What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-13 compared with 2025-08-20 · 601 added, 417 removed, 26 unchanged (98% of the section changed)

Management’s Discussion and Analysis of Financial Conditions and Results of Operations

following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited

condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the audited

financial statements of SEE ID as of and for the fiscal years ended December 31, 2024 and 2023 and the audited financial statements of

SUAC as of and for the fiscal years ended December 31, 2024 and 2023 each included in the in the Current Report on Form 8-K

filed with the SEC on June 26, 2025 .

In addition to the unaudited condensed consolidated financial information, the following discussion

contains forward-looking statements that reflect our plans, estimates, beliefs, and expectations that involve risks and uncertainties.

Our actual results and the timing of events could differ materially from those discussed in these forward-looking statements.

that could cause or contribute to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q,

particularly in Item 1A.

“Risk Factors” and “Special Note Regarding Forward-Looking Statements”.

Defined terms

included below have the same meaning as terms defined and included elsewhere in this Quarterly Report on Form 10-Q.

(the “Company”, “CID” or “CID Holdco”), formerly known as SEE ID Inc, dba Dot AI (the

“Legacy Company” or “SEE ID”), was incorporated in Delaware with the headquarters in Las Vegas, Nevada.

businesses digitally transform their operations using IoT and AI technology.

With significant innovations in radio frequency networking,

use of vision system overlays and a cloud-based AI engine, the Company offers a differentiated asset tracking and workflow management

solutions for industrial enterprises.

Through its technological solutions, CID serves multiple industries including aviation, construction,

delivery, military, mining, retail, seaports, medical logistics, warehousing and manufacturing.

are headquartered in Las Vegas, NV with our management and administrative staff located in Bethesda, MD for East Coast customer engagements

and government lobbying activity.

Management’s Discussion and Analysis of Financial

Conditions and Results of Operations

The following discussion

and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated

financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and the audited financial statements of

SEE ID as of and for the fiscal years ended December 31, 2024 and 2023 and the audited financial statements of SUAC as of and for the

fiscal years ended December 31, 2024 and 2023 each included in the in the Current Report on Form 8-K filed with the SEC on June

In addition to the unaudited condensed consolidated financial information, the following discussion contains forward-looking

statements that reflect our plans, estimates, beliefs, and expectations that involve risks and uncertainties.

Our actual results and the

timing of events could differ materially from those discussed in these forward-looking statements.

Factors that could cause or contribute

to these differences include those discussed below and elsewhere in this Quarterly Report on Form 10-Q, particularly in Item 1A.

Factors” and “Special Note Regarding Forward-Looking Statements”.

Defined terms included below have the same meaning

as terms defined and included elsewhere in this Quarterly Report on Form 10-Q.

CID Holdco, Inc.

(the “Company”,

or “CID Holdco”, or “CID”), formerly known as SEE ID Inc., dba Dot AI (the “Legacy Company” or “SEE

ID”), was incorporated in Delaware with its headquarters in Las Vegas, Nevada.

The Company helps businesses transform their operations

by optimizing safety, security and efficiency of operations through real-time tracking of resources.

Through CID Holdco’s extensive

research and development initiatives, CID Holdco’s main focus includes areas such as Industrial IoT, Indoor & Outdoor tracking

with seamless transitions, Passive RFID (including Bluetooth and 5G), Collision Avoidance, real-time locating system, Dolly Management,

and related supported software applications.

CID Holdco is the developer

of an asset tracking platform intended to push the limits of near real-time precision-based location technology.

CID Holdco’s platform

leverages the technologies including the patented passive and active RFID tracking solutions, low power edge camera platforms utilizing

artificial intelligence, enabling users to give accuracy to all mapping technologies in areas that are troublesome.

Through its technological

solutions, CID Holdco serves multiple industries including construction, military, mining, retail, warehousing and manufacturing.

We are headquartered in Las

Vegas, NV with our management and administrative staff located in Bethesda, MD for East Coast customer engagements and government lobbying

We also manufacture hardware in Puerto Rico through our wholly owned subsidiary Dot Works.

development team and Design for Manufacturing (“DFM”) capability is built around our CTO in Worcester, MA and our core software

team is in Bangalore, India.

the notes to the condensed consolidated financial statements, unless otherwise noted or otherwise suggested by context, the “Company”,

“we”, “us”, “our” refers to the Legacy Company prior to the consummation of the Business Combination,

and the Company after the consummation of the Business Combination.

June 18, 2025 (the “Closing Date”) the Company consummated the Business Combination transactions by and among the Company,

ShoulderUp Technology Acquisition Corp (“SUAC” or “ShoulderUp”), ShoulderUp Merger Sub, Inc., SEI Merger Sub,

Inc., and SEE ID, Inc.

Pursuant to the Business Combination Agreement, on the Closing Date, (i) ShoulderUp Merger Sub merged with and

into SUAC (the “ShoulderUp Merger”), with SUAC surviving the ShoulderUp Merger as a wholly-owned subsidiary of the Company

(“SUAC Surviving Company”);

and (ii) simultaneously with the ShoulderUp Merger, SEI Merger Sub merged with and into SEE ID

(“the SEE ID Merger”), with SEE ID surviving the SEE ID Merger as a wholly-owned subsidiary of the Company (the “Surviving

Company”) (the ShoulderUp Merger and the SEE ID Merger, together the “Mergers” and together with the other transactions

contemplated by the Business Combination Agreement, the “Business Combination”).

connection with the Business Combination, CID Holdco filed a registration statement on Form S-4 (File No.

333-282600) (as amended, the

“Registration Statement”) with the U.S.

Our embedded development team and

Design for Manufacturing (“DFM”) capability is built around our CTO in Worcester, MA and our core software team is in Bangalore,

Throughout the notes to the

condensed consolidated financial statements, unless otherwise noted or otherwise suggested by context, the “Company”, “we”,

“us”, “our” refers to the Legacy Company prior to the consummation of the Business Combination, and the Company

after the consummation of the Business Combination.

Business Combination

On June 18, 2025 (the “Closing

Date”) the Company consummated the Business Combination transactions by and among the Company, ShoulderUp Technology Acquisition

Corp (“SUAC” or “ShoulderUp”), ShoulderUp Merger Sub, Inc., SEI Merger Sub, Inc., and SEE ID, Inc.

the Business Combination Agreement, on the Closing Date, (i) ShoulderUp Merger Sub merged with and into SUAC (the “ShoulderUp Merger”),

with SUAC surviving the ShoulderUp Merger as a wholly-owned subsidiary of the Company (“SUAC Surviving Company”);

simultaneously with the ShoulderUp Merger, SEI Merger Sub merged with and into SEE ID (“the SEE ID Merger”), with SEE ID surviving

the SEE ID Merger as a wholly-owned subsidiary of the Company (the “Surviving Company”) (the ShoulderUp Merger and the SEE

ID Merger, together the “Mergers” and together with the other transactions contemplated by the Business Combination Agreement,

the “Business Combination”).

In connection with the Business

Combination, CID Holdco filed a registration statement on Form S-4 (File No.

333-282600) (as amended, the “Registration Statement”)

with the U.S.

Securities and Exchange Commission (the “SEC”).

On June 18, 2025, the

Registration Statement was declared effective by the SEC.

At Closing, the assets and liabilities of Legacy Company were combined with

the assets and liabilities ShoulderUp Technology Acquisition Corp on a historical cost basis.

All Legacy Company common stock was exchanged

for common stock of the Company based upon the exchange ratio as defined in the Business Combination Agreement as Aggregate Merger Consideration

(13,000,000 CID Holdco shares) divided by the Company Fully Diluted Common Stock (159,915,641) or 8.129% Stock options of Legacy Company

were not exercised and remain outstanding after giving into effect the exchange ratio.

In connection with the Business Combination, we

incurred transaction costs, settled certain SUAC related party notes through the issuance of common shares, converted SAFE notes into

common stock of the Company, and raised cash proceeds from PIPE investors.

Additional information regarding the Business Combination

and Reverse Recapitalization is provided in Note 4 to the unaudited condensed consolidated financial statements.

Affecting Our Performance

New Customers

believe that we have a substantial opportunity to grow our customer base.

We intend to drive new customers by continuing to invest significantly

in sales and marketing to engage our prospective customers, increase brand awareness, and drive adoption of our Dot Cloud platform.

ability to attract new customers depends on a number of factors, including the effectiveness of our sales and marketing efforts, macroeconomic

factors and their impact on our customers’ businesses, and the success of our efforts to expand internationally.

Within Our Existing Customer Base

believe that there is a significant opportunity to expand sales to existing customers following their initial adoption of our Dot Cloud.

We will expand our customer base by selling more applications and expanding use of existing applications across geographies and divisions.

Our ability to expand within our customer base will depend on a number of factors, including our customers’ satisfaction, pricing,

competition, macroeconomic factors, and changes in our customers’ spending levels.

While there are many factors involved in this

expansion, the Customer Success department will be the key internal driver to retention and expansion of customer revenue.

At this juncture,

it is not a significant part of our operational expense but will be built out as our bookings increase and our channel support requirements

in Innovation and Future Growth

market leadership is supported by continuous innovation in our Dot Cloud, our inventions in IoT data collection and our advances in applying

AI to our customer problem sets.

On June 18, 2025, the Registration Statement was declared effective

At Closing, the assets and liabilities of Legacy Company were combined with the assets and liabilities ShoulderUp Technology

Acquisition Corp on a historical cost basis.

All Legacy Company Common Stock was exchanged for Common Stock of the Company based upon

the exchange ratio as defined in the Business Combination Agreement as Aggregate Merger Consideration (13,000,000 CID Holdco shares) divided

by the Company Fully Diluted Common Stock (159,915,641) or 8.129%.

Stock options of Legacy Company were not exercised and remain outstanding

after giving into effect the exchange ratio.

In connection with the Business Combination, we incurred transaction costs, settled certain

SUAC related party notes through the issuance of common shares, converted SAFE notes into Common Stock of the Company, and raised cash

proceeds from PIPE investors.

Additional information regarding the Business Combination and Reverse Recapitalization is provided in Note

3 to the unaudited condensed consolidated financial statements.

Factors Affecting Our Performance

Acquiring New Customers

We believe that we have a

substantial opportunity to grow our customer base.

We intend to drive new customers by continuing to invest significantly in sales and

marketing to engage our prospective customers, increase brand awareness, and drive adoption of our Dot Cloud platform.

Our ability to

attract new customers depends on a number of factors, including the effectiveness of our sales and marketing efforts, macroeconomic factors

and their impact on our customers’ businesses, and the success of our efforts to expand internationally.

Expanding Within Our Existing Customer Base

We believe that there is a

significant opportunity to expand sales to existing customers following their initial adoption of our Dot Cloud.

We will expand our customer

base by selling more applications and expanding use of existing applications across geographies and divisions.

Our ability to expand within

our customer base will depend on a number of factors, including our customers’ satisfaction, pricing, competition, macroeconomic

factors, and changes in our customers’ spending levels.

While there are many factors involved in this expansion, the Customer Success

department will be the key internal driver to retention and expansion of customer revenue.

At this juncture, it is not a significant part

of our operational expense but will require additional investment as our bookings increase and our channel support requirements come online.

Investments in Innovation and Future Growth

Our market leadership is supported

by continuous innovation in our Dot Cloud, our inventions in IoT data collection and our advances in applying AI to our customer problem

We will continuously invest in adding new applications and methods to our solutions.

As such, spending

on research and development will always be an important part of our strategy.

the driving force that will fuel our company is market growth.

Our recent pivot to move most of our spending to Sales and Marketing shows

a commitment to our go-to-market strategy.

We recognize the need to increase adoption and expand brand awareness as we increase market

This fiscal year is a critical period to add productive resources to ensure success is sustained.

additional compliance and oversight resources as we grow, and especially as we adapt to operating as a public entity, is a natural and

essential step.

In addition, our small operations team will continue to grow as the demand increases from our maturing sales pipeline.

of Results of Operations

will provide access to our Dot Cloud through subscription arrangements, where the customer is charged a per-subscription fee for access

for a specified term.

Subscription agreements will contain multiple service elements for one or more of our cloud-based Applications

via mobile app(s) or a website that enables data collection and provides access to the cellular network, IoT devices (which we also refer

to as connected devices), and support services delivered over the term of the arrangement.

Our subscription contracts will typically

have an initial term of three to five years and are generally non-cancellable and non-refundable, subject to limited exceptions under

our standard terms of service and other exceptions for public sector customers, who are often subject to annual budget appropriations

Our Connected Dot Cloud and IoT devices are highly integrated with the subscription service and together will represent a single

performance obligation.

Revenues attributable to this combined performance obligation are recognized over time as the services are delivered.

also provide professional services including onboarding (implementation) services, marketing services, and product consulting.

services were evaluated to be distinct and are treated as separate performance obligations from the subscription services.

Revenue related

to these services are recognized over time as services are performed.

revenues are primarily related to the delivery of feasibility study reports to customers seeking to gain insight into how data driven

tracking could improve their business, which is recognized upon acceptance of the feasibility report.

of Overhead Costs

costs that are not substantially dedicated for use by a specific functional group are allocated based on headcount.

Such costs include

costs associated with office facilities, depreciation of property and equipment, IT and security expenses, and other expenses, such as

corporate software, subscription services, and insurance.

Manufacturing overheads are allocated to production based on volume.

of Goods Sold

of goods sold will consists primarily of cellular-related costs, third-party cloud infrastructure expenses, customer support costs, warranty

charges, employee-related costs directly associated with our customer support and operations, including salaries, employee benefits and

stock-based compensation, amortization of internal-use software development, certain cloud computing implementation costs, expenses related

to shipping and handling, packaging, fulfillment, warehousing, write-downs of excess and obsolete inventory, and allocated overhead costs.

our customers expand and increase, the use of our Dot Cloud driven by additional IoT devices and Applications, our cost of revenue may

vary from quarter to quarter as a percentage of our revenue due to the timing and extent of these expenses.

We intend to continue to

invest additional resources in our Dot Cloud and customer support and operations personnel as we grow our business.

The level and timing

of investment in these areas will affect our cost of revenue in the future.

and development

and development expenses consist primarily of employee-related costs, including salaries, employee benefits and stock-based compensation,

depreciation and other expenses related to prototyping IoT devices, product initiatives, software subscriptions, hosting used in research

and development, and allocated overhead costs.

We continue to focus our research and development efforts on adding new features and products

and enhancing the utility of our Dot Cloud.

We capitalize the portion of our internal-use software development costs that meets the criteria

for capitalization.

We expect our research and development expenses to generally increase in absolute dollars for the foreseeable future

as we continue to invest in research and development efforts to enhance our Dot Cloud.

Our research and development expenses may fluctuate

as a percentage of our revenue from period to period due to the timing and extent of these expenses.

and marketing

and marketing expenses consist primarily of employee-related costs directly associated with our sales and marketing activities, including

salaries, employee benefits and stock-based compensation, and sales commissions.

Sales and marketing expenses also include expenditures

related to advertising, media, marketing, promotional costs, free trial expenses, brand awareness activities, business development, corporate

partnerships, travel, conferences and events, professional services, and allocated overhead costs.

We also have a heavy reliance on contracted

services in these areas which are reflected in the department spend.

We plan to continue to invest in sales and marketing to grow our

customer base and increase our brand awareness.

As a result, we expect our sales and marketing expenses to increase in absolute dollars

for the foreseeable future.

Our sales and marketing expenses may fluctuate as a percentage of our revenue from period to period due to

the timing and extent of these expenses.

and administrative

and administrative expenses consist of employee-related costs for executive, finance, legal, human resources, facilities, and certain

IT personnel, including salaries, employee benefits and stock-based compensation, professional fees for external legal, accounting, recruiting

and other consulting services, credit losses, allocated overhead costs, and unallocated lease costs.

We expect our general and administrative

expenses to continue to increase in absolute dollars for the foreseeable future to support our growth and because of additional costs

associated with legal, accounting, compliance, insurance, investor relations, and other areas associated with being a public company.

Our general and administrative expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent

As such, spending on research and development

will always be an important part of our strategy.

However, the driving force

that will fuel our company is market growth.

Our recent pivot to move most of our spending to Sales and Marketing shows a commitment to

our go-to-market strategy.

We recognize the need to increase adoption and expand brand awareness as we increase market share.

year is a critical period to add productive resources to ensure success is sustained.

Adding additional compliance

and oversight resources as we grow, and especially as we adapt to operating as a public entity, is a natural and essential step.

our small operations team will continue to grow as the demand increases from our maturing sales pipeline.

Components of Results of Operations

We will provide access to

our Dot Cloud through subscription arrangements, where the customer is charged a per-subscription fee for access for a specified term.

Subscription agreements will contain multiple service elements for one or more of our cloud-based Applications via mobile app(s) or a

website that enables data collection and provides access to the cellular network, IoT devices (which we also refer to as connected devices),

and support services delivered over the term of the arrangement.

Our subscription contracts will typically have an initial term of three

to five years and are generally non-cancellable and non-refundable, subject to limited exceptions under our standard terms of service

and other exceptions for public sector customers, who are often subject to annual budget appropriations cycles.

Our Connected Dot Cloud

and IoT devices are highly integrated with the subscription service and together will represent a single performance obligation.

attributable to this combined performance obligation are recognized over time as the services are delivered.

We also provide professional

services including onboarding (implementation) services, marketing services, and product consulting.

These services were evaluated to

be distinct and are treated as separate performance obligations from the subscription services.

Revenue related to these services are

recognized over time as services are performed.

Currently, revenues are primarily

related to the delivery of hardware products such as bridges, labels and gateways to customers.

We also provide feasibility study reports

to customers seeking to gain insight into how data driven tracking could improve their business, which is recognized upon acceptance of

the feasibility report.

Allocation of Overhead Costs

Overhead costs that are not

directly attributable to a specific functional group are allocated based on relative usage.

These costs include expenses related to warehouse

lease and cloud hosting services.

Cost of Goods Sold

Cost of goods sold will consists

primarily of cellular-related costs, third-party cloud infrastructure expenses, customer support costs, warranty charges, employee-related

costs directly associated with our customer support and operations, including salaries, employee benefits and share-based compensation,

amortization of internal-use software development, certain cloud computing implementation costs, expenses related to shipping and handling,

packaging, fulfillment, warehousing, write-downs of excess and obsolete inventory, and allocated overhead costs.

As our customers expand and

increase the use of our Dot Cloud driven by additional IoT devices and Applications, our cost of goods sold may vary from quarter to quarter

as a percentage of our revenue due to the timing and extent of these expenses.

We intend to continue to invest additional resources in

our Dot Cloud and customer support and operations personnel as we grow our business.

The level and timing of investment in these areas

will affect our cost of goods sold in the future.

Operating Expenses

Research and development

Research and development expenses

consist primarily of employee-related costs, including salaries, employee benefits and share-based compensation, depreciation and other

expenses related to prototyping IoT devices, product initiatives, software subscriptions, hosting used in research and development, and

allocated overhead costs.

We continue to focus our research and development efforts on adding new features and products and enhancing

the utility of our Dot Cloud.

We capitalize the portion of our internal-use software development costs that meets the criteria for capitalization.

We expect our research and development expenses to generally increase in absolute dollars for the foreseeable future as we continue to

invest in research and development efforts to enhance our Dot Cloud.

Our research and development expenses may fluctuate as a percentage

of our revenue from period to period due to the timing and extent of these expenses.

Sales and marketing

Sales and marketing expenses

consist primarily of employee-related costs directly associated with our sales and marketing activities, including salaries, employee

benefits and share-based compensation, and sales commissions.

Sales and marketing expenses also include expenditures related to advertising,

media, marketing, promotional costs, free trial expenses, brand awareness activities, business development, corporate partnerships, travel,

conferences and events, professional services, and allocated overhead costs.

We also have a heavy reliance on contracted services in these

areas which are reflected in the department spend.

We plan to continue to invest in sales and marketing to grow our customer base and

increase our brand awareness.

As a result, we expect our sales and marketing expenses to increase in absolute dollars for the foreseeable

Our sales and marketing expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent

of these expenses.

expense consists primarily of interest incurred for our short term bridge loans.

in fair value of SAFE agreements

change in the fair value of SAFE agreements represents the unrealized gains or losses resulting from the fluctuations in the estimated

fair value of the outstanding SAFE agreements, or reevaluation of updated market conditions and company-specific factors.

Company accounts for transaction costs incurred in connection with the Business Combination that occurred in June 2025, and therefore

transaction costs expensed were not a component of our results of operations during 2024.

Costs that are directly attributable to the

issuance of equity instruments, such as legal, accounting, and advisory fees related to the merger and recapitalization, are recorded

as a reduction to additional paid-in capital.

General and administrative

expenses consist of employee-related costs for executive, finance, legal, human resources, facilities, and certain IT personnel, including

salaries, employee benefits and share-based compensation, professional fees for external legal, accounting, recruiting and other consulting

services, credit losses, allocated overhead costs, and unallocated lease costs.

We expect our general and administrative expenses to continue

to increase in absolute dollars for the foreseeable future to support our growth and because of additional costs associated with legal,

accounting, compliance, insurance, investor relations, and other areas associated with being a public company.

Our general and administrative

expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.

Interest expense

Interest expense consists

primarily of interest incurred for our short-term bridge loans.

Change in fair value of SAFE agreements

The change in the fair value

of SAFE agreements represents the unrealized gains or losses resulting from the fluctuations in the estimated fair value of the outstanding

SAFE agreements, or reevaluation of updated market conditions and company-specific factors.

Transaction costs

The Company accounts for transaction

costs incurred in connection with the Business Combination that occurred in June 2025, and therefore transaction costs expensed were not

a component of our results of operations during 2024.

Costs that are directly attributable to the issuance of equity instruments, such

as legal, accounting, and advisory fees related to the merger and recapitalization, are recorded as a reduction to additional paid-in

All other transaction costs have been expensed as incurred.

from extinguishment of debt

to the Closing of the Business Combination, one lender elected to convert a portion of its outstanding principal and accrued interest

into shares of Common Stock.

In connection with the bridge loan conversion, the Company derecognized the liability, issued shares of

Common Stock and recognized a loss on debt extinguishment, based on the fair value of the Common Stock at the date of Closing.

of Operations

of Three and Six Months Ended June 30, 2025 and 2024

Cost of Goods Sold, Gross Profit, and Gross Margin

total revenue, cost of revenue, gross profit, and gross margin for the three and six months ended June 30, 2025 and 2024 are summarized

the three months ended

Loss from extinguishment of debt

Prior to the Closing of the

Business Combination, one lender elected to convert a portion of its outstanding principal and accrued interest into shares of Common

In connection with the bridge loan conversion, the Company derecognized the liability, issued shares of Common Stock and recognized

a loss on debt extinguishment, based on the fair value of the Common Stock at the date of Closing.

Results of Operations

Comparison of Three and nine

months Ended September 30, 2025 and 2024.

Revenue, Cost of Goods Sold, Gross Profit,

and Gross Margin

Our total revenue, cost of

goods sold, gross profit, and gross margin for the three and nine months ended September 30, 2025 and 2024 are summarized as follows:

For the three months ended

September 30,

(As Restated)

Cost of goods sold

Gross (loss) profit

Gross margin %

the six months ended

For the nine months ended

September 30,

(As Restated)

Cost of goods sold

Gross (loss) profit

Gross margin %

increased by $103,391, or 441.1%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 and $377,336,

or 370.0% for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

The increase in revenue is primarily

due to an increase in feasibility studies to new and existing customers.

of goods sold increased by $60,752, or 943.1%, for the three months ended June 30, 2025 compared to the three months ended June 30, 2024.

Cost of goods sold increased $74,263 or 742.0% for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

The increases are primarily due to additional warehouse expenditure related to the new Puerto Rico lease and increased tariffs on imported

raw materials.

gross margin was 47.0% for the three months ended June 30, 2025 compared to 72.5% for the three months ended June 30, 2024 and 82.4%

for the six months ended June 30, 2025 compared to 90.2% for the six months ended June 30, 2024.

The decrease in gross margin is primarily

due to additional warehouse expenditure related to the new Puerto Rico lease and increased tariffs on imported raw materials.

and Development

and development expenses for the three and six months ended June 30, 2025 and 2024 are summarized as follows:

the three months ended

and development

For the three months ended September

30, 2025, total revenue increased by approximately $697 thousand, or 853.6%, to $778 thousand compared to $82 thousand for the same period

The increase was primarily attributable to product revenue recognized during the current quarter from sales of bridges, gateways,

and labels to existing customers, partially offset by a $196 thousand revenue reversal tied to an updated estimate based on the timing

of actual revenue recognized compared to the estimate utilized related to the $2 million exclusivity client payment.

Based on expected

$175 million client spend over the 5-year term to retain exclusivity, the Company refined its estimate to recognize the exclusivity

payment as revenue across the full 5 years.

Total cost of goods sold increased

by $480 thousand, or 6,005.9%, to $488 thousand, reflecting higher material and labor costs associated with increased product sales.

a result, gross profit increased by $217 thousand, or 294.1%, to $290 thousand, compared to $74 thousand for the same period in 2024.

Gross margin decreased to 37.3% from 90.2%, primarily due to the higher proportion of product sales, which generally carry lower margins.

For the nine months ended September

30, 2025, total revenue increased by approximately $1,074 thousand, or 585.0%, to $1,258 thousand compared to $184 thousand for the same

period in 2024.

The increase was primarily attributable to product revenue recognized during the current period from sales of bridges,

gateways, and labels to existing customers.

Total cost of goods sold increased by $555 thousand, or 3,079.8%, to $573 thousand, reflecting

higher material and labor costs associated with increased product sales.

As a result, gross profit increased by $520 thousand, or 313.7%,

to $685 thousand compared to $166 thousand for the same period in 2024.

Gross margin decreased to 54.5% from 90.2%, primarily due to the

higher proportion of product sales, which generally carry lower margins.

Research and Development

Research and development expenses

for the three and nine months ended September 30, 2025 and 2024 are summarized as follows:

For the three months ended

September 30,

(As Restated)

Research and development

Percentage of revenue

the six months ended

and development

For the nine months ended

September 30,

(As Restated)

Research and development

Percentage of revenue

and development expense increased by $29,174, or 19.1%, for the three months ended June 30, 2025 compared to the three months ended June

30, 2024 and by $302,192, or 110.6%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

for research and development reflects growing capacity to satisfy customer feature requests and investing in our technology roadmap.

The increases are primarily driven by onboarding of additional software and hardware development contractors.

and Marketing

and marketing expenses for the three and six months ended June 30, 2025 and 2024 is summarized as follows:

the three months ended

Research and development (“R&D”)

expenses were $397 thousand for the three months ended September 30, 2025, an increase of $210 thousand, or 112.7%, compared to $187 thousand

for the same period in 2024.

The increase was primarily driven by the onboarding of additional software and hardware development contractors,

as well as higher personnel-related and prototype development costs to support new product initiatives.

Our spending for research and

development reflects our growing capacity to satisfy customer feature requests and continued investment in our technology roadmap.

a percentage of revenue, R&D expenses decreased to 51.0% from 228.7%, primarily due to significantly higher revenue in the current

For the nine months ended September 30, 2025, research and development

(“R&D”) expenses increased by $512 thousand, or 111.4%, to $973 thousand compared to $460 thousand in the prior-year period.

The year-to-date increase was primarily driven by onboarding additional development contractors and expanding engineering activities in

support of the Company’s long-term product innovation goals.

R&D expenses represented 77.3% of total revenue for the nine months

ended September 30, 2025, compared to 250.5% in the same period of 2024, reflecting improved operating leverage as revenue expanded.

Sales and Marketing

Sales and marketing expenses

for the three and nine months ended September 30, 2025 and 2024 are summarized as follows:

For the three months ended

September 30,

(As Restated)

Sales and marketing

Percentage of revenue

the six months ended

and marketing

and marketing expense increased by $39,627, or 5.4%, for the three months ended June 30, 2025 compared to the three months ended June

30, 2024 and by $328,410 or 29.2%, for the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

for the three months ended March 31, 2025 reflects our continued pivot towards the market, with sales and marketing spending increasing

by $328,410 or 29.2% year over year.

We expect to increase this further in the following quarter to take advantage of additional public

investment to build this department to drive growth.

increases are primarily driven by the usage of additional modules and users in the customer relationship management software.

support labor cost also contributed to the increases.

and Administrative

and administrative expense for the three and six months ended June 30, 2025 and 2024 is summarized as follows:

the three months ended

and administrative

For the nine months ended

September 30,

(As Restated)

Sales and marketing

Percentage of revenue

the six months ended

and administrative

For the three months ended

September 30, 2025, sales and marketing expenses totaled $1,112 thousand, an increase of $473 thousand, or 74.1%, compared to $639 thousand

for the same period in 2024.

The increase was primarily driven by enhanced functionality in our customer relationship management software,

as well as additional investment in customer support to expand our sales and marketing capabilities We expect to further increase spending

in the following quarter to leverage additional public investment and strengthen this department to drive growth.

For the nine months ended September 30, 2025, sales and marketing expenses

totaled $2,565 thousand, an increase of $802 thousand, or 45.5%, compared to $1,763 thousand in the same period of 2024, demonstrating

the Company’s ongoing commitment to market expansion and revenue growth.

General and Administrative

General and administrative

expense for the three and nine months ended September 30, 2025 and 2024 are summarized as follows:

For the three months ended

September 30,

(As Restated)

General and administrative

Percentage of revenue

and administrative expense increased by $577,988, or 234.7%, for the three months ended June 30, 2025 compared to the three months ended

June 30, 2024 and increased by $884,360, or 158.6%, for the six months ended June 30, 2025 compared to the six months ended June 30,

The increases are primarily due to labor cost pertaining to ramp up of the manufacturing facility in Puerto Rico, shipment of hardware,

equipment and inventories between our manufacturing and testing facilities, and increased headcount in back office.

expenses – SAFE agreements

tables below summarize the change in the fair value of SAFE agreements and the SAFE agreements activity for the three and six months

ended June 30, 2025 and 2024:

the three months ended

fair value of SAFE notes

$ (17,980,118 )

$ (17,319,363 )

the six months ended

fair value of SAFE notes

For the nine months ended

September 30,

(As Restated)

General and administrative

Percentage of revenue

For the three months ended

September 30, 2025, general and administrative expenses totaled $2,743 thousand, an increase of $2,236 thousand, or 441.1%, compared to

$507 thousand in the same period last year.

The increase is primarily driven by labor costs related to the ramp-up of operations, higher

administrative support for business functions, and increased back-office headcount.

For the nine months ended September 30, 2025, general

and administrative expenses totaled $4,185 thousand, up $3,120 thousand, or 293.1%, compared to $1,064 thousand in the prior year, reflecting

the continued expansion of operational infrastructure to support company growth.

Acquisition and integration

Acquisition and integration expense for the three

and nine months ended September 30, 2025 and 2024 are summarized as follows:

For the three months ended September 30,

Acquisition and integration

Percentage of revenue

For the nine months ended September 30,

Acquisition and integration

Percentage of revenue

For the three months ended September 30, 2025,

acquisition and integration expenses were $243 thousand, a decrease of $392 thousand, or 61.7%, compared to $635 thousand in the same

period of 2024.

The decrease reflects lower professional and consulting costs as the Company completed the Business Combination on June

For the nine months ended September 30, 2025, acquisition and integration expenses totaled $1,155 thousand, a decline of $346

thousand, or 23.1%, compared to $1,501 thousand in the prior year period.

These expenses primarily consisted of accounting, auditing,

and legal fees incurred in connection with the Business Combination, as well as other costs related to transaction execution and post-acquisition

integration activities.

Other expenses – SAFE agreements

The tables below summarize

the change in the fair value of SAFE agreements and the SAFE agreements activity for the three and nine months ended September 30, 2025

For the three months ended

September 30,

Change in fair value of SAFE notes

For the nine months ended

September 30,

Change in fair value of SAFE notes

$ (17,368,415 )

1 unchanged sentence

$ (3,141,259 )

the three months ended

the six months ended

SAFE agreements at fair value,

beginning of period

For the three months ended

September 30,

For the nine months ended

September 30,

(As Restated)

SAFE agreements at fair value, beginning of period

SAFE agreements issued for cash

Change in fair value

SAFE notes converted

(40,726,793 )

SAFE notes converted into shares

(40,726,793 )

SAFE agreements at fair

value, end of period

decrease in the balance of SAFE agreements was primarily driven by an increased estimated fair value of the Company and an increased

probability of the Business Combination that closed on June 18, 2025, as described in Note 4, qualified as an “Equity Financing”

under the terms of the Company’s SAFE agreements.

As a result, all outstanding SAFE notes were converted into 2,909,057 shares

of Common Stock.

The Company recognized a fair value change in the SAFE notes of $17,368,415, based on the fair value of the Common Stock

at Closing of $14.00 per share.

Accordingly, no SAFE notes remained outstanding as of June 30, 2025.

and Capital Resources

Requirements and Going Concern

is a measure of our ability to access sufficient cash flows to meet the short-term and long-term cash requirements of our business operations.

To date, we have funded our operations primarily with proceeds from the issuance of common shares to PIPE investors contemporaneously

with the close of the Business Combination.

Our future capital requirements will depend on many factors, including, but not limited to,

our growth, our ability to attract and retain customers, the continued market acceptance of our solution, the timing and extent of spending

necessary to support our efforts to develop our Dot Cloud and meet our performance obligations related to subscription sales of the same,

the expansion of sales and marketing activities, and the impact of macroeconomic conditions on us and our customers’ and partners’

SAFE agreements at fair value, end of period

For the three months ended

September 30, 2025, there was no change in the fair value of SAFE notes, compared to a decrease of $0.8 million in the same period of

2024, representing a 100% decline.

For the nine months ended September 30, 2025, the Company recorded a decrease in fair value of $17.4

million, compared to a decrease of $14.2 million in the prior year, an increase of $3.1 million, or 22%.

At the beginning of the three-month

period, no SAFE agreements were outstanding, compared to $22.7 million at the same point in 2024.

During the nine months ended September

30, 2025, SAFE agreements at fair value decreased from $23.3 million to zero, following the conversion of all outstanding notes into 2,909,057

shares of Common Stock.

No new SAFE agreements were issued for cash during the three months ended September 30, 2025.

The change in fair

value of $17.4 million for the nine months ended September 30, 2025, was based on the fair value of Common Stock at closing of $14.00

The decrease in the balance

of SAFE agreements was primarily driven by the increased estimated fair value of the Company and the higher probability of the Business

Combination, which closed on June 18, 2025, qualifying as an “Equity Financing” under the terms of the Company’s SAFE

As a result, all outstanding SAFE notes were converted into Common Stock, and no SAFE notes remained outstanding as of September

Liquidity and Capital Resources

Funding Requirements and Going Concern

Liquidity is a measure of

our ability to access sufficient cash flows to meet the short-term and long-term cash requirements of our business operations.

we have funded our operations primarily with proceeds from the issuance of common shares to PIPE investors contemporaneously with the

close of the Business Combination.

Our future capital requirements will depend on many factors, including, but not limited to, our growth,

our ability to attract and retain customers, the continued market acceptance of our solution, the timing and extent of spending necessary

to support our efforts to develop our Dot Cloud and meet our performance obligations related to subscription sales of the same, the expansion

of sales and marketing activities, and the impact of macroeconomic conditions on us and our customers’ and partners’ businesses.

Further, we may enter into arrangements to acquire or invest in businesses, products, services, and technologies.

need to raise additional capital in the future to finance our operations and expand our business.

connection with the Company’s assessment of going concern considerations in accordance with FASB ASC Topic 205-40, “Presentation

of Financial Statements — Going Concern,” management anticipates the Company will continue to incur substantial operating

losses for the next several years and will need to obtain additional near-term financing in order to continue its research and development

Our ability to continue as a going concern is dependent on its ability to raise additional capital to fund research and development

activities and meet obligations on a timely basis.

However, there can be no assurance that sufficient funding will be available to allow

us to successfully continue our research and development activities and commercialize our products.

the Company is unable to obtain necessary funds through its business operations and the proceeds realized through the business combination,

significant reductions in spending and the delay or cancellation of planned activities may be necessary.

These actions would have a material

adverse effect on our business, results of operations, and prospects.

These conditions raise substantial doubt about our ability to continue

as a going concern within one year from the date these interim unaudited consolidated financial statements are issued.

of June 30, 2025 and December 31, 2024, we had cash of $6,492,646 and $721,032, respectively, and working capital (deficit) of $454,040

and ($1,215,988), respectively.

date, we have funded our operations primarily with proceeds from the issuance of common shares to PIPE investors contemporaneously with

the close of the Business Combination in the amount of $10,837,643 and proceeds from the issuance of bridge loans.

As of June 30, 2025,

we had cash of $6,492,646.

In the future, we expect to finance our cash needs through a combination of equity, debt financings, and improvement

of cash from operations derived from selling subscriptions to our platform.

part of its funding efforts, on June 18, 2025, the Company entered into a Standby Equity Purchase Agreement (“SEPA”) with

New Circle Principal Investment LLC (“New Circle”), which provides the Company the right, but not the obligation, to direct

New Circle from time to time to purchase up to $50 million of the Company’s Common Shares during the commitment period ending

June 18, 2028, at a discount of the volume-weighted average price (VWAP) over a defined pricing period.

Under the SEPA, the Company may

sell shares to the New Circle at a price based on either:

option 1 – 97% of the lowest daily VWAP over the three trading days following

the purchase notice, or option 2 – the greater of 85% of the VWAP or the lowest sale price on a specific trading day determined

by the timing of the notice.

Company has the option to issue a variable number of shares of Common Stock or cash in satisfaction of the $350,000 commitment fee

agreed upon in SEPA.

The Company has not paid the commitment fee as of the date the unaudited condensed consolidated financial statements.

purchase would be subject to certain limitations, including that New Circle shall not purchase any shares that would result in it and

its affiliates beneficially owning more than 4.99% of the then outstanding voting power or number of shares of Common Stock or any

shares that would exceed 19.99% of all shares of Common Stock of the Company outstanding on the date of the SEPA, unless Company

shareholder approval was obtained allowing for issuances in excess of such amount (the “Exchange Cap”).

The Exchange Cap

will not apply under certain circumstances, including where the average purchase price of all applicable sales of Common Shares equals

or exceeds the lower of (i) the Nasdaq Official Closing Price immediately preceding the Effective Date;

or (ii) the average Nasdaq Official

Closing Price for the five Trading Days immediately preceding the Effective Date.

following table shows a summary of our cash flow for the periods presented:

For the six months ended

We will need to raise

additional capital in the future to finance our operations and expand our business.

In connection with the Company’s

assessment of going concern considerations in accordance with FASB ASC Topic 205-40, “Presentation of Financial Statements —

Going Concern,” management anticipates the Company will continue to incur substantial operating losses for the next several years

and will need to obtain additional near-term financing in order to continue its research and development activities.

Our ability to continue

as a going concern is dependent on its ability to raise additional capital to fund research and development activities and meet obligations

on a timely basis.

However, there can be no assurance that sufficient funding will be available to allow us to successfully continue our

research and development activities and commercialize our products.

If the Company is unable to

obtain necessary funds through its business operations and the proceeds realized through the business combination, significant reductions

in spending and the delay or cancellation of planned activities may be necessary.

These actions would have a material adverse effect on

our business, results of operations, and prospects.

These conditions raise substantial doubt about our ability to continue as a going

concern within one year from the date these interim unaudited consolidated financial statements are issued.

As of September 30, 2025 and December 31, 2024, we had cash of $1,418,834

and $721,032, respectively, and working capital deficit of $5,404,007 and $1,215,988, respectively.

Sources of Liquidity

To date, we have funded our

operations primarily with proceeds from the issuance of common shares to PIPE investors contemporaneously with the close of the Business

Combination in the amount of $10,837,643 and proceeds from the issuance of bridge loans.

As of September 30, 2025, we had cash of $1,418,834.

In the future, we expect to finance our cash needs through a combination of equity, debt financings, and improvement of cash from operations

derived from selling subscriptions to our platform.

As part of its funding efforts,

on June 18, 2025, the Company entered into a Standby Equity Purchase Agreement (“SEPA”) with New Circle Principal Investment

LLC (“New Circle”), which provides the Company the right, but not the obligation, to direct New Circle from time to time to

purchase up to $50 million of the Company’s Common Shares during the commitment period ending June 18, 2028, at a discount

of the volume-weighted average price (VWAP) over a defined pricing period.

Under the SEPA, the Company may sell shares to the New Circle

at a price based on either:

option 1 – 97% of the lowest daily VWAP over the three trading days following the purchase notice, or

option 2 – the greater of 85% of the VWAP or the lowest sale price on a specific trading day determined by the timing of the notice.

Any purchase would be subject

to certain limitations, including that New Circle shall not purchase any shares that would result in it and its affiliates beneficially

owning more than 4.99% of the then outstanding voting power or number of shares of Common Stock or any shares that would exceed 19.99%

of all shares of Common Stock of the Company outstanding on the date of the SEPA, unless Company shareholder approval was obtained allowing

for issuances in excess of such amount (the “Exchange Cap”).

The Exchange Cap will not apply under certain circumstances,

including where the average purchase price of all applicable sales of Common Shares equals or exceeds the lower of (i) the Nasdaq Official

Closing Price immediately preceding the Effective Date;

or (ii) the average Nasdaq Official Closing Price for the five Trading Days immediately

preceding the Effective Date.

The Company had the option

to satisfy the $350,000 commitment fee under the SEPA through the issuance of a variable number of shares of Common Stock or by payment

On September 24, 2025, the Company paid the commitment fee through the issuance of 106,383 shares of Common Stock, valued at

$3.29 per share, which was determined based on the closing price of the Common Stock on September 18, 2025, the date the Form S-1 was

declared effective by the SEC.

The commitment fee of $350,000 was expensed in September 2025.

Before the Company elects

to sell shares by issuing a purchase notice, the SEPA represents a purchased put option on the Company’s equity.

Once the Company

delivers a purchase notice under the SEPA, the related number of shares to be issued constitutes a forward contract to issue common stock.

As the feature is embedded in an equity host, meets the definition of a derivative, and does not qualify for the equity scope exception

under ASC 815 Derivatives and Hedging , it must be bifurcated and accounted for separately as a derivative asset or liability, depending

on changes in the underlying stock price relative to the pegged discounted VWAP.

The derivative is measured at fair value, with changes

in fair value recognized in net income.

The fair value of the purchased put option was determined to be de minimis as of September 30,

2025, and therefore was not recorded on the Company’s balance sheet as of that date.

No purchase notices were issued

during the three and nine months ended September 30, 2025.

On October 13, 2025, the Company issued a purchase notice to sell 30,000 shares

of its common stock.

The purchase price was settled at $2.6172 per share, resulting in total cash proceeds of $78,516.

The following table shows

a summary of our cash flow for the periods presented:

For the nine months ended

September 30,

Net cash (used in) operating activities

$ (8,197,830 )

$ (3,099,229 )

Net cash (used in) investing activities

Net cash provided by financing activities

largest source of operating cash is investments made by our shareholders.

Our primary uses of cash from operating activities are for

employee-related expenditures, sales and marketing expenses, inventory purchases, and research & development activities.

negative cash flows from operations in the preceding two fiscal years.

We have supplemented working capital through net proceeds from

the sale of equity securities and bridge loans.

used in operating activities was $3.8 million for the six months ended June 30, 2025.

This consisted of a net loss of $30.1 million,

adjusted for non-cash charges of $18.5 million, and changes in our operating assets and liabilities of $7.8 million.

The non-cash charges

were primarily composed of change in fair value expense of $17.4 million and loss on extinguishment of debt of $5.7 million.

used in operating activities was $2.3 million for the six months ended June 30, 2024.

This consisted of a net loss of $16.2 million,

adjusted for non-cash charges of $13.6 million, and changes in our operating assets and liabilities of $229 thousand.

The non-cash charges

were primarily composed of change in fair value SAFE note expense of $13.5 million.

used in investing activities was $744 thousand for the six months ended June 30, 2025, which primarily consisted of $107 thousand of

property and equipment purchases and $637 thousand of capital expenditures for

internal-use software development costs.

used in investing activities was $362 thousand for the six months ended June 30, 2024, which consisted of capital expenditures for internal-use

software development costs.

provided by financing activities was $10.3 million for the six months ended June 30, 2025, which primarily consisted of $10.8 million

in proceeds from PIPE investors.

provided by financing activities was $3.1 million for the six months ended June 30, 2024, which consisted of $3.1 million of proceeds

from issuance of bridge loans.

Obligations and Commitments

estimated future obligations consist of leases and non-cancelable purchase commitments as of June 30, 2025.

For additional discussion

on our leases and other commitments, refer to Note 13 – Leases and Note 15 – Commitments and Contingencies to our condensed

consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Accounting Policies and Estimates

management’s discussion and analysis of our financial condition and results of operations is based on our financial statements,

which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP.

The preparation of

these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities

and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues and

expenses during the reporting periods.

We evaluate these estimates and judgments on an ongoing basis.

We base our estimates on historical

experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for

making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Our actual results

may differ from these estimates under different assumptions or conditions.

our significant accounting policies are more fully described in Note 2 to our condensed consolidated financial statements, we believe

that the following accounting policies are the most critical to fully understanding and evaluating our financial condition and results

of operations.

for SAFE Agreements

accordance with FASB ASC 815 40, Contracts in Entity’s Own Equity, the Company determined the SAFE agreements are freestanding

financial instruments and accordingly are classified as “liabilities” in the accompanying condensed consolidated balance

The SAFE agreements are carried at estimated fair value determined by the Company using a probability weighted expected return

is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration to which we expect

to be entitled in exchange for those goods or services.

determine revenue recognition through the following steps:

Identification

of the contract, or contracts, with a customer;

Identification

of the performance obligations in the contract;

Determination

of the transaction price;

of the transaction price to the performance obligations in the contract;

of revenue when, or as, we satisfy a performance obligation.

offer feasibility studies which allow customers to gain insight into how data driven tracking could improve their business.

our studies, off-the-shelf components are installed on customer-owned assets which enable data to be captured by our beta Zero Infrastructure

Mesh (“ZIM”) technology network.

These feasibility studies allow the refinement of our software protocols and provide essential

information for the continued development of our solution.

Operating Activities

Our largest source of operating

cash is investments made by our shareholders.

Our primary uses of cash from operating activities are for employee-related expenditures,

sales and marketing expenses, inventory purchases, and research & development activities.

We generated negative cash flows from operations

in the preceding two fiscal years.

We have supplemented working capital through net proceeds from the sale of equity securities and bridge

Cash used in operating activities was $8.2 million for the nine months

ended September 30, 2025.

This consisted of a net loss of $34.4 million, adjusted for non-cash charges of $18.6 million, and changes in

our operating assets and liabilities of $7.6 million.

The non-cash charges were primarily composed of change in fair value of SAFE note

expense of $17.4 million and loss on extinguishment of debt of $5.7 million.

Cash used in operating activities

was $3.1 million for the nine months ended September 30, 2024.

This consisted of a net loss of $18.9 million, adjusted for non-cash charges

of $14.4 million, and changes in our operating assets and liabilities of $1.3 million.

The non-cash charges were primarily composed of

change in fair value SAFE note expense of $14.2 million.

Investing Activities

Cash used in investing activities was $1.4 million for the nine months

ended September 30, 2025, which primarily consisted of $484 thousand of property and equipment purchases and $899 thousand of capital

expenditures for internal-use software development costs.

Cash used in investing activities

was $579 thousand for the nine months ended September 30, 2024, which consisted of capital expenditures for internal-use software development

Financing Activities

Cash provided by financing

activities was $10.3 million for the nine months ended September 30, 2025, which primarily consisted of $10.8 million in proceeds from

PIPE investors.

Cash provided by financing

activities was $3.8 million for the nine months ended September 30, 2024, which consisted of $3.8 million of proceeds from issuance of

Contractual Obligations and Commitments

Our estimated future obligations

consist of leases and non-cancelable purchase commitments as of September 30, 2025.

For additional discussion on our leases and other

commitments, refer to Note 13 – Leases and Note 15 – Commitments and Contingencies to our condensed consolidated

financial statements included elsewhere in this Quarterly Report on Form 10-Q.

Critical Accounting Policies and Estimates

Our management’s discussion

and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance

with generally accepted accounting principles in the United States, or GAAP.

The preparation of these financial statements requires management

to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and

liabilities at the date of the financial statements, as well as the reported revenues and expenses during the reporting periods.

these estimates and judgments on an ongoing basis.

We base our estimates on historical experience and on various other factors that we

believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets

and liabilities that are not readily apparent from other sources.

Our actual results may differ from these estimates under different assumptions

or conditions.

While our significant accounting

policies are more fully described in Note 2 to our condensed consolidated financial statements, we believe that the following accounting

policies are the most critical to fully understanding and evaluating our financial condition and results of operations.

Accounting for SAFE Agreements

In accordance with FASB ASC

815 40, Contracts in Entity’s Own Equity, the Company determined the SAFE agreements are freestanding financial instruments

and, accordingly, are classified as “liabilities” in the accompanying condensed consolidated balance sheets.

SAFE agreements are carried at estimated fair value determined by the Company using a probability weighted expected return method.

Revenue Recognition

The Company recognizes revenue

in accordance with ASC 606, Revenue from Contracts with Customers .

Revenue is recognized when promised goods or services are transferred

to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services.

We determine revenue recognition

through the following steps:

Identification of the contract, or contracts, with a customer;

Identification of the performance obligations in the contract;

Determination of the transaction price;

Allocation of the transaction price to the performance obligations in the contract;

Recognition of revenue when, or as, we satisfy a performance obligation.

The Company primarily recognizes

revenue from the sale and delivery of products.

As it is still in the early stages of developing its software-as-a-service (SaaS) product,

most revenue is derived from product sales, including bridges, gateways, and labels.

We also offer feasibility

studies which allow customers to gain insight into how data driven tracking could improve their business.

As part of our studies, off-the-shelf

components are installed on customer-owned assets which enable data to be captured by our beta Zero Infrastructure Mesh (“ZIM”)

technology network.

These feasibility studies allow the refinement of our software protocols and provide essential information for the

continued development of our solution.

Customers receive the information captured in our feasibility study reports.

These feasibility study reports are the only performance obligation in our contracts.

determined that the single promise to our customers is satisfied at a point in time.

In reaching this conclusion, we considered the context

of the contract and the nature of our promise to provide the customer with actionable insights to improve the management of their operations

in a feasibility report.

single performance obligation is satisfied at a point in time, as our customers do not consume the benefits of our studies until their

feasibility report is delivered.

Accordingly, the fixed consideration related to the performance obligation is recognized on when control

of the feasibility report is transferred to the customer which is upon acceptance.

estimates involved in revenue recognition pertain to determination of standalone selling price.

Management considered the data inputs

for the standalone selling price and determined that the adjusted market assessment approach provided the best estimate of the standalone

selling price.

The estimates applied have been reasonable in the past and the likelihood of change in estimate to impact the standalone

selling price is remote.

Software Development

accordance with FASB ASC Topic 350 40, Intangibles Goodwill and Other Internal Use Software , we capitalize software development

costs incurred on new applications or enhancements to applications during the application development phase of software for internal

use to provide services to customers.

These capitalized costs include certain payroll and payroll related costs for employees and costs

for outside consultants who are directly associated with and who devote time to internal use software projects.

Costs incurred prior

to the application development phase and after the market release are expensed as incurred.

use software is amortized on a straight-line basis over its estimated useful life from the date the project is substantially complete

and ready for its intended use.

The estimated useful life will be determined based on management’s judgment on how long the core

technology and functionality serves internal needs and the customer base.

Once projects are substantially complete, management will evaluate

the useful lives of these assets on an annual basis and will test for impairment whenever events or changes in circumstances occur that

could impact the recoverability of these assets.

Our contracts with customers

include various performance obligations which are satisfied at a point in time or over time.

In reaching this conclusion, we considered

the context of the contract and the nature of our promises to provide the customers with products and services.

The product performance obligations

are satisfied at a point in time, as our customers do not consume the benefits until the products are delivered.

Accordingly, the consideration

related to the performance obligations are recognized on when control of the products are transferred to the customer which is upon acceptance.

The estimates involved in revenue recognition pertain to determination

of the stand-alone selling price.

Management considered the data inputs for the stand-alone selling price and

determined that the adjusted market assessment approach provided the best estimate of the stand-alone selling price and the

total products and services to be delivered over the term of the contract.

The estimates applied have been reasonable in the

past and the likelihood of change in estimate to impact the stand-alone selling price is remote.

The Company entered into an

exclusivity agreement on November 8, 2024, and a partner agreement on December 18, 2024, with a major reseller.

The exclusivity agreement

grants the reseller the exclusive right to sell the Company’s products for one year, with automatic renewal for up to four additional

one-year periods if specified sales targets are achieved.

The partner agreement provides a 5% purchasing incentive based on the reseller’s

quarterly growth in total solution purchases and requires the Company to contribute at least 1% of revenue toward marketing activities,

paid as a rebate.

Management concluded that the exclusivity agreement, partner agreement, and future product purchase orders should be

combined and accounted for as a single contract under ASC 606, Revenue from Contracts with Customers.

In November 2024, the Company

received a $2,000,000 payment from the reseller for a five-year exclusivity right, including four successive one year automatic renewal

periods, granting the reseller exclusive rights to distribute the Company’s products to its customers.

Since exclusivity does not

represent a distinct performance obligation under ASC 606, the payment was recorded as deferred revenue.

Revenue will be recognized over

the contract term in proportion to the products and services delivered, based on estimated total sales over the five-year period.

estimates will be reviewed quarterly and adjusted based on the reseller’s actual performance.

If the reseller fails to meet sales

targets and the agreement is terminated, any remaining deferred revenue will be recognized at that time.

Under ASC 606, both the incentive

and rebate represent variable consideration, as they depend on actual sales volume.

Management will estimate expected sales and related

rebates to determine the transaction price and recognize revenue accordingly.

The purchasing incentive and marketing rebate are not separate

performance obligations, and variable consideration related to these incentives will be included in revenue only when it is probable that

no significant reversal will occur once uncertainties are resolved.

The Company will accrue the incentive amount at the end of each quarter

when sales revenue is finalized.

Internal-Use Software Development

In accordance with FASB ASC

Topic 350 40, Intangibles Goodwill and Other Internal Use Software , we capitalize software development costs incurred on new applications

or enhancements to applications during the application development phase of software for internal use to provide services to customers.

These capitalized costs include certain payroll and payroll related costs for employees and costs for outside consultants who are directly

associated with and who devote time to internal use software projects.

Costs incurred prior to the application development phase and after

the market release are expensed as incurred.

Internal use software is amortized

on a straight-line basis over its estimated useful life from the date the project is substantially complete and ready for its intended

The estimated useful life will be determined based on management’s judgment on how long the core technology and functionality

serves internal needs and the customer base.

Once projects are substantially complete, management will evaluate the useful lives of these

assets on an annual basis and will test for impairment whenever events or changes in circumstances occur that could impact the recoverability

of these assets.

These costs are not yet amortized as our SaaS solution has not been deployed.

considers use of estimates in determining the appropriate allocation of personnel costs (including fringe benefits and stock compensation)

and software development consultants’ costs to software capitalization.

Such costs were analyzed for reasonableness and the current

basis (evaluation of project plans and stage) is determined to be the best estimate of the costs capitalized during the period.

The estimates

applied have been reasonable in the past and the likelihood of change in estimate to impact the software cost capitalized is remote.

Issued and Adopted Accounting Pronouncements

describe the recently issued accounting pronouncements that apply in Note 2 of the unaudited condensed consolidated financial statements

as of and for the three and six months ended June 30, 2025.

Growth Company Status

102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards

until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a

class of securities registered under the Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)

are required to comply with the new or revised financial accounting standards.

The JOBS Act provides that a company can elect to opt

out of the extended transition period and comply with the requirements that apply to non- emerging growth companies but any such election

to opt out is irrevocable.

The Company has elected not to opt out of such extended transition period which means that when an accounting

standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth

company, can adopt the new or revised accounting standard at the time private companies adopt the new or revised standard.

Quantitative and Qualitative Disclosures About Market Risk

required for smaller reporting companies.

Management considers use of

estimates in determining the appropriate allocation of personnel costs (including fringe benefits and stock compensation) and software

development consultants’ costs to software capitalization.

Such costs were analyzed for reasonableness and the current basis (evaluation

of project plans and stage) is determined to be the best estimate of the costs capitalized during the period.

The estimates applied have

been reasonable in the past and the likelihood of change in estimate to impact the software cost capitalized is remote.

Recently Issued and Adopted Accounting Pronouncements

We describe the recently issued

accounting pronouncements that apply in Note 2 of the unaudited condensed consolidated financial statements as of and for the three and

nine months ended September 30, 2025.

Emerging Growth Company Status

Section 102(b)(1) of the JOBS

Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies

(that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered

under the Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are required to comply with

the new or revised financial accounting standards.

The JOBS Act provides that a company can elect to opt out of the extended transition

period and comply with the requirements that apply to non- emerging growth companies but any such election to opt out is irrevocable.

The Company has elected not to opt out of such extended transition period which means that when an accounting standard is issued or revised

and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new

or revised accounting standard at the time private companies adopt the new or revised standard.

Quantitative and Qualitative Disclosures

About Market Risk

Not required for smaller reporting

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 2. Management’s Discussion and Analysis