Change Agents Corporation. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: This Quarterly Report on Form 10-Q contains forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 under Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as “may,” “will,” “can,” “anticipate,” “assume,” “should,” “indicate,” “would,” “believe,” “contemplate,” “expect,” “seek,” “estimate,” “continue,” “plan,” “point to,” “project,” “predict,” “could,” “intend,” “target,” “potential” and other similar words and expressions of the future. Accordingly, factors that may affect our results include, but are not limited to: ● our ability to commercialize our product candidates and the growth of the markets for those product candidates; ● our ability to develop and commercialize products before competitors that are superior to the alternatives developed by such competitors; and ● a decline in economic conditions, including the impact of an inflationary environment and tariffs. All forward-looking statements are expressly qualified in their entirety by this cautionary notice. You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the filing date of this Quarterly Report on Form 10-Q or the date of the document incorporated by reference into this Quarterly Report on Form 10-Q. We have no obligation, and expressly disclaim any obligation, to update, revise or correct any of the forward-looking statements, whether as a result of new information, future events or otherwise. We have expressed our expectations, beliefs and projections in good faith, and we believe they have a reasonable basis. However, we cannot assure you that our expectations, beliefs or projections will result or be achieved or accomplished. The following discussion and analysis of our financial condition and results of operations for the three months ended March 31, 2026 and 2025 should be read in conjunction with our condensed consolidated financial statements and related notes to those condensed consolidated financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. Overview Through our AI-driven subsidiary, we are advancing next-generation agentic AI systems targeted to consumers and small businesses, starting with an SaaS automated video production platform. We are also expanding our intellectual property portfolio in cellular therapy and generative AI publishing and software. In addition, we are marketing the KetoAir™ breathalyzer device, which is registered with the U.S. Food and Drug Administration as a Class I medical device, and plan to pursue additional diagnostic applications for the technology. In addition, we owned and operated commercial real estate at our headquarters in Freehold, NJ through February 2026. We had the following areas of focus in the three months ended March 31, 2026 and 2025: Research and Development We are focused on bringing forward the existing patent applications previously filed with the Massachusetts Institute of Technology (“MIT”). We completed a sponsored research and co-development project with MIT led by Professor Shuguang Zhang as Principal Investigator. Using the unique QTY code protein design platform, six water-soluble variant cytokine receptors have been successfully designed and tested in a laboratory to show binding affinity to the respective cytokines. We currently are focused on bringing forward the existing patent applications previously filed as part of this program. We also continue to bring forward the existing patent application previously filed with Arbele related to CAR-T cellular therapy technologies. - 29 - Product Commercialization We have begun the commercialization and development of a versatile breathalyzer system. We were granted distributorship rights for the KetoAir from Qi Diagnostics for the following territories: North America, South America, the EU and the UK. For our commercialization strategy, we intend to target the diabetes and obesity markets. We sell the product through the KetoAir website and social media. We believe the KetoAir device has some competitive advantages to other methods for measuring ketosis. The KetoAir is a handheld device that allows the user to detect acetone levels in exhaled breath. The acetone level is in concentration units (ppm, part-per-million) such that the user will know his/her real-time ketosis status: inadequate ketosis (0-3.99 ppm), mild ketosis (4-9.99 ppm), optimal ketosis (10-40 ppm), or alarming level (> 40 ppm). The KetoAir is registered with the United States Food and Drug Administration as a Class I medical device. The device is also paired with an “AI Nutritionist” software program (via Bluetooth connection) which is downloadable from Google Play (for Android mobile phones, approved) and iPhone (the app is currently being reviewed by Apple iOS AppStore). It helps users monitor and manage their ketogenic diet and related programs. We believe the KetoAir can be an essential tool to help diabetic patients adhere to their therapeutic programs and optimize their ketogenic dietary management. Cessation of Laboratory Services During the first quarter of 2025, to preserve cash, the Company entered into discussions with Lab Services MSO for the potential redemption of our investment and on February 26, 2025, we and Lab Services MSO entered into a Redemption and Abandonment Agreement, whereby Lab Services MSO redeemed the 40% equity interest in Lab Services MSO held by us. Accordingly, beginning in February 2025, we no longer offer laboratory services. Artificial Intelligence Content Technology Through our wholly-owned subsidiary, Avalon Quantum AI LLC, we are advancing next-generation Agentic AI systems, including automated video generation and small business marketing automation solutions. Other Areas In order to preserve cash and focus on product commercialization, we have suspended all research and development efforts related to cellular therapy. We are redirecting our funding efforts to our core business strategies outlined above. Going Concern Our condensed consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates, among other things, the realization of assets and the satisfaction of liabilities in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, we had working capital deficit of approximately $2,774,000 at March 31, 2026 and had incurred recurring net losses from continuing operations and generated negative cash flow from operating activities of continuing operations of approximately $4,377,000 and $2,860,000 for the three months ended March 31, 2026, respectively. - 30 - We have a limited operating history and our continued growth is dependent upon the continuation of generating revenue for selling of Keto Air, generating revenue from advanced Agentic AI systems, including automated video generation and small business marketing automation, and obtaining additional financing to fund future obligations and pay liabilities arising from ordinary course business operations. In addition, the current cash balance cannot be projected to cover our operating expenses for the next twelve months from the release date of this Quarterly Report on Form 10-Q. These matters raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise additional capital, implement our business plan, and generate sufficient revenues. There are no assurances that we will be successful in our efforts to generate sufficient revenues, maintain sufficient cash balance or report profitable operations or to continue as a going concern. We plan on raising capital through the sale of equity to implement our business plan. However, there is no assurance these plans will be realized and that any additional financings will be available to us on satisfactory terms and conditions, or at all. The accompanying condensed consolidated financial statements do not include any adjustments related to the recoverability or classification of asset-carrying amounts or the amounts and classification of liabilities that may result should we be unable to continue as a going concern. Critical Accounting Policies Use of Estimates The preparation of the condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Changes in these estimates and assumptions may have a material impact on the condensed consolidated financial statements and accompanying notes. Making estimates requires management to exercise significant judgment. It is at least reasonably possible that the estimate of the effect of a condition, situation or set of circumstances that existed at the date of the financial statements, which management considered in formulating its estimate, could change in the near term due to one or more future confirming events. Accordingly, the actual results could differ significantly from those estimates. Significant estimates during the three months ended March 31, 2026 and 2025 include the useful life of intangible assets, the assumptions used in assessing impairment of long-term assets, the allowance for credit loss, the valuation of deferred tax assets and the associated valuation allowances, the valuation of stock-based compensation, the valuation of Series D convertible preferred stock (“Series D Preferred Stock”), and the determination of the fair value of the warrants. Income Taxes We are governed by the income tax laws of China and the United States. Income taxes are accounted for pursuant to ASC 740 “Accounting for Income Taxes,” which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. The charge for taxes is based on the results for the period as adjusted for items, which are non-assessable or disallowed. It is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is accounted for using the balance sheet liability method in respect of temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax basis used in the computation of assessable tax profit. In principle, deferred tax liabilities are recognized for all taxable temporary differences, and deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Deferred tax is calculated using tax rates that are expected to apply to the period when the asset is realized or the liability is settled. Deferred tax is charged or credited in the income statement, except when it is related to items credited or charged directly to equity, in which case the deferred tax is changed to equity. Deferred tax assets and liabilities are offset when they related to income taxes levied by the same taxation authority and we intend to settle its current tax assets and liabilities on a net basis. Recent Accounting Standards For details of applicable new accounting standards, please, refer to Recent Accounting Standards in Note 3 of our condensed consolidated financial statements accompanying this Quarterly Report on Form 10-Q. RESULTS OF OPERATIONS Comparison of Results of Operations for the Three Months Ended March 31, 2026 and 2025 Income from Equity Method Investment – Lab Services MSO As a result of the sale of our ownership of 40% of Lab Services MSO on February 26, 2025, for the three months ended March 31, 2026, we had no income from our investment in Lab Services MSO. - 31 - For the three months ended March 31, 2025, we had income from our investment in Lab Services MSO of $392,677, which consists of our share of Lab Services MSO’s net income of $503,833 and amortization of identifiable intangible assets acquired from Lab Services MSO acquisition of $111,156. Other Operating Expenses For the three months ended March 31, 2026 and 2025, other operating expenses consisted of the following : Three Months Ended March 31, 2026 2025 Advertising and marketing expenses $ 209,846 $ 71,150 Professional fees 1,581,951 1,632,215 Compensation and related benefits 223,416 309,022 Miscellaneous taxes 40,910 40,245 Directors’ and officers’ liability insurance premium 34,104 35,517 Travel and entertainment 33,095 44,661 Amortization 563,000 - Other general and administrative 34,804 45,290 $ 2,721,126 $ 2,178,100 ● For the three months ended March 31, 2026, advertising and marketing expenses increased by $138,696, or 194.9%, as compared to the three months ended March 31, 2025. The increase was primarily due to increased advertising activities in the three months ended March 31, 2026. We expect that our advertising and marketing expenses will likely remain at its current level with minimal increase in the near future. ● Professional fees primarily consisted of accounting fees, audit fees, legal service fees, consulting fees, investor relations service charges, advisory service fees, fairness opinion charge, valuation service fees and other fees. For the three months ended March 31, 2026, professional fees decreased by $50,264, or 3.1%, as compared to the three months ended March 31, 2025, which was primarily attributable to a decrease in legal service fees of approximately $108,000, mainly due to the decreased legal services related to our potential merger with YOOV, offset by an increase in other miscellaneous items of approximately $58,000. We expect that our professional fees will decrease in the near future . ● For the three months ended March 31, 2026, compensation and related benefits decreased by $85,606, or 27.7%, as compared to the three months ended March 31, 2025. The decrease was primarily attributable to the decreased compensation for our interim chief executive officer, Meng Li, and decreased compensation for our directors due to the resignations of some directors in the three months ended March 31, 2026. We expect that our compensation and related benefits will likely remain at its current level with minimal decrease in the near future. ● For the three months ended March 31, 2026, miscellaneous taxes increased by $665, or 1.7%, as compared to the three months ended March 31, 2025. We expect that our miscellaneous taxes will remain relatively steady, with minimal increase, in the near future. ● For the three months ended March 31, 2026, directors’ and officers’ liability insurance premium decreased by $1,413, or 4.0%, as compared to the three months ended March 31, 2025. The decrease was mainly due to our switching to a different insurance provider, resulting in a lower premium . ● For the three months ended March 31, 2026, travel and entertainment expense decreased by $11,566, or 25.9%, as compared to the three months ended March 31, 2025, which was primarily attributable to decreased business travel activities in the three months ended March 31, 2026 as compared to the three months ended March 31, 2025 . ● For the three months ended March 31, 2026, amortization expense increased by $563,000, or 100.0%, as compared to the three months ended March 31, 2025, which was attributable to increased amortization of identifiable intangible assets acquired, representing developed technology and trade name. There was no comparable amortization prior to the date of acquisition, December 12, 2025. ● Other general and administrative expenses mainly consisted of NASDAQ listing fee, office supplies, and other miscellaneous items. For the three months ended March 31, 2026, other general and administrative expenses decreased by $10,486, or 23.2%, as compared to the three months ended March 31, 2025, due to our efforts at stricter controls on corporate expenditure. - 32 - Loss from Operations As a result of the foregoing, for the three months ended March 31, 2026, loss from operations amounted to $2, 721,126, as compared to $1,785,423 for the three months ended March 31, 2025, representing an increase of $935,703, or 52.4%. Other Expense Other expense mainly includes interest expense, change in fair value of derivative liability, and other miscellaneous expense. Other expense totaled $ 1,655,554 for the three months ended March 31, 2026, as compared to $481,257 for the three months ended March 31, 2025, representing an increase of $1,174,297, or 244.0%, which was primarily attributable to an increase in loss from change in fair value of derivative liability of approximately $1,163,000, and an increase in other expense of approximately $106,000 mainly due to the loss from litigation settlement, offset by a decrease in interest expense of approximately $94,000, mainly driven by the decrease in amortization of debt discount and debt issuance costs of approximately $94,000. Income Taxes We did not have any income taxes expense for the three months ended March 31, 2026 and 2025 since we incurred losses in these periods. Net Loss from Continuing Operations As a result of the factors described above, our net loss from continuing operations was $4,376,680 for the three months ended March 31, 2026, as compared to $2,266,680 for the three months ended March 31, 2025, representing an increase of $2,110,000, or 93.1%. Net Loss from Discontinued Operations Our net loss from discontinued operations was $103,015 for the three months ended March 31, 2026, as compared to $215,431 for the three months ended March 31, 2025, representing a decrease of $112,416, or 52.2%. Net Loss As a result of the factors described above, our net loss was $4,479,695 for the three months ended March 31, 2026, as compared to $2,482,111 for the three months ended March 31, 2025, representing an increase of $1,997,584, or 80.5%. Net Loss Attributable to Avalon GloboCare Corp. Common Shareholders The net loss attributable to our common shareholders was $4,479,695, or $0.50 per share (basic and diluted), for the three months ended March 31, 2026, as compared to $2,319,638 (after taking into effect $162,473 in deemed contribution), or $1.43 per share (basic and diluted), for the three months ended March 31, 2025, representing an increase of $2,160,057, or 93.1%. Foreign Currency Translation Adjustment Our reporting currency is the U.S. dollar. The functional currency of our U.S. entities is the U.S. dollar and the functional currency of Avalon Shanghai is the Chinese Renminbi (“RMB”). The financial statements of our subsidiary whose functional currency is the RMB are translated to U.S. dollars using period end rate of exchange for assets and liabilities, average rate of exchange for revenues, costs, and expenses and cash flows, and at historical exchange rate for equity. Net gains and losses resulting from foreign exchange transactions are included in the results of operations. As a result of foreign currency translations, which are a non-cash adjustment, we reported a foreign currency translation loss of $(311) and a foreign currency translation gain of $279 for the three months ended March 31, 2026 and 2025, respectively. This non-cash loss/gain had the effect of increasing/decreasing our reported comprehensive loss in each respective period. Comprehensive Loss As a result of our foreign currency translation adjustment, we had comprehensive loss of $4,480,006 and $2,481,832 for the three months ended March 31, 2026 and 2025, respectively . - 33 - Liquidity and Capital Resources We have a limited operating history and our continued growth is dependent upon the continuation of generating revenue for selling of Keto Air, generating revenue from advanced Agentic AI systems, including automated video generation and small business marketing automation, as well as obtaining additional financing to fund future obligations and pay liabilities arising from ordinary course business operations. In addition, the current cash balance cannot be projected to cover our operating expenses for the next twelve months from the release date of this report. These matters raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to raise additional capital, implement our business plan, and generate sufficient revenues. There are no assurances that we will be successful in our efforts to generate sufficient revenues, maintain sufficient cash balance or report profitable operations or to continue as a going concern. We plan to raise capital in the future through the sale of equity or debt to implement our business plan. However, there is no assurance these plans will be realized and that any additional financings will be available to us on satisfactory terms and conditions, if at all. Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations as they come due and otherwise operate on an ongoing basis. At March 31, 2026 and December 31, 2025, we had a cash balance of approximately $776,000 and $109,000, respectively. These funds are kept in financial institutions located as follows: Country: March 31, 2026 December 31, 2025 United States $ 775,917 99.99 % $ 108,599 99.5 % China 78 0.01 % 492 0.5 % Total cash $ 775,995 100.0 % $ 109,091 100.0 % The following table sets forth a summary of changes in our working capital deficit from December 31, 2025 to March 31, 2026: March 31, December 31, Changes in 2026 2025 Amount Percentage Working capital deficit: Total current assets $ 1,670,142 $ 1,495,877 $ 174,265 11.6 % Total current liabilities 4,444,573 14,147,114 (9,702,541 ) (68.6 )% Working capital deficit $ (2,774,431 ) $ (12,651,237 ) $ 9,876,806 (78.1 )% Our working capital deficit decreased by $9,876,806 to $2,774,431 at March 31, 2026 from $12,651,237 at December 31, 2025. The decrease in working capital deficit was primarily attributable to an increase in cash of approximately $667,000, an increase on prepaid expense and other current assets of approximately $144,000 which was mainly attributable to the increase in prepaid professional fees of approximately $194,000 due to prepayments made to our professional service providers in the first quarter of 2026, a decrease in accrued professional fees of approximately $526,000 driven by the payments made to our professional service providers in the first quarter of 2026, a decrease in accrued payroll liability and compensation of approximately $354,000 driven by the payments made to our employees and directors in the first quarter of 2026, a decrease in advance from pending sale of subsidiary – related party of approximately $3,158,000 resulting from the sale of our subsidiary of Avalon RT 9 to Mr. Lu in the first quarter of 2026 as described in elsewhere in this report, a decrease in convertible note payable, net, of approximately $737,000 mainly due to the conversion of our June 2024 Convertible Note in the principal amount of approximately $546,000 into our common stock in the first quarter of 2026 and the repayments of principal of $200,000 made to two individual investors in the first quarter of 2026, and the decrease in current liabilities of discontinued operations of approximately $6,061,000 driven by the sale of our subsidiary of Avalon RT 9 to Mr. Lu in the first quarter of 2026 as described in elsewhere in this report, offset by a decrease in receivable from sale of equity method investment of approximately $281,000 due to the payments received in the first quarter of 2026, a decrease in current assets of discontinued operations of approximately $357,000 driven by the sale of our subsidiary of Avalon RT 9 to Mr. Lu in the first quarter of 2026 as described in elsewhere in this report, and an increase in note payable, net, of approximately $1,142,000 resulting from our loan financing in the first quarter of 2026. Because the exchange rate conversion is different for the cond ensed consolidated balance sheets and the condensed consolidated statements of cash flows, the changes in assets and liabilities reflected on the condensed consolidated statements of cash flows are not necessarily identical with the comparable changes reflected on the condensed consolidated balance sheets. - 34 - Cash Flows for the Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025 The following table summarizes the key components of our cash flows for the three months ended March 31, 2026 and 2025: Three Months Ended March 31, 2026 2025 Net cash used in operating activities from continuing operations $ (2,860,379 ) $ (1,691,135 ) Net cash provided by investing activities from continuing operations 280,500 95,000 Net cash provided by financing activities from continuing operations 3,436,812 219,972 Net cash flows used in discontinued operations (231,956 ) (209,688 ) Effect of exchange rate on cash – continuing operations 41,927 231 Net increase (decrease) in cash $ 666,904 $ (1,585,620 ) Net cash flow used in operating activities from continuing operations for the three months ended March 31, 2026 was $2,860,379, which primarily reflected our consolidated net loss from continuing operations of approximately $4,377,000, and the changes in operating assets and liabilities, primarily consisting of a decrease in accrued liabilities and other payables of approximately $796,000 which was mainly driven by payments made to our vendors in the first quarter of 2026, offset by the non-cash item adjustments, primarily consisting of depreciation and amortization of intangible assets of approximately $563,000 mainly due to the amortization of identifiable intangible assets acquired, representing developed technology and trade name, in the first quarter of 2026 as described in elsewhere in this report, stock-based compensation and service expense of approximately $320,000, amortization of debt issuance costs and debt discount of approximately $189,000, and change in fair market value of derivative liability of approximately $1,277,000. Net cash flow used in operating activities from continuing operations for the three months ended March 31, 2025 was $1,691,135, which primarily reflected our consolidated net loss from continuing operations of approximately $2,267,000, and the non-cash item adjustments, primarily consisting of income from equity method investment of approximately $393,000, offset by amortization of debt issuance costs and debt discount of approximately $284,000, and change in fair market value of derivative liability of approximately $114,000, and the changes in operating assets and liabilities, primarily consisting of an increase in accrued liabilities and other payables of approximately $575,000, mainly due to the increase in services related to our potential merger with YOOV in the three months ended March 31, 2025 . We expect our cash used in o perating activities to increase in the next 12 months due to the following: ● the development and commercialization of new products; and ● an increase in public relations and/or sales promotions for existing and/or new brands as we expand within existing markets or enter new markets. Net cash flow provided by investing activities from continuing operations was $280,500 for the three months ended March 31, 2026, as compared to $95,000 for the three months ended March 31, 2025. During the three months ended March 31, 2026 and 2025, we received proceeds from sale of equity method investment of approximately $281,000 and $95,000, respectively. Net cash flow provided by financing activities from continuing operations was $3,436,812 for the three months ended March 31, 2026, as compared to $219,972 for the three months ended March 31, 2025. During the three months ended March 31, 2026, we received net proceeds from issuance of debt of $1,130,000 (net of original issue discount of approximately $91,000 and cash paid for debt issuance costs of $34,000), net proceeds from the February 2026 private offering of approximately $2,757,000 (net of cash paid for the February 2026 private offering costs of approximately $493,000), offset by repayments made for bridge loan of $250,000, and repayments made for convertible debt of $200,000. During the three months ended March 31, 2025, we received advance from pending sale of subsidiary of approximately $220,000. The following trends are reasonably likely to result in a material decrease in our liquidity over the near to long term: ● an increase in working capital requirements to finance our current business; ● the use of capital for acquisitions and the development of business opportunities; and ● the cost of being a public company. - 35 - In addition, the impact that the imposition of tariffs and changes to global trade policies could have on our results of operations is uncertain. We estimate that, based on current plans and assumptions, our available cash will be insufficient to satisfy our cash requirements under our present operating expectations through cash flow provided by operations and sales of equity. Other than funds received as described above and cash resources generated from our operations, we presently have no other significant alternative source of working capital. We have used these funds to fund our operating expenses, pay our obligations and grow our company. We will need to raise significant additional capital to fund our operations and to provide working capital for our ongoing operations and obligations. Therefore, our future operation is dependent on our ability to secure additional financing. Financing transactions may include the issuance of equity or debt securities, obtaining credit facilities, or other financing mechanisms. However, there can be no assurance that financing will be available in amounts or on terms acceptable to the Company. Additionally, the trading price of our common stock and a downturn in the U.S. equity and debt markets could make it more difficult to obtain financing through the issuance of equity or debt securities. Even if we are able to raise the funds required, it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek alternative financing. Furthermore, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. The inability to obtain additional capital may restrict our ability to grow and may reduce our ability to continue to conduct business operations. If we are unable to obtain additional financing, we will be required to cease our operations. To date, we have not considered this alternative, nor do we view it as a likely occurrence. Foreign Currency Exchange Rate Risk We ceased all operations in China in 2022, with the exception of a small administrative office. We did not during the three months ended March 31, 2026, and do not expect in the foreseeable future, to generate any additional revenue from PRC operations. Thus, exchange rate fluctuations between the RMB and the U.S. dollar do not, and are not expected to, have a material effect on us. For the three months ended March 31, 2026 and 2025, we had an unrealized foreign currency translation loss of approximately $(300) and an unrealized foreign currency translation gain of approximately $300, respectively, because of changes in the exchange rate. Inflation The effect of inflation on our revenues and operating results was not significant for the three months ended March 31, 2026 and 2025. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. As a “smaller reporting company”, as defined in Rule 12b-2 of the Exchange Act, we are not required to provide the information required by this Item.