{"url_path":"/sec/avai/10-k/2026/item-1a","section_key":"item-1a","section_title":"Item 1A Risk Factors.**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-07-14","source_url":"https://www.sec.gov/Archives/edgar/data/1740797/0001740797-26-000017-index.html","accession_number":"0001740797-26-000017","cik":"0001740797","ticker":"AVAI","issuer_name":"AVAI BIO, INC.","edgar_url":"https://www.sec.gov/Archives/edgar/data/1740797/0001740797-26-000017-index.html","primary_entity_key":"0001740797","primary_entity_name":"AVAI BIO, INC."},"word_count":3406,"has_tables":true,"body_markdown":"** **\n\n**Item 1A.  Risk Factors.**\n\n \n\nAs a Smaller Reporting Company, the Company is not\nrequired to include the disclosure under this Item 1A. Risk Factors. Despite the fact that we are not required to provide risk factors,\nwe consider the following factors to be risks to our continued growth and development:\n\n \n\n**WE HAVE A LIMITED OPERATING HISTORY IN AN EVOLVING\nINDUSTRY, WHICH MAKES IT DIFFICULT TO EVALUATE OUR FUTURE PROSPECTS AND MAY INCREASE THE RISK THAT WE WILL NOT BE SUCCESSFUL.**\n\n \n\nWe have a limited operating history in an evolving\nindustry that may not develop as expected. Assessing our business and future prospects is challenging in light of the risks and difficulties\nwe may encounter. These risks and difficulties include our ability to:\n\n \n\n \n●\naccurately forecast our revenues and plan our operating expenses;\n\n \n\n \n●\nsuccessfully expand our business;\n\n \n\n \n●\nassimilate our acquisitions;\n\n \n\n \n●\nadapt to rapidly evolving trends in the ways consumers and businesses interact with technology;\n\n \n\n \n●\navoid interruptions or disruptions in the offering of our products and our services;\n\n \n\n \n●\ndevelop a scalable, high-performance technology infrastructure that can efficiently and reliably handle increased usage, as well as the deployment of new features and products;\n\n \n\n \n●\nhire, integrate and retain talented sales, customer service, technology and other personnel; and\n\n \n\n \n●\neffectively manage rapid growth in personnel and operations; and\n\n \n\nIf the demand for our services and/or platforms/products\noffered or our products under development are not finalized, our business will be harmed. We may not be able to successfully address these\nrisks and difficulties, which could harm our business and results of operations.\n\n \n\n**OUR LIMITED OPERATING HISTORY MAKES IT DIFFICULT\nFOR US TO EVALUATE OUR FUTURE BUSINESS PROSPECTS AND MAKE DECISIONS BASED ON THOSE ESTIMATES OF OUR FUTURE PERFORMANCE.**\n\n \n\nWe have a limited operating history and, as a\nconsequence, it is difficult, if not impossible, to forecast our future results based upon our historical data. Reliance on the historical\nresults may not be representative of the results we will achieve. Because of the uncertainties related to our limited historical operations,\nwe may be hindered in our ability to anticipate and timely adapt to increases or decreases in revenues or expenses. If we make poor budgetary\ndecisions as a result of unreliable historical data, we could be less profitable or continue to incur losses.\n\n \n\n**OUR RESULTS OF OPERATIONS HAVE NOT RESULTED IN\nPROFITABILITY AND WE MAY NOT BE ABLE TO ACHIEVE PROFITABILITY GOING FORWARD.**\n\n \n\nThe Company does not accrue or capitalize development\ncosts (or any costs to this effect) and expense it to its profit and loss statements as required by accounting principles generally accepted\nin the United States of America (“U.S. GAAP”). As such, the\n\n8\n\n \n\n \n\nCompany incurred a net loss of $1,749,509 for the\nyear ended March 31, 2026 and net loss of $1,142,115 for the year ended March 31, 2025. If we incur additional significant operating losses,\nour stock price, may decline, perhaps significantly. Our management is developing plans to alleviate the negative trends and conditions\ndescribed above. Our business plan is speculative and unproven. There is no assurance that we will be successful in executing our business\nplan or that even if we successfully implement our business plan, that we will be able to curtail our losses now or in the future. Further,\nas we are an emerging enterprise, we expect that net losses will continue, and our working capital deficiency will increase.\n\n \n\n**WE HAVE NOT GENERATED POSITIVE CASH FLOW FROM OPERATIONS,\nAND OUR ABILITY TO GENERATE POSITIVE CASH FLOW IS UNCERTAIN. IF WE ARE UNABLE TO GENERATE POSITIVE CASH FLOW OR OBTAIN SUFFICIENT CAPITAL\nWHEN NEEDED, OUR BUSINESS AND FUTURE PROSPECTS WILL BE ADVERSELY AFFECTED AND WE COULD BE FORCED TO SUSPEND OR DISCONTINUE OPERATIONS.**\n\n \n\nOur operations have not generated positive cash flow\nfor any period since our inception, and we have funded our operations primarily through the issuance of common stock and short-term and\nlong-term debt and convertible debt. Our limited operating history makes an evaluation of our future prospects difficult. The actual amount\nof funds that we will need to meet our operating needs will be determined by a number of factors, many of which are beyond our control.\nThese factors include the timing and volume of sales transactions, the success of our marketing strategy, market acceptance of our products,\nthe success of our manufacturing and research and development efforts (including any unanticipated delays), our manufacturing and labor\ncosts, the costs associated with obtaining and enforcing our intellectual property rights, regulatory changes, competition, technological\ndevelopments in the market, evolving industry standards and the amount of working capital investments we are required to make.\n\n \n\nOur ability to continue to operate until we are able\nto generate sufficient our cash flow from operations will depend on our ability to generate sufficient positive cash flow from our operations.\nIf we are unable to generate sufficient cash flow from our operations, our business and future prospects will be adversely affected and\nwe could be forced to suspend or discontinue operations.\n\n \n\nThe Company had a stockholders’ deficit of $2,815,155\nand an accumulated deficit of $5,868,019 as of March 31, 2026.\n\n \n\n**WE WILL REQUIRE ADDITIONAL CAPITAL TO SUPPORT BUSINESS\nGROWTH, AND THIS CAPITAL MIGHT NOT BE AVAILABLE ON ACCEPTABLE TERMS, IF AT ALL.**\n\n \n\nWe intend to continue to make investments to support\nour business growth and we will require additional funds to respond to business challenges, including the need to develop new features\nand products or enhance our existing products, improve our operating infrastructure or acquire complementary businesses and technologies.\nFurther, we need additional capital to continue operations. Accordingly, we need to engage in equity or debt financings to secure additional\nfunds. We expect that we have sufficient capital to maintain operations through the year of 2026/7. In order to fully implement our business\nplan, we will need to raise about $10,000,000. If we raise additional funds through future issuances of equity or convertible debt securities,\nour existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and\nprivileges superior to those of holders of our common stock. Any debt financing that we secure in the future could involve restrictive\ncovenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for\nus to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain additional\nfinancing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us\nwhen we require it, our ability to continue to support our business growth and to respond to business challenges could be impaired, and\nour business may be harmed.\n\n \n\n**WE DEPEND UPON KEY PERSONNEL AND NEED ADDITIONAL\nPERSONNEL.**\n\n \n\nOur success depends on our inability to attract and\nretain key personnel including our existing personal, and our inability to do so may materially and adversely affect our business operations. The\nloss of qualified personnel could have a material and adverse effect on our business operations. Additionally, the success of the Company’s\noperations will largely depend upon its ability to successfully attract and maintain competent and qualified key management personnel.\nAs with any company with limited resources, there can be no guaranty that the Company will be able to attract such individuals or that\nthe presence of such individuals will necessarily translate into profitability for the Company.\n\n \n\n9\n\n \n\n \n\n**OUR BUSINESS REQUIRES SUBSTANTIAL CAPITAL, AND\nIF WE ARE UNABLE TO MAINTAIN ADEQUATE CASH FLOWS FROM OPERATIONS OUR PROFITABILITY AND FINANCIAL CONDITION WILL SUFFER AND JEOPARDIZE\nOUR ABILITY TO CONTINUE OPERATIONS.**\n\n \n\nWe require substantial capital to support our operations.\nIf we are unable to generate adequate cash flows from our operations, maintain adequate financing or other sources of capital are not\navailable, we could be forced to suspend, curtail or reduce our operations, which could harm our revenues, profitability, financial condition\nand business prospects.\n\n \n\n**THERE IS CURRENTLY A LIMITED PUBLIC MARKET FOR\nOUR COMMON STOCK. FAILURE TO FURTHER DEVELOP OR MAINTAIN A TRADING MARKET COULD NEGATIVELY AFFECT THE VALUE OF OUR COMMON STOCK AND MAKE\nIT DIFFICULT OR IMPOSSIBLE FOR YOU TO SELL YOUR STOCK.**\n\n \n\nThere is a limited public market for our Common Stock,\nwhich is traded on the OTC QB under the symbol AVAI. We cannot give any assurances that there will ever be a mature, developed market\nfor our common stock. Failure to further develop or maintain an active trading market could negatively affect the value of our shares\nand make it difficult for you to sell your shares or recover any part of your investment in us. Even if a market for our common stock\ndoes develop in a material way, the market price of our common stock may be highly volatile. In addition to the uncertainties relating\nto our future operating performance and the profitability of our operations, factors such as variations in our interim financial results,\nor various, as yet unpredictable factors, many of which are beyond our control, may have a negative effect on the market price of our\ncommon stock.\n\n \n\n**IF WE FAIL TO MAINTAIN\nAN EFFECTIVE SYSTEM OF INTERNAL CONTROLS, WE MAY NOT BE ABLE TO ACCURATELY REPORT OUR FINANCIAL RESULTS OR PREVENT FRAUD. AS A RESULT,\nCURRENT AND POTENTIAL STOCKHOLDERS COULD LOSE CONFIDENCE IN OUR FINANCIAL REPORTING, WHICH WOULD HARM OUR BUSINESS AND THE TRADING PRICE\nOF OUR STOCK.**\n\n \n\nEffective internal controls\nare necessary for us to provide reliable financial reports and effectively prevent fraud. If we cannot provide reliable financial reports\nor prevent fraud, our brand and operating results could be harmed. We have in the past discovered, and may in the future discover, areas\nof our internal controls that need improvement. For example, for the years ended March 31, 2026 and 2025, we reported that our disclosure\ncontrols and procedures were not effective due to the lack of resources and the reliance on outside consultants. We intend to increase\nmanagement’s review of our financials. We cannot be certain that these measures will ensure that we implement and maintain adequate\ncontrols over our financial processes and reporting in the future. Any failure to implement required new or improved controls, or difficulties\nencountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. Inferior\ninternal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect\non the trading price of our stock.\n\n \n\n**INABILITY TO COMMERCILIZE\nACQUIRED TECHNOLOGIES**\n\n \n\nWe may be unable to generate\nrevenue from the Avant! AI or InstantFAME platforms despite significant investment. Commercializing proprietary AI and digital assets\nremains speculative.\n\n \n\n**CYBERSECURITY OVERSIGHT\nGAPS**\n\n** **\n\nWe do not yet maintain a\nformal enterprise risk management program, and our board has not established a cybersecurity subcommittee. These governance gaps increase\npotential exposure.\n\n \n\n**DEPENDENCE ON EQUITY/DEBT\nISSUANCE**\n\n** **\n\nOur business is highly dependent\non our ability to raise equity or convertible debt capital. These financing arrangements may be dilutive, carry high interest, or impose\nrestrictive covenants.\n\n \n\n**Additional Risks Related to Our Common Stock**\n\n \n\n**Because we are quoted on the OTC QB marketplace\ninstead of a national securities exchange, our investors may experience significant volatility in the market price of our stock and have\ndifficulty selling their shares.**\n\n \n\nOur Common Stock is currently quoted on the OTC Market\nGroup’s OTC QB marketplace under the ticker symbol “AVAI”.\n\n10\n\n \n\n \n\nThe OTC is a regulated quotation service that displays\nreal-time quotes and last sale prices in over-the-counter securities. Trading in shares quoted on the OTC QB is often thin and characterized\nby volatility. This volatility may be caused by a variety of factors, including the lack of readily available price quotations, the absence\nof consistent administrative supervision of bid and ask quotations, lower trading volume and market conditions. As a result, there may\nbe wide fluctuations in the market price of the shares of our Common Stock for reasons unrelated to operating performance, and this volatility,\nwhen it occurs, may have a negative effect on the market price for our securities. Moreover, the OTC QB is not a stock exchange, and trading\nof securities on this platform is more sporadic than the trading of securities listed on a national quotation system or stock exchange.\nAccordingly, our stockholders may not be able to realize a fair price from their shares when they determine to sell them or may have to\nhold them for a substantial period of time until the market for our Common Stock improves.\n\n \n\n**Our stock price and trading volume may be volatile,\nwhich could result in substantial losses for our stockholders.**\n\n \n\nThe equity trading markets may experience periods\nof volatility, which could result in highly variable and unpredictable pricing of equity securities. The market price of our Common Stock\ncould change in ways that may or may not be related to our business, our industry or our operating performance and financial condition.\nIn addition, the trading volume in our Common Stock has been low and may fluctuate and cause significant price variations to occur. We\nhave experienced significant volatility in the price of our stock. In addition, the stock markets in general can experience considerable\nprice and volume fluctuations.\n\n \n\n**We have not paid dividends in the past and have\nno immediate plans to pay cash dividends.**\n\n \n\nWe plan to reinvest all of our earnings, to the extent\nwe have earnings, to develop and deliver our products and cover operating costs and to otherwise become and remain competitive. We do\nnot plan to pay any cash dividends with respect to our securities in the foreseeable future. We cannot assure you that we would, at any\ntime, generate sufficient surplus cash that would be available for distribution to the holders of our Common Stock as a dividend. Therefore,\nyou should not expect to receive cash dividends on our Common Stock.\n\n \n\n**Shares eligible for future sale may adversely affect\nthe market for our Common Stock.**\n\n \n\nOf the 153,916,565 shares of our Common Stock outstanding\nas of the date of this Annual Report, approximately 38,562,563 are restricted and 115,354,002 shares are freely tradable without restriction\npursuant to Rule 144. Any substantial sale of our Common Stock pursuant to Rule 144 or pursuant to any resale prospectus may have a material\nadverse effect on the market price of our Common Stock.\n\n \n\n**You may experience future dilution as a result\nof future equity offerings.**\n\n \n\nTo raise additional capital, we may in the future\noffer additional shares of our Common Stock or other securities convertible into or exchangeable for our Common Stock at prices that may\nnot be the same as the price per share in this offering. We may sell shares or other securities in any future offering at a price per\nshare that is lower than the price per share paid by investors in this offering, which would result in those newly issued shares being\ndilutive. In addition, investors purchasing shares or other securities in the future could have rights superior to existing stockholders,\nwhich could impair the value of your shares. The price per share at which we sell additional shares of our Common Stock, or securities\nconvertible or exchangeable into shares of our Common Stock, in future transactions may be higher or lower than the price per share paid\nby investors in this offering.\n\n \n\n**Our charter documents and Nevada law may inhibit\na takeover that stockholders consider favorable.**\n\n \n\nProvisions of our certificate of incorporation and\nbylaws and applicable provisions of Nevada law may delay or discourage transactions involving an actual or potential change in control\nor change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions\nthat our stockholders might otherwise deem to be in their best interests. The provisions in our certificate of incorporation and bylaws:\n\n \n\n \n●\nlimit who may call stockholder meetings;\n\n \n\n \n●\ndo not provide for cumulative voting rights; and\n\n \n\n \n●\nprovide that all vacancies may be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum.\n\n \n\n11\n\n \n\n \n\n**There are limitations on director/officer liability.**\n\n \n\nAs permitted by Nevada law, our certificate of incorporation\nlimits the liability of our directors for monetary damages for breach of a director’s fiduciary duty except for liability in certain\ninstances. As a result of our charter provision and Nevada law, shareholders may have limited rights to recover against directors for\nbreach of fiduciary duty. In addition, our certificate of incorporation provides that we shall indemnify our directors and officers to\nthe fullest extent permitted by law.\n\n  \n\n**Penny stock regulations may impose certain restrictions\non marketability of our securities.**\n\n \n\nThe SEC adopted regulations which generally define\na “penny stock” to be any equity security that has a market price of less than $5 per share or an exercise price of less than\n$5 per share, subject to certain exceptions. A security listed on a national securities exchange is exempt from the definition of a penny\nstock. Our Common Stock is not currently listed on a national security exchange. Our Common Stock is therefore subject to rules that impose\nadditional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited\ninvestors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse).\nFor transactions covered by such rules, the broker-dealer must make a special suitability determination for the purchase of such securities\nand have received the purchaser’s written consent to the transaction prior to the purchase.\n\n \n\nAdditionally, for any transaction involving a penny\nstock, unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the SEC relating\nto the penny stock market. The broker-dealer must also disclose the commission payable to both the broker-dealer and the registered representative,\ncurrent quotations for the securities and, if the broker-dealer is the sole market maker, the broker dealer must disclose this fact and\nthe broker-dealer’s presumed control over the market. Finally, monthly statements must be sent disclosing recent price information\nfor the penny stock held in the account and information on the limited market in penny stocks. Broker-dealers must wait two business days\nafter providing buyers with disclosure materials regarding a security before effecting a transaction in such security. Consequently, the\n“penny stock” rules\n\nrestrict the ability of broker-dealers to sell our\nsecurities and affect the ability of investors to sell our securities in the secondary market and the price at which such purchasers can\nsell any such securities, thereby affecting the liquidity of the market for our Common Stock.\n\n \n\nStockholders should also be aware that, according\nto the SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include:\n\n \n\n \n●\ncontrol of the market for the security by one or more broker-dealers that are often related to the promoter or issuer;\n\n \n\n \n●\nmanipulation of prices through prearranged matching of purchases and sales and false and misleading press releases;\n\n \n\n \n●\n“boiler room” practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons;\n\n \n\n \n●\nexcessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and\n\n \n\n \n●\nthe wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses.\n\n \n\n**FINRA sales practice requirements may limit a stockholder’s\nability to buy and sell our stock.**\n\n \n\nThe Financial Industry Regulatory Authority (referred\nto as FINRA) has rules requiring that, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing\nthat the investment is suitable for that customer. Prior to recommending speculative or low-priced securities to their non-institutional\ncustomers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status,\ninvestment objectives and other information. Under interpretations of these rules, FINRA has indicated its belief that there is a high\nprobability that speculative or low-priced securities will not be suitable for at least some customers. If these FINRA requirements are\napplicable to us or our securities, they may make it more difficult for broker-dealers to recommend that at least some of their customers\nbuy our Common Stock, which may limit the ability of our stockholders to buy and sell our common stock and could have an adverse effect\non the market for and price of our common stock.\n\n \n\n12"}