational harm …”see in full comparison
“Other than our debt facility with our chairman, we have no arrangements or credit facilities in place as a source of funds, and there can be no assurance that we will be able to raise sufficient additional capital on acceptable terms, or at all, and if we are not successful in raising additional capital, we may not be able to continue as a going concern. We may seek additional capital through a combination of private and public equity offerings, debt financings and strategic collaborations. …”see in full comparison
Full comparison: every changed paragraph (245)
An investment in our securities involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this Annual Report, before making an investment decision. Our business, financial condition, results of operations, and future prospects could be materially and adversely affected by any of the following risks. The trading price of our common stock could decline due to any of these risks, and you may lose all or part of your investment. The risks described below are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adversely affect our business operations.
You should carefully consider the following
material risk factors as well as all other information set forth or referred to in this report before purchasing shares of our common
stock. Investing in our common stock involves a high degree of risk. We may not be successful in preventing the material adverse effects
that any of the following risks and uncertainties may cause. These potential risks and uncertainties may not be a complete list of the
risks and uncertainties facing us. There may be additional risks and uncertainties that we are presently unaware of, or presently consider
immaterial, that may become material in the future and have a material adverse effect on us. You could lose all or a significant portion
of your investment due to any of these risks and uncertainties.
Summary of Risk Factors
Our business is subject to numerous risks and
uncertainties that you should consider before investing in our company, as fully described below. The principal factors and uncertainties
that make investing in our company risky include, among others:
Risks Related to the Potential Merger with
YOOV
General Operating and Business Risks
Risk Factors Related to Commercialization
Activity
Risks RelatedRelating to Our SecuritiesBusiness and Operations
We have a limited operating history in our current business segments, which makes it difficult to evaluate our business and future prospects.
We have a limited operating history in our current businesses. We were initially pursuing a biotech platform and, through our acquisition of RPM in December 2025, have pivoted to primarily operating as an AI company. Because of this limited history, it is difficult to evaluate our proposed business and future prospects, including our ability to plan for and model future growth, and there is no guarantee that our AI platform or Keto Air businesses will result in profit or growth. Investors should consider the risks, expenses, and difficulties frequently encountered by companies in the early stage of development. There can be no assurance that we will successfully address any of these risks.
We have a history of net losses and an accumulated deficit, which raises substantial doubt about our ability to continue as a going concern.
Our results of operations have not resulted in profitability. We incurred net losses from continuing operations of approximately $17.5 million and $7.0 million for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025, we had an accumulated deficit of approximately $105.9 million. There is no assurance that we will be successful in executing our business plan or that we will be able to curtail our losses. There is substantial doubt about our ability to continue as a going concern. Our independent registered public accounting firm has included an explanatory paragraph in its audit report expressing substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern depends on our ability to obtain additional equity or debt financing, attain further operating efficiencies, reduce expenditures, and ultimately generate revenue.
Risks Related to the Potential Merger with
YOOV
Failure to complete the Merger could negatively
impact the stock price and our future business and financial results.
The parties’ respective obligations to complete
the Merger are subject to the satisfaction or waiver of a number of conditions set forth in the Merger Agreement. There can be no assurance
that the conditions to completion of the Merger will be satisfied or waived or that the Merger will be completed. If the Merger is not
completed for any reason, our ongoing businesses may be materially and adversely affected and, without realizing any of the benefits of
having completed the Merger, We would be subject to a number of risks, including the following:
In addition, we could be subject to litigation
related to any failure to complete the Merger or related to any proceeding to specifically enforce our or YOOV’s obligations under
the Merger Agreement.
If any of these risks materialize, they may materially
and adversely affect our business, financial condition, financial results and stock prices.
We and YOOV will be subject to business uncertainties
and contractual restrictions while the Merger is pending.
Uncertainty about the effect of the Merger on
employees, vendors and customers may have an adverse effect on our or YOOV and consequently on the combined company after the closing
of the Merger. These uncertainties may impair our and YOOV’s ability to retain and motivate key personnel and could cause customers
and others that deal with us and YOOV, as applicable, to defer or decline entering into contracts with us or YOOV, as applicable, or making
other decisions concerning us or YOOV, as applicable, or seek to change existing business relationships with us or YOOV, as applicable.
In addition, if key employees depart because of uncertainty about their future roles and the potential complexities of the Merger, our
and YOOV’s businesses could be harmed. Furthermore, the Merger Agreement places certain restrictions on the operation of our and
YOOV’s businesses prior to the closing of the Merger, which may delay or prevent us and YOOV from undertaking certain actions or
business opportunities that may arise prior to the consummation of the Merger.
Third parties may terminate or alter existing
contracts or relationships with us or YOOV.
Each of us and YOOV has contracts with customers,
vendors and other business partners which may require us or YOOV, as applicable, to obtain consents from these other parties in connection
with the Merger. If these consents cannot be obtained, the counterparties to these contracts and other third parties with which us and/or
YOOV currently have relationships may have the ability to terminate, reduce the scope of or otherwise materially adversely alter their
relationships with either party in anticipation of the Merger, or with the combined company following the Merger. The pursuit of such
rights may result in us and YOOV suffering a loss of potential future revenue, incurring liabilities in connection with a breach of such
agreements or losing rights that are material to their businesses. Any such disruptions could limit the combined company’s ability
to achieve the anticipated benefits of the Merger. The adverse effect of such disruptions could also be exacerbated by a delay in the
completion of the Merger or the termination of the Merger.
The Merger is subject to a number of closing
conditions and, if these conditions are not satisfied, the Merger Agreement may be terminated in accordance with its terms and the Merger
may not be completed. In addition, the parties have the right to terminate the Merger Agreement under other specified circumstances, in
which case the Merger would not be completed.
The Merger is subject to a number of closing conditions
and, if these conditions are not satisfied or waived (to the extent permitted by law), the Merger will not be completed.
These conditions include, among others: (i) the
absence of certain legal impediments, (ii) effectiveness of the registration statement on Form S-4 relating to the Merger, (iv) obtaining
approval from our stockholders to (i) approve the issuance of the shares of our common stock to be issued to YOOV shareholders in
connection with the Merger pursuant to the rules of Nasdaq and (ii) amend our certificate of incorporation to effect a reverse stock split
of our common stock to the extent we and YOOV mutually agree implementing such reverse stock split is necessary to meet Nasdaq’s
listing requirements, (v) the approval of the Merger Agreement and the Merger by YOOV shareholders and (vi) the approval of the Nasdaq
listing application and the listing of the our shares on The Nasdaq Capital Market following the Merger. In addition, each party’s
obligation to complete the Merger is subject to the accuracy of the other parties’ representations and warranties in the Merger
Agreement, the other parties’ compliance, in all material respects, with their respective covenants and agreements in the Merger
Agreement.
The conditions to the closing of the Merger may
not be fulfilled and, accordingly, the Merger may not be completed. In addition, if the Merger is not completed by March 7, 2026, any
party may choose not to proceed with the Merger. Moreover, the parties can mutually decide to terminate the Merger Agreement at any time
prior to the consummation of the Merger, before or after receipt of the requisite approvals by our stockholders and the YOOV shareholders,
each party may elect to terminate the Merger Agreement in certain other circumstances, as set forth in the Merger Agreement. If the Merger
Agreement is terminated, we may incur substantial fees and expenses in connection with termination of such Agreement and we will not realize
the anticipated benefits of the Merger. In addition, if the Merger is not completed, we may not have sufficient capital to continue to
operate our business in the long term and may become insolvent and be required to seek the protection of the bankruptcy courts and, without
additional funding or a strategic transaction, we would likely be delisted from Nasdaq.
We or YOOV may waive one or more of the closing
conditions to the Merger without re-soliciting stockholder approval.
Each of us and YOOV has the right to waive certain
of the closing conditions to the Merger. Any such waiver may not require re-solicitation of stockholders, in which case stockholders of
us and shareholders of YOOV will not have the chance to change their votes as a result of any such waiver and we and YOOV will have the
ability to complete the Merger without seeking further stockholder approval. Any determination whether to waive any condition to the Merger,
whether stockholder approval would be re-solicited as a result of any such waiver or whether this proxy statement/prospectus would be
amended as a result of any waiver will be made us or YOOV, as applicable, at the time of such waiver based on the facts and circumstances
as they exist at that time, and any such waiver could have an adverse effect on the combined company.
Our stockholders will have a reduced ownership
and voting interest after the Merger and will exercise less influence over management.
Our stockholders, as a group have significantly
reduced ownership and voting power in the combined company compared to their current ownership and voting power in us. In particular,
upon consummation of the Merger, our stockholders, as a group, will own less than 3% of the outstanding common stock of us. In addition,
our stockholders, as a group, will be able to exercise less collective influence over the management and policies of the combined company
than they currently exercise over the management and policies of us.
The Merger Agreement limits our ability to
pursue alternatives to the Merger.
The Merger Agreement contains provisions that
make it more difficult for us to enter into alternative transactions. The Merger Agreement contains certain provisions that restrict our
ability to solicit or facilitate proposals from third parties with respect to transactions involving the financing or sale of us, or provide
non-public information to, or otherwise participate or engage in discussions or negotiations with, third parties or take certain other
actions that would reasonably be expected to lead to a third-party acquisition proposal. Further, there are only limited exceptions to
our agreement that our board of directors will not change its recommendation in favor of the adoption of the Merger Agreement. However,
at any time prior to the receipt of the requisite stockholder approval by our stockholders and the approval of the Merger Agreement and
the Merger by YOOV shareholders, in response to an unsolicited superior proposal made by a third party, Our board of directors may make
an adverse recommendation change, and terminate the Merger Agreement to enter into an alternative acquisition agreement, if it concludes
in good faith, after consultation with outside financial advisors and outside legal counsel, that the failure to take such action would
be inconsistent with the fiduciary duties of our board of directors under the circumstances and under applicable law.
As described above, we may be required to pay
a termination fee of $1,000,000 to YOOV if the Merger is not consummated under specified circumstances as set forth in the Merger Agreement.
Upon obtaining the requisite approvals from our stockholders and YOOV shareholders, our right to terminate the Merger Agreement in response
to a Superior Proposal (as defined in the Merger Agreement) will cease.
While we believe these provisions are reasonable,
customary and not preclusive of other offers, the provisions might discourage a third party that has an interest in acquiring all or a
significant part of us from considering or proposing such an acquisition, even if such party were prepared to pay consideration with a
higher per-share value than the currently proposed merger consideration or if such party were prepared to enter into an agreement that
may be more favorable to us or our stockholders.
Our executive officers and directors may have
interests in the Merger that are different from, or in addition to, the rights of their respective stockholders.
Our executive officers negotiated the terms of
the Merger Agreement and the board of directors approved the Merger Agreement and the Merger and recommend that each stockholder vote
in favor of the proposals to be presented at the special meeting in connection with the Merger. These executive officers and directors
may have interests in the Merger that are different from, or in addition to, our stockholders. These interests include the potential continued
employment or retention as consultants of certain executive officers of us with the combined company following the Merger, the continued
service of certain of our directors as directors of the combined company following the Merger and the indemnification of our executive
officers and directors.
We, YOOV and, subsequently, the combined company
may have difficulty attracting, motivating and retaining executives and other key employees in light of the proposed Merger.
The combined company’s success after the
Merger will depend in part on each of our and YOOV’s ability to retain key executives and other employees. Uncertainty about the
effect of the Merger on our and YOOV’s employees may have an adverse effect on each company separately and consequently, the combined
company. This uncertainty may impair the combined company’s ability to attract, retain and motivate key personnel. Employee retention
may be particularly challenging during the pendency of the Merger, as our and YOOV’s employees may experience uncertainty about
their future roles in the combined business. YOOV’s common stock Furthermore, if any of our or YOOV’s key
employees depart or are at risk of departing, including because of issues relating to the uncertainty and difficulty of integration, financial
security or a desire not to become employees of the combined business, we or YOOV, as applicable, may have to incur significant costs
in retaining such individuals or in identifying, hiring and retaining replacements for departing employees and may lose significant expertise
and talent, and the combined company’s ability to realize the anticipated benefits of the Merger may be materially and adversely
affected. No assurance can be given that the combined company will be able to attract or retain key employees to the same extent that
we or YOOV have been able to attract or retain employees in the past.
We will incur significant transaction and Merger-related
transition costs in connection with the Merger.
We expect that we will incur significant, non-recurring
costs in connection with consummating the Merger and integrating the operations of the two companies post-Closing. We will incur significant
fees and expenses relating to financing arrangements and legal services (including any costs that would be incurred in defending against
any potential class action lawsuits and derivative lawsuits in connection with the Merger if any such proceedings are brought), accounting
and other fees and costs, associated with consummating the Merger. Some of these costs are payable regardless of whether the Merger is
completed. In addition, we may be required to pay a termination fee of $1,000,000 if the Merger Agreement is terminated under specified
circumstances described in the Merger Agreement. Though we continue to assess the magnitude of these costs, additional unanticipated costs
may be incurred in the Merger and the integration of the businesses of us and YOOV.
We may be the target of securities class action
and stockholder lawsuits which could result in substantial costs and may delay or prevent the Merger from being completed.
Securities class action lawsuits and stockholder
lawsuits are often brought against public companies that have entered into merger agreements. Even if the lawsuits are without merit,
defending against these claims can result in substantial costs and divert management time and resources. An adverse judgment could result
in monetary damages, which could have a negative impact on our liquidity and financial condition. Additionally, if a plaintiff is successful
in obtaining an injunction prohibiting completion of the Merger, then that injunction may delay or prevent the Merger from being completed,
which may adversely affect our or the combined company’s business, financial position and results of operations. As of the date
of this report, no such lawsuits have been filed in connection with the Merger and the parties cannot predict whether any will be filed.
General Operating and Business Risks
Our limited revenue makes it difficult for
us to evaluate our future business prospects and make decisions based on those estimates of our future performance.
We have limited operating revenue. Because of the uncertainties related
to our lack of significant revenue, we may be hindered in our ability to anticipate and timely adapt to increases or decreases in revenues
or expenses. If we make poor budgetary decisions as a result of unreliable historical data, we could be less profitable or incur losses,
which may result in a decline in our stock price.
Our results of operationsWe have not resultedgenerated sustainable revenue since
in profitabilityinception, and we may not be able to generate sufficient revenue to achieve profitabilityor goingmaintain forward.profitability.
We have not yet developed a meaningful customer base and have not generated sustainable revenue since inception. We are subject to the substantial risk of failure facing businesses seeking to develop and commercialize new products and technologies, and maintaining and improving our platform will require significant capital. Our Keto Air product has generated minimal revenue to date, and we anticipate that it will take approximately one year from the date of this Annual Report for us to begin generating meaningful revenue from our RPM platform. There can be no assurance that we will generate revenue at the levels we anticipate, or at all, and our failure to do so could have a material adverse effect on our business, financial condition, and results of operations.
We may not be successful in commercializing our AI platform or our Keto Air product, either of which would materially harm our business.
We may not be successful in our AI vodcasting and podcasting platform businesses or our sales of Keto Air. Market acceptance of AI-driven offerings is uncertain, and we will rely on other companies, developers, and partners to build our product offerings. Additionally, evolving laws and regulations in areas such as privacy, intellectual property, safety, competition, content regulation, and consumer protection may delay or impede the development of our products and services. Our Keto Air product is currently operating as an early-stage commercial activity, and we are continuing to evaluate the future strategic direction of the Keto Air product line as we assess its commercial performance. There can be no assurance that either of our current business segments will achieve market acceptance or commercial viability.
Our RPM platform is in an early stage of development and is based on new and evolving AI technologies, which are subject to significant uncertainty.
Our Catch-Up Vodcast and Podcast Platform is currently under development and is based on new and evolving AI systems and technologies. This exposes us to risks including failure to gain market acceptance, inability to secure sufficient intellectual property rights, proprietary rights of third parties limiting our marketing efforts, failure to obtain sufficient user exposure, superior competing products, and the unpredictability of AI technology. Our platform is currently in beta testing with a limited number of users, and Phase 2 of the platform — which will expand our addressable market beyond podcasters — is currently in development and expected to launch in Q3 of 2026. There can be no assurance that Phase 2 will be completed on schedule or that it will achieve the commercial results we anticipate.
We face intense competition in both of our business segments, and many of our competitors have substantially greater resources than we do.
We face intense competition from numerous technology companies seeking to enter the generative AI-powered vodcasting and podcasting businesses. Many of our current and potential competitors have significantly larger market presence, greater name recognition, access to more potential customers, and substantially greater financial, technical, sales, marketing, management, support, and other resources than we do. In our consumer health technology segment, we compete with manufacturers and distributors of urine-based ketone test strips and other breath-based ketone monitoring devices, many of which have established retail distribution networks and marketing infrastructure that we currently lack. Our failure to compete effectively in either segment could have a material adverse effect on our business, financial condition, and results of operations.
Our business is subject to rapid technological change, and if we fail to adapt, our business may be negatively impacted.
Our industry is subject to rapid technological change, and if we do not adapt to and appropriately allocate resources among emerging technologies and business models, our business may be negatively impacted. Competitors may adapt to emerging technologies or business models more quickly or effectively than we do. The generative AI industry in particular is evolving at an exceptionally rapid pace, and technologies, platforms, and distribution channels that are relevant to our business today may be superseded or disrupted in ways that we cannot currently anticipate.
We may encounter difficulties associated with early-stage companies that could adversely affect our operations.
We may encounter numerous difficulties frequently encountered by early-stage companies, including implementing our growth strategy, countering competitors, pursuing new users, maintaining adequate expense control, attracting and retaining qualified personnel, reacting to user preferences, successfully launching products, and maintaining regulatory compliance. Failure to address any of these factors could have a material adverse effect on our business, financial condition, results of operations, and future prospects.
Our success depends on the continued services of our key personnel, the loss of whom could materially harm our business.
Our success depends on the continuing services of Wenzhao Lu, our Chairman, Meng Li, Luisa Ingargiola, our Chief Financial Officer, our other executive officers, and Michael Mathews, the Chief Executive Officer of RPM. The loss of any of these individuals could have a material and adverse effect on our business operations. The supply of qualified technical, professional, managerial, and other personnel is currently constrained, and competition for qualified employees is intense. In particular, our former Chief Executive Officer, David Jin, was instrumental in sourcing our Keto Air distribution rights through his personal industry relationships, and the loss of his services could adversely affect the continuation and development of that segment.
Our strategy of continuing to evaluate additional possible acquisitions to supplement our operations involves significant risks, and we may not be able to identify, complete, or successfully integrate any such acquisitions.
We are actively evaluating complementary possible artificial intelligence acquisitions that we believe could generate near-term revenue to supplement our current operations. Strategic transactions, including mergers, acquisitions, joint ventures, and investments, involve risks including the ability to integrate personnel, labor models, financial, information technology, and other systems successfully; disruption of ongoing business; distraction of management; and the possibility of material impairments of goodwill or other assets. We may not realize the anticipated benefits from such transactions and may be exposed to additional liabilities of any acquired business. We have previously pursued and terminated multiple acquisition transactions, including our proposed merger with YOOV Group Holding Limited, and there can be no assurance that future acquisition efforts will result in completed transactions or, if completed, that such transactions will deliver the anticipated strategic or financial benefits.
Management's Discussion & Analysis (MD&A)
New heading “Cessation of Laboratory Services”
New heading “Acquisition of an AI Generated Publishing Company”
New heading “Net Loss from Continuing Operations”
New heading “Net Loss from Discontinued Operations”
Removed heading “Laboratory Acquisitions”
Removed heading “Investment in Unconsolidated Companies”
Removed heading “Real Property Rental”
Removed heading “Real Property Rental Revenue”
Removed heading “Real Property Operating Expenses”
Removed heading “Real Property Operating Income”
Removed heading “August 2019 Credit Facility”
Removed heading “At-the-Market Offering”
Removed heading “March 2024 Convertible Note Financing”
Removed heading “June 2024 Convertible Note Financing”
Removed heading “Series C Convertible Preferred Stock Sold Pursuant to Securities Purchase Agreement”
Largest changes
“Net cash flow used in operating activities from continuing operations for the year ended December 31, 2024 was $4,668,458, which primarily reflected our consolidated net loss from continuing operations of approximately $7,040,000, and the non-cash item adjustment, consisting of change in fair market value of derivative liability of approximately $374,000, and the changes in operating assets and liabilities, primarily consisting of an increase in prepaid expense and other assets of approximately $107,000 mainly due to the increase in finished goods of approximately $92,000, a decrease in …”see in full comparison
“Net cash flow used in operating activities for the year ended December 31, 2024 was $4,969,205, which primarily reflected our consolidated net loss of approximately $7,903,000, and the non-cash item adjustment, consisting of change in fair market value of derivative liability of approximately $374,000, and the changes in operating assets and liabilities, primarily consisting of a decrease in accrued liabilities and other payables of approximately $1,165,000 resulting from payments made to our vendors in the year ended December 31, 2024, and a decrease in operating lease obligation of …”see in full comparison
Net cash flow used in operating activities from continuing operations for the year ended December 31,see in full comparison20232025 was$6,504,718,$4,580,620, which primarily reflected our consolidated netnetloss from continuing operations of approximately$16,707,000,$17,519,000, and the non-cash item adjustments, consisting of income from equity method investment of approximately $393,000, and change in fair market value of derivative liability of approximately $538,000, offset by stock-based compensation and service expense of approximately $1,816,000, amortization of debt issuance costs and debt discount of approximately $1,136,000, and loss on extinguishment of debt of approximately $9,077,000 resulted from the reduction in the conversion price of our June 2024 Convertible Note, and the changes in operating assets and liabilities, primarily consisting ofa decrease in operating lease obligation of approximately $113,000, and the non-cash items adjustment, consisting of change in fair market value of derivative liability of approximately $188,000, and gain on debts extinguishment of approximately $683,000, offset by depreciation of approximately $212,000, amortization of operating lease right-of-use asset of approximately $118,000, stock-based compensation and service expense of approximately $1,180,000, loss from equity method investments of approximately $8,590,000 mainly due to the impairment of goodwill acquired from Lab Services MSO acquisition resulting from Lab Services MSO’s lower revenues and net incomes than anticipated and the decline in our stock price and market capitalization, impairment of equity method investment - Epicon of approximately $455,000 due to Epicon’s series of operating losses and the joint venture partner unable to obtain funds to commence operations, and amortization of debt issuance costs and debt discount of approximately $544,000 resulting from our outstanding convertible debt and note payable, and the changes in operating assets and liabilities, primarily consisting ofan increase in accrued liabilities and other payables– related partiesof approximately$106,000$1,750,000 which was mainly driven by theincreasedincrease in accruedinterestprofessionalforfees of approximately $1,221,000 relatedparty.to our potential merger with YOOV in the year ended December 31, 2025 and the increase in accrued payroll liability and compensation of approximately $571,000.
Other expense, net, totaled $9,927,514 for thesee in full comparison$2,975,662year ended December 31, 2025, as compared to $2,198,354 for the year ended December 31, 2024,as compared to $953,327 for the year ended December 31, 2023,representing an increase of$2,022,335,$7,729,160, or212.1%,351.6%, which was primarily attributable to an increase in loss on extinguishment of debt of approximately $9,077,000 resulted from the reduction in the conversion price of our June 2024 Convertible Note, offset by a decrease in third party interest expense of approximately$1,077,000,$161,000, mainly driven by theincreasedecrease in amortization of debt discount and debt issuance costs of approximately$867,000$155,000,andathedecrease inincreased interest expense of approximately $210,000 from thirdrelated partydebts, an increase ininterest expense– related partyof approximately$9,000,$42,000,anaincreasedecrease in debt modification charge of approximately $839,000,a decrease in gain on debts extinguishment of approximately $683,000, andan increasein other expense of approximately $56,000, offset by an increasein gain from change in fair value of derivative liability of approximately$186,000,$164,000, and a decrease inimpairmentotherof equity method investment on Epiconexpense of approximately $142,000$455,000.mainly due to the gain from litigation settlement.
“We are a technology-focused company developing and acquiring innovative artificial intelligence platforms. Through our AI-driven subsidiary, we are advancing next-generation AI systems, including automated video generation, enterprise documentation, and workflow automation solutions. We are also expanding our intellectual property portfolio in cellular therapy and generative AI publishing and software. In addition, we are marketing the KetoAir™ breathalyzer device, which is registered with the U.S. …”see in full comparison
“We consider whether the fair value of our equity method investment has declined below its carrying value whenever adverse event or change in circumstance indicates that recorded value may not be recoverable. If we consider any decline to be other than temporary (based on various factors, including historical financial results and the overall health of the investee), then a write-down would be recorded to estimated fair value. Impairment of equity method investment amounted to $259,579 and $9,651,361 for the years ended December 31, 2024 and 2023, respectively.”see in full comparison
Full comparison: every changed paragraph (68)
We are a technology-focused company developing and acquiring innovative artificial intelligence platforms. Through our AI-driven subsidiary, we are advancing next-generation AI systems, including automated video generation, enterprise documentation, and workflow automation solutions. We are also expanding our intellectual property portfolio in cellular therapy and generative AI publishing and software. In addition, we are marketing the KetoAir™ breathalyzer device, which is registered with the U.S. Food and Drug Administration as a Class I medical device, and plan to pursue additional diagnostic applications for the technology. In addition, we owned and operated commercial real estate at our headquarters in Freehold, NJ through February 2026.
Overview
We are a commercial-stage
company dedicated to developing and delivering precision diagnostic consumer products. We are currently marketing the Keto Air breathalyzer
device and plan to develop additional diagnostic uses of the breathalyzer technology. In addition, we own commercial real estate that
houses our headquarters in Freehold, New Jersey.
We havehad the following
areas of focus in 20242025 and 20232024:
Laboratory Acquisitions
We had embarked on
a laboratory rollup strategy focused on forming joint ventures and acquiring laboratories that were accretive to our commercial
strategy. As a first step, in February 2023, we acquired a 40% membership interest in Lab Services MSO. Among other things, Lab
Services MSO provides toxicology and wellness testing services, a broad portfolio of diagnostic tests, and a broad array of test
services. During 2025, to preserve cash, the Company entered into discussions with Lab Services MSO for the potential redemption of
our investment and on February 26, 2025, we and Lab Services MSO entered into a Redemption and Abandonment Agreement, whereby Lab
Services MSO redeemed the 40% equity interest in Lab Services MSO held by us. Accordingly, beginning in February 2025, we no longer
offer laboratory services.
We are focused on bringing
forward intellectualthe property through joint existing
patent filingsapplications previously filed with the Massachusetts Institute of Technology (“MIT”). We completed
a sponsored research
and co-development project with MIT led by Professor Shuguang Zhang as Principal Investigator. Using the unique QTY
code protein design
platform, six water-soluble variant cytokine receptors have been successfully designed and tested in a laboratory to show binding affinity
affinity to the respective cytokines. We currently are focused on bringing forward the intellectualexisting propertypatent associatedapplications previously filed as part of
this program. We also continue to bring forward the existing patent application previously filed with thisArbele programrelated to CAR-T cellular
throughtherapy joint patent submissions.technologies.
We were granted
exclusive distributorship rights for the
KetoAir from Qi Diagnostics for the following territories: North America, South America,
the EU and the UK. For our commercialization
strategy, we intend to target the diabetes and obesity markets. We sell the
product through the KetoAir website and social media. We believe
the KetoAir device has some competitive advantages to other methods
for measuring ketosis.
Cessation of Laboratory Services
During the first quarter of 2025, to preserve cash, the Company entered into discussions with Lab Services MSO for the potential redemption of our investment and on February 26, 2025, we and Lab Services MSO entered into a Redemption and Abandonment Agreement, whereby Lab Services MSO redeemed the 40% equity interest in Lab Services MSO held by us. Accordingly, beginning in February 2025, we no longer offer laboratory services.
Acquisition of an AI Generated Publishing Company
On December 12, 2025, we acquired RPM Interactive, Inc., a Nevada corporation (“RPM”). As a result of the acquisition, effective December 12, 2025, we are advancing next-generation AI systems, including automated video generation, enterprise documentation, and workflow automation solutions.
In order to preserve
cash and focus on our core laboratory rollup strategy and product
commercialization, we have currently suspended all research and development
efforts related to cellular therapytherapy. inWe orderare to redirectredirecting our funding
efforts to our core business strategies outlined above.
We are a commercial-stage company dedicated to developing and delivering
precision diagnostic consumer products. We are currently marketing the Keto Air breathalyzer device and plan to develop additional diagnostic
uses of the breathalyzer technology.
In
addition, we own commercial real estate that houses our headquarters in Freehold, New Jersey. TheseOur consolidated financial statements
have been
prepared assuming that we will continue as a going concern, which contemplates, among other things, the realization of assets
and the
satisfaction of liabilities in the normal course of business.
As reflected in the accompanying consolidated
consolidated financial statements, we had working capital deficit of approximately $10,646,000$12,651,000 at December 31, 20242025 and had incurred recurring net
netlosses lossesfrom continuing operations and generated negative cash flow from operating activities of continuing operations of approximately $7,903,000
$17,519,000 and $4,969,000$4,581,000 for the year ended December
31, 2024,2025, respectively.
We have a limited operating
history and our continued
growth is dependent upon the continuation of generating rentalrevenue for selling of Keto Air, generating revenue from ouradvanced income-producingAgentic realAI estatesystems,
propertyincluding inautomated Newvideo Jerseygeneration and workflow automation, and obtaining additional financing to fund future obligations and pay liabilities
arising from ordinary course
business operations. In addition, the current cash balance cannot be projected to cover our operating expenses
for the next twelve months
from the release date of this report.Annual Report on Form 10-K. These matters raise substantial doubt about our ability
to continue as a going concern. Our ability
to continue as a going concern is dependent on our ability to raise additional capital, implement
our business plan, and generate sufficient
revenues. There are no assurances that we will be successful in our efforts to generate sufficient
revenues, maintain sufficient cash
balance or report profitable operations or to continue as a going concern. We plan on raising capital
through the sale of equity to implement
our business plan. However, there is no assurance these plans will be realized and that any additional
financings will be available to
us on satisfactory terms and conditions, or at all.
Significant estimates
during the years ended December
31, 20242025 and 20232024 include the useful life of investment in real estate and intangible assets, the assumptions
used in assessing impairment of long-term assets, the
allowance for credit loss, the valuation of deferred tax assets and the associated valuation allowances, the valuation
of stock-based
compensation, compensation,the valuation of Series D convertible preferred stock (“Series D Preferred Stock”), the fair value of the consideration
given in the purchase of RPM, the fair value of assets acquired and liabilities assumed in acquisition, and the assumptions used to determine
fair value of warrants and embedded conversion features of convertible
note payable, and the fair value of the consideration given and assets acquired in the purchase of our equity interest in Lab Services
MSO.payable.
Investment in Unconsolidated
Companies
We use the equity method
of accounting for our investment in, and earning or loss of, company that we do not control but over which we do exert significant influence.
We apply the equity method by initially recording these investments at cost, as equity method investments, subsequently adjusted for equity
in earnings and cash distributions.
We consider whether the
fair value of our equity method investment has declined below its carrying value whenever adverse event or change in circumstance indicates
that recorded value may not be recoverable. If we consider any decline to be other than temporary (based on various factors, including
historical financial results and the overall health of the investee), then a write-down would be recorded to estimated fair value. Impairment
of equity method investment amounted to $259,579 and $9,651,361 for the years ended December 31, 2024 and 2023, respectively.
We classify distributions
received from equity method investments using the cumulative earnings approach. Distributions received are considered returns on the investment
and classified as cash inflows from operating activities. If, however, the investor’s cumulative distributions received, less distributions
received in prior periods determined to be returns of investment, exceeds cumulative equity in earnings recognized, the excess is considered
a return of investment and is classified as cash inflows from investing activities.
Real Property Rental
We have determined that
the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 606 does not
apply to rental contracts, which are within the scope of other revenue recognition accounting standards.
Rental income from operating
leases is recognized on a straight-line basis under the guidance of ASC 842. Lease payments under tenant leases are recognized on a straight-line
basis over the term of the related leases. The cumulative difference between lease revenue recognized under the straight-line method and
contractual lease payments are included in rent receivable on the consolidated balance sheets.
Real
Property Rental Revenue
For
the year ended December 31, 2024, we had real property rental revenue of $1,333,403, as compared to $1,255,681 for the year ended December
31, 2023, an increase of $77,722, or 6.2%. The increase was primarily attributable to the increase in the number of tenants occupying
the building in the year ended December 31, 2024 as compared to the year ended December 31, 2023. We expect that our revenue from real
property rent will remain at its current level with minimal increase in the near future.
Real Property Operating
Expenses
Real property operating
expenses consist of property management fees, property insurance, real estate taxes, depreciation, repairs and maintenance fees, utilities
and other expenses related to our rental properties.
For the year ended December
31, 2024, our real property operating expenses amounted to $1,065,574, as compared to $1,017,493 for the year ended December 31, 2023,
an increase of $48,081, or 4.7%. The increase was primarily attributable to an increase in electric fee of approximately $40,000 and an
increase in other miscellaneous items of approximately $8,000.
Real Property Operating
Income
Our real property operating
income for the year ended December 31, 2024 was $267,829, representing an increase of $29,641, or 12.4%, as compared to $238,188 for the
year ended December 31, 2023. The increase was primarily attributable to the increase in real property rental revenue as described above.
We expect our real property operating income will remain at its current level with minimal increase in the near future.
Income (Loss) from
Equity Equity
Method Investment – Lab Services MSO
For the year ended December 31, 2025, we had income from our investment in Lab Services MSO of $392,677, which consisted of our share of Lab Services MSO’s net income of $503,833 and amortization of identifiable intangible assets acquired from Lab Services MSO acquisition of $111,156. We sold our ownership of 40% of Lab Services MSO on February 26, 2025.
For the year ended December
31, 2023, we had loss from our investment in Lab Services MSO of $8,571,647, which consists of our share of Lab Services MSO’s net
income of $1,236,391, and amortization of identifiable intangible assets acquired from Lab Services MSO acquisition of $611,356, and impairment
of goodwill acquired from Lab Services MSO acquisition of $9,196,682, which was primarily attributable to Lab Services MSO’s lower
revenues and net incomes than anticipated and the decline in our stock price and market capitalization.
As a result of the foregoing,
for the year ended December 31, 2024,2025, loss from operations amounted to $4,927,732,$7,591,359, as compared to $15,753,683$4,841,250 for the year ended December
31, 2023,2024, representing aan decreaseincrease of $10,825,951,$2,750,109, or 68.7%.56.8%.
Other (expense) income
mainly includes third party
and related party interest expense, debt modification charge, change in fair value of derivative liability,
impairment of equity method investmentloss on Epicon,extinguishment gain on debts extinguishment,of
debt, and other miscellaneous expense.income (expense).
Other expense, net, totaled $9,927,514 for the
$2,975,662year ended December 31, 2025, as compared to $2,198,354 for the year ended December 31, 2024, as compared to $953,327 for the year ended December 31, 2023,representing an increase of $2,022,335,$7,729,160,
or 212.1%,351.6%, which was primarily attributable to an increase in loss on extinguishment of debt of approximately $9,077,000 resulted from
the reduction in the conversion price of our June 2024 Convertible Note, offset by a decrease in third party interest expense of approximately $1,077,000,
$161,000, mainly driven
by the increasedecrease in amortization of debt discount and debt issuance costs of approximately $867,000$155,000, anda thedecrease
in increased interest expense
of approximately $210,000 from thirdrelated party debts, an increase in interest expense – related party of approximately $9,000,$42,000, ana increase
decrease in debt modification charge of approximately $839,000, a decrease in gain on debts extinguishment of approximately $683,000, and an increase
in other expense of approximately $56,000, offset by an increase in gain from change in fair value of derivative liability of approximately
$186,000, $164,000, and a decrease in impairmentother of equity method investment on Epiconexpense of approximately
$142,000 $455,000.mainly due to the gain from litigation settlement.
Net Loss from Continuing Operations
As a result of the factors described above, our net loss from continuing operations was $17,518,873 for the year ended December 31, 2025, as compared to $7,039,604 for the year ended December 31, 2024, representing an increase of $10,479,269, or 148.9%.
Net Loss from Discontinued Operations
Our net loss from discontinued operations was $742,103 for the year ended December 31, 2025, as compared to $863,790 for the year ended December 31, 2024, representing a decrease of $121,687, or 14.1%.
As
a result of the factors described above, our
net loss was $18,260,976 for the year ended December 31, 2025, as compared to $7,903,394 for the year ended December 31, 2024, asrepresenting
an compared to $16,707,010
for the year ended December 31, 2023, a decreaseincrease of $8,803,616,$10,357,582, or 52.7%.131.1%.
The
net loss attributable to our common shareholders
(after taking into effect $162,473 in deemed contribution) was $18,098,503, or $5.64 per share (basic and diluted), for the year ended
December 31, 2025, as compared to $7,903,394, or $8.44 per share (basic and diluted), for the year ended December 31,
2024, asrepresenting
an comparedincrease toof $16,707,010,$10,195,109, or $23.80 per share (basic and diluted), for the year ended December 31, 2023, a decrease of $8,803,616,
or 52.7%.129.0%.
Our reporting currency
is the
U.S. dollar. The functional currency of our parent company, AHS, Avalon RT 9, Avalon Lab, and Q&A Distribution is the U.S. dollar and
and the functional currency of Avalon Shanghai is the Chinese Renminbi (“RMB”). The financial statements of our subsidiary whose
whose functional currency is the RMB are translated to U.S. dollars using period end rate of exchange for assets and liabilities, average rate
rate of exchange for revenues, costs, and expenses and cash flows, and at historical exchange rate for equity. Net gains and losses resulting
from foreign exchange transactions are included in the results of operations. As a result of foreign currency translations, which are
a non-cash adjustment, we reported a foreign currency translation loss of $273$9,402 and $18,590$273 for the yearsyear ended December 31, 20242025 and 2023,2024,
respectively. This non-cash loss had the effect of increasing our reported comprehensive loss in each respective period.
As a result
of our foreign currency translation
adjustment, we had comprehensive loss of $7,903,667$18,270,378 and $16,725,600$7,903,667 for the yearsyear ended December 31,
2024 2025 and 2023,2024, respectively.
We have
a limited operating history and our continued
growth is dependent upon the continuation of generating rentalrevenue for selling of Keto Air, generating revenue from ouradvanced income-producingAgentic AI systems,
realincluding estateautomated propertyvideo ingeneration Newand Jersey,workflow automation, as well as obtaining additional financing to fund future obligations and
pay liabilities arising from
ordinary course business operations. In addition, the current cash balance cannot be projected to cover our
operating expenses for the
next twelve months from the release date of this report. These matters raise substantial doubt about our ability
to continue as a going
concern. Our ability to continue as a going concern is dependent on our ability to raise additional capital, implement
our business plan,
and generate sufficient revenues. There are no assurances that we will be successful in our efforts to generate sufficient
revenues, maintain
sufficient cash balance or report profitable operations or to continue as a going concern. As described below, we have raised additional
capital through the sale of equity and debt and weWe plan to raise additional capital
in the future through the sale of equity or debt to
implement our business plan. However, there is no assurance these plans will be realized
and that any additional financings will be available
to us on satisfactory terms and conditions, if at all.
Our working capital deficit increased by $2,005,180 to $12,651,237 at December 31, 2025 from $10,646,057 at December 31, 2024. The increase in working capital deficit was primarily attributable to a decrease in cash of approximately $2,549,000, an increase in accrued professional fees of approximately $1,221,000 which was mainly attributable to the increase in professional services related to our potential merger with YOOV, an increase in accrued payroll liability and compensation of approximately $571,000, an increase in stock subscription liability of $150,000 resulting from the securities purchase agreement signed in June 2025, and an increase in bridge loan payable, net, of approximately $197,000 driven by our bridge loan financing in December 2025, offset by an increase in receivable from sale of equity method investment of $748,000 resulting from execution of the Redemption Agreement signed on February 26, 2025 and the Confidential Settlement Agreement and Mutual Release signed on August 26, 2025 as described elsewhere in this report, a decrease in accrued liabilities and other payables – related parties of approximately $633,000 which was extinguished upon our sale of equity method investment in the first quarter of 2025, and a decrease in convertible note payable, net, of approximately $1,377,000 mainly due to the conversion of our June 2024 Convertible Note in the principal amount of approximately $2,011,000 into our common stock in the year ended December 31, 2025 and the increase in debt discount of approximately $27,000 resulting from our issuance of the July 2025 Convertible Note in the third quarter of 2025, which was offset by our issuance of the July 2025 Convertible Note with principal of $200,000 in the third quarter of 2025 and the amortization of debt discount and debt issuance costs for our convertible note of approximately $461,000 (excluding the initial fair value of the Second Warrant of $621,353) in the year ended December 31, 2025.
Our working capital deficit increased
by $4,734,238 to $10,646,057 at December 31, 2024 from $5,911,819 at December 31, 2023. The increase in working capital deficit was primarily
attributable to a decrease in rent receivable of approximately $117,000 driven by collection efforts in the year ended December 31, 2024,
an increase in accrued liabilities and other payables of $161,000 mainly due to the increase in accrued Delaware state franchise tax in
the year ended December 31, 2024, an increase in accrued liabilities and other payables – related parties of approximately $526,000
mainly due to our equity method investment payable paid by a related party on our behalf, a significant increase in advance from pending
sale of noncontrolling interest – related party of approximately $2,622,000 resulting from advance received in connection with the
membership interest purchase agreement entered into in November 2023 in the year ended December 31, 2024, an increase in derivative liability
of approximately $103,000, an increase in note payable, net, of approximately $5,715,000, which was attributable to the reclassification
of note payable from non-current to current, and an increase in convertible note payable, net, of approximately $189,000, offset by n
increase in cash of approximately $2,571,000, a decrease in accrued professional fees of approximately $1,193,000 resulting from payments
made to our professional service providers in the year ended December 31, 2024, a decrease in operating lease obligation of approximately
$119,000, and a decrease in equity method investment payable of approximately $667,000 resulting from payment of $100,000 made to investee
and payment of approximately $567,000 made by a related party on our behalf in the year ended December 31, 2024.
Net
cash flow used in operating activities for the year ended December 31, 2024 was $4,969,205, which primarily reflected our
consolidated net loss of approximately $7,903,000, and the non-cash item adjustment, consisting of change in fair market value of
derivative liability of approximately $374,000, and the changes in operating assets and liabilities, primarily consisting of a
decrease in accrued liabilities and other payables of approximately $1,165,000 resulting from payments made to our vendors in the
year ended December 31, 2024, and a decrease in operating lease obligation of approximately $123,000, offset by a decrease in rent
receivable of approximately $131,000 driven by our collection efforts, and the non-cash items adjustment, primarily consisting of
depreciation of approximately $178,000, amortization of operating lease right-of-use asset of approximately $123,000, stock-based
compensation and service expense of approximately $522,000, loss from equity method investments of approximately $847,000 which was
mainly attributable to the amortization of identifiable intangible assets acquired from Lab Services MSO acquisition of
approximately $667,000 and the impairment of goodwill acquired from Lab Services MSO acquisition of approximately $260,000,
resulting from Lab Services MSO’s lower revenues and net incomes than anticipated and the decline in our stock price and
market capitalization, distribution of earnings from equity method investment of approximately $612,000, amortization of debt
issuance costs and debt discount of approximately $1,411,000, impairment of laboratory equipment of approximately $111,000, and debt
modification charge of approximately $689,000.
Net cash
flow used in
operating activities from continuing operations for the year ended December 31, 20232025 was $6,504,718,$4,580,620, which primarily reflected our consolidated
net net
loss from continuing operations of approximately $16,707,000,$17,519,000, and the non-cash item adjustments, consisting of income from equity
method investment of approximately $393,000, and change in fair market value of derivative liability of approximately $538,000, offset
by stock-based compensation and service expense of approximately $1,816,000, amortization of debt issuance costs and debt discount of
approximately $1,136,000, and loss on extinguishment of debt of approximately $9,077,000 resulted from the reduction in the conversion
price of our June 2024 Convertible Note, and the changes in operating assets and liabilities, primarily consisting of a decrease in operating
lease obligation of approximately $113,000, and the non-cash items adjustment, consisting of change in fair market value of derivative
liability of approximately $188,000, and gain on debts extinguishment of approximately $683,000, offset by depreciation of approximately
$212,000, amortization of operating lease right-of-use asset of approximately $118,000, stock-based compensation and service expense of
approximately $1,180,000, loss from equity method investments of approximately $8,590,000 mainly due to the impairment of goodwill acquired
from Lab Services MSO acquisition resulting from Lab Services MSO’s lower revenues and net incomes than anticipated and the decline
in our stock price and market capitalization, impairment of equity method investment - Epicon of approximately $455,000 due to Epicon’s
series of operating losses and the joint venture partner unable to obtain funds to commence operations, and amortization of debt issuance
costs and debt discount of approximately $544,000 resulting from our outstanding convertible debt and note payable, and the changes in
operating assets and liabilities, primarily consisting of an increase in accrued
liabilities and other payables – related parties
of approximately $106,000$1,750,000 which was mainly driven by the increasedincrease in accrued interestprofessional forfees of approximately
$1,221,000 related party.to our potential merger with YOOV in the year ended December 31, 2025 and the increase in accrued payroll liability
and compensation of approximately $571,000.
Net cash flow used in operating activities from continuing operations for the year ended December 31, 2024 was $4,668,458, which primarily reflected our consolidated net loss from continuing operations of approximately $7,040,000, and the non-cash item adjustment, consisting of change in fair market value of derivative liability of approximately $374,000, and the changes in operating assets and liabilities, primarily consisting of an increase in prepaid expense and other assets of approximately $107,000 mainly due to the increase in finished goods of approximately $92,000, a decrease in accrued liabilities and other payables of approximately $1,206,000 resulting from payments made to our vendors in the year ended December 31, 2024, and a decrease in operating lease obligation of approximately $123,000, offset by the non-cash items adjustment, primarily consisting of amortization of operating lease right-of-use asset of approximately $123,000, stock-based compensation and service expense of approximately $522,000, loss from equity method investments of approximately $847,000 which was mainly attributable to the amortization of identifiable intangible assets acquired from Lab Services MSO acquisition of approximately $667,000 and the impairment of goodwill acquired from Lab Services MSO acquisition of approximately $260,000, resulting from Lab Services MSO’s lower revenues and net incomes than anticipated and the decline in our stock price and market capitalization, distribution of earnings from equity method investment of approximately $612,000, amortization of debt issuance costs and debt discount of approximately $1,292,000, impairment of laboratory equipment of approximately $111,000, and debt modification charge of approximately $689,000.
Net cash flow provided by investing activities
from continuing operations was $1,083,026 for the year ended December 31, 2025, as compared to net cash flow used in investing activities
from wascontinuing operations of $100,000 for the year ended December 31, 2024, as compared to $22,159 for the year ended December
31, 2023.2024. During the year ended December 31, 2025, we received proceeds
from sale of equity method investment of $1,069,000 and acquired cash on acquisition of approximately $14,000. During the year ended December
31, 2024, we paid $100,000 for the acquisition of a 40% interest in Lab Services MSO. During
the year ended December 31, 2023, we made payment for purchase of property and equipment of approximately $22,000.
Net
cash flow provided by financing activities
from continuing operations was $7,638,667$1,400,820 for the year ended December 31, 2024,2025, as compared to $4,825,337$7,638,667 for the year ended December
31, 2024. During the year ended December 31, 2023.2025, we received proceeds from issuance of July 2025 Convertible Note of $200,000, proceeds
from stock subscription of $150,000, an advance from pending sale of noncontrolling interest in subsidiary of approximately $50,000, net
proceeds from the issuance of convertible preferred stock of $290,000 (net of cash paid for convertible preferred stock issuance costs
of $10,000), proceeds from the issuance of bridge loan of $300,000, and proceeds from issuance of common stock and warrants approximately
$476,000, offset by payments made for offering costs of approximately $65,000. During the year ended December 31, 2024, we received net
proceeds from the issuance of convertible debts and
warrants of approximately $3,085,000 (net of original issue discount of approximately
$177,000 and cash paid for convertible note issuance
costs of approximately $283,000), an advance from the pending sale of a noncontrolling
interest in a subsidiary of approximately $2,122,000,
net proceeds from equity offering of approximately $2,719,000 (net of cash paid
for commission and other offering costs of approximately
$138,000), and proceeds from issuance of convertible preferred stock of $3,500,000,
offset by repayments made for loan payable –
related party of $400,000, and made for convertible debts of approximately $3,388,000. During the year ended December 31, 2023, we received
proceeds from related party borrowings of $850,000, and net proceeds from issuance of convertible debt and warrants of approximately $2,238,000
(net of original issue discount of $135,000 and cash paid for convertible note issuance costs of approximately $327,000), and net proceeds
from issuance of balloon promissory note of approximately $936,000 (net of cash paid for promissory note issuance costs of approximately
$64,000), and net proceeds from equity offering of approximately $616,000 (net of cash paid for commission and other offering costs of
approximately $19,000), and advance from pending sale of noncontrolling interest in subsidiary of approximately $486,000, offset by repayments
made for convertible debt of $300,000.
In addition, the impact that the imposition of tariffs and changes to global trade policies could have on our results of operations is uncertain.
August 2019 Credit
Facility
In the third quarter
of 2019, we entered into a $20 million credit facility (the “Line of Credit”) provided by our Chairman of the Board and a
significant (and our largest) stockholder, Wenzhao Lu. The Line of Credit allowed us to request loans thereunder and to use the proceeds
of such loans for working capital and operating expense purposes until the facility matured on December 31, 2024.
At-the-Market Offering
In June 2023, we entered
into a sales agreement (the “Sales Agreement”) with Roth Capital Partners, LLC (“Roth”) under which we may offer
and sell from time to time shares of our common stock having an aggregate offering price of up to $3.5 million. From July 1, 2023 to August
16, 2024, we sold an aggregate of 312,285 shares of our common stock at an average price of $11.19 per share to investors pursuant to
the Sales Agreement, and received net cash proceeds of $3,388,251, net of cash paid for Roth’s commissions and other fees of $104,992.
March 2024 Convertible
Note Financing
What changed in the latest 10-Q
Risk Factors
New heading “Risks Relating to Our Capital Structure and Nasdaq Listing”
New heading “We are currently listed on The Nasdaq Capital Market. If we are unable to maintain listing of our securities on Nasdaq or any stock exchange, our stock price could be adversely affected and the liquidity of our stock and our ability to obtain financing could be impaired and it may be more difficult for our shareholders to sell their securities.”
Largest changes
“We are currently listed on The Nasdaq Capital Market. If we are unable to maintain listing of our securities on Nasdaq or any stock exchange, our stock price could be adversely affected and the liquidity of our stock and our ability to obtain financing could be impaired and it may be more difficult for our shareholders to sell their securities.”see in full comparison
“As previously disclosed on a Current Report on Form 8-K filed by us on April 17, 2026, we received a notification from The Nasdaq Stock Market, LLC (“Nasdaq”) notifying us that we were not in compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. …”see in full comparison
“If we are unable to regain compliance with the Nasdaq minimum bid price requirement and Nasdaq delists our common stock and warrants and we are unable to obtain listing on another national securities exchange, a reduction in some or all of the following may occur, each of which could have a material adverse effect on our shareholders:”see in full comparison
“We are currently listed on the Nasdaq Capital Market, a national securities exchange. Nasdaq requires companies desiring to list their common stock to meet certain listing criteria including total number of shareholders: minimum stock price, total value of public float, and in some cases total shareholders’ equity and market capitalization. Our failure to meet such applicable listing criteria could prevent us from listing our common stock on Nasdaq. …”see in full comparison
see in full comparisonInRiskaddition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider thefactors that affect our business and financial results are discussed in Part I,“Item1A.1A “RiskFactorsFactors,” in our Annual Report on Form 10-K for the year ended December 31,2025,2025 as filed with the SEC on March 30,2026,2026 (“Annual Report”). Except astheset forthsamebelow,maytherebehaveupdatedbeen no material changes in our risk factors fromtimethosetopreviouslytime,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 futurefutureresults. The risks described in our Annual Reporton Form 10-K mayare notbethe only risksfacingweus.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, financialconditioncondition, and/or operating results.results.If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.
Full comparison: every changed paragraph (7)
InRisk
addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors that affect our business and financial results are discussed
in Part I, “Item 1A.1A “Risk FactorsFactors,” in our Annual Report
on Form 10-K for the year ended December 31, 2025,2025 as filed with the
SEC on March 30, 2026,2026 (“Annual Report”). Except as theset
forth samebelow, maythere behave updatedbeen no material changes in our risk factors from timethose topreviously time,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
future results. The risks described in our Annual Report on Form 10-K mayare not be the only risks facingwe us.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
condition, and/or operating
results. results.If any of the risks actually occur, our business, financial condition, and/or results of operations could be negatively affected.
Risks Relating to Our Capital Structure and Nasdaq Listing
We are currently listed on The Nasdaq Capital Market. If we are unable to maintain listing of our securities on Nasdaq or any stock exchange, our stock price could be adversely affected and the liquidity of our stock and our ability to obtain financing could be impaired and it may be more difficult for our shareholders to sell their securities.
We are currently listed on the Nasdaq Capital Market, a national securities exchange. Nasdaq requires companies desiring to list their common stock to meet certain listing criteria including total number of shareholders: minimum stock price, total value of public float, and in some cases total shareholders’ equity and market capitalization. Our failure to meet such applicable listing criteria could prevent us from listing our common stock on Nasdaq. In the event we are unable to have our shares traded on Nasdaq, our common stock could potentially trade on the OTCQX or the OTCQB, each of which is generally considered less liquid and more volatile than Nasdaq. Our failure to have our shares traded on the Nasdaq could make it more difficult for you to trade our shares, could prevent our common stock trading on a frequent and liquid basis and could result in the value of our common stock being less than it would be if we were able to list our shares on Nasdaq.
As previously disclosed on a Current Report on Form 8-K filed by us on April 17, 2026, we received a notification from The Nasdaq Stock Market, LLC (“Nasdaq”) notifying us that we were not in compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. Specifically, Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. Therefore, in accordance with Listing Rule 5810(c)(3)(A), we were provided 180 calendar days, or until December 24, 2025, to regain compliance with the Rule. Subsequently, on December 24, 2025, Nasdaq determined the Company was eligible for an additional 180 calendar days, or until October 12, 2026, to regain compliance with the Rule. If we fail to regain compliance during the second 180-day period, then Nasdaq will notify us of its determination to delist our common stock, at which as will have an opportunity to appeal the delisting determination to a Hearings Panel.
If we are unable to regain compliance with the Nasdaq minimum bid price requirement and Nasdaq delists our common stock and warrants and we are unable to obtain listing on another national securities exchange, a reduction in some or all of the following may occur, each of which could have a material adverse effect on our shareholders:
As a smaller reporting company, the Company is
not required to disclose material changes to the risk factors that were contained in the Company’s Annual Report on Form 10-K for
the year ended December 31, 2025, as the same may be updated from time to time.
Management's Discussion & Analysis (MD&A)
New heading “Artificial Intelligence Software Segment - Avalon Quantum AI, LLC / RPM Interactive”
New heading “The Catch-Up AI-powered Video Platform - Phase 1”
New heading “The Beacon Agentic Generative Engine Optimization (GEO) Search Product”
New heading “Consumer Health Technology Segment - Keto-Air Breathalyzer”
New heading “Recent Developments”
New heading “Equity Purchase Agreement”
New heading “Business Loan and Security Agreement”
New heading “Forbearance Letter Agreement”
Removed heading “Product Commercialization”
Removed heading “Artificial Intelligence Content Technology”
Largest changes
“Artificial Intelligence Software Segment - Avalon Quantum AI, LLC / RPM Interactive”see in full comparison
“On July 22, 2026, the Company entered into an Equity Purchase Agreement (the “Purchase Agreement”) with Hudson Global Ventures, LLC, a Nevada limited liability company (the “Investor”). Pursuant to the Purchase Agreement, upon the terms and subject to the conditions set forth therein, the Company may, from time to time during the Commitment Period, in its sole discretion, require the Investor to purchase shares of the Company’s common stock, par value $0.0001 per shares (“Common Stock”) having an aggregate purchase price of up to $10,000,000 at a fixed purchase price per share of $0.30. …”see in full comparison
“Artificial Intelligence Content Technology”see in full comparison
“Through our AI-driven subsidiary, we are advancing next-generation agentic AI systems targeted to consumers and small businesses, starting with an SaaS automated video production platform. We are also expanding our intellectual property portfolio in cellular therapy and generative AI publishing and software. In addition, we are marketing the KetoAir™ breathalyzer device, which is registered with the U.S. Food and Drug Administration as a Class I medical device, and plan to pursue additional diagnostic applications for the technology. …”see in full comparison
“Our artificial intelligence software segment is operated through Avalon Quantum AI, LLC, a wholly owned subsidiary of our company organized in the State of Nevada and formed in connection with our acquisition of RPM Interactive, Inc. (“RPM”) in December 2025. RPM merged with and into Avalon Quantum AI, LLC pursuant to the merger, and Avalon Quantum AI, LLC continues to operate as our wholly owned subsidiary. …”see in full comparison
“The Beacon Agentic Generative Engine Optimization (GEO) Search Product”see in full comparison
Full comparison: every changed paragraph (73)
The
following discussion and analysis of our financial
condition and results of operations for the three and six months ended MarchJune 31,30, 2026
and 2025 should be read in conjunction with our condensed
consolidated financial statements and related notes to those condensed consolidated
financial statements that are included elsewhere in
this Quarterly Report on Form 10-Q.
We are a technology-focused company with a strategic focus on developing innovative Agentic AI software and consumer health products that target consumers and small businesses. We recently announced our intent to expand into drone interception and surveillance AI enhanced technology solutions through the establishment of Autonomous Air Defense Systems LLC. Throughout our operating history, we have maintained our corporate identity, management team and original mission while strategically evolving our business in response to market conditions and commercial opportunities, with each such evolution being the product of deliberate decisions. We are actively seeking complementary bolt-on AI acquisitions that could generate near-term revenue to supplement our current operations as both segments continue to develop. We believe our diverse and evolving portfolio of commercial activities reflects our ongoing commitment to identifying and building value-oriented technology businesses for the benefit of its stockholders.
Through our AI-driven subsidiary, we are advancing next-generation agentic AI systems targeted to consumers and small businesses, starting
with an SaaS automated video production platform. We are also expanding our intellectual
property portfolio in cellular therapy and generative AI publishing and software. In addition, we are marketing the KetoAir™ breathalyzer
device, which is registered with the U.S. Food and Drug Administration as a Class I medical device, and plan to pursue additional diagnostic
applications for the technology. In addition, we owned and operated commercial real estate at our headquarters in Freehold, NJ through
February 2026.
We had the following
areas of focus in the three
and six months ended MarchJune 31,30, 2026 and 2025:
We currently operate through two business segments: (i) an artificial intelligence software segment, through which we develop and commercialize an AI-driven, short-form agentic video generation platform and an agentic Generative Engine Optimization (GEO) search product operated by Avalon Quantum AI, LLC, our wholly owned subsidiary formed in connection with our acquisition of RPM Interactive, Inc. in December 2025; and (ii) a consumer health technology segment, through which we distributes the Keto Air breathalyzer device - a non-invasive consumer breathalyzer that measures ketosis levels and is sold in North America, bearing an FDA registration number. Each segment is described more fully below.
Artificial Intelligence Software Segment - Avalon Quantum AI, LLC / RPM Interactive
Our artificial intelligence software segment is operated through Avalon Quantum AI, LLC, a wholly owned subsidiary of our company organized in the State of Nevada and formed in connection with our acquisition of RPM Interactive, Inc. (“RPM”) in December 2025. RPM merged with and into Avalon Quantum AI, LLC pursuant to the merger, and Avalon Quantum AI, LLC continues to operate as our wholly owned subsidiary. Avalon Quantum AI LLC is advancing next-generation Agentic AI software products that we believe are designed to deliver material revenue increases for small businesses and content creators.
The Catch-Up AI-powered Video Platform - Phase 1
The Catch-Up platform is an AI-driven, short-form video generation software product. In its current Phase 1 form, the platform enables content creators - with an initial focus on the podcasting market - to input a topic of their choosing, after which the platform automatically scrapes YouTube for relevant videos, identifies the most-viewed or most-discussed content on that topic, and generates a structured, short-form video featuring an AI-generated avatar of the creator that replicates their voice and likeness. Each short-generated video consists of three segments: an introduction delivered by the creator’s AI avatar, the featured video clip sourced by the platform, and a concluding statement also delivered by the AI avatar.
ResearchCatch-Up andPhase 2 Development
Phase 2 of the Catch-Up platform is currently in development and is expected to launch in Q3 of 2026. As announced on March 31, 2026, the Company hired Caylent, Inc. a cloud-native services company and an Amazon Web Services (AWS) Premier Tier Consulting Partner, to support the development of this Phase 2 AWS-based initiative. This Phase 2 development is expected to transition the platform from a manually configured AI video production system into a fully autonomous, agentic AI-driven video platform. Phase 2 is expected to expand the platform’s user base beyond podcasters to a substantially broader range of content creators and marketers, including social media influencers and individuals or businesses engaged in product marketing and e-commerce.
The Beacon Agentic Generative Engine Optimization (GEO) Search Product
The Beacon Agentic GEO search product is designed to help small, local service businesses get recommended by AI systems like ChatGPT, Gemini, Claude, Perplexity and Grok. The agentic software product is designed to autonomously; a) diagnose a small businesses AI visibility and SEO effectiveness in about 60 seconds, b) provide a visibility score, and c) generate implementation-ready fixes upon approval. The Beacon app will be offered in the form of a monthly subscription fee.
Consumer Health Technology Segment - Keto-Air Breathalyzer
Our consumer health technology segment is centered on the Keto Air breathalyzer device, a non-invasive consumer health product that allows users to determine whether they are in a state of nutritional ketosis, and at what level, by exhaling into a compact, pen-like breathalyzer. Ketosis is a metabolic state in which the body burns fat for fuel rather than carbohydrates, and is widely associated with low-carbohydrate and ketogenic dietary regimens. The Keto Air device represents a meaningful improvement over prior methods of measuring ketosis, such as urine test strips or earlier-generation breathalyzers that required cartridge replacements, offering users a convenient, reusable, and non-invasive testing experience.
We entered into an exclusive North American distribution agreement for the Keto-Air technology and device in 2024. Pursuant to this agreement, we have exclusive distribution rights in the United States, Canada and Mexico through July of 2025 and since that time, we continue to be the only distributor in North America. We believe this provides us with a meaningful competitive advantage in the North American ketosis monitoring market for the duration of the agreement.
We are focused on bringing forward the existing
patent applications previously filed with the Massachusetts Institute of Technology (“MIT”). We completed a sponsored research
and co-development project with MIT led by Professor Shuguang Zhang as Principal Investigator. Using the unique QTY code protein design
platform, six water-soluble variant cytokine receptors have been successfully designed and tested in a laboratory to show binding affinity
to the respective cytokines. We currently are focused on bringing forward the existing patent applications previously filed as part of
this program. We also continue to bring forward the existing patent application previously filed with Arbele related to CAR-T cellular
therapy technologies.
-2929--
Product Commercialization
We have begun the commercialization and development
of a versatile breathalyzer system.
We were granted distributorship rights for the
KetoAir from Qi Diagnostics for the following territories: North America, South America, the EU and the UK. For our commercialization
strategy, we intend to target the diabetes and obesity markets. We sell the product through the KetoAir website and social media. We believe
the KetoAir device has some competitive advantages to other methods for measuring ketosis.
The KetoAir is a handheld device that allows the
user to detect acetone levels in exhaled breath. The acetone level is in concentration units (ppm, part-per-million) such that the user
will know his/her real-time ketosis status: inadequate ketosis (0-3.99 ppm), mild ketosis (4-9.99 ppm), optimal ketosis (10-40 ppm), or
alarming level (> 40 ppm). The KetoAir is registered with the United States Food and Drug Administration as a Class I medical device.
The device is also paired with an “AI Nutritionist” software program (via Bluetooth connection) which is downloadable from
Google Play (for Android mobile phones, approved) and iPhone (the app is currently being reviewed by Apple iOS AppStore). It helps users
monitor and manage their ketogenic diet and related programs. We believe the KetoAir can be an essential tool to help diabetic patients
adhere to their therapeutic programs and optimize their ketogenic dietary management.
Artificial Intelligence Content Technology
Through our wholly-owned subsidiary, Avalon Quantum
AI LLC, we are advancing next-generation Agentic AI systems, including automated video generation and small business marketing automation
solutions.
As
reflected in the accompanying condensed consolidated
financial statements, we had working capital deficit of approximately $2,774,000 $4,093,000
at MarchJune 31,30, 2026 and had incurred recurring net losses
from continuing operations and generated negative cash flow from operating activities
of continuing operations of approximately $4,377,000
$6,555,000 and $2,860,000$3,556,000 for the threesix months ended MarchJune 31,30, 2026, respectively.
-3030-- We have a limited operating history and our continued
growth is dependent upon the continuation of generating revenue for selling of Keto Air, generating revenue from advanced
Agentic AI systems,
including automated video generation and small business marketing automation, the continuation of generating revenue
for selling of Keto Air, and obtaining additional financing to fund future obligations
and pay liabilities arising from ordinary course
business operations. In addition, the current cash balance cannot be projected to cover
our operating expenses for the next twelve months
from the release date of this Quarterly Report on Form 10-Q. These matters raise substantial
doubt about our ability to continue as a
going concern. Our ability to continue as a going concern is dependent on our ability to raise
additional capital, implement our business
plan, and generate sufficient revenues. There are no assurances that we will be successful
in our efforts to generate sufficient revenues,
maintain sufficient cash balance or report profitable operations or to continue as a going
concern. We plan on raising capital through
the sale of equity to implement our business plan. However, there is no assurance these plans
will be realized and that any additional
financings will be available to us on satisfactory terms and conditions, or at all.
Recent Developments
Name Change
On July 17, 2026, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation, as amended with the Secretary of State of the State of Delaware to change the name of the Company from “Avalon GloboCare Corp.” to “Change Agents Corporation” effective as of July 20, 2026 (the “Name Change”). In connection with the Name Change, the Company’s trading symbol for its common stock began trading on The Nasdaq Capital Market on July 22, 2026 under the symbol “CHGA”
Equity Purchase Agreement
On July 22, 2026, the Company entered into an Equity Purchase Agreement (the “Purchase Agreement”) with Hudson Global Ventures, LLC, a Nevada limited liability company (the “Investor”). Pursuant to the Purchase Agreement, upon the terms and subject to the conditions set forth therein, the Company may, from time to time during the Commitment Period, in its sole discretion, require the Investor to purchase shares of the Company’s common stock, par value $0.0001 per shares (“Common Stock”) having an aggregate purchase price of up to $10,000,000 at a fixed purchase price per share of $0.30. The Commitment Period ends on the earliest of (i) the date on which the Investor has purchased shares equal to the $10,000,000 maximum commitment amount, (ii) 36 months after the date of the Purchase Agreement, (iii) written notice of termination by the Company to the Investor, subject to certain limitations, and (iv) certain bankruptcy-related events.
In connection with the Purchase Agreement, the Company issued to the Investor a common stock purchase warrant (the “Warrant”) to purchase up to 925,925 shares of Common Stock at an exercise price of $0.01 per share, subject to adjustment as provided in the Warrant. The Warrant is exercisable at any time following stockholder approval of the shares issuable upon exercise of the Warrant (the “Stockholder Approval Date”) until 5:00 p.m. Eastern time on the date that is five years after the Stockholder Approval Date, subject to the terms and limitations set forth therein, including a 4.99% beneficial ownership limitation.
Business Loan and Security Agreement
On July 24, 2026, the Company entered into a Business Loan and Security Agreement (the “Business Loan Agreement”) with a commercial funding source (the “Lender”), pursuant to which the Company obtained a loan from the Lender in the principal amount of $825,000 (the “Business Loan”), with net proceeds to the Company of $254,350, following the payment of an administration fee of $41,500 and repayment in full of the current loan from Agile Lending in the amount of $529,400, with a total repayment amount of $1,188,000, including interest charges of $363,000 (assuming all payments are made on time and the July 2026 Loan is not prepaid) repayable in 30 weekly installments of $37,125 with a maturity date of July 29, 2026.. Pursuant to the Business Loan Agreement, the Company granted the Lender a continuing security interest in certain collateral (as defined in the Business Loan Agreement). In connection with the Business Loan, the Company issued Lender a Confessed Judgement Secured Promissory Note (the “Secured Note”) dated July 24, 2026 in the amount 825,000 with a maturity date of February 19, 2027.
Forbearance Letter Agreement
On July 24, 2026, the Company entered into a Forbearance Letter Agreement with Agile Lending LLC under which it agreed to issue 360,000 shares of its common stock (the “Forbearance Shares”) in consideration of Agile Lending’s agreement to forbear the July 2026 payment and to not under the March 2026 Business Loan and Security Agreement between the Company and Agile Lending. The Company granted Agile Lending piggyback registration rights with respect to the Forbearance Shares.
Significant
estimates during the three and six months
ended MarchJune 31,30, 2026 and 2025 include the useful life of intangible assets, the assumptions
used in assessing impairment of long-term
assets, the allowance for credit loss, the valuation of deferred tax assets and the associated
valuation allowances, the valuation
of stock-based compensation, the valuation of Series D convertible preferred stock (“Series
D Preferred Stock”), and the determination
of the fair value of the warrants.
Comparison
of Results of Operations for the
Three and Six Months Ended MarchJune 31,30, 2026 and 2025
As
a result of the sale of our ownership of 40% of Lab Services MSO on February 26, 2025, for the three months ended March 31, 2026, we had
no income from our investment in Lab Services
MSO MSO.after February 2025.
-3131-- For
the threesix months ended MarchJune 31,30, 2025, we
had income from our investment in Lab Services MSO of $392,677, which consists of our share of
Lab Services MSO’s net income of
$503,833 and amortization of identifiable intangible assets acquired from Lab Services MSO acquisition
of $111,156.
For
the three and six months ended MarchJune 31,30, 2026 and 2025, other operating expenses consisted of the following:
-3232--
As
a result of the foregoing, for the three months ended MarchJune 31,30, 2026, loss from operations amounted to $2,721,126,
$2,051,879, as compared to $1,785,423 $3,908,516
for the three months ended MarchJune 31,30, 2025, representing ana increasedecrease of $935,703,$1,856,637, or 52.4%.47.5%. As a result of the foregoing, for the six
months ended June 30, 2026, loss from operations amounted to $4,773,005, as compared to $5,693,939 for the six months ended June 30,
2025, representing a decrease of $920,934, or 16.2%.
Other
expense mainly includes interest expense,
change in fair value of derivative liability, loss on extinguishment of debt, and other miscellaneous expense.
income.
Other
expense totaled $1,655,554$126,933 for the three months ended MarchJune 31,30, 2026, as compared to $481,257$9,376,095 for the three months ended March
31,June 30, 2025,
representing ana increasedecrease of $1,174,297,$9,249,162, or 244.0%,98.6%, which was primarily attributable to an increase in loss from change in fair
value of derivative liability of approximately $1,163,000, and an increase in other expense of approximately $106,000 mainly due to the
loss from litigation settlement, offset by a decrease in interest expense of approximately $94,000,
$620,000, mainly driven by the decrease in amortization
of debt discount and debt issuance costs of approximately $94,000.$715,000, offset by
the increase in interest expense of approximately $95,000 from debts, a decrease in loss on extinguishment of debt of approximately $9,077,000,
and an increase in other income of approximately $112,000 mainly due to the gain from payable settlement, offset by a decrease in gain
from change in fair value of derivative liability of approximately $560,000.
Other expense totaled $1,782,487 for the six months ended June 30, 2026, as compared to $9,857,352 for the six months ended June 30, 2025, representing a decrease of $8,074,865, or 81.9%, which was primarily attributable to a decrease in interest expense of approximately $715,000, mainly driven by the decrease in amortization of debt discount and debt issuance costs of approximately $810,000, offset by the increase in interest expense of approximately $95,000 from debts, a decrease in loss on extinguishment of debt of approximately $9,077,000, and an increase in other income of approximately $5,000, offset by a decrease in gain from change in fair value of derivative liability of approximately $1,722,000.
We
did not
have any income taxes expense for the three and six months ended MarchJune 31,30, 2026 and 2025 since we incurred losses in these periods.
As
a result of the factors described above, our
net loss from continuing operations was $4,376,680$2,178,812 for the three months ended MarchJune 31,30, 2026,
as compared to $2,266,680$13,284,611 for the three
months ended MarchJune 31,30, 2025, representing ana increasedecrease of $2,110,000,$11,105,799, or 93.1%.83.6%.
As a result of the factors described above, our net loss from continuing operations was $6,555,492 for the six months ended June 30, 2026, as compared to $15,551,291 for the six months ended June 30, 2025, representing a decrease of $8,995,799, or 57.8%.
Our
net loss from discontinued operations was
$103,015 $0 for the three months ended MarchJune 31,30, 2026, as compared to $215,431$173,987 for the three months ended
June March 31,30, 2025, representing a
decrease of $112,416,$173,987, or 52.2%.100.0%.
Our net loss from discontinued operations was $103,015 for the six months ended June 30, 2026, as compared to $389,418 for the six months ended June 30, 2025, representing a decrease of $286,403, or 73.5%.
As
a result of the factors
described above, our net loss was $4,479,695$2,178,812 for the three months ended MarchJune 31,30, 2026, as compared to $2,482,111 $13,458,598
for the three months
ended MarchJune 31,30, 2025, representing ana increasedecrease of $1,997,584,$11,279,786, or 80.5%.83.8%.
As a result of the factors described above, our net loss was $6,658,507 for the six months ended June 30, 2026, as compared to $15,940,709 for the six months ended June 30, 2025, representing a decrease of $9,282,202, or 58.2%.
Net
Loss Attributable to AvalonChange GloboCare
Corp.Agents Corporation Common Shareholders
The
net loss attributable to our common shareholders
was $4,479,695,$2,178,812, or $0.50$0.14 per share (basic and diluted), for the three months ended March 31,June
30, 2026, as compared to $2,319,638 (after taking
into effect $162,473 in deemed contribution),$13,458,598, or $1.43$6.22 per share (basic and diluted), for the three months ended MarchJune 31,30, 2025, representing
ana increasedecrease of $2,160,057,$11,279,786, or 93.1%.83.8%.
The net loss attributable to our common shareholders was $6,658,507, or $0.54 per share (basic and diluted), for the six months ended June 30, 2026, as compared to $15,778,236 (after taking into effect $162,473 in deemed contribution), or $8.33 per share (basic and diluted), for the six months ended June 30, 2025, representing a decrease of $9,119,729, or 57.8%.
Our
reporting currency is the U.S. dollar. The functional currency of our U.S. entities is the U.S. dollar and the functional currency of
of Avalon Shanghai is the Chinese Renminbi (“RMB”). The financial statements of our subsidiary whose functional currency is
the RMB are translated to U.S. dollars using period end rate of exchange for assets and liabilities, average rate of exchange for revenues,
costs, and expenses and cash flows, and at historical exchange rate for equity. Net gains and losses resulting from foreign exchange
transactions transactions
are included in the results of operations. As a result of foreign currency translations, which are a non-cash adjustment,
we reported
a foreign currency translation loss of $(311316) and a foreign currency translation gain of $279$104 for the three months ended
June March 31,30, 2026
and 2025, respectively. As a result of foreign currency translations, which are a non-cash adjustment, we reported a foreign
currency translation loss of $(627) and a foreign currency translation gain of $383 for the six months ended June 30, 2026 and 2025,
respectively. This non-cash loss/gain had the effect of increasing/decreasing our reported comprehensive loss in each respective
period.
As
a result of our foreign currency translation adjustment, we had comprehensive loss of $4,480,006$2,179,128 and $2,481,832$13,458,494 for the three months
ended ended
MarchJune 31,30, 2026 and 2025, respectively.
As a result of our foreign currency translation adjustment, we had comprehensive loss of $6,659,134 and $15,940,326 for the six months ended June 30, 2026 and 2025, respectively.
-3333--
CHGA insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-05 | Mathews Michael |
Conversion | 62,280 | — | — |
Well-known investors holding CHGA (13F)
None of the 59 investors we track reported a position in their latest 13F.