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Item 1. Financial Statements

2025-08-05 compared with 2025-05-15 · 177 added, 168 removed, 519 unchanged (40% of the section changed)

2 unchanged sentences

CONDENSED CONSOLIDATED BALANCE SHEETS

As of March 31, 2025 and December 31, 2024

March 31, 2025

As of June 30, 2025 and December 31, 2024

June 30, 2025

December 31, 2024 (1)

CURRENT ASSETS:

20 unchanged sentences

STOCKHOLDERS' DEFICIT:

Preferred stock - no par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of March 31, 2025 and December 31, 2024

Common stock - $ 0.0001 par value, 200,000,000 shares authorized, 31,844,471 and 30,588,413 shares issued and outstanding as of March 31, 2025 and December 31, 2024

Preferred stock - no par value, 5,000,000 shares authorized, 0 shares issued and outstanding as of June 30, 2025 and December 31, 2024

Common stock - $ 0.0001 par value, 200,000,000 shares authorized, 31,909,096 and 30,588,413 shares issued and outstanding as of June 30, 2025 and December 31, 2024

Additional paid in capital

11 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

For the three months ended March 31, 2025 and 2024

For the three and six months ended June 30, 2025 and 2024

Three Months Ended

March 31, 2025

March 31, 2024

Six Months Ended

June 30, 2025

June 30, 2024

June 30, 2025

June 30, 2024

NET REVENUES:

8 unchanged sentences

TOTAL OPERATING EXPENSES

OPERATING LOSS

OPERATING (LOSS) INCOME

( 2,021,881 )

1 unchanged sentence

OTHER INCOME (EXPENSE) :

Gain (loss) from change in fair value of earnout liability

(Loss) gain from change in fair value of earnout liability

( 7,301,585 )

Gain (loss) from change in fair value of warrant liability

( 6,607,923 )

Loss from change in fair value of convertible debt

(Loss) gain from change in fair value of warrant liability

( 14,494,184 )

( 5,304,744 )

Gain (loss) from change in fair value of convertible debt

Loss on note conversion

Interest income (expense), net

Total other income (expense), net

Other expense

Total other (expense) income, net

( 21,735,170 )

INCOME (LOSS) BEFORE PROVISON FOR INCOME TAXES

( 13,076,257 )

(LOSS) INCOME BEFORE PROVISON FOR INCOME TAXES

( 23,757,051 )

( 13,502,474 )

Provision for income taxes

NET INCOME (LOSS)

NET (LOSS) INCOME

( 23,757,051 )

( 13,502,474 )

OTHER COMPREHENSIVE (LOSS) INCOME

Foreign currency translation (loss) income, net

TOTAL COMPREHENSIVE INCOME (LOSS)

TOTAL COMPREHENSIVE (LOSS) INCOME

$ ( 23,757,051 )

NET INCOME (LOSS) PER SHARE:

$ ( 13,493,490 )

NET (LOSS) INCOME PER SHARE:

Weighted average shares of common stock outstanding

18 unchanged sentences

( 48,050,609 )

Stock-based compensation

Issuance of common stock for services

Issuance of common stock for exercise of warrants

Issuance of common stock for stock options exercise

Issuance of common stock for debt interest payment

Foreign currency translation gain

Balance as of June 30, 2024

( 30,979,174 )

( 27,966,537 )

Balance as of January 1, 2025

9 unchanged sentences

( 23,509,549 )

Stock-based compensation

Issuance of common stock for exercise of warrants

Issuance of common stock for stock options exercise

( 23,757,051 )

Balance as of June 30, 2025

$ ( 74,990,656 )

$ ( 46,879,390 )

The accompanying notes are an integral part of these condensed consolidated financial statements.

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

For the three months ended March 31, 2025 and 2024

Three Months Ended

March 31, 2025

March 31, 2024

For the six months ended June 30, 2025 and 2024

Six Months Ended

June 30, 2025

June 30, 2024

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$ ( 13,502,474 )

Adjustments to reconcile net income (loss) to net cash used in operating activities

Adjustments to reconcile net loss to net cash used in operating activities

Depreciation and amortization

1 unchanged sentence

Amortization of operating lease right of use asset

Issuance of common stock for services

Noncash interest expense

(Gain) loss from change in fair value of warrant liability

7 unchanged sentences

( 1,330,670 )

( 1,791,217 )

Prepaid expenses and other

2 unchanged sentences

Accounts payable - trade and accrued expenses

( 1,426,970 )

Deferred revenue

( 1,299,813 )

NET CASH USED IN OPERATING ACTIVITIES

3 unchanged sentences

Proceeds from warrant exercise, net

Repayment of advances from founders

(Repayment of) proceeds from advances from founders

( 1,300,000 )

Proceeds from stock option exercises

NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES

( 1,182,328 )

NET DECREASE IN CASH AND CASH EQUIVALENTS

8 unchanged sentences

Issuance of common stock for debt conversion

Issuance of common stock for debt interest payment

Issuance of common stock for earnout shares

25 unchanged sentences

See Note 13– Fair Value Measurements for more information.

Liability as of

June 30, 2025

December 31, 2024

Earnout liability

2 unchanged sentences

Total liabilities measured at fair value

Other income (expense) related to instruments recorded at fair value during the three months ended March 31, 2025 and 2024

$ ( 30,371,318 )

The Company is a robust AI-driven data management platform that solves complex data challenges for large institutions operating in dynamic and mission-critical environments with rapidly increasing volumes of data being ingested from a similarly rapidly growing number of data sources.

17 unchanged sentences

Its offerings allow customers to manage their data across the full data lifecycle, when and where they need it, using a highly secure permissioned based architecture.

The Company employed fifty two employees as of March 31, 2025.

The Company employed fifty five employees as of June 30, 2025.

The employees are headquartered in Redmond, WA and are supported by a growing team at its Customer Center of Excellence located in Charlotte, NC.

The Company employed eight research and development personnel in Taiwan as of March 31, 2025.

The Company employed ten research and development personnel in Taiwan as of June 30, 2025.

Summary of Significant Accounting Policies

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In the event that there is a failure of warranties in such agreements, the Company is generally obligated to correct the product or service to conform to the warranty provision as set forth in the applicable agreement, or, if the Company is unable to do so, the customer is entitled to seek a refund of the purchase price of the product and service (generally prorated over the contract term).

For the three months ended March 31, 2025 and 2024, the Company did not incur any significant warranty expenses and as such a warranty reserve was not considered necessary as of March 31, 2025 and December 31, 2024.

For the three and six months ended June 30, 2025 and 2024, the Company did not incur any significant warranty expenses and as such a warranty reserve was not considered necessary as of June 30, 2025 and December 31, 2024.

Product Revenue

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payment is due within 30 to 90 calendars days of the invoice date and may include options to renew.

For the three months ended March 31, 2025 and 2024, the Company recognized revenue of $101,599 and $59,361, respectively, related to one-year support contracts.

For the three months ended March 31, 2025 and 2024, the Company recognized revenue of $ 896,452 and $ 1,116,893 respectively, related to multi-year support contracts.

Other Services

The Company earns other service revenues from installation services, training and licensing which are short-term in nature and revenue for these services are recognized at the time of performance when the service is provided.

For the three months ended March 31, 2025 and 2024, the Company recognized revenue of $ 7,737 and $ 0 , respectively, related to other services.

For the three months ended June 30, 2025 and 2024, the Company recognized revenue of $ 475,551 and $ 80,236 , respectively, related to one-year support contracts.

For the three months ended June 30, 2025 and 2024, the Company recognized revenue of $ 899,820 and $ 961,987 , respectively, related to multi-year support contracts.

For the six months ended June 30, 2025 and 2024, the Company recognized revenue of $ 577,150 and $ 139,597 , respectively, related to one-year support contracts.

For the six months ended June 30, 2025 and 2024, the Company recognized revenue of $ 2,251,797 and $ 2,078,865 , respectively, related to multi-year support contracts.

Contracts with Multiple Performance Obligations

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Transfer of control is evidenced upon passage of title and risk of loss to the customer unless the Company is required to provide additional services.

The Company’s short-term and long-term deferred revenue balances totaled $ 2,948,695 and $ 2,528,716 as of March 31, 2025.

The Company’s short-term and long-term deferred revenue balances totaled $ 4,629,075 and $ 2,167,307 as of June 30, 2025.

The Company’s short-term and long-term deferred revenue balances totaled $ 3,238,483 and $ 2,951,850 as of December 31, 2024.

Of the deferred revenue balance of $ 6,190,333 and $ 8,970,780 as of January 1, 2025 and 2024, the Company recognized approximately $985,548 and $1,176,239 during the three months ended March 31, 2025 and 2024, respectively.

Accounts Receivable and Provision for Credit Losses

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Management monitors the payments for these large balances closely and very often requires payment of existing invoices before shipping new sales orders.

As of March 31, 2025 and December 31, 2024, the Company did not have a reserve for credit losses as all accounts receivable are considered collectible.

Accounts receivable balances as of March 31, 2025, December 31, 2024 and January 1, 2024 were $ 2,782,650 , $ 1,226,757 and $ 1,648,904 , respectively.

As of June 30, 2025 and December 31, 2024, the Company did not have a reserve for credit losses as all accounts receivable are considered collectible.

Accounts receivable balances as of June 30, 2025, December 31, 2024 and January 1, 2024 were $ 2,557,427 , $ 1,226,757 and $ 1,648,904 , respectively.

Concentration of Credit and Sales Risk

The Company sells its product to commercial and government customers under agreements that are normally paid within 30 days of contract completion.

For the three months ended March 31, 2025, the Company had revenue from twenty customers and three customer represented 83 % of total revenue.

The primary reason for the high level of customer concentration for the three months ended March 31, 2025 was due to reliance on these three customers for the three months ended March 31, 2024.

As of March 31, 2025, two customers represent approximately 81 % and 13 % of outstanding account receivables.

For the six months ended June 30, 2025, the Company had revenue from thirty customers and two customers represented 65 % of total revenue.

The primary reason for the high level of customer concentration for the six months ended June 30, 2025 was due to reliance on these two customers for the six months ended June 30, 2025.

As of June 30, 2025, one customer represents approximately 83 % of outstanding account receivables.

Due to the nature of the customers and timely payment history, customer concentration and credit risk in account receivables is estimated to be minimal.

For the three months ended March 31, 2024, the Company had revenue from seventeen customers and one customer represented 78 % of total revenue, although such a high level of customer concentration is not typical.

The primary reason for the increase in reliance on a single customer for the three months ended March 31, 2024 was due to one large order received in late 2023 which was fulfilled in the three months ended March 31, 2024.

As of March 31, 2024, two customers represent approximately 52 % and 27 % of outstanding account receivables.

For the six months ended June 30, 2024, the Company had revenue from 36 customers and two customers represented 72 % and 11 % of total revenue, although such a high level of customer concentration is not typical.

The primary reason for the high level of customer concentration for the six months ended June 30, 2024 was due to one large order received in late 2023 which was fulfilled in the six months ended June 30, 2024.

As of June 30, 2024, four customers represent approximately 49 %, 20 %, 11 % and 10 % of outstanding account receivables.

Due to the nature of the customers and timely payment history, customer concentration and credit risk in account receivables is estimated to be minimal.

1 unchanged sentence

Upon receipt of inventory, the Company generally configures the servers and loads proprietary software onto the servers before shipping out.

The Company holds inventory for a short period of time and as of March 31, 2025 and December 31, 2024, it had no inventory in stock.

The Company holds inventory for a short period of time and as of June 30, 2025 and December 31, 2024, it had no inventory in stock.

Inventory value is primarily material costs and is valued at the lower of cost (first in, first out method) or net realizable value.

4 unchanged sentences

To the extent carrying values exceed fair values, an impairment loss is recognized in operating results.

The Company recorded no impairment losses for the three months ended March 31, 2025 and 2024.

The Company recorded no impairment losses for the three and six months ended June 30, 2025 and 2024.

Research and Development Expenses

2 unchanged sentences

The Company is also actively involved in identifying new applications.

The Company’s current internal team along with outside consultants has considerable experience working with the application of the Company’s technologies and their applications.

The Company’s current internal team along with outside consultants have considerable experience working with the application of the Company’s technologies and their applications.

The Company engages third party experts as required to supplement the Company’s internal team.

The Company believes that continued development of new and enhanced technologies is essential to the Company’s future success.

The Company incurred research and development expenses of $ 719,382 and $ 695,366 for the three months ended March 31, 2025 and 2024, respectively, on development activities.

The Company incurred research and development expenses of $ 740,571 and $ 702,771 for the three months ended June 30, 2025 and 2024, respectively, on development activities.

The Company incurred research and development expenses of $ 1,459,953 and $ 1,398,137 for the six months ended June 30, 2025 and 2024, respectively, on development activities.

Software Development Costs

3 unchanged sentences

Capitalization of software costs ceases when the software is substantially complete and is ready for its intended use.

No software development costs have been capitalized as of March 31, 2025 and December 31, 2024.

No software development costs have been capitalized as of June 30, 2025 and December 31, 2024.

Cost of Net Revenues

3 unchanged sentences

Advertising costs are charged to selling, general and administrative expenses as incurred.

Advertising and marketing costs for the three months ended March 31, 2025 and 2024 were $ 169,221 and $ 22,458 , respectively.

Advertising and marketing costs for the three months ended June 30, 2025 and 2024 were $ 55,694 and $ 66,863 , respectively.

Advertising and marketing costs for the six months ended June 30, 2025 and 2024 were $ 224,915 and $ 89,321 , respectively.

Shipping and Handling of Products

12 unchanged sentences

The senior secured convertible promissory notes were converted to equity during the year ended December 31, 2024.

The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of March 31, 2025 and December 31, 2024 are based upon the short-term nature of the assets and liabilities.

The recorded value of other financial assets and liabilities, which consist primarily of cash and cash equivalents, accounts receivable, other current assets, accounts payable and accrued expenses approximate the fair value of the respective assets and liabilities as of June 30, 2025 and December 31, 2024 are based upon the short-term nature of the assets and liabilities.

The Company classifies as liabilities any contracts that (i) require net-cash settlement (including a requirement to net- cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement).

5 unchanged sentences

At the Merger closing, the Company assumed 515,000 private placement warrants and 16,184,612 public warrants.

As of March 31, 2025, there were 515,000 private placement warrants and 16,145,210 public warrants outstanding.

As of June 30, 2025, there were 515,000 private placement warrants and 16,145,110 public warrants outstanding.

Upon consummation of the Merger, the Company evaluated the warrants and concluded that they did not meet the criteria to be classified within the stockholders’ deficit.

10 unchanged sentences

At the closing of the Merger, the earnout shares associated with unvested underlying shares were considered to be equity instruments and valued at approximately $ 2,675,000 .

During the three months ended March 31, 2025 and 2024, the Company stock-based compensation expense for the vesting of earnout shares was $ 133,761 .

As of March 31, 2025, unrecognized compensation cost related to unvested earnout shares totaled $ 2,006,419 .

During the six months ended June 30, 2025 and 2024, the Company stock-based compensation expense for the vesting of earnout shares was $ 267,522 .

As of June 30, 2025, unrecognized compensation cost related to unvested earnout shares totaled $ 1,872,658 .

The weighted average period over which this remaining compensation cost is expected to be recognized is 3.5 years.

13 unchanged sentences

Comprehensive (loss) gain is defined as the change in equity of a business during a period from non-owner sources.

There was other comprehensive (loss) gain of ($ 7,409 ) and $ 3,239 , respectively, related to foreign exchange translation for the three months ended March 31, 2025 and 2024, respectively.

There was other comprehensive (loss) gain of $ 0 and $ 3,239 , respectively, related to foreign exchange translation for the three months ended June 30, 2025 and 2024, respectively.

There was other comprehensive (loss) gain of $( 7,409 ) and $ 8,984 related foreign exchange translation for the six months ended June 30, 2025 and 2024, respectively.

Going Concern Assessment

2 unchanged sentences

Further, a company must provide certain disclosures if there is “substantial doubt about the entity’s ability to continue as a going concern” and management plans to alleviate the going concern.

In May 2025, the Company analyzed its cash requirements and operations at least through May 2026 and has determined that, based upon the Company’s current available cash and operations, the Company has no substantial doubt about its ability to continue as a going concern.

In August 2025, the Company analyzed its cash requirements and operations at least through August 2026 and has determined that, based upon the Company’s current available cash and operations, the Company has no substantial doubt about its ability to continue as a going concern.

Use of Estimates

3 unchanged sentences

Income (Loss) Per Share

Basic income (loss) per share is based upon the net income (loss) for the three months ended March 31, 2025 and 2024 divided by the weighted average shares of common stock outstanding.

Diluted net income per share is determined using the weighted average number of common shares and potential common shares (representing the dilutive effect of stock options, warrants and stock appreciation rights) outstanding during the period using the treasury stock method for the three months ended March 31, 2025.

Common stock equivalents for the three months ended March 31, 2024 are not included in the calculation of diluted earnings (loss) per share given the Company incurred a loss and they are anti-dilutive.

Basic income (loss) per share is based upon the net income (loss) for the three and six months ended June 30, 2025 and 2024 divided by the weighted average shares of common stock outstanding.

Common stock equivalents for the three and six months ended June 30, 2025 and the six months ended June 30, 2024 are not included in the calculation of diluted earnings (loss) per share given the Company incurred a loss and they are anti-dilutive.

See Note 14—Earnings per share.

10 unchanged sentences

Advances due to Founders

As of January 1, 2024, advances due to founders totaled $ 1,750,000 .

During 2024, Mr.

3 unchanged sentences

Huang and Mr.

Xu were repaid $ 300,000 each, with $ 700,000 recorded as advances from founders as of March 31, 2025.

The outstanding advances as of March 31, 2025 are non-interest bearing and the Company expects to pay the balance off within a one year period.

Master Loan Agreement

On September 27, 2024, the Company entered into a Master Loan Agreement with Mr.

Huang, whereby he may provide additional funding of up to $ 1,500,000 under certain terms and conditions.

The agreement provides for interest of 6 %.

The Company agreed to pay interest for the 2024 advances (described under Advances to Founders above) of $ 11,913 and issued warrants to purchase up to 220,000 shares of common stock.

The warrants have an exercise price of $ 2.36 per share, are exercisable immediately upon issuance and will expire in five years following the date of issuance.

The $ 284,478 fair value of the warrant is recorded in permanent equity in the consolidated balance sheets and was fully expensed on the date of grant.

There are no outstanding advances under this Master Loan Agreement as of March 31, 2025 and December 31, 2024.

Xu were repaid $ 650,000 each, with $ 0 recorded as advances from founders as of June 30, 2025.

The outstanding advances as of December 31, 2024 were non-interest bearing and the Company paid the balance off as of June 30, 2025.

Disaggregation of Revenue

The Company’s net revenues for the three months ended March 31, 2025 and 2024 consisted of approximately $ 4.5 million and $ 9.4 million, respectively, of hardware and software bundled systems for which revenue is transferred at a point in time.

The Company’s remaining net revenue of approximately $ 1.0 million and $ 1.2 million relates to PCS revenue and other services which are transferred over time.

The Company’s net revenues for the three months ended June 30, 2025 and 2024 consisted of approximately $ 0.7 million and $ 5.4 million, respectively, of hardware and software bundled systems for which revenue is transferred at a point in time.

The Company’s net revenues for the six months ended June 30, 2025 and 2024 consisted of approximately $ 4.8 million and $ 14.8 million, respectively, of hardware and software bundled systems for which revenue is transferred at a point in time.

The Company’s remaining net revenue for the three months ended June 30, 2025 and 2024 of approximately $ 1.4 million and $ 1 million, respectively relates to PCS revenue and other services which are transferred over time.

The Company’s remaining net revenue for the six months ended June 30, 2025 and 2024 of approximately $ 2.8 million and $ 2.2 million, respectively, relates to PCS revenue and other services which are transferred over time.

Within each product category, contract terms, conditions and economic factors affecting the nature, amount, timing, and uncertainty around revenue recognition and cash flow are substantially similar.

3 unchanged sentences

Receivables are generally paid within thirty days and there is no financing element to the customer contracts.

As of March 31, 2025 and December 31, 2024, there are no unbilled receivable balances.

The Company’s short-term and long-term deferred revenue balances totaled $ 2,948,695 and $ 2,528,716 as of March 31, 2025.

As of June 30, 2025 and December 31, 2024, there are no unbilled receivable balances.

The Company’s short-term and long-term deferred revenue balances totaled $ 4,629,075 and $ 2,167,307 as of June 30, 2025.

The Company’s short-term and long-term deferred revenue balances totaled $ 3,238,483 and $ 2,951,850 as of December 31, 2024.

Of the deferred revenue balance of $ 6,190,333 and $ 8,970,780 as of January 1, 2025 and 2024, the Company recognized approximately $ 985,548 and $ 1,176,239 during the three months ended March 31, 2025 and 2024, respectively.

Remaining Performance Obligations

As of March 31, 2025 and December 31, 2024, the Company had approximately $ 5.5 million and $ 6.2 million of remaining performance obligations, which were comprised of deferred service contracts not yet delivered.

As of June 30, 2025 and December 31, 2024, the Company had approximately $ 6.8 million and $ 6.2 million of remaining performance obligations, which were comprised of deferred service contracts not yet delivered.

The Company expects to recognize approximately 43 % of its remaining performance obligations as revenue in fiscal 2025 and the remaining 57 % in fiscal 2026 and years thereafter.

10 unchanged sentences

On September 13, 2024, the Company issued an additional 86,198 shares of common stock related to the conversion of notes at $ 2.65 per share.

During the three months ended March 31, 2024, the Company recorded an unrealized loss due to the increase in the fair value of the convertible notes payable totaling $ 2,039,377 .

During the six months ended June 30, 2024, the Company recorded an unrealized loss due to the increase in the fair value of the convertible notes payable totaling $ 512,184 .

Stockholders’ Deficit

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Details on the common stock, preferred stock and equity incentive plans were disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 and filed with the SEC on February 28, 2025.

As of March 31, 2025 and December 31, 2024, there were 31,844,471 and 30,588,413 shares of common stock outstanding, respectively.

Three Months Ended March 31, 2025

During the three months ended March 31, 2025, the Company had the following issuances of equity securities:

As of June 30, 2025 and December 31, 2024, there were 31,909,096 and 30,588,413 shares of common stock outstanding, respectively.

Six Months Ended June 30, 2025

During the six months ended June 30, 2025, the Company had the following issuances of equity securities:

As of September 30, 2024, the Company determined the First Operating Performance Milestone of the earnout shares was achieved resulting in the vesting of 1,250,000 shares, of which 1,160,906 shares of the Company’s common stock were issued to applicable personnel on January 7, 2025.

During the three months ended March 31, 2025, investors exercised warrants for 13,200 shares of the Company’s common stock at $ 4.50 per share, and the Company received proceeds of $ 59,400 .

During the three months ended March 31, 2025, the Company issued an aggregate of 81,952 shares of common stock and received $ 43,201 upon the exercise of stock options at exercise prices ranging from $ 0.12 to $ 1.64 per share.

During the six months ended June 30, 2025, investors exercised warrants for 13,300 shares of the Company’s common stock at $ 4.50 per share, and the Company received proceeds of $ 59,850 .

During the six months ended June 30, 2025, the Company issued an aggregate of 146,477 shares of common stock and received $ 57,822 upon the exercise of stock options at exercise prices ranging from $ 0.12 to $ 2.64 per share.

2023 Equity Incentive Plan

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Such aggregate number of shares of stock will automatically increase on January 1 of each year for a period of ten years commencing on January 1, 2024 and ending on January 1, 2033, in an amount equal to 2.0 % of the total number of shares of common stock outstanding on December 31 of the preceding year.

The aggregate number of shares of common stock reserved for grant and issuance under the 2023 Plan is 3,334,721 as of March 31, 2025.

The aggregate number of shares of common stock reserved for grant and issuance under the 2023 Plan is 3,419,247 as of June 30, 2025.

The Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award.

The cost is recognized over the period which an employee is required to provide service in exchange for the award-the requisite service period.

The Company had the following stock option activity during the three months ended March 31, 2025:

During the three months ended March 31, 2025, the Company granted stock options to 3 employees to purchase an aggregate of 455,000 shares of common stock with an exercise price of $ 3.34 and which vest primarily quarterly over four years and expire on during 2035.

Stock option activity for the three months ended March 31, 2025 was as follows:

The cost is recognized over the period which an employee is required to provide service in exchange for the award requisite service period.

The Company had the following stock option activity during the six months ended June 30, 2025:

During the six months ended June 30, 2025, the Company granted stock options to 3 employees to purchase an aggregate of 455,000 shares of common stock with an exercise price of $ 3.34 and which vest primarily quarterly over four years and expire during 2035.

Stock option activity for the three months ended June 30, 2025 was as follows:

Weighted Average

Exercise Price

Outstanding as of January 1, 2025

Outstanding as of March 31, 2025

The following table summarizes information about stock options outstanding and exercisable as of March 31, 2025:

Outstanding as of June 30, 2025

The following table summarizes information about stock options outstanding and exercisable as of June 30, 2025:

Remaining Life

5 unchanged sentences

and Exercisable

There were 5,900,607 options to purchase common stock at an average exercise price of $ 1.22 per share outstanding as of March 31, 2025 under the 2023 and 2022 Plans.

The Company recorded $ 294,525 and $ 135,227 of compensation expense, net of related tax effects, relative to stock options for the three months ended March 31, 2025 and 2024, respectively, in accordance with ASC 718.

As of March 31, 2025, there was $ 2,777,071 of total unrecognized costs related to employee granted stock options that were not vested.

There were 5,816,083 options to purchase common stock at an average exercise price of $5.56 per share outstanding as of June 30, 2025 under the 2023 and 2022 Plans.

The Company recorded $ 372,139 and $ 261,636 of compensation expense, net of related tax effects, relative to stock options for the three months ended June 30, 2025 and 2024, respectively, in accordance with ASC 718.

The Company recorded $ 800,425 and $ 530,625 of compensation expense, net of related tax effects, relative to stock options for the six months ended June 30, 2025 and 2024, respectively, in accordance with ASC 718.

As of June 30, 2025, there was $ 2,508,297 of total unrecognized costs related to employee granted stock options that were not vested.

These costs are expected to be recognized over a period of approximately 5.56 years.

The significant weighted-average assumptions relating to the valuation of the Company’s stock option grants were as follows for the three months ended March 31, 2025:

Estimated stock price

$ 3.27 - 4.47

Exercise price

$ 3.27 - 4.47

Dividend yield

Expected life

Expected volatility

Risk free interest rate

3.48 %- 3.81 %

There were stock incentive plan awards outstanding at March 31, 2025 totaling 5,900,607 shares with an aggregate intrinsic value of $ 15,552,307 .

There were stock incentive plan awards outstanding at June 30, 2025 totaling 5,816,083 shares with an aggregate intrinsic value of $ 27,106,313 .

Stock Appreciation Rights Plan

Related to the Share Exchange Agreement with Super Simple AI, Inc., on February 17, 2022, the Company’s Board of Directors approved the 2022 Stock Appreciation Rights Plan (the “SAR Plan”) to issue a maximum of 1,500,000, which was later adjusted to 2,637,150 stock appreciation rights (“SARs”) after the Merger .

As of March 31, 2025 and December 31, 2024, there were 1,758,000 SARs outstanding with a base value of $ 0.12 and January 2028 expiration.

There were no SAR grants during the three months ended March 31, 2025 or the year ended December 31, 2024.

As of June 30, 2025 and December 31, 2024, there were 1,758,000 SARs outstanding with a base value of $ 0.12 and January 2028 expiration.

There were no SAR grants during the three months ended June 30, 2025 or the year ended December 31, 2024.

Warrants to Purchase Common Stock

See Note 11 for public and private placement warrants assumed after the merger.

The Company had the following warrant activity during the three months ended March 31, 2025:

During the three months ended March 31, 2025, investors exercised warrants for 13,200 shares of the Company’s common stock at $ 4.50 per share, and the Company received proceeds of $ 59,400 .

Warrant activity for the three months ended March 31, 2025 was as follows:

The Company had the following warrant activity during the six months ended June 30, 2025:

During the six months ended June 30, 2025, investors exercised warrants for 13,300 shares of the Company’s common stock at $ 4.50 per share, and the Company received proceeds of $ 59,850 .

Warrant activity for the six months ended June 30, 2025 was as follows:

Outstanding January 1, 2025

Outstanding at March 31, 2025

A summary of the warrants outstanding as of March 31, 2025 were as follows:

March 31, 2025

Outstanding at June 30, 2025

A summary of the warrants outstanding as of June 30, 2025 were as follows:

June 30, 2025

Life (In Years)

There were warrants outstanding at June 30, 2025 totaling 21,948,390 shares with an aggregate intrinsic value of $ 38,545,413 .

Earnout Liability

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The plan provides for a 3.5% match on up to 6% of deferred salary .

The Company expensed $ 50,978 and $ 50,102 of contributions during the three months ended March 31, 2025 and 2024, respectively.

The Company expensed $ 55,668 and $ 50,696 of contributions during the three months ended June 30, 2025 and 2024, respectively.

The Company expensed $ 106,646 and $ 100,798 of contributions during the six months ended June 30, 2025 and 2024, respectively.

Related Party Transactions

Advances due to Founders

As of January 1, 2024, advances due to founders totaled $ 1,750,000 .

During 2024, Mr.

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Huang and Mr.

Xu were repaid $ 300,000 each, with $ 700,000 recorded as advances from founders as of March 31, 2025.

The outstanding advances as of March 31, 2025 and December 31, 2024 are non-interest bearing and the Company expects to pay the balance off within a one year period.

Master Loan Agreement

On September 27, 2024, the Company entered into a Master Loan Agreement with Mr.

Huang, whereby he may provide additional funding of up to $ 1,500,000 under certain terms and conditions.

The agreement provides for interest of 6 %.

The Company agreed to pay interest for the 2024 advances (described under Advances to Founders above) of $ 11,913 and the Company issued warrants to purchase up to 220,000 shares of the Company’s common stock.

The warrants have an exercise price of $ 2.36 per share, are exercisable immediately upon issuance and will expire in five years following the date of issuance.

The $ 284,478 fair value of the warrant is recorded in permanent equity in the consolidated balance sheets and was fully expensed on the date of grant.

There are no outstanding advances under this Master Loan Agreement as of March 31, 2025 and December 31, 2024.

Xu were repaid $ 650,000 each, with $ 0 recorded as advances from founders as of June 30, 2025.

The outstanding advances as of June December 31, 2024 were non-interest bearing and the Company paid the balance off as of June 30, 2025.

Commitments, Contingencies and Legal Proceedings

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The Company may from time to time become a party to various legal proceedings arising in the ordinary course of its business.

The Company is currently not a party to any pending legal proceeding that is not ordinary routine litigation incidental to its business.

The Company is currently not a party to any pending legal proceedings that is not ordinary routine litigation incidental to its business.

Properties and Operating Leases-Right of Use Asset and Lease Liability

10 unchanged sentences

There is a one three year option to extend the lease based on the fair market rate on October 31, 2027, which the Company expects to exercise.

On February 29, 2024, the Company extended an office lease in Moorestown, North Carolina.

The Company leases 3,621 square feet and the net monthly payment is $ 6,488 .

On August 27, 2024, the Company extended the lease, which expired on February 28, 2025 .

On February 1, 2025, the Company entered into an office lease in Mooresville, North Carolina.

5 unchanged sentences

Operating lease liabilities and their corresponding right-of-use assets are recorded based upon the present value of the lease payments over the expected lease term.

As of March 31, 2025 and December 31, 2024, total operating lease liabilities were $ 1,164,292 and $ 943,703 , respectively.

Right of use assets was $ 1,102,967 and $ 882,024 at March 31, 2025 and December 31, 2024, respectively.

Current lease liabilities were $ 405,917 and $ 305,178 at March 31, 2025 and December 31, 2024, respectively.

In the three months ended March 31, 2025 and 2024, the Company recognized $ 102,417 and $ 98,943 in total lease costs for the leases, respectively.

As of June 30, 2025 and December 31, 2024, total operating lease liabilities were $ 1,067,331 and $ 943,703 , respectively.

Right of use assets was $ 1,006,359 and $ 882,024 at June 30, 2025 and December 31, 2024, respectively.

Current lease liabilities were $ 416,583 and $ 305,178 at June 30, 2025 and December 31, 2024, respectively.

In the three months ended June 30, 2025 and 2024, the Company recognized $ 115,742 and $ 128,124 in total lease costs for the leases, respectively.

In the six months ended June 30, 2025 and 2024, the Company recognized $ 218,159 and $ 227,067 in total lease costs for the leases, respectively.

Because the rate implicit in each lease is not readily determinable, the Company uses its estimated incremental borrowing rate to determine the present value of the lease payments.

The weighted average remaining lease term for the operating leases was thirty two months at March 31, 2025 and the weighted average discount rate was 7 %.

The minimum future lease payments as of March 31, 2025 are as follows:

Years Ended March 31,

The weighted average remaining lease term for the operating leases was twenty nine months at June 30, 2025 and the weighted average discount rate was 7 %.

The minimum future lease payments as of June 30, 2025 are as follows:

Years Ended June 30,

Total remaining payments

1 unchanged sentence

Total lease liability

Employment Agreement

On March 4, 2025, the Company entered into an employment agreement with Paul Allen to serve as President.

The employment agreement provides for a base salary of $ 350,000 .

The term of the employment agreement is for a period of three years, which will be automatically extended for additional one-year periods unless either party gives the other party written notice of such party’s decision not to renew the term at least 90 days prior to the end of the initial three-year term or any renewal term.

Allen is also eligible to participate in annual performance-based bonus programs established from time to time by the Company’s Board, subject to the achievement by Mr.

Allen and the Company of the applicable performance criteria set forth in the employment agreement and established for Mr.

Allen by the Board.

The employment agreement is terminable by either party at any time.

In the event of termination by us without cause or by Mr.

Allen for good reason, as those terms are defined in the employment agreement, he is entitled to three months’ severance.

In connection with entering into the employment agreement, Mr.

Allen was granted ten-year options under our 2023 Plan to purchase 100,000 shares of common stock, which options vest immediately, at an exercise price equal to $ 3.27 , being the fair market value on the date of grant.

The total stock compensation expense related to this grant was approximately $ 131,000 .

Allen was also granted ten-year options under the Plan to purchase 300,000 shares of common stock, which options vest quarterly over four years, at an exercise price equal to $3.27 , being the fair market value on the date of grant.

The Company recorded a provision for income taxes of $ 0 for the three months ended March 31, 2025 and 2024.

The Company’s effective tax rate was 0 % for the three months ended March 31, 2025 and 2024.

The difference between the effective tax rate and the federal statutory tax rate for the three months ended March 31, 2025 and 2024 primarily related to the valuation allowance on the Company’s deferred tax assets.

The Company recorded a provision for income taxes of $ 0 for the six months ended June 30, 2025 and 2024.

The Company’s effective tax rate was 0 % for the six months ended June 30, 2025 and 2024.

The difference between the effective tax rate and the federal statutory tax rate for the six months ended June 30, 2025 and 2024 primarily related to the valuation allowance on the Company’s deferred tax assets.

For interim periods, the Company estimates its annual effective income tax rate and applies the estimated rate to the year-to-date income or loss before income taxes.

1 unchanged sentence

The Company also recognizes the effect of changes in enacted tax laws or rates in the interim periods in which the changes occur.

As of March 31, 2025 and December 31, 2024, the Company retains a full valuation allowance on its deferred tax assets.

As of June 30, 2025 and December 31, 2024, the Company retains a full valuation allowance on its deferred tax assets.

The realization of the Company’s deferred tax assets depends primarily on its ability to generate taxable income in future periods.

7 unchanged sentences

The public warrants will expire on December 21, 2028.

The following table is a summary of the number of shares of the Company’s common stock issuable upon exercise of the public and private warrants outstanding as of March 31, 2025 and December 31, 2024:

March 31, 2025

The following table is a summary of the number of shares of the Company’s common stock issuable upon exercise of the public and private warrants outstanding as of June 30, 2025 and December 31, 2024:

June 30, 2025

Number of Shares

Exercise Price

Expiration Date

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Number of Shares

Exercise Price

Expiration Date

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Refer to the Company’s annual report on Form 10-K filed with the SEC on February 28, 2025 for more information.

As of March 31, 2025, the estimated fair value of the earnout liability decreased to $ 8,199,079 primarily due to the common stock issued to settle approximately $ 5.3 million of earnout liability that was previously achieved plus the decrease in the Company’s share price, which resulted in a gain due to the change in fair value of the earnout liability during the three months ended March 31, 2025 of approximately $ 9.8 million and is recorded on the consolidated statements of operations and comprehensive income (loss).

As of June 30, 2025, the estimated fair value of the earnout liability decreased to $ 15,500,664 primarily due to the common stock issued to settle approximately $ 5.3 million of earnout liability that was previously achieved plus the decrease in the Company’s share price, which resulted in a gain due to the change in fair value of the earnout liability during the six months ended June 30, 2025 of approximately $ 2.5 million and is recorded on the consolidated statements of operations and comprehensive income (loss).

In addition, a portion of the earnout shares may be issued to individuals with unvested equity awards.

6 unchanged sentences

Fair Value Measurements

The following table sets forth by level within the ASC 820, Fair Value Measurement, fair value hierarchy of the Company’s liabilities that are measured at fair value on a recurring basis as of March 31, 2025:

March 31, 2025

June 30, 2025

Earnout liability

11 unchanged sentences

The following assumptions were used in the simulation at each valuation date:

March 31, 2025

March 31, 2024

June 30, 2025

Risk-free interest rate

4 unchanged sentences

On January 7, 2025, 1,160,906 shares were issued with a fair value of $ 5,282,125 to applicable personnel and were reclassified to equity as additional paid in capital.

The fair value of the remaining 89,094 shares that vested as of September 30, 2024 was determined using the Company’s closing stock price on March 31, 2025.

The fair value of the remaining 89,094 shares that vested as of September 30, 2024 was determined using the Company’s closing stock price on June 30, 2025.

The initial estimated fair value of the private warrants was measured using a Monte Carlo simulation.

The estimated fair value of the public warrants is based on the listed price in an active market for such warrants and the fair value of the private placement warrants continues to be measured based on the public warrants listed price.

There were no transfers of financial instruments between valuation levels during the three months ended March 31, 2025 and 2024.

There were no transfers of financial instruments between valuation levels during the six months ended June 30, 2025 and 2024.

Earnings per Share

The following table sets forth the computation of basic and diluted net income (loss) per share attributable to common stockholders:

March 31, 2025

March 31, 2024

The following table sets forth the computation of basic and diluted net (loss) income per share attributable to common stockholders:

June 30, 2025

June 30, 2024

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

Net income (loss)

$ ( 23,757,051 )

$ ( 13,502,474 )

interest expense and remeasurement of convertible debt

( 1,005,611 )

Net income (loss) - Diluted

( 23,757,051 )

( 13,502,474 )

Weighted average shares outstanding-

2 unchanged sentences

The following potentially dilutive shares were not included in the calculation of diluted shares outstanding for the periods presented as the effect would have been anti-dilutive:

March 31, 2025

March 31, 2024

June 30, 2025

June 30, 2024

Public Warrants

1 unchanged sentence

Outstanding stock options

The 3,750,000 remaining unvested earnout shares as of March 31, 2025 are excluded from basic and diluted net loss per share as such shares are contingently issuable until the Company exceeds certain milestone thresholds that have not been achieved.

The 3,750,000 remaining unvested earnout shares as of June 30, 2025 are excluded from basic and diluted net loss per share as such shares are contingently issuable until the Company exceeds certain milestone thresholds that have not been achieved.

Subsequent Events

The Company evaluated subsequent events, for the purpose of adjustment or disclosure, up through the date the financial statements were issued.

Subsequent to March 31, 2025, there were no material transaction that occurred that would require recognition or disclosure in the financial statements.

Subsequent to June 30, 2025, there were no material transactions that occurred that would require recognition or disclosure in the financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements