FFR 10-K & 10-Q changes, risk factors and insider trading
FF EAI Robotics Ecosystem Inc. (also AIXC) · Nasdaq · Finance Services · CIK 1460702 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We have a history of negative cash flows and will require additional financing to execute our business strategy.”
New heading “We are in an early-stage development phase under our current business model.”
New heading “Our customer-facing platforms may not achieve user adoption or generate revenue.”
New heading “Our software development efforts may be delayed, exceed budget, or fail to perform as intended.”
New heading “Our AI Blockchain platform is internally developed and may not function as intended.”
New heading “We are exposed to significant digital asset price volatility.”
New heading “The regulatory environment surrounding digital assets, tokenization, and AI-enabled financial tools is evolving and uncertain.”
New heading “Our platforms could be subject to regulatory classification that imposes additional obligations.”
New heading “We depend on third-party service providers for technology infrastructure and digital asset custody.”
New heading “Our business and operations could suffer in the event of computer system failures, cyberattacks, or deficiencies in our cybersecurity.”
New heading “Our “C10” Treasury strategy subjects our financial condition to extreme market volatility.”
New heading “Concentration of Control and Sole Custody of Digital Assets May Expose the Company to Significant Financial and Operational Risks”
New heading “We have in the past, and may in the future, enter into partnerships, collaborations, joint ventures, or strategic alliances with third parties. If we are unsuccessful in establishing or maintaining strategic relationships with these third parties or if these third parties fail to deliver certain services, our business, operating results, and financial condition could be adversely affected.”
New heading “The future development and growth of crypto is subject to a variety of factors that are difficult to predict and evaluate. If crypto does not grow as we expect, our business, operating results, and financial condition could be adversely affected.”
New heading “We operate in a highly competitive industry and we compete against unregulated or less regulated companies and companies with greater financial and other resources, and our business, operating results, and financial condition could be adversely affected if we are unable to compete effectively.”
New heading “If we cannot keep pace with rapid industry changes to provide new and innovative products and services, the use of our products and services, and consequently our net revenue, could decline, which could adversely affect our business, operating results, and financial”
New heading “A particular crypto asset, product or service’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty and if we are unable to properly characterize a crypto asset or product offering, we may be subject to regulatory scrutiny, inquiries, investigations, fines, and other penalties, which could adversely affect our business, operating results, and financial condition.”
New heading “The theft, loss, or destruction of private keys required to access any crypto assets held in custody for our own account. If we are unable to access our private keys or if we experience a hack or other data loss relating to our ability to access any crypto assets, it could cause regulatory scrutiny, reputational harm, and other losses.”
New heading “Due to our limited operating history, it may be difficult to evaluate our business and future prospects, and we may not be able to achieve or maintain profitability in any given period.”
New heading “Key business metrics and other estimates are subject to inherent challenges in measurement and change as our business evolves, and our business, operating results, and financial condition could be adversely affected by real or perceived inaccuracies in those metrics or any changes in metrics we disclose.”
New heading “We may suffer losses due to abrupt and erratic market movements.”
New heading “Adverse economic conditions could adversely affect our business.”
New heading “If we fail to maintain an effective system of disclosure controls and procedures and internal control over our financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.”
New heading “We may require additional capital to support business growth, and this capital might not be available.”
New heading “Pending SEC Enforcement Actions Against Our Co-CEO, Chief Advisor, and Lead Investor Could Materially Disrupt Our Operations and Restrict Access to Our Treasury Assets.”
New heading “If we are unable to obtain, maintain, and enforce adequate intellectual property protection for our core technologies, our competitors could develop and commercialize similar products, which would materially and adversely affect our business.”
New heading “Claims by third parties that we infringe upon their intellectual property rights could be costly, time-consuming, and materially and adversely affect our business.”
New heading “We heavily rely on trade secrets and confidentiality agreements to safeguard our competitive advantage, and these measures may not adequately protect our proprietary information.”
New heading “Limitations on intellectual property protection in certain jurisdictions outside the United States could adversely affect our global competitive position.”
New heading “The requirements of being a public company may strain our resources and divert management’s attention.”
New heading “Periods of rapid growth and expansion could place a significant strain on our resources, including our employee base, which could negatively impact our operating results.”
New heading “Macroeconomic and financial market disruptions may adversely affect our liquidity, operations, and results.”
New heading “Heightened public scrutiny and negative publicity could damage our reputation and adversely affect our business and prospects.”
New heading “Certain data and information in this Annual Report were obtained from third-party sources and were not independently verified by us.”
Removed heading “Various factors raise substantial doubt about the Company’s ability to continue as a going concern.”
Removed heading “Any failure to develop or maintain effective internal controls over financial reporting or difficulties encountered in implementing or improving our internal controls over financial reporting could harm our operating results and prevent us from meeting our reporting obligations.”
Removed heading “Continued uncertain economic conditions, including inflation and the risk of a global recession could impair our ability to forecast and may harm our business, operating results, including our revenue growth and profitability, financial condition and cash flows.”
Removed heading “Our business and operations would suffer in the event of computer system failures, cyberattacks or a deficiency in our cybersecurity or a natural disaster.”
Removed heading “We will need additional financing in order to grow our business.”
Removed heading “Geopolitical conditions, including direct or indirect acts of war or terrorism, could have an adverse effect on our operations and financial results.”
Removed heading “Even if our development efforts are successful, we may not obtain regulatory approval for any of our product candidates in the United States or other jurisdictions, which would prevent us from commercializing our product candidates. Even if we obtain regulatory approval for our product candidates, any such approval may be subject to limitations, including with respect to the approved indications or patient populations, which could impair our ability to successfully commercialize our product candidates.”
Removed heading “The regulatory approval processes of the FDA and comparable foreign regulatory authorities are lengthy, time consuming and inherently unpredictable. If we are not able to obtain, or experience delays in obtaining, required regulatory approvals, we will not be able to commercialize our product candidates as expected, and our ability to generate revenue may be materially impaired.”
Removed heading “Changes in product candidate manufacturing or formulation may result in additional costs or delay.”
Removed heading “Regulatory approval by the FDA or comparable foreign regulatory authorities is limited to those specific indications and conditions for which approval has been granted, and we may be subject to substantial fines, penalties, injunctions, or other enforcement actions, including criminal actions, if we are determined to be promoting the use of our products for unapproved or “off label” uses, resulting in damage to our reputation and business.”
Removed heading “Even if our product candidates receive regulatory approval, we will be subject to ongoing obligations and continued regulatory review, which may result in significant additional expense and limit how we manufacture and market our products.”
Removed heading “Risks related to commercialization”
Removed heading “We face significant competition from other biopharmaceutical and biotechnology companies, academic institutions, government agencies, and other research organizations, which may result in others discovering, developing or commercializing products more quickly or marketing them more successfully than us. If their product candidates are shown to be safer or more effective than ours, our commercial opportunity may be reduced or eliminated.”
Removed heading “If we are unable to establish effective marketing, sales and distribution capabilities or enter into agreements with third parties to market and sell our product candidates, if they are approved, the revenues that we generate may be limited and we may never become profitable.”
Removed heading “As we continue to evolve from a company primarily involved in research and development to a company also expected to be involved in commercialization, we may encounter difficulties in managing our growth and expanding our operations successfully.”
Removed heading “Our product candidates are based on a novel approach to the treatment of cancer, which makes it difficult to predict the time and cost of product candidate development.”
Removed heading “If our product candidates do not achieve broad market acceptance, the revenues that we generate from their sales may be limited, and we may never become profitable.”
Removed heading “The successful commercialization of our product candidates, if approved, will depend in part on the extent to which government authorities and health insurers establish adequate reimbursement levels and pricing policies.”
Removed heading “The size of the potential market for our product candidates is difficult to estimate and, if any of our assumptions are inaccurate, the actual markets for our product candidates may be smaller than our estimates.”
Largest changes
“A particular crypto asset, product or service’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty and if we are unable to properly characterize a crypto asset or product offering, we may be subject to regulatory scrutiny, inquiries, investigations, fines, and other penalties, which could adversely affect our business, operating results, and financial condition.”see in full comparison
“If we are found to have impermissibly promoted any of our product candidates, we may become subject to significant liability and government fines. The FDA and other agencies actively enforce the laws and regulations regarding product promotion, particularly those prohibiting the promotion of off label uses, and a company that is found to have improperly promoted a product may be subject to significant sanctions. …”see in full comparison
“In the United States, engaging in the impermissible promotion of our products, following approval, for off label uses can also subject us to false claims and other litigation under federal and state statutes. These include fraud and abuse and consumer protection laws, which can lead to civil penalties, and criminal fines and agreements with governmental authorities that materially restrict the manner in which we promote or distribute therapeutic products and conduct our business. …”see in full comparison
“Effective internal controls, particularly those related to financial reporting, are necessary for us to produce reliable financial reports. If we cannot provide reliable financial reports, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our common stock could drop significantly. …”see in full comparison
“Regulatory approval by the FDA or comparable foreign regulatory authorities is limited to those specific indications and conditions for which approval has been granted, and we may be subject to substantial fines, penalties, injunctions, or other enforcement actions, including criminal actions, if we are determined to be promoting the use of our products for unapproved or “off label” uses, resulting in damage to our reputation and business.”see in full comparison
“In June 2025, FF (the “Lead Investor”), our Co-CEO (Jiawei Wang), and our Chief Advisor (YT Jia) received SEC Wells Notices regarding alleged federal securities law violations. The SEC is considering seeking remedies that include barring Mr. Wang and Mr. Jia from serving as officers or directors of a public company. Pursuant to our Lead Investor Agreement, Mr. Wang is solely responsible for our non-medical business operations. He has also been granted sole access, subject to delegation, to all of our crypto-related accounts. If the SEC successfully pursues a D&O bar against Mr. …”see in full comparison
Full comparison: every changed paragraph (151)
We have a history of negative cash flows and will require additional financing to execute our business strategy.
We have incurred recurring losses and experienced negative cash flows from operations. We incurred net loss of $16.9 million for the year ended December 31, 2025. As of December 31, 2025, we remain in a development and investment stage with respect to our digital asset and software initiatives and have not generated material revenue from these initiatives. Our ability to continue developing and deploying our software platforms depends on our ability to obtain additional financing. There can be no assurance that such financing will be available on acceptable terms, or at all. If we are unable to secure sufficient capital when needed, we may be required to delay, reduce, or eliminate development activities, reduce operating expenses, or otherwise materially modify our business plans. Any equity financing may result in substantial dilution to our stockholders, and debt or convertible debt financing may impose restrictive covenants that could adversely affect our operations.
We are in an early-stage development phase under our current business model.
Following the divestiture of our prior diagnostics business , we transitioned to a digital asset–focused software strategy. Our RWA + EAI initiatives remain in development phases and have not generated material revenue. We have limited operating history under our current business model, and investors have limited historical information upon which to evaluate our prospects. Our future success depends on our ability to successfully develop, deploy, and commercialize new software platforms in competitive and evolving markets.
Various
factors raise substantial doubt about the Company’s ability to continue as a going concern.
The
Company has incurred significant losses since its inception, including a net loss of $6.3 million for the year ended December 31, 2024,
and has an accumulated deficit of $123.1 million as of December 31, 2024. These factors, among others, raise substantial doubt about
the Company’s ability to continue as a going concern. The Company’s continuation as a going concern is dependent upon its
ability to generate positive cash flows from operations and to secure additional sources of equity and/or debt financing. Despite the
Company’s intent to fund operations through equity and debt financing arrangements, there is no assurance that such financing will
be available on terms acceptable to the Company, if at all.
Our
independent auditors have included an explanatory paragraph in their audit report regarding the Company’s ability to continue as
a going concern. This going concern risk may materially limit our ability to raise additional funds through the issuance of new debt
or equity or may adversely affect the terms upon which such capital may be available. The inability to obtain sufficient financing on
acceptable terms could have a material adverse effect on the Company’s financial condition, results of operations, and business
prospects.
The
Company is actively pursuing strategies to mitigate these risks. However, there can be no assurance that these efforts will prove successful
or that the Company will achieve its intended financial stability. The failure to successfully address these going concern risks may
materially and adversely affect the Company’s business, financial condition, and results of operations. Investors should consider
the substantial risks and uncertainties inherent in the Company’s business before investing in the Company’s securities.
Any
failure to develop or maintain effective internal controls over financial reporting or difficulties encountered in implementing or improving
our internal controls over financial reporting could harm our operating results and prevent us from meeting our reporting obligations.
Effective
internal controls, particularly those related to financial reporting, are necessary for us to produce reliable financial reports. If we
cannot provide reliable financial reports, our business and operating results could be harmed, investors could lose confidence in our
reported financial information, and the trading price of our common stock could drop significantly. In addition, investors relying upon
this misinformation could make an uninformed investment decision, and we could be subject to sanctions or investigations by the SEC or
other regulatory authorities or to stockholder class action securities litigation.
In connection
with the audit of our financial statements as of and for the year ended December 31, 2024 (the “2024 audit”), our management
identified a material weakness in our internal control over financial reporting related to the lack of accounting department resources
and/or policies and procedures to ensure recording and disclosure of items in compliance with U.S. GAAP. This material weakness resulted
in adjustments to our prepaid expense accounts and recording short term notes receivable net of current expected credit losses in connection
with the 2024 audit. In response to the material weakness, we took a number of remediation steps to enhance our internal controls, including
implementing additional procedures and utilizing external consulting resources with experience and expertise in U.S. GAAP and public company
accounting and reporting requirements to assist management with its accounting and reporting of complex and/or non-recurring transactions
and related disclosures.
In connection with
the audit of our financial statements as of and for the year ended December 31, 2024 (the “2024 audit”), our management determined
that the material weakness identified in connection with the 2024 audit had not been fully remediated and resulted in adjustments to
the accounting treatment related to our prepaid expense accounts and recording short term
notes receivable net of current expected credit losses during the 2024 audit, which resulted in the late filing of the 2024 Annual
Report.
During
the year ended December 31, 2024 audit, we identified the lack of sufficient number of personnel within the accounting function to adequately
segregate duties, the Company did not have a designed and implemented effective Information Technology General Controls (“ITGC”)
related to access controls to financial accounting system, and the Company did not have formalized documentation of its processes and
controls that could be evaluated for proper design and implementation.
We intend
to continue to take steps to enhance our internal controls, including implementing additional internal procedures and utilizing well-established
external consulting resources with experience and expertise in U.S. GAAP and public company accounting and reporting requirements.
If we are unable to remediate the material weaknesses and achieve and maintain effective internal control over financial
reporting and effective disclosure controls, our business could be adversely affected.
Continued
uncertain economic conditions, including inflation and the risk of a global recession could impair our ability to forecast and may harm
our business, operating results, including our revenue growth and profitability, financial condition and cash flows.
While
U.S. inflation rates have come down substantially from their 2022 highs, the U.S. economy is still experiencing higher than target inflation
rates, and high levels of inflation persist in many countries around the world. Historically, we have not experienced significant inflation
risk in our business. The global economy suffers from slowing growth and elevated interest rates, and many economists are still unsure
whether a global recession may begin in the near future. If the global economy slows, our business would likely be adversely affected.
Our
business and operations would suffer in the event of computer system failures, cyberattacks or a deficiency in our cybersecurity or a
natural disaster.
There
are growing risks related to the security, confidentiality and integrity of personal and corporate information stored and transmitted
electronically due to increasingly diverse and sophisticated threats to networks, systems and data security. Potential attacks span a
spectrum from attacks by criminal hackers, hacktivists, and nation state or state-sponsored actors, to employee malfeasance and human
or technological error.
Despite
the implementation of security measures, our internal computer systems, and those of third parties on which we rely (including our vendors,
contractors and other third-party partners who process information on our behalf or have access to our systems), are vulnerable to damage
from computer viruses, malware, ransomware, phishing attacks and other forms of social engineering, denial-of-service attacks, third
party or employee theft or misuse and other negligent actions, natural disasters, terrorism, war, telecommunication and electrical failures,
cyberattacks or cyber-intrusions over the internet, security incidents, disruptions, attachments to emails, persons inside our organization,
or persons with access to systems inside our organization. The risk of a security breach or disruption, particularly through cyberattacks
or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number,
intensity and sophistication of attempted attacks and intrusions from around the world have increased. If such an event were to occur
and cause interruptions in our operations, it could result in a material disruption of our product development programs. To the extent
that any disruption or security breach was to result in a loss of or damage to our data or applications, or inappropriate disclosure
of confidential or proprietary information, we could incur material legal claims (including class claims) and liability, substantial
remediation costs, regulatory enforcement, liability under data protection laws, additional reporting requirements and damage to our
reputation, and the further development of our product lines could be delayed.
Our ability to grow depends on several factors, including successful product development, user adoption, access to capital, technological performance, regulatory developments, and market conditions affecting digital assets. If we are unable to successfully execute our development plans, attract users, or compete effectively, our growth prospects may be limited. Additionally, evolving regulatory frameworks, economic conditions, or declines in digital asset market activity may constrain our ability to expand operations or generate revenue.
Our customer-facing platforms may not achieve user adoption or generate revenue.
The success of BesTrade and our planned RWA + EAI initiatives depends on our ability to attract and retain users. User adoption may be adversely affected by competition, market volatility, technological limitations, regulatory changes, or security concerns. If we are unable to achieve sufficient user engagement, our ability to generate subscription-based or other revenue from these platforms may be materially impaired.
Our software development efforts may be delayed, exceed budget, or fail to perform as intended.
The development of BesTrade and RWA + EAI involves technical complexity, integration challenges, and evolving product requirements. Development timelines may be extended due to technical obstacles, changes in regulatory requirements, resource constraints, or unforeseen operational issues. Internally developed systems may contain errors, defects, or vulnerabilities that could result in operational disruption, reputational harm, or financial loss.
Our AI Blockchain platform is internally developed and may not function as intended.
AI Blockchain is used internally to support digital asset portfolio monitoring, analytics, and operational oversight. As an internally developed and evolving system, it may contain errors, design limitations, or cybersecurity vulnerabilities. Failures or deficiencies in internal systems could impair decision-making, result in inaccurate reporting, or expose us to financial or operational risk.
We are exposed to significant digital asset price volatility.
We maintain digital assets as part of our treasury and investment activities, including our internally managed C10 portfolio. Digital asset markets have historically experienced significant price volatility. Market fluctuations may materially impact the fair value of our holdings and could adversely affect our financial condition and results of operations. Digital asset prices may be influenced by factors beyond our control, including regulatory developments, macroeconomic conditions, market sentiment, technological changes, and security events.
The regulatory environment surrounding digital assets, tokenization, and AI-enabled financial tools is evolving and uncertain.
Digital asset markets and tokenization initiatives are subject to evolving regulatory frameworks in the United States and internationally. Regulatory authorities may impose new or additional requirements relating to securities laws, commodities laws, anti-money laundering compliance, custody requirements, or other regulatory regimes. Changes in applicable regulations or regulatory interpretations could limit our ability to operate our platforms as currently contemplated, increase compliance costs, or require modification of our business model.
Our platforms could be subject to regulatory classification that imposes additional obligations.
BesTrade is designed to provide analytics and informational tools and does not operate as a broker, exchange, custodian, or trading venue. However, regulatory authorities may interpret aspects of our activities differently. If regulators were to determine that our activities require registration, licensing, or compliance with additional regulatory requirements, we could incur substantial costs, face operational limitations, or be required to modify or discontinue certain activities.
We depend on third-party service providers for technology infrastructure and digital asset custody.
We rely on third-party providers for hosting infrastructure, data services, and, where applicable, digital asset custody and related services. The failure, disruption, or insolvency of these providers, or cybersecurity incidents affecting them, could adversely affect our operations, financial condition, and reputation.
Our business and operations could suffer in the event of computer system failures, cyberattacks, or deficiencies in our cybersecurity.
Our operations depend on the secure and reliable performance of our technology systems and infrastructure. Cybersecurity incidents, including unauthorized access, malware attacks, system disruptions, or data breaches, could result in operational interruptions, loss of digital assets, regulatory scrutiny, litigation, or reputational harm. As our platforms develop and potentially expand user engagement, our exposure to cybersecurity risk may increase.
Our “C10” Treasury strategy subjects our financial condition to extreme market volatility.
We hold a concentrated basket of digital assets. Because our Common Stock may trade as a high-beta proxy for these assets, our stock price may fluctuate significantly based on global crypto market swings, completely independent of our AI infrastructure.
Concentration of Control and Sole Custody of Digital Assets May Expose the Company to Significant Financial and Operational Risks
We have in the past, and may in the future, enter into partnerships, collaborations, joint ventures, or strategic alliances with third parties. If we are unsuccessful in establishing or maintaining strategic relationships with these third parties or if these third parties fail to deliver certain services, our business, operating results, and financial condition could be adversely affected.
We have in the past, and may in the future, enter partnerships, collaborations, joint ventures, or strategic alliances with third parties in connection with the development, operation, and enhancement of our platform and products and the provision of our services. Identifying strategic relationships with third parties and negotiating and documenting relationships with them may be time-consuming and complex and may distract management. Moreover, we may be delayed, or not be successful, in achieving the objectives that we anticipate as a result of such strategic relationships. For example, we rely on our strategic relationship with Faraday Future to fuel our decentralized AI models and on-chain strategies. If Faraday Future experiences financial distress, supply chain disruptions, or shifts its strategic priorities away from our partnership, we may lose access to the critical data required for our EAIRWA ecosystem. In evaluating counterparties in connection with partnerships, collaborations, joint ventures or strategic alliances, we consider a wide range of economic, legal and regulatory criteria depending on the nature of such relationship, including the counterparties’ reputation, operating results and financial condition, operational ability to satisfy our and our customers’ needs in a timely manner, efficiency and reliability of systems, certifications costs to us or to our customers, and licensure and compliance status. Despite this evaluation, third parties may still not meet our or our customers’ needs, which may adversely affect our ability to deliver products and services to customers, and could adversely affect our business, operating results, and financial condition. Counterparties to any strategic relationship may have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals, and may subject us to additional risks to the extent any such third party becomes the subject of negative publicity, faces its own litigation or regulatory challenges, or faces other adverse circumstances. Conflicts may arise with our strategic partners, such as the interpretation of significant terms under any agreement, which may result in litigation or arbitration which would increase our expenses and divert the attention of our management. If we are unsuccessful in establishing or maintaining strategic relationships with third parties, our ability to compete in the marketplace or to grow our revenue could be impaired and our business, operating results, and financial condition could be adversely affected.
The future development and growth of crypto is subject to a variety of factors that are difficult to predict and evaluate. If crypto does not grow as we expect, our business, operating results, and financial condition could be adversely affected.
Crypto assets built on blockchain technology were only introduced in 2008 and remain in the early stages of development. In addition, different crypto assets are designed for different purposes. The further growth and development of any crypto assets and their underlying networks and other cryptographic and algorithmic protocols governing the creation, transfer, and usage of crypto assets represent a new and evolving paradigm that is subject to a variety of factors that are difficult to evaluate.
We operate in a highly competitive industry and we compete against unregulated or less regulated companies and companies with greater financial and other resources, and our business, operating results, and financial condition could be adversely affected if we are unable to compete effectively.
The crypto industry is highly innovative, rapidly evolving, and characterized by healthy competition, experimentation, changing customer needs, frequent introductions of new products and services, and subject to uncertain and evolving industry and regulatory requirements. We expect competition to intensify in the future as existing and new competitors introduce new products or enhance existing products. We face significant competition from a variety of companies around the world, in particular those located outside the United States, who at times are and may in the future be subject to significantly less stringent regulatory and compliance requirements in their local jurisdictions. Their business models rely on being unregulated or only regulated in a small number of lower compliance jurisdictions, whilst also offering their products in highly regulated jurisdictions, including the United States, without necessarily complying with the relevant regulatory requirements in such jurisdictions. Given the uneven enforcement by United States and foreign regulators, many of these competitors have been able to operate from offshore while offering large numbers of products and services to consumers, including in the United States, without complying with the relevant licensing and other requirements in these jurisdictions, and historically without penalty. We also have expended significant managerial, operational, and compliance costs to comply with laws and regulations applicable to us in the jurisdictions in which we operate, and expect to continue to incur significant costs to comply with these requirements, which these unregulated or less regulated competitors have not had to incur. As regulations and compliance requirements in the United States become clearer, we may face increased competition from companies based in the United States. Our current and potential competitors may establish cooperative relationships among themselves or with third parties that may further enhance their resources. If we are unable to compete successfully, or if competing successfully requires us to take costly actions in response to the actions of our competitors, our business, operating results, and financial condition could be adversely affected.
If we cannot keep pace with rapid industry changes to provide new and innovative products and services, the use of our products and services, and consequently our net revenue, could decline, which could adversely affect our business, operating results, and financial
Condition.
Our industry has been characterized by many rapid, significant, and disruptive products and services in recent years. We expect new services and technologies to continue to emerge and evolve, which may be superior to, or render obsolete, the products and services that we currently provide. For example, decentralized networks and other disruptive technologies such as generative AI may fundamentally alter the use of our products or services in unpredictable ways. We cannot predict the effects of new services and technologies on our business. However, our ability to grow our customer base and net revenue will depend heavily on our ability to innovate and create successful new products and services, both independently and in conjunction with third-party developers. In particular, developing and incorporating new products and services into our business may require substantial expenditures, take considerable time, and ultimately may not be successful. Any new products or services could fail to attract customers, generate revenue, or perform or integrate well with third-party applications and platforms. In addition, our ability to adapt and compete with new products and services may be inhibited by regulatory requirements and general uncertainty in the law or other factors. Moreover, we must continue to enhance our technical infrastructure and other technology offerings to remain competitive and maintain a platform that has the required functionality, performance, capacity, security, and speed to attract and retain customers. As a result, we expect to incur significant costs and expenses to develop and upgrade our technical infrastructure to meet the evolving needs of the industry. Our success will depend on our ability to develop, scale, and incorporate new offerings and adapt to technological changes and evolving industry practices. If we are unable to do so in a timely or cost-effective manner, our ability to successfully compete, to retain existing customers, and to attract new customers may be impacted and our business, operating results, and financial condition could be adversely affected.
A particular crypto asset, product or service’s status as a “security” in any relevant jurisdiction is subject to a high degree of uncertainty and if we are unable to properly characterize a crypto asset or product offering, we may be subject to regulatory scrutiny, inquiries, investigations, fines, and other penalties, which could adversely affect our business, operating results, and financial condition.
Whether or not an asset, product, or service is a security or constitutes a securities offering under federal securities laws is ultimately determined by a federal court. The legal test for determining whether any given crypto asset, product, or service is an investment contract security was set forth in the 1946 Supreme Court case SEC v. W.J. Howey Co. and whether any given crypto asset, product, or service is a note in the 1990 Supreme Court case Reves v. Ernst & Young. The legal tests for determining whether any given crypto asset, product, or service is a security requires a highly complex, fact-driven analysis. Accordingly, whether any given crypto asset, product or service would be ultimately deemed by a federal court to be a security is uncertain and difficult to predict notwithstanding the conclusions of the SEC or any conclusions we may draw based on our risk-based assessment regarding the likelihood that a particular crypto asset, product or service could be deemed a “security” or “securities offering” under applicable laws.
The theft, loss, or destruction of private keys required to access any crypto assets held in custody for our own account. If we are unable to access our private keys or if we experience a hack or other data loss relating to our ability to access any crypto assets, it could cause regulatory scrutiny, reputational harm, and other losses.
Crypto assets are generally controllable only by the possessor of the unique private key relating to the digital wallet in which the crypto assets are held. While blockchain protocols typically require public addresses to be published when used in a transaction, private keys must be secured and kept private in order to prevent a third party from accessing the crypto assets held in such a wallet. To the extent that any of the private keys relating to our wallets containing crypto assets held for our own account is lost, destroyed, or otherwise compromised or unavailable, and no backup of the private key is accessible, we will be unable to access the crypto assets held in the related wallet. Further, we cannot provide assurance that our wallets will not be hacked or compromised. Crypto assets and blockchain technologies have been, and may in the future be, subject to security breaches, hacking, or other malicious activities.
Due to our limited operating history, it may be difficult to evaluate our business and future prospects, and we may not be able to achieve or maintain profitability in any given period.
We began to transition our operations in 2025 and since then our business model has continued to evolve. Our limited operating history and the volatile nature of our business make it difficult to evaluate our current business and our future prospects. We have encountered and will continue to encounter risks and difficulties as described in this section. If we do not manage these risks successfully, our business, operating results, and financial condition could be adversely affected.
Key business metrics and other estimates are subject to inherent challenges in measurement and change as our business evolves, and our business, operating results, and financial condition could be adversely affected by real or perceived inaccuracies in those metrics or any changes in metrics we disclose.
We regularly review our key business metrics to evaluate our business, measure our performance, identify trends affecting our business, and make strategic decisions. These key business metrics are calculated using internal company data and have not been validated by an independent third-party. While these numbers are based on what we believe to be reasonable estimates for the applicable period of measurement at the time of reporting, there are inherent challenges in such measurements. If we fail to maintain an effective analytics platform, our key business metrics calculations may be inaccurate, and we may not be able to identify those inaccuracies. Additionally, we may in the future calculate certain key business metrics using third-party data. While we believe the third-party data we have used in the past or may use in the future is reliable, we have not independently verified and may not in the future independently verify the accuracy or completeness of the data contained in such sources and there can be no assurance that such data is free of error. Any inaccuracy in the third-party data we use could cause us to overstate or understate our key business metrics. We generally will not update previously disclosed key business metrics for any such inaccuracies or adjustments that are immaterial. We may change our key business metrics from time to time, which may be perceived negatively. Given the rapid evolution of the crypto markets and our revenue sources, we regularly evaluate whether our key business metrics remain meaningful indicators of the performance of our business. Further if investors or the media perceive any changes to our key business metrics disclosures negatively, our business, operating results, and financial condition could be adversely affected.
We may suffer losses due to abrupt and erratic market movements.
The crypto asset market has been characterized by significant volatility and unexpected price movements, and has experienced significant declines in the past.
Adverse economic conditions could adversely affect our business.
Management's Discussion & Analysis (MD&A)
New heading “Faraday Investment”
New heading “Reverse Stock Split”
New heading “Series B Preferred Stock Conversions”
New heading “Gain on Change in Fair Value of Convertible Debt”
New heading “Net Loss on Digital Assets”
Removed heading “Warrant Liabilities”
Removed heading “Short-Term Notes Receivable”
Removed heading “Loss on Fixed Asset Disposal”
Removed heading “Net Cash Provided by Financing Activities”
Largest changes
“Delisting of our common stock from Nasdaq would have a serious negative effect on any future financing efforts. On April 24, 2025, the Company received a notice from Nasdaq notifying the Company that, because the Company was delinquent in filing its 2024 Form 10-K, the Company no longer complied with Nasdaq Listing Rule 5250(c), which requires companies with securities listed on Nasdaq to timely file all required periodic reports with the SEC. Therefore, in line with the Panel Monitor’s decision, the Company’s securities will be delisted from Nasdaq. …”see in full comparison
“In September 2025 we consummated a Subscription Agreement (the “Subscription Agreement”) with certain investors including Faraday Future Intelligent Electric Inc. (NASDAQ: FFAI)(the “Lead Investor” or “Faraday”) pursuant to which the investors purchased $40.7 million (the “Offering”) of our Common Stock and shares of a newly created Series B Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”). …”see in full comparison
“Our Pan-RAS program, which is currently at the preclinical stage, consists of a family of RAS oncogene protein-protein interaction inhibitor small molecules believed to inhibit or block mutated RAS genes’ proteins from binding to their effector proteins thereby leaving the proteins from the mutated RAS unable to cause further harm. In theory, such mechanism of action may be effective in the treatment of about one quarter of all cancers, including certain forms of pancreatic, colorectal, and lung cancers. …”see in full comparison
Full comparison: every changed paragraph (80)
You
should read the following discussion and analysis of our financial condition and results of operations together with the consolidated
financial statements and related notes that are included elsewhere in this Annual Report. This discussion contains forward-looking statements
based upon current expectations that involve risks and uncertainties. Our actual results may differ materially from those anticipated
in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or in
other parts of this Annual Report. See “Cautionary Note Regarding Forward-Looking Statements” for additional information.
Unless otherwise indicated, all information in this Annual Report on Form 10-K gives effect to a 1-for-50 reverse stock split of our
common stock that became effective on November 5, 2024, and all references to shares of common stock outstanding and per share amounts
give effect to the reverse stock split.
Overview
We
are an early-clinical-stage therapeutics company focused on developing treatments for adult and pediatric cancer. Our business now consists
of one early-clinical-stage therapeutic program (QN-302), one preclinical therapeutic program (Pan-RAS), and a co-development agreement
with Marizyme, Inc (“Marizyme”).
Our
lead program, QN-302, is an investigational small molecule G-quadruplexes (G4)-selective transcription inhibitor with strong binding
affinity to G4s prevalent in cancer cells (such as pancreatic cancer). Such binding could, by stabilizing the G4s against DNA “unwinding,”
help inhibit cancer cell proliferation.
Our
Pan-RAS program, which is currently at the preclinical stage, consists of a family of RAS oncogene protein-protein interaction inhibitor
small molecules believed to inhibit or block mutated RAS genes’ proteins from binding to their effector proteins thereby leaving
the proteins from the mutated RAS unable to cause further harm. In theory, such mechanism of action may be effective in the treatment
of about one quarter of all cancers, including certain forms of pancreatic, colorectal, and lung cancers. The investigational compounds
within our Pan-RAS portfolio are designed to suppress the interaction of endogenous RAS with c-RAF, upstream of the KRAS, HRAS and NRAS
effector pathways.
Marizyme
In
addition, during the year ended December 31, 2024,2025, the Company advanced a total of $2,257,400$4,166,900 to Marizyme, against which
Marizyme had
previously delivered demand promissory notes to the Company of like principal amounts (the “Marizyme Notes”).
The Marizyme
Notes bear interest the rate of eighteen percent (18%) per annum. Marizyme may pre-pay all or any part of the outstanding
principal or
interest of the Marizyme Notes at any time and from time to time, in whole or in part, without premium or penalty.penalty, until its maturity on August 21, 2026. Throughout the fourth quarter of 2025, the Board reassessed its interest
in further pursuing a transaction with Marizyme given the Faraday Investment (as described further below) and Marizyme’s continued
need for funding support, and, as such, management updated its expected credit loss (“CECL”) estimate under ASC 326 as of
December 31, 2025.
Faraday Investment
In September 2025 we consummated a Subscription Agreement (the “Subscription Agreement”) with certain investors including Faraday Future Intelligent Electric Inc. (NASDAQ: FFAI)(the “Lead Investor” or “Faraday”) pursuant to which the investors purchased $40.7 million (the “Offering”) of our Common Stock and shares of a newly created Series B Convertible Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”). Up to $6.8 million of the net proceeds from the Offering were used to pay existing debt and fund our existing business operations, and the balance of the cash proceeds and contributed currency will be used for the establishment of our cryptocurrency treasury operations, using AlxCrypto. AIxCrypto (AIxC) is committed to building a world-leading ecosystem that integrates Artificial Intelligence (AI) and blockchain, bridging Web2 and Web3. This ecosystem unites a decentralized protocol, distributed network, AI DePIN and EAI RWA value regeneration, and a DeAI Agent product and technology platform designed to achieve optimal trading performance. Its core products include the BesTrade DeAI Agent and the AIxC ecosystem products.
Reverse Stock Split
On
November 5, 2024, the Company effected a 1-for-50, reverse stock split of our outstanding shares of common stock (the “Reverse
Stock Split”). The Reverse Stock Split reduced our shares of outstanding common stock, stock options, and warrants to purchase
shares of our common stock. Fractional shares of common stock that would have otherwise resulted from the Reverse Stock Split were rounded
down to the nearest whole share and cash in lieu of fractional shares was paid to stockholders. All share and per share data for all
periods presented in this Annual Report on Form 10-K have been adjusted retrospectively to reflect the Reverse Stock Split. The number
of authorized shares of common stock and the par value per share remains unchanged.
Series B Preferred Stock Conversions
Subsequent to December 31, 2025, and through the date of this filing, 33,858 shares of the Company’s Series B Preferred Stock were converted into 15,074,611 shares of common stock at a conversion price of $2.246 per share.
The following table summarizes the conversion activities:
As a result of these conversions, the Company’s outstanding common stock increased by approximately 192%, which will result in a dilution to existing common stockholders.
We
do not expect to be profitable before products from our therapeutics pipeline are commercialized. To experience losses while therapeutic
products are still under development is, of course, typical for biotechnology companies. Given our financial situation, the company slowed
the development of the aforementioned therapeutic products beginning in the second quarter 2024. We have also implemented dramatic expense
controls in an effort to stem the rate of losses. Management and the board are strategically reviewing plans on how to best advance our
therapeutics pipeline, and will ramp up development when properly funded through either the capital markets or strategic partnerships.
This discussion and analysis is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the consolidated financial statements. While the Company’s significant accounting policies and estimates are further outlined in Note 1 - Business and Summary of Significant Accounting Policies and Estimates of the consolidated financial statements, Management believes that none of these give rise to critical accounting policies or estimates in these consolidated financial statements.
Our
consolidated financial statements historically have not separated our diagnostics-related activities from our therapeutics-related activities.
All of our historically reported revenue was diagnostics-related. Before the third quarter of 2023, our reported expenses represented
the total of our diagnostics-related and therapeutics-related expenses. In this Annual Report, all diagnostics-related revenues and expenses
have been reclassified to discontinued operations (See Note 6 - Discontinued Operations).
This
discussion and analysis is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP.
The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our consolidated
financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to the determination of
the allowance for credit losses, fair value of derivative financial instruments and warrant liabilities, and stock-based
compensation. We base our estimates on historical experience, known trends and events and various other factors we believe to be
reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different
assumptions or conditions.
While
our significant accounting policies are more fully described in Note 1 to our consolidated financial statements appearing in “Item
8. Financial Statements and Supplementary Data,” we believe that the following accounting policies are the most critical to aid
you in fully understanding and evaluating our financial condition and results of operations:
Warrant
Liabilities
From
time to time the Company has issued certain warrants with terms that give rise to warrant liabilities (see Note 8 – Warrant Liabilities).
Accounting principles generally accepted in the United States of America (“U.S. GAAP”) require us to recognize the fair value
of these warrants as warrant liabilities on our Consolidated Balance Sheets and to reflect period-to-period changes in the fair value
of the warrant liabilities on our Consolidated Statements of Operations. The estimated fair value of these warrant liabilities was approximately
$0.3 million, and $0.1 million at December 31, 2024 and 2023, respectively. There were liability classified warrants outstanding for
68,712 shares with a weighted average price of $2.00 (of which 52,693 were exercisable with a weighted average price of $0.23) at December
31, 2024 and liability classified warrants outstanding for 9,113 shares (of which all were exercisable) with a weighted average price
of $36.50 at December 31, 2023.
Because
the fair value of the above liability classified warrants will be determined each quarter on a “mark-to-market” basis, significant
variability in our future quarterly and annual Consolidated Statement of Operations and Consolidated Balance Sheets could occur based
on changes in our public market common stock price. Pursuant to U.S. GAAP, a quarter-to-quarter increase in our stock price would result
in an increase in the fair value of the warrant liabilities and a quarter-to-quarter decrease in our stock price would result in a decrease
in the fair value of warrant liabilities.
During
the year ended December 31, 2024, the Company issued liability classified warrants for 52,474 shares, at a weighted average price of
$8.64, reclassified warrants for 71,026 shares with a weighted average price of $2.14 from equity to liabilities, and warrants for 38,315
shares with a weighted average price of $6.50 from liabilities to equity. Liability classified warrants for 25,586 shares expired with
a weighted average price of $13.00. No liability classified warrants were exercised during the year ended December 31, 2024.
During
the year ended December 31, 2023, the Company issued liability classified warrants for 9,113 shares, at a weighted average price of
$36.50, reclassified warrants for 50,000 shares with a weighted average price of $82.50 from liabilities to equity. Liability
classified warrants for 21,952 shares with a weighted average price of $66.00 expired, and liability classified warrants for 5,040
shares with a weighted average price of $66.00 were forfeited. No liability classified warrants were exercised during the year ended
December 31, 2023.
Short-Term
Notes Receivable
During
the year ended December 31, 2024, the Company advanced to Marizyme, Inc., $2,257,400, against which Marizyme delivered demand promissory
notes to the Company of like principal amounts (the “Marizyme Notes”). As of December 31, 2024, accrued interest related
to the Marizyme Notes was $113,292 and interest income of this amount was recognized in other income in the consolidated statement of
operations. As of December 31, 2023 there were no amounts due to the Company under the Marizyme Notes.
The
Marizyme Notes bear at interest the rate of eighteen percent (18%) per annum. Marizyme may pre-pay all or any part of the outstanding
principal or interest at any time and from time to time, in whole or in part, without premium or penalty.
Under
ASC 326-20, known as the current expected credit loss (“CECL”) model, the Company was required to estimate credit losses
expected over the life of an exposure (or pool of exposures) based on historical information, current information, and reasonable and
supportable forecasts. The Company is unable to use its historical data to estimate losses as it has no relevant loss history to
date. To determine the estimate of expected credit losses, the Company used a probability-weighted approach that incorporates multiple
settlement scenarios, including recovery of amounts due upon an acquisition of the debtor, and recovery in different liquidation scenarios,
and determines the expected recoverable amount of the loan in each scenario. This model requires management to make certain assumptions
including the likelihood of each outcome, the estimated value of the debtor’s assets, and the Company’s expected claim and
recovery rate on the debtor’s assets in the event of an insolvency or a liquidation proceeding. As of December 31, 2024, the estimate
for expected credit losses on the Marizyme Notes is $360,000. Given the inherently uncertain nature of the debtor’s financial condition
and future outcomes, actual credit losses may differ materially from this estimate. The Company will continue to monitor relevant events
and conditions and update its assumptions and allowance as necessary.
General
and administrative expenses decreasedincreased from $6.1$4.2 million for the year ended December 31, 20232024 to $4.2$8.8 million for the year ended December
31, 2024.2025. This decrease wasis primarily due to aan $0.8increase in investor relation fees of $1.4 million as we paid consultants to help raise capital,
plus $3.0 million increase in consultant fees and $0.9 million in master service fees offset by a decrease in stock-based compensation expense, a $0.9 million decrease in
payroll related expenses dueof to a reduction in force,$1.0
million and a $0.3 million decrease in insurance expenses, offset by an increaseexpense of $0.1$0.2 million in professional fees.million.
Research and development expenses decreased from $1.2 million for the year ended December, 2024, to $0.2 million for the year ended December 31, 2025. This was primarily due to all research and development being slowed down in 2025 due to lack of funding, resulting in decreases in QN-302 program expenses of approximately $200,000 and a decrease in Marizyme research expense of $700,000.
Research
and development expenses decreased from $5.2 million for the year ended December 31, 2023 to $1.2 million for year ended December 31,
2024. This decrease was primarily due to a $2.9 million decrease in preclinical, clinical research, and licensing costs for QN-302, a
$1.0 million decrease in preclinical research, and licensing costs for Pan-RAS, a $0.6 million decrease in payroll related expenses due
to a reduction in force, a $0.1 million decrease in stock-based compensation expense, and a $0.1 million decrease in professional fees,
offset by a $0.7 increase in expenses related to the Marizyme Co-Development Agreement.
Credit
Loss Expense -– ShortShort-Term Term NotesNote Receivable
Credit loss expense – short-term note receivable increased from $0.4 million for the year ended December, 2024, to $4.2 million for the year ended December 31, 2025. This is due to Marizyme’s debt increasing from $2.4 million for the year ended December 31, 2024 to $4.9 million for the year ended December 31, 2025, as well as the likelihood of our being able to collect being assessed at a significantly lower rate than prior year.
There was a $0.4 million loss in the current year due to a charge for the Company’s estimate for expected credit
losses on the Marizyme Notes Receivable during the year ended December 31, 2024. There were no credit losses during the year ended December
31, 2023.
During
the year ended December 31, 2024 we experienced a $0.4 million gain in other income due to the change in fair value of the warrant liabilities
described above. The estimated fair value of warrant liabilities increased to $0.3 million as of December 31, 2024 from $0.1 million
as of December 31, 2023 due to the issuance of new liability classified warrants with an initial fair value of $0.6 million, the reclassification
at fair value of equity classified warrants to warrant liabilities of $0.3 million, offset by the reclassification at fair value to equity
of liability classified warrants of $0.2 million, and the $0.4 million gain on the change in fair value of the warrant liabilities due
to an associated decrease in the market price of our common stock and the expiration of liability classified warrants during the year.
During
the year ended December 31, 20232025 we experienced a $2.0$0.2 million gain in other income becausedue ofto the change in fair value of the warrant liabilities
liabilities.described above. The estimated fair value of warrant liabilities decreased to $0.1 million as of December 31, 20232025 from $3.6$0.3 million
as of
December 31, 20222024 primarily due to a reductionchanges in fairour valuestock price and expiration of thewarrants warrant liabilities resulting from an associated decrease induring the marketprior price
of our common stock, and the reclassification at fair value of a liability classified warrant to equity of $1.6 million.period.
During the year ended December 31, 2024 we experienced a $0.4 million gain in other income because of the change in fair value of the warrant liabilities. The estimated fair value of warrant liabilities increased to $0.3 million as of December 31, 2024 from $0.1 million as of December 31, 2023 due to the issuance of new liability classified warrants with an initial fair value of $0.6 million, the reclassification at fair value of equity classified warrants to warrant liabilities of $0.3 million, offset by the reclassification at fair value to equity of liability classified warrants of $0.2 million, and the $0.4 million gain on the change in fair value of the warrant liabilities due to an associated decrease in the market price of our common stock and the expiration of liability classified warrants during the year.
During
the year ended December 31, 2024, we experienced a gain of approximately $0.2 million on change in fair value of derivative liabilities
due to the issuance and subsequent extinguishment of the 2024 Alpha Debenture and 2024 Chen Debenture during the year. DerivativeThere were no
derivative liabilities
at December 31, 2023 had no fair value.2025.
Gain on Change in Fair Value of Convertible Debt
During the year ended December 31, 2025 we experienced an approximately $38,000 gain on change in fair value of convertible debt, compared to no change for the year ended December 31, 2024. We did not hold any convertible debt in 2024.
There
was $0.1$0.7 million in interest income during the year ended December 31, 20242025 compared to no$0.1 interest income during the year ended December
31, 2023.2024. The increase was due to interest accrued on the Marizyme Notes.Notes, Therewhich wereincreased nosignificantly Marizyme notes outstanding duringin the year ended
December 31, 2023.
2025.
Interest
Expense, NetExpense
There
was $0.9$1.0 million in net interest expense during the year ended December 31, 20242025 compared to net interest expense of $1.5$0.9 million during the
year ended December 31, 2024. The increase was due to the short term promissory notes carrying higher interest rates
than the convertible debt carried in the year ended December 31, 2023. The decrease was due to lower outstanding balances on convertible debt during the current year compared
to the prior year.2024.
During the year ended December 31, 2024 we incurred a loss on issuance of convertible debt of approximately $358,000 due to the fair value of the 2024 Alpha Debenture and derivative liabilities exceeding the cash proceeds. During the year ended December 31, 2025 we incurred a loss on issuance of convertible debt of approximately $92,000 due to the fair value of the 2025 Convertible Note and derivative liabilities exceeding the cash proceeds.
Net Loss on Digital Assets
During
the year ended December 31, 20242025 we experienced a loss ofan approximately $358,000$3.6 due to the issuance of new convertible debt. There
was nomillion loss on issuancedigital ofassets, convertiblecompared debtto duringno change for the year
ended December 31, 2023.2024. We did not hold any digital assets in 2024.
(Gain)
Loss on Voluntary Conversion of Convertible Debt into Common Stock
During the year ended December 31, 2024, we recognized a gain of approximately $56,000 on the voluntary conversion of convertible debt into common stock, due to the issuance of 58,378 shares of common stock with a fair value of approximately $674,000 upon partial voluntary conversion of the 2022 Alpha Debenture at a weighted average share price of $13.00, resulting in a gain of approximately $85,000, offset by a loss of approximately $29,000 from the issuance of 7,842 shares of common stock with a fair value of approximately $61,000 upon Alpha’s partial voluntary conversion of the 2024 Alpha Debenture at a weighted average share price of $6.50. There was no debt conversions in the year ended December 31, 2025.
During
the year ended December 31, 2023 we issued 16,835 shares of common stock upon Alpha’s partial voluntary conversion of the 2022
Debenture at $66.00 per share for a total of $1,111,078 principal converted. Upon conversion, we recognized a loss on voluntary conversion
of convertible debt of approximately $1.1 million.
During the year ended December 31, 2024, we recognized a loss on debt extinguishment of approximately $57,000. In connection with the closing of the Company’s private placement transaction and issuance of Series A-2 Preferred Stock, we used approximately $531,000 of the proceeds to repay the outstanding principal and accrued interest on the 2024 Alpha Debenture, in full settlement of the obligation, resulting in a debt extinguishment loss of approximately $68,000. This loss was offset by a debt extinguishment gain of approximately $13,000 from the issuance of 1,154 shares of newly designated Series A-2 Preferred Stock, in full settlement of the obligation of $1,154,000 in outstanding principal and interest on the 2024 Chen Debenture. There was no debt extinguished in the year ended December 31, 2025.
During
the year ended December 31, 2023, we issued 6,193 shares of common stock in lieu of cash for the October and December 2023 monthly redemptions,
for a total of $220,000 principal redeemed, pursuant to the terms of the 2022 Debenture at a weighted average share price of $35.52.
Upon redemption in shares, we recognized a loss on partial debt extinguishment of $34,315. The modification of the 2022 Debenture during
the year ended December 31, 2023 met the criteria to be accounted for as a debt extinguishment in the amount of $591,338. Accordingly,
we recognized an additional loss on partial debt extinguishment of that amount.
During the year ended December 31, 2024, we issued 45,496 shares of common stock with a fair value of approximately $903,000, in lieu of cash for monthly redemptions of $660,000 principal and approximately $34,000 accrued interest redeemed, pursuant to the terms of the 2022 Alpha Debenture at a weighted average share price of $14.51. Upon redemption in shares, we recognized a loss on monthly redemptions of convertible debt into common stock of approximately $209,000. There was no redemptions of convertible debt in the year ended December 31, 2025.
Loss
on Fixed Asset Disposal
During
the year ended December 31, 2024 there was no loss on fixed asset disposal. During the year ended December 31, 2023, we incurred a $21,747
loss on fixed asset disposal due to disposal of research and development equipment previously used for QN-165.
There
was no loss from discontinued operations during the year ended December 31, 2024, compared approximately $0.7 million during the year
ended December 31, 2023, which consisted of approximately $0.2 million from our former Qualigen, Inc. subsidiary and approximately $0.5
million from NanoSynex.
The
Company recorded a loss of approximately $0.1 million on disposal of discontinued operations during the year ended December 31, 2024,
which was generated due to the early settlement of an escrow account from the sale of Qualigen, Inc. DuringThere were no such discontinued
operations in the year ended December 31,
2023, the Company recorded a loss of approximately $0.6 million on disposal of discontinued operations, consisting of a loss of approximately
$4.5 million from the deconsolidation of NanoSynex, offset by a gain of approximately $3.9 million from the sale of our former Qualigen,
Inc. subsidiary.2025.
Our
financial position is weak. As of December 31, 2024,2025, we had approximately $1.2$19.3 million in cash and net accounts payable of over$1.3 $1.6million.
million. We are in arrears on accounts payable to important partners. We have incurred recurring losses from operations and have an accumulated
deficit of $123.1$140.0 million at December 31, 2024.2025. We expect to continue to incur losses subsequent to the consolidated balance sheet date
of December 31, 2024.2025. For the years ended December 31, 20242025 and 2023,2024, we used cash of $6.5$7.0 million and $10.3$6.3 million, respectively, in
operations. We sold our Qualigen, Inc. FastPack® diagnostics products business in 2023.operations.
Our
current liabilities at December 31, 20242025 include approximately $1.6
$1.3 million of accounts payable, $170,000$1.6 million of related party payables,
approximately $123,000 of accrued expenses and other current liabilities, approximately $142,000 of short term convertible
debt, and $269,000approximately $142,000 in warrant liabilities.
We
currently expect our cash balances to fund operations only into the third quarter of 2025. We expect to continue to have net
losses and negative cash flow from operations, which will challenge our liquidity. While we are establishing
cryptocurrency treasury operations, it is newly established and there are no guarantees it will generate revenue. These factors raise
substantial doubt regarding our
ability to continue as a going concern for the one-year period following the date that the financial
statements in this Annual Report
were issued.
What changed in the latest 10-Q
Risk Factors
New heading “A substantial portion of our capital is committed to an investment in Faraday Future Intelligent Electric Inc., which is also our majority stockholder and which we hold indirectly, exposing us to concentration and counterparty risk.”
New heading “Our recently launched RoboShare platform is new and unproven, and may not achieve market adoption or generate revenue.”
Largest changes
“A substantial portion of our capital is committed to an investment in Faraday Future Intelligent Electric Inc., which is also our majority stockholder and which we hold indirectly, exposing us to concentration and counterparty risk.”see in full comparison
“Our recently launched RoboShare platform is new and unproven, and may not achieve market adoption or generate revenue.”see in full comparison
“In June 2026, we launched RoboShare, a platform for on-demand robot rentals, as part of our embodied AI and robot ecosystem strategy. This offering is newly introduced and has not yet generated material revenue or established a user base. Its success depends on market adoption, technological performance, and evolving regulatory conditions, none of which can be assured. …”see in full comparison
“We have committed a substantial portion of our capital to an investment in the securities of Faraday Future Intelligent Electric Inc. (“FFAI”), which is also our Lead Investor and controls significant board and operational appointments. We hold this investment indirectly through a third party, Gold King Arthur Holding Limited (“GKA”), which we have entrusted to purchase, hold, and dispose of FFAI securities on our behalf under an Entrusted Investment Agreement. …”see in full comparison
“Except as set forth below, there have been no material changes to the risk factors previously disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 under the heading “Risk Factors.” The following risk factors should be read together with those previously disclosed risk factors. Additional risks and uncertainties not currently known to the Company, or that the Company currently deems immaterial, may also materially and adversely affect its business, financial condition, and results of operations.”see in full comparison
“Because we hold this investment through GKA rather than directly, we depend on GKA’s performance under the Entrusted Investment Agreement and do not hold a direct security interest in the underlying FFAI securities. If GKA or FFAI fails to perform, or if the value of the FFAI securities declines, we may be unable to recover our investment, which could have a material adverse effect on our business, financial condition, and results of operations.”see in full comparison
Full comparison: every changed paragraph (6)
Except as set forth below, there have been no material changes to the risk factors previously disclosed in Part I, Item 1A of the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2025 under the heading “Risk Factors.” The following risk factors should be read together with those previously disclosed risk factors. Additional risks and uncertainties not currently known to the Company, or that the Company currently deems immaterial, may also materially and adversely affect its business, financial condition, and results of operations.
A substantial portion of our capital is committed to an investment in Faraday Future Intelligent Electric Inc., which is also our majority stockholder and which we hold indirectly, exposing us to concentration and counterparty risk.
We have committed a substantial portion of our capital to an investment in the securities of Faraday Future Intelligent Electric Inc. (“FFAI”), which is also our Lead Investor and controls significant board and operational appointments. We hold this investment indirectly through a third party, Gold King Arthur Holding Limited (“GKA”), which we have entrusted to purchase, hold, and dispose of FFAI securities on our behalf under an Entrusted Investment Agreement. As a result, our financial condition and results of operations are materially dependent on a single investee that is also our controlling Lead Investor, and we do not hold the invested securities directly.
Because we hold this investment through GKA rather than directly, we depend on GKA’s performance under the Entrusted Investment Agreement and do not hold a direct security interest in the underlying FFAI securities. If GKA or FFAI fails to perform, or if the value of the FFAI securities declines, we may be unable to recover our investment, which could have a material adverse effect on our business, financial condition, and results of operations.
Our recently launched RoboShare platform is new and unproven, and may not achieve market adoption or generate revenue.
In June 2026, we launched RoboShare, a platform for on-demand robot rentals, as part of our embodied AI and robot ecosystem strategy. This offering is newly introduced and has not yet generated material revenue or established a user base. Its success depends on market adoption, technological performance, and evolving regulatory conditions, none of which can be assured. If RoboShare does not achieve sufficient adoption, or if its development or operation encounters technical, commercial, or regulatory obstacles, our ability to generate revenue from it may be materially impaired, which could adversely affect our business, financial condition, and results of operations.
Management's Discussion & Analysis (MD&A)
New heading “EAI and RoboShare”
New heading “Loss on settlement of short-term note receivable”
New heading “Interest Income”
New heading “Loss on issuance of convertible debt”
New heading “Net Loss on Digital Assets”
New heading “Comparison of the six months ended June 30, 2026 and 2025:”
New heading “General and Administrative Expenses”
New heading “Sales and Marketing Costs”
New heading “Research and Development Costs”
New heading “Credit Loss Expense – Short-Term Note Receivable”
New heading “Other Expense (Income), Net”
New heading “Gain on Change in Fair Value of Warrant Liabilities”
New heading “Gain on Change in Fair Value of Convertible Debt”
New heading “Loss on settlement of short-term note receivable”
New heading “Interest Expense”
New heading “Loss on issuance of convertible debt”
Removed heading “Embodied AI Infrastructure”
Removed heading “License and Sponsored Research Agreements”
Removed heading “Other Service Agreements”
Largest changes
“Management’s plans to manage liquidity constraints include continued operating expense discipline, targeted monetization of digital asset holdings as needed, the planned commercialization of the Company’s physical AI activities through RoboShare, and prudent utilization of the equity purchase facility only upon satisfaction of all applicable conditions. …”see in full comparison
We expect to continue to have net losses and negative cash flow from operations, which will challenge our near-term liquidity.see in full comparisonWhileOurwe are establishing cryptocurrencydigital-asset treasuryoperations,strategyitandisRoboShare operations are newlyestablishedestablished, and there are no guaranteesitthat either will generaterevenue.revenueTheseorfactorsprovideraisesufficient liquidity. NotwithstandingsubstantialthedoubtJuneregarding22,our2026abilitypublic launch of RoboShare, the Company has not yet generated operating revenue from the platform. Our nearest commercial milestone is the first RoboShare rental delivery, targeted for August 2026; the timing of delivery and associated revenue recognition remain subject tocontinueexecutionas a going concern for the one-year period following the date that the financial statements in this Annual Report were issued.risk.
“To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our common stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. …”see in full comparison
This discussion and analysis is based on our unaudited condensed consolidated financial statements, which have been prepared in accordancesee in full comparisonaccordancewith U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our unaudited condensed consolidated financial statements. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact the unaudited condensed consolidated financial statements. While the Company’s significant accounting policies and estimates are further outlined in Note 1 - Business and Summary of Significant Accounting Policies and Estimates of the unaudited condensed consolidated financial statements,Managementmanagementbelievesconsidersthat nonethe accounting for digital assets at fair value, the valuation ofthesewarrant liabilities,giveandrisethe going concern assessment to be critical accountingpoliciesestimates.orTheseestimatesareas involve significant judgments and assumptions about inherently uncertain matters, and changes in theseunauditedestimates could materially impact the Company’s condensed consolidated financialfinancial statements.position and results of operations.
“The Company is developing the AIxC Hub, a decentralized application ecosystem intended to support the registration, validation, and economic coordination of AI enabled physical systems, with transaction settlement and incentive mechanisms encoded on chain. AIxC is engaged in an early stage collaboration with FFAI Robotics Inc., a subsidiary of Faraday Future Intelligent Electric Inc., as a potential initial deployment environment. No definitive commercial agreements have been executed, and there can be no assurance that any such arrangements will be completed.”see in full comparison
“On April 11, 2024, we entered into a Co-Development Agreement with Marizyme, Inc. (“Marizyme”). Under the Co-Development Agreement (as amended on August 6, 2024), we agreed to pay Marizyme a Funding Payment of up to $1,750,000 and an Exclusivity Fee of $200,000. The Exclusivity Fee of $200,000 and a Funding Payment of $500,000 was paid to Marizyme on April 12, 2024. The Exclusivity Fee entitled us to an exclusivity period until May 31, 2024 for purposes of proposing and outlining a broader strategic relationship with Marizyme with regard to Marizyme’s DuraGraft business. …”see in full comparison
Full comparison: every changed paragraph (88)
By
their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics, and healthcare,
regulatory and scientific developmentsdynamics and depend
on the economic circumstances that may or may not occur in the future or may occur
on longer or shorter timelines than anticipated. In
light of the significant uncertainties in these forward-looking statements, you should
not rely upon forward-looking statements as predictions
of future events. Although we believe that we have a reasonable basis for each
forward-looking statement contained in this Quarterly
Report, we caution you that forward-looking statements are not guarantees of future
performance and that our actual results of operations,
financial condition and liquidity, and the development of the industry in which
we operate may differ materially from the forward-looking
statements contained in this Quarterly Report. In addition, even if our results
of operations, financial condition and liquidity, and
the development of the industry in which we operate, are consistent in some future
periods with the forward-looking statements contained
in this Quarterly Report, they may not be predictive of results or developments
in other future periods. Any forward-looking statement
that we make in this Quarterly Report speaks only as of the date of this Quarterly
Report, and we disclaim any intent or obligation to
update these forward-looking statements beyond the date of this Quarterly Report,
except as required by law. This caution is made under
the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
We are a technology company focused on the commercialization of embodied artificial intelligence (“EAI”), also referred to as physical AI - robots and AI-enabled systems that perceive and act in the physical world, together with software infrastructure for the tokenization of real-world assets (“RWA”). Our objective is to provide compliance-oriented software across the infrastructure, protocol and application layers of our platform.
In September 2025, the Company completed an approximately $41 million PIPE financing and subsequently rebranded from Qualigen Therapeutics to AIxCrypto Holdings, Inc. (Nasdaq: AIXC). Following a strategic review, in February 2026 the Company realigned its operations to focus on RWA tokenization, EAI infrastructure and AI Agent products. Subsequent to quarter end, in July 2026, the Company designated RoboShare, an on-demand robot sharing and matchmaking platform, as its top operating priority for the second half of 2026 and began executing a Los Angeles go-to-market plan. RoboShare is expected to be the principal near-term commercialization channel for the Company’s physical AI capabilities. The Company’s RWA tokenization initiative and its other physical AI programs continue in development, with resources sequenced behind RoboShare.
On May 21, 2026, our Board of Directors approved the structured wind-down of our legacy biotechnology business. The wind-down continued during the quarter and subsequent period, and limited residual costs may continue to be incurred. As of June 30, 2026, the biotech component does not satisfy all held-for-sale criteria under ASC 205-20, and all associated operating costs remain classified within continuing operations of our single reportable segment.
We
are a technology infrastructure company focused on developing programmable systems at the intersection of real-world asset (“RWA”)
tokenization and Embodied Artificial Intelligence (“EAI”). Our objective is to provide regulated, auditable software infrastructure
that enables traditional assets and AI-enabled physical systems to interact with blockchain-based networks.
In
September 2025, the Company completed a $41 million PIPE financing and rebranded from Qualigen Therapeutics to AIxCrypto Holdings, Inc.
(Nasdaq: AIXC). Following a strategic review, in February 2026 the Company realigned its operations to focus exclusively on RWA tokenization
and EAI infrastructure. As part of this realignment, the Company discontinued development of the BesTrade DeAI Agent platform and the
C10 digital asset portfolio management tools, which were early-stage initiatives that did not align with our enterprise and institutional
infrastructure objectives. We did not incur material additional impairment charges related to these initiatives beyond amounts previously
disclosed.
The
Company continues to evaluate strategic alternatives for its legacy therapeutics assets, including continued development, licensing,
or disposition.
EAI and RoboShare
The Company’s robotics activities are focused on RoboShare, its commercialization platform through which EAI capabilities are deployed. RoboShare is being developed as an on-demand robot sharing and matchmaking platform intended to connect robot owners with enterprises, educational institutions and other users seeking access to robotic equipment and related services. On June 22, 2026, at Automate 2026, the Company launched RoboShare alongside its Robot Second Life Cycle framework. RoboShare is designed to support on-site robotic service packages, providing customers access to robotic capability without upfront equipment purchases. The broader market for offerings of this type is commonly described as robots-as-a-service; the Company’s initial arrangements are expected to be short-term and individual service engagements rather than recurring subscription contracts. Subsequent to quarter end, the Company elevated RoboShare to its top operating priority for the second half of 2026. The Company’s physical AI technology stack is being designed to allow robotic assets to be discovered, coordinated, monitored and transacted for across their operating life. Faraday Future Intelligent Electric Inc. (“FFAI”), the Company’s majority stockholder, is expected to serve as an initial ecosystem partner; however, no definitive agreement had been executed as of June 30, 2026.
The revenue opportunity the Company has identified from commercialize its physical AI activities is expected to be realized principally through RoboShare. These arrangements are transactional in nature, and the Company has not established recurring or contracted revenue from them. The Company’s prioritization of RoboShare reflects a change in the commercialization channel and sequencing of its physical AI initiatives, and was not a determination to reduce the scope of those initiatives. The periods in which revenue from these activities may be realized, and the amount of any such revenue, remain subject to significant uncertainty.
AIxCThe Company is evaluating and developing software
infrastructure to support the digitization and on chainon-chain administration of traditional financial and realreal-world world
assets,assets withA complianceportion logic and ownership records encoded directly into programmable smart contracts. As an initial reference implementation,
pursuant to an Entrusted Investment Agreement, in February 2026of the
Company’s Company advanced $10.0 million in connection a contractually committed
equity investment in Faraday Future Intelligent Electric Inc. (Nasdaq: FFAI), which is recordedintended to serve as aan prepaidasset investment to a related party
as of March 31, 2026, asfor the underlyingCompany’s sharestokenization hadinitiatives. This initiative
remains under technical and regulatory evaluation and has not been issued or settled as of that date. Tokenization of this investment has not
yet occurred and remains subject to further technical development and regulatory considerations.executed. The Company expects tothat pursueany near-term revenue
through from structuring
fees, platform licensing,licensing andor asset administration services.services would not be material, and has sequenced resources for this initiative behind
RoboShare.
Embodied
AI Infrastructure
The Company is developing the AIxC Hub, a decentralized application ecosystem intended to support the registration, validation, and economic
coordination of AI enabled physical systems, with transaction settlement and incentive mechanisms encoded on chain. AIxC is engaged in
an early stage collaboration with FFAI Robotics Inc., a subsidiary of Faraday Future Intelligent Electric Inc., as a potential initial
deployment environment. No definitive commercial agreements have been executed, and there can be no assurance that any such arrangements
will be completed.
On May 12, 2026, the Company entered into a Note Purchase Agreement to assign all outstanding Marizyme loan and creditor claims. On May 14, 2026, the Marizyme notes, with a gross balance of approximately $5.2 million including accrued interest and a net carrying value of $475,844 after credit-loss allowances, were extinguished for $100,000 in cash. The Company recorded a $375,844 loss on settlement for the three and six months ended June 30, 2026. The note receivable and related allowance were removed from the balance sheet, eliminating the Company’s remaining Marizyme note exposure. The assignment did not modify the Company’s contingent royalty rights under the 2024 Co-Development Agreement, and no royalty receivable was recorded as of June 30, 2026.
On
April 11, 2024, the Company entered into a Co-Development Agreement (the “Co-Development Agreement”) with Marizyme. Under
the Co-Development Agreement (as amended), we agreed to pay Marizyme a Funding Payment of up to $1,750,000 and an Exclusivity Fee of
$200,000. The Exclusivity Fee of $200,000 and a Funding Payment of $500,000 was paid to Marizyme on April 12, 2024. The Exclusivity Fee
entitled us to an exclusivity period until May 31, 2024 for purposes of proposing and outlining a broader strategic relationship with
Marizyme with regard to Marizyme’s DuraGraft business. The Funding Payment is designed to provide financial support for commercialization
of Marizyme’s DuraGraft™ vascular conduit solution, which is indicated for adult patients undergoing coronary artery bypass
grafting surgeries and is intended for the flushing and storage of the saphenous vein grafts used in coronary artery bypass grafting
surgery. In return for the Funding Payment, we will receive quarterly a 33% payment in the nature of royalties on any Net Sales (as defined
with a meaning tantamount to gross profit on net sales) of DuraGraft, capped at double the amount of the Funding Payment cash provided.
No such payments-in-the-nature-of-royalties would accrue until after DuraGraft has been launched in the United States and a cumulative
total of $500,000 of DuraGraft Net Sales have been made in the United States.
In
addition, during the year ended December 31, 2025, the Company advanced a total of $4,166,900 to Marizyme, against which Marizyme had
previously delivered demand promissory notes to the Company of like principal amounts (the “Marizyme Notes”). No additional
funds were advanced during the three months ended March 31, 2026. The Marizyme Notes bear interest the rate of eighteen percent (18%)
per annum. Marizyme may pre-pay all or any part of the outstanding principal or interest of the Marizyme Notes at any time and from time
to time, in whole or in part, without premium or penalty, until its maturity on August 21, 2026. Throughout the fourth quarter of 2025,
the Board reassessed its interest in further pursuing a transaction with Marizyme given the Faraday Investment (as described further
below) and Marizyme’s continued need for funding support, and, as such, management updated its expected credit loss (“CECL”)
estimate under ASC 326 as of March 31, 2026.
Pursuant to amended investment documents executed on April 10 and April 14, 2026, the aggregate investment consideration for the Company’s Faraday Future securities position was increased to $12,002,192, and the transaction closed on April 15, 2026. At closing, GKA received 1,926,337 shares of FFAI Class A common stock, 11,502 shares of FFAI Series C Convertible Preferred Stock and a four-year warrant to purchase up to 1,000,000 shares of FFAI Class A common stock on the Company’s behalf. The securities held indirectly through GKA were classified as parent company equity held at cost at cost within stockholders’ equity as of June 30, 2026. The position is intended to serve as a proof-of-concept asset for the Company’s RWA tokenization strategy; partial tokenization remains subject to technical and regulatory evaluation and had not been executed as of June 30, 2026.
In
September 2025 we consummated a Subscription Agreement (the “Subscription Agreement”) with certain investors including Faraday
Future Intelligent Electric Inc. (NASDAQ: FFAI)(the “Lead Investor” or “Faraday”) pursuant to which the investors
purchased $40.7 million (the “Offering”) of our Common Stock and shares of a newly created Series B Convertible Preferred
Stock, par value $0.001 per share (the “Series B Preferred Stock”). Up to $6.8 million of the net proceeds from the Offering
were used to pay existing debt and fund our existing business operations, and the balance of the cash proceeds and contributed currency
will be used for the establishment of our cryptocurrency treasury operations, using AlxCrypto.
This
discussion and analysis is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance
accordance with U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make
estimates and judgments
that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of
contingent assets and liabilities
in our unaudited condensed consolidated financial statements. An accounting policy is deemed to be
critical if it requires an accounting
estimate to be made based on assumptions about matters that are highly uncertain at the time
the estimate is made, and if different estimates
that reasonably could have been used, or changes in the accounting estimates that
are reasonably likely to occur periodically, could
materially impact the unaudited condensed consolidated financial statements.
While the Company’s significant accounting policies
and estimates are further outlined in Note 1 - Business and Summary of
Significant Accounting Policies and Estimates of the unaudited
condensed consolidated financial statements, Managementmanagement believesconsiders that
nonethe accounting for digital assets at fair value, the valuation of thesewarrant
liabilities, giveand risethe going concern assessment to be critical accounting policiesestimates. orThese estimatesareas involve significant judgments and assumptions
about inherently uncertain matters, and changes in these unauditedestimates could materially impact the Company’s condensed consolidated
financial financial
statements.position and results of operations.
Comparison
of the three months Endedended MarchJune 31,30, 2026 and 2025:
General
and administrative expenses increased from $2.5$1.4 million for the
three months ended June 30, 2025 to $2.9 million for the three months ended MarchJune 31, 2025 to $3.5 million for the three months
ended March 31,30, 2026. This iswas primarily due to ana $529,000 increase
in gross wages resulting from increased headcount, a $395,000 increase in transactiondirector serviceresignation agreementfees, feesa of $0.5 million as we paid our parent
company for management services and $0.7 million$393,000 increase in payroll as we hired new employeesconsulting
fees, and paida signing bonuses to executives,
plus $0.2 million$134,000 increase in accounting fees, $0.2 million increase in insurance expense, and $0.3 million in legal fees, offset by
a $1.3 million decrease in investor relation expenses.fees. The increase in general and administrative expenses iswas primarily a result of the deployment
of the Company’s
change in strategy following the Faraday investment.
Sales
and Marketing expenses increased from zero for the three months ended MarchJune 31,30, 2025, to approximately $638,000$86,000 for the three months ended
endedJune March 31,30, 2026. InThis 2026increase wewas beganprimarily driven by brand-building and commercialization expenditures in support of the Company’s
RWA and EAI initiatives, including resource reallocation toward RoboShare operations, as no sales or marketing campaigns related to increasing brand awareness for its real-world asset tokenization
and embodied AI Infrastructure activities. while in 2025 weactivities were notconducted
during marketingthe anythree products.months ended June 30, 2025.
Research
and development expenses decreased from approximately $33,000$18,000 for the three months ended MarchJune 31,30, 2025, to approximately $5,000 for the
three months ended June 30, 2026. This decrease was primarily driven by the Board-approved wind-down of legacy biotechnology research
and development activities during fiscal 2026, which left only minimal residual expenses recorded for the three months ended MarchJune 31, 30,
2026. This was primarily due to all research and development being slowed down in 2025 due to lack of
funding, resulting in minimal expenses incurred in 2026.
Credit loss expense – short-term note receivable decreased from $271,000 for the three months ended June 30, 2025, to zero for the three months ended June 30, 2026. This decrease was attributable to the settlement of all outstanding Marizyme notes effective May 14, 2026. The Company measures its allowance for credit losses related to Marizyme’s promissory notes under the CECL model based on the expected collectability of outstanding debt balances. Following the full settlement of the Marizyme notes in May 2026, the Company held no remaining exposure to this debt asset during the current quarter, resulting in no credit loss expense recognized for the three months ended June 30, 2026.
Credit
loss expense – short-term note receivable decreased from $0.2 million for the three months ended March 31, 2025, to $0.1 million
for the three months ended March 31, 2026. The methodology used to Marizyme’s credit allowance is based on the collectability of
the receivable, and during the year ended December 31, 2025 a significant decrease in collectability assessed caused us to record significant
increases to the credit allowance, so for the three months ended March 31, 2026, only a small adjustment was required due to interest
being recorded on the outstanding balance.
During
the three months ended MarchJune 31,30, 2026 wethe Company experienced a $0.1$5.0 millionthousand gain in other income due to the change in fair value of
the warrant
liabilities described above,above. comparedThe estimated fair value of warrant liabilities decreased to aapproximately gain$67,000 as of June
30, 2026 from approximately $39,000$72,000 duringas the three months endedof March 31, 2025. This was2026 primarily due to changes in our stock price and expiration of warrants during
the prior period.
The Company recorded no gain or loss on change in fair value of convertible debt for the three months ended June 30, 2026. All outstanding convertible debt instruments were fully settled and extinguished in the prior fiscal quarter.
Loss on settlement of short-term note receivable
The Company recorded a $375,844 loss on settlement of short-term note receivable in the three months ended June 30, 2026. In May 2026, all Marizyme promissory notes were fully settled for $100,000 cash. After CECL credit allowances, the net carrying amount of the notes totaled $475,844. The loss represents the gap between the asset’s net carrying value and settlement proceeds. This was a one-time loss arising from the complete divestment of the Marizyme debt position.
Interest expense decreased from $0.1 million for the three months ended June 30, 2025 to zero for the three months ended June 30, 2026. This change was driven by the full settlement of all convertible debt obligations in the prior quarter.
Interest Income
Interest income decreased from $142.5 thousand for the three months ended June 30, 2025 to $127.0 thousand for the three months ended June 30, 2026. The decrease was primarily attributable to the full settlement of the Marizyme Notes in May 2026.
Loss on issuance of convertible debt
Loss on issuance of convertible debt decreased from $0.1 million for the three months ended June 30, 2025 to zero for the three months ended June 30, 2026. The loss was attributable to the issuance of the 2025 Convertible Note during the three months ended June 30, 2025. No new convertible debt instruments were issued during the three months ended June 30, 2026, resulting in no loss on issuance of convertible debt for the current period.
Net Loss on Digital Assets
During
the three months ended MarchJune 31,30, 2026 wethe Company experienced an approximately $10,000$1.0 gainmillion loss on changedigital inassets, fair value of convertible debt as a result of repayment of the outstanding debt,
compared to no change
for the three months ended MarchJune 31,30, 2025. WeThe Company did not purchase or sell digital assets during the three months ended June 30,
2026; the change in the digital asset treasury during the quarter was attributable to fair value movements. The Company did not hold
any convertibledigital debtassets in the periodthree months ended MarchJune 31,
2025.30,2025.
Comparison of the six months ended June 30, 2026 and 2025:
Expenses
General and Administrative Expenses
General and administrative expenses increased from $3.9 million for the six months ended June 30, 2025 to $6.4 million for the six months ended June 30, 2026. This was primarily due to a $1.2 million increase in gross wages, a $712,000 increase in seminar and marketing fees, and a $553,000 increase in master service fees. The increase in general and administrative expenses was primarily a result of the deployment of the Company’s change in strategy following the Faraday investment.
Sales and Marketing Costs
Sales and Marketing expenses increased from zero for the six months ended June 30, 2025, to approximately $724,000 for the six months ended June 30, 2026. In 2026 the Company began marketing campaigns related to increasing brand awareness for its real-world asset tokenization and embodied AI Infrastructure activities, including commercialization support for RoboShare, whereas no sales or marketing activities were conducted during the six months ended June 30, 2025.
Research and Development Costs
Research and development expenses decreased from approximately $51,000 for the six months ended June 30, 2025, to approximately $10,000 for the six months ended June 30, 2026. Legacy biotechnology research and development activities were already scaled back in 2025 due to insufficient funding. The Board-approved wind-down of such development work in fiscal 2026 contributed to minimal residual R&D expenses for the six months ended June 30, 2026.
Credit Loss Expense – Short-Term Note Receivable
Credit loss expense – short-term note receivable decreased from $468,000 for the six months ended June 30, 2025, to approximately $143,000 for the six months ended June 30, 2026. This decrease is attributable to the settlement of all outstanding Marizyme notes effective May 14, 2026. The Company measures its allowance for credit losses related to Marizyme’s promissory notes under the CECL model based on the expected collectability of outstanding debt balances. The Company recorded incremental credit loss expense in the early portion of the current six-month period prior to the May 14, 2026 settlement. Once the Marizyme notes were fully settled mid-period, no additional credit loss accruals were required for the remainder of the six months ended June 30, 2026, lowering total credit loss expense for the six months ended June 30, 2026.
Other Expense (Income), Net
Gain on Change in Fair Value of Warrant Liabilities
During the six months ended June 30, 2026 the Company experienced a $0.1 million gain in other income due to the change in fair value of the warrant liabilities described above. The estimated fair value of warrant liabilities decreased to approximately $67,000 as of June 30, 2026 from $142,000 as of December 31, 2025 primarily due to changes in our stock price and expiration of warrants during the prior period.
Gain on Change in Fair Value of Convertible Debt
During the six months ended June 30, 2026 the Company experienced an approximately $10,000 gain on change in fair value of convertible debt as a result of repayment of the outstanding debt, compared an approximately $38,000 gain for the six months ended June 30, 2025.
Loss on settlement of short-term note receivable
The Company recorded a $375,844 loss on settlement of short-term note receivable in the six months ended June 30, 2026. In May 2026, all Marizyme promissory notes were fully settled for $100,000 cash. After CECL credit allowances, the net carrying amount of the notes totaled $475,844. The loss represents the gap between the asset’s net carrying value and settlement proceeds. This is a one-time loss arising from the complete divestment of the Marizyme debt position.
There
was approximately $183,000 in impairment of intangible assets during the threesix months ended MarchJune 31,30, 2026 compared to no impairment recorded
recorded during the threesix months ended MarchJune 31,30, 2025. During 2026 wethe Company wrote off some software development costs that had been capitalized,
capitalized, which did not occur in 2025.
Interest Expense
Interest expense decreased from $0.2 million for the six months ended June 30, 2025 to zero for the six months ended June 30, 2026. This change was driven by the full settlement of all convertible debt obligations in the prior quarter.
There
was $0.4 million in interest income during the six months ended June 30, 2026 compared to $0.3 million in interest income during the three
six months ended MarchJune 31, 2026 compared to $0.1 million in interest income during the
three months ended March 31,30, 2025. The increase was due to interest accrued on the Marizyme Notes, which increased significantly in the
year ended December 31, 2025, as well as interest recorded on our money market accounts.
Loss on issuance of convertible debt
Loss on issuance of convertible debt decreased from $0.1 million for the six months ended June 30, 2025 to zero for the six months ended June 30, 2026. The loss was attributable to the issuance of the 2025 Convertible Note during the six months ended June 30, 2025. No new convertible debt instruments were issued during the six months ended June 30, 2026, resulting in no loss on issuance of convertible debt for the current period.
There
was $1.0 million in interest expense during the three months ended March 31, 2025 compared to no interest expense recorded during the
three months ended March 31, 2026. The promissory notes we held during the three months ended March 31, 2025 were repaid prior to the
three months ended March 31, 2026.
FFR 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.
No Form 4 stock transactions in this period.
Well-known investors holding FFR (13F)
None of the 59 investors we track reported a position in their latest 13F.