American Fusion, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and with the audited financial statements and related notes included in our Registration Statement on Form 10 filed with the Securities and Exchange Commission on March 12, 2026. Overview We are a development-stage advanced energy company focused on the development and commercialization of the Texatron™, a compact pulsed toroidal fusion reactor designed to provide clean, scalable baseload electricity. We operate under a Power-as-a-Service business model, intending to own and operate Texatron™ units and sell electricity under long-term contracts. The Company completed its reverse recapitalization with Kepler Fusion Technologies Inc. on February 27, 2026. As a result of the transaction, Kepler Fusion became our wholly owned subsidiary, and we have fully integrated its assets, technology, and operations. We are pre-commercial and have no revenue from operations. Our activities during the three months ended March 31, 2026 continued to focus on research and development, prototype testing (including advancement of the Version 9 prototype in Midland, Texas), intellectual property expansion, and preparation for commercial deployment. Results of Operations Three Months Ended March 31, 2026 Compared to Three Months Ended March 31, 2025 We reported a net loss of $632,583 for the three months ended March 31, 2026, compared to a net loss of $100,000 for the three months ended March 31, 2025. The increase in net loss was primarily attributable to increased professional fees and advertisement and marketing costs associated with operating as a public reporting company as well as certain patent filing costs. Operating expenses for the three months ended March 31, 2026 consisted primarily of: General and administrative expenses, including legal, accounting, compliance, and public-company costs Personnel and consulting expenses Patent filing costs There was no revenue during either period. We expect operating expenses to increase in future periods as we advance our technology development, expand our team, and prepare for commercial demonstration projects. Liquidity and Capital Resources As of March 31, 2026, we had $99,594 in cash and cash equivalents. Cash flows used in operations of $415,931 were offset by cash flows provided by financing activities of $513,000, Cash flows provided by financing activities increased as a result of prepaid warrant funding. We have historically funded our operations primarily through equity issuances and related-party loans. We continue to incur significant losses and negative cash flows from operations. We expect to require substantial additional capital to fund our research and development activities, prototype testing, intellectual property filings, and preparation for commercial deployment. Management is actively pursuing financing opportunities, including the previously announced $50 million capital raise targeted for 2026. 16 Going Concern The Company’s consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As of March 31, 2026, the Company has an accumulated deficit of approximately $9.6 million and has incurred recurring losses from operations. These factors raise substantial doubt about the Company's ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Management believes that the completion of the Kepler business merger and planned capital-raising activities will provide the resources necessary to fund ongoing operations; however, no assurance can be given that these plans will be successful. Critical Accounting Policies and Estimates There have been no material changes to our critical accounting policies and estimates from those disclosed in our Registration Statement on Form 10. Forward-Looking Statements The discussion in this Item 2 contains forward-looking statements. See “Cautionary Note Regarding Forward-Looking Statements” at the beginning of this Quarterly Report for important information regarding such statements.