Gaxos.ai Inc. (GXAI) — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; filed March 27, 2024. This is an annual report, not a standalone fourth-quarter report. The company, formerly The NFT Gaming Company, Inc., develops AI applications for gaming and health and wellness.
Business context and outlook
Gaxos launched four AI-enabled games during 2023. It was developing a generative-AI solution for game developers, targeted for launch in Q2 2024, and an AI-powered health optimization product, targeted for the second half of 2024. Management estimated development costs for its games and planned products at approximately $1.1 million. The company had three full-time employees as of March 27, 2024.
Financial results and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Revenue | $256 | $0 |
| Operating expenses | $4.016 million | $1.424 million |
| Operating loss | $4.015 million | $1.424 million |
| Other income | $67,188 | $2,924 |
| Net loss | $3.948 million | $1.421 million |
| Comprehensive loss | $3.852 million | $1.421 million |
| Net cash used in operating activities | $2.981 million | $1.260 million |
- Revenue was negligible; meaningful margins cannot be assessed. Operating expenses rose 182%, with higher compensation, professional fees and operating costs following the February 2023 IPO. Stock-based compensation was $936,354.
- At year-end, cash was $1.025 million, short-term U.S. Treasury investments were $2.593 million, working capital was $3.373 million, and total assets were $3.696 million. Total liabilities were $270,036, consisting of current accounts payable and accrued expenses; no debt is reported on the balance sheet.
- Cash increased by $344,929 during the year. Financing provided $5.859 million, principally from the IPO; investing used $2.533 million, mainly for short-term investments.
- The audited financial statements report basic and diluted net loss per share of $4.00 for 2023 and $1.64 for 2022, reflecting the filing’s retrospective share-split adjustment. Elsewhere, MD&A gives different per-share figures; see investor verification items below.
Material changes and unusual items
- Revenue began in 2023 but totaled only $256. Net loss increased from $1.421 million to $3.948 million.
- The company completed its IPO in February 2023, reporting approximately $5.96 million in net proceeds before certain deferred offering costs. It repurchased and cancelled 20,349 shares for $99,736 during 2023.
- Gaxos terminated its Columbia University software and patent license in August 2023, concluding the licenses were not commercially viable, and recorded a $52,363 impairment charge.
- Short-term investments generated $20,662 in realized gains and $95,785 in unrealized gains recorded in other comprehensive income.
- After year-end, the company changed its name to Gaxos.ai, effected a 1-for-12 reverse stock split on March 7, 2024, and regained Nasdaq’s minimum bid-price compliance on March 22, 2024.
Guidance, risks and contingencies
- Management expects operating losses to continue while it develops products and funds public-company overhead. It stated that year-end working capital and cash, together with subsequent financing, were expected to support operations for at least 12 months from the report’s issuance. The filing also identifies substantial doubt about the company’s ability to continue as a going concern if it cannot generate revenue or obtain financing.
- In March 2024, the company closed a private placement for approximately $3.5 million gross and reported approximately $3.057 million net proceeds. The package included common shares, pre-funded warrants and warrants, creating potential dilution. Proceeds were designated for general corporate purposes and working capital.
- Key risks include inability to attract users or generate sustainable revenue, need for additional capital and possible dilution, competition, product-development and launch execution, and changing regulation of NFTs, crypto assets, privacy and health data. Cybersecurity, third-party technology dependence, and intellectual-property risks are also highlighted.
- The company reported no currently known legal proceeding expected to have a material adverse effect. Management concluded disclosure controls and internal control over financial reporting were effective at year-end; the auditor did not provide an internal-control attestation.
Important facts for investors to verify
- Reconcile the per-share loss figures: the audited statements report $4.00 for 2023 and $1.64 for 2022, while MD&A states $0.33 and $0.14. Confirm the correct reverse-split-adjusted amounts.
- Review post-year-end financing terms, including warrant quantities, exercise prices, fees and potential dilution, and compare them with shares outstanding after the transaction.
- Track actual product launches, customer and user adoption, revenue generation, and cash burn against management’s 2024 targets and estimated $1.1 million development cost.
- Assess whether liquidity remains adequate as losses continue, and whether the company will need further financing on potentially dilutive terms.
- Monitor Nasdaq listing compliance and the legal, privacy, cybersecurity and regulatory readiness of the planned gaming, NFT and health products.