CID Holdco, Inc. 10-K

Item 8. Financial Statements and Supplementary Data Report of Independent Registered Public Accounting Firm (PCAOB ID 213 ) F-2 Report of Independent Registered Public Accounting Firm (PCAOB ID 52) F-3 Consolidated balance sheets F-4 Consolidated statements of operations F-5 Consolidated statements of stockholders’ deficit F-6 Consolidated statements of cash flows F-7 Notes to consolidated financial statements F-8 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of CID Holdco, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of CID Holdco, Inc. (the “Company”) as of December 31, 2025, and the related consolidated statements of operations, stockholders’ deficit and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. We have also audited the adjustments to the consolidated financial statements as of and for the year ended December 31, 2024 to retrospectively apply such adjustments to the consolidated financial statements to reflect the effects of the reverse recapitalization, as described in Notes 2, 3 and 11. In addition, we have audited the adjustments to the consolidated financial statements for the year ended December 31, 2024, as described in Notes 2 and 4. In our opinion, such adjustments in Notes 2, 3, 4 and 11 are appropriate and have been properly applied. We were not engaged to audit, review or apply any procedures to the consolidated financial statements as of or for the year ended December 31, 2024, of the Company other than with respect to the adjustments described above, and, accordingly, we do not express an opinion on any other form of assurance on the December 31, 2024 consolidated financial statements as a whole. Substantial Doubt about the Company’s Ability to Continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has incurred recurring losses from operations, has a working capital deficiency, and an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters also are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ Carr, Riggs & Ingram L.L.C. We have served as the Company’s auditor since 2026. Palm Beach Gardens, Florida March 11, 2026 F- 2 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Stockholders of SEE ID, Inc. dba Dot Ai Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of SEE ID, Inc. dba Dot Ai (the “Company”) as of December 31, 2024, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the year then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Substantial Doubt about the Company’s Ability to Continue as a Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations, has a working capital deficiency, and accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters also are described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion. /s/ Berkowitz Pollack Brant Advisors + CPAs We have served as the Company’s auditor since 2024. New York, New York June 25, 2025 F- 3 CID HOLDCO, INC. CONSOLIDATED BALANCE SHEETS December 31, 2025 December 31, 2024 ASSETS Current assets: Cash $ 865,624 $ 721,032 Accounts receivable 3,624,547 50,264 Inventory 1,430,881 65,248 Prepaid expenses and other current assets 480,903 167,551 Total current assets 6,401,955 1,004,095 Noncurrent assets: Property and equipment, net 645,240 11,286 Operating lease right-of-use assets (ROU) 701,878 307,892 Capitalized software development costs 2,920,718 1,761,396 Other long-term assets 27,893 12,103 Total long-term assets 4,295,729 2,092,677 Total assets $ 10,697,684 $ 3,096,772 LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT) Current liabilities: Accounts payable $ 4,124,924 $ 770,276 Accrued expenses 1,826,189 24,219 Accrued compensation 177,222 246,720 Accrued franchise taxes 8,428 - Derivative liabilities 78,635 - Short-term debt, net 1,540,651 - Deferred revenue, current portion 236,038 1,142,643 Operating lease liabilities, current portion 139,963 36,225 Total current liabilities 8,132,050 2,220,083 Long-term liabilities: SAFE notes - 23,334,626 Deferred revenue, net of current portion 1,748,512 1,570,572 Operating lease liabilities, net of current portion 577,656 265,413 Total long-term liabilities 2,326,168 25,170,611 Total liabilities 10,458,218 27,390,694 Commitments and contingencies (Note 17) Shareholders’ equity (deficit) Common stock, $ 0.0001 par value; 300,000,000 shares authorized; 29,273,321 and 12,210,718 shares issued and outstanding as of December 31, 2025 and 2024, respectively 2,927 1,221 Additional paid-in capital 61,687,873 438,120 Accumulated deficit ( 61,451,334 ) ( 24,733,263 ) Total shareholders’ equity (deficit) 239,466 ( 24,293,922 ) Total liabilities and shareholders’ equity (deficit) $ 10,697,684 $ 3,096,772 See accompanying notes to consolidated financial statements. F- 4 CID HOLDCO, INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December 31, 2025 2024 Revenue $ 5,804,369 $ 172,661 Cost of goods sold 3,133,139 43,634 Gross profit 2,671,230 129,027 Operating expenses: General and administrative 6,764,453 1,563,328 Research and development 1,446,203 850,261 Sales and marketing 3,671,865 2,721,981 Acquisition and integration 1,154,857 2,038,130 Depreciation and amortization 36,463 - Total operating expenses 13,073,841 7,173,700 Loss from operations ( 10,402,611 ) ( 7,044,673 ) Other expenses: Interest expense ( 404,624 ) - Change in fair value of SAFE notes ( 17,368,415 ) ( 14,492,176 ) Change in fair value of derivative liabilities 158,241 - Business combination transaction costs ( 2,726,183 ) - Loss on extinguishment of debt ( 5,728,295 ) - Loss on issuance of shares ( 246,184 ) - Total other expenses ( 26,315,460 ) ( 14,492,176 ) Loss before income taxes ( 36,718,071 ) ( 21,536,849 ) Provision for income taxes - 581 Net loss $ ( 36,718,071 ) $ ( 21,537,430 ) Net loss per share Basic and diluted $ ( 1.78 ) $ ( 1.78 ) Weighted average number of shares Basic and diluted 20,579,971 12,124,303 See accompanying notes to consolidated financial statements. F- 5 CID HOLDCO, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT FOR THE YEARS ENDED DECEMBER 31, 2025 AND 2024 Legacy Common Stock Prior to retroactive application of recapitalization Common Stock Additional Paid-In Accumulated Total Shareholders’ Shares Amount Shares Amount Capital Deficit Deficit Balances as of December 31, 2023 108,975,000 $ 108,975 - $ - $ 133,360 $ ( 3,195,833 ) $ ( 2,953,498 ) Retroactive application of recapitalization ( 108,975,000 ) ( 108,975 ) 12,208,851 1,221 107,754 - - Balances as of December 31, 2023, adjusted - - 12,208,851 1,221 241,114 ( 3,195,833 ) ( 2,953,498 ) Stock-based compensation - - 1,867 - 197,006 - 197,006 Net loss - - - - - ( 21,537,430 ) ( 21,537,430 ) Balances as of December 31, 2024 - $ - 12,210,718 $ 1,221 $ 438,120 $ ( 24,733,263 ) $ ( 24,293,922 ) Stock-based compensation - - - - 37,827 - 37,827 Reverse recapitalization transactions, net - - 15,426,221 1,543 56,155,649 - 56,157,192 Share purchase commitment - - 106,382 10 349,990 - 350,000 Share issuance for cash - - 1,530,000 153 801,047 - 801,200 Excise tax forgiveness - - - - 3,905,240 - 3,905,240 Net loss - - - - - ( 36,718,071 ) ( 36,718,071 ) Balances as of December 31, 2025 - $ - 29,273,321 $ 2,927 $ 61,687,873 $ ( 61,451,334 ) $ 239,466 See accompanying notes to consolidated financial statements. F- 6 CID HOLDCO, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Years Ended December 31, 2025 2024 OPERATING ACTIVITIES Net loss $ ( 36,718,071 ) $ ( 21,537,430 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 36,463 — Amortization of debt origination fees 15,833 — Change in fair value of SAFE notes 17,368,415 14,492,176 Change in fair value of derivative liabilities ( 158,241 ) — Transaction costs paid in shares 156,869 — Share-based compensation expense 37,827 197,006 Noncash operating lease expense 98,850 37,689 Loss on debt extinguishment 5,728,295 — Loss on share issuance 246,184 — Reverse recapitalization transaction 566,071 — Fair value of shares issued as commitment fee 350,000 — Change in operating assets and liabilities: Accounts receivable ( 3,574,283 ) ( 45,486 ) Prepaid expenses and other assets ( 311,543 ) ( 35,095 ) Inventory ( 1,365,633 ) ( 65,248 ) Accounts payable 3,354,648 768,542 Accrued expense 1,801,970 714 Accrued compensation ( 69,498 ) 227,852 Accrued franchise taxes 8,428 — Operating lease liabilities ( 94,452 ) ( 43,943 ) Deferred revenue ( 728,665 ) 2,713,215 Net cash used in operating activities ( 13,250,533 ) ( 3,290,008 ) INVESTING ACTIVITIES Purchase of property and equipment ( 670,417 ) — Capitalized software development costs ( 1,159,322 ) ( 834,220 ) Net cash used in investing activities ( 1,829,739 ) ( 834,220 ) FINANCING ACTIVITIES Proceeds from issuance of bridge loans 2,850,000 — Proceeds from issuance of SAFE notes 23,752 4,239,500 Proceeds from issuance of short term loan, net 2,000,000 — Proceeds from issuance of new shares 555,016 — Payment of debt origination fees ( 190,000 ) — Repayment of bridge loans ( 1,380,545 ) — Repayment of short term loan ( 48,306 ) — Proceeds from PIPE investments 10,837,643 — Purchase of common stock ( 5,000,000 ) — Proceeds from Trust account 5,577,304 — Net cash provided by financing activities 15,224,864 4,239,500 Net increase in cash during the year 144,592 115,272 Cash, beginning of year 721,032 605,760 Cash, end of year $ 865,624 $ 721,032 SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES Right-of-use asset obtained in exchange for lease liability $ 482,227 $ 324,426 Conversion of SAFE notes to equity $ 40,726,793 $ - Conversion of short-term debt to equity $ 8,597,750 $ - SUPPLEMENTAL DISCLOSURE OF CASH ACTIVITIES Cash paid for interest $ 377,028 $ - See accompanying notes to consolidated financial statements. F- 7 CID HOLDCO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1 – Company Information Organization and Nature of Operations 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 in-process tracking of resources. Through the Company’s extensive research and development initiatives, the Company’s main focus includes areas such as Industrial IoT, Indoor & Outdoor tracking with seamless transitions, Passive RFID (including Bluetooth and 5G), in-process locating system, Dolly Management, and related supported software applications. The Company is the developer of an asset tracking platform intended to push the limits of near real-time precision-based location technology. The Company’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, the Company serves multiple industries including construction, military, mining, retail, warehousing and manufacturing. In July 2024, the Legacy Company incorporated Dot Works, Inc., a Puerto Rico corporation, as a wholly-owned subsidiary. Dot Works, based in Puerto Rico, serves as the primary manufacturing facility for Dot Ai, producing smart hardware devices and embedded technological components used in AI-driven enterprise solutions (ZIM Bridges and Smart Industrial TAGS). Activities include assembly, quality control, and packaging of proprietary systems. On March 18, 2024, ShoulderUp Technology Acquisition Corp., a Delaware corporation (“ ShoulderUp ”), entered into a Business Combination Agreement (the “ Business Combination Agreement ”) by and among CID Holdco, Inc., a Delaware corporation and a direct, wholly-owned subsidiary of ShoulderUp (“ Holdings ”), ShoulderUp Merger Sub, Inc., a Delaware corporation and wholly-owned subsidiary of Holdings (“ ShoulderUp Merger Sub ”), SEI Merger Sub, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Holdings (“ SEI Merger Sub ” and together with ShoulderUp Merger Sub, the “ Merger Subs ”), and SEE ID, Inc., a Nevada corporation (collectively with any predecessor entities, the “ Company ”). On June 18, 2025 (the “Closing Date” or “Closing”), the Company consummated the Business Combination transactions by and among the Company, SUAC, 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”). Pursuant to the Business Combination Agreement, on June 18, 2025, each of the following transactions occurred in the following order: (a) ShoulderUp Merger Sub merged with and into SUAC, with SUAC continuing as the surviving entity, and, in connection therewith, each ordinary share of SUAC issued and outstanding immediately prior to the Closing Date were cancelled in exchange for the right of the holder thereof to receive, with respect to each ordinary share that is not redeemed or converted at Closing, one share of common stock of the Company (“Common Stock”); (b) SEI Merger Sub merged with and into SEE ID, with SEE ID continuing as the surviving entity, and, in connection therewith, (i) SEE ID Common Stock issued and outstanding immediately prior to the Closing Date were cancelled in exchange for the right of the holders thereof to receive shares of Common Stock as set forth in the Business Combination Agreement and (ii) any convertible securities of SEE ID were converted; and (c) as a result of the Mergers, SUAC and SEE ID each became wholly owned subsidiaries of the Company, and the Company became a publicly traded company, all upon the terms and subject to the conditions set forth in the Business Combination Agreement and in accordance with the provisions of applicable law. F- 8 At Closing, Continental Stock Transfer & Trust Company (the “Transfer Agent”), SUAC and the Company entered into the Warrant Assumption and Assignment Agreement (the “Warrant Assumption Agreement”), pursuant to which, among other things, SUAC assigned to the Company all of SUAC’s right, title and interests, and the Company assumed all of SUAC’s liabilities and obligations under the certain Warrant Agreement, dated as of November 16, 2021, between SUAC and Continental Stock Transfer & Trust Company (the “Existing Warrant Agreement”). As a result, each Warrant automatically ceased to represent a right to acquire SUAC Class A Common Stock and instead represents a right to acquire shares of the Company’s Common Stock pursuant to the terms and conditions of the Existing Warrant Agreement (as amended by the Warrant Assumption Agreement). As such, the holders of each whole warrant to purchase SUA Class A Common Stock received one warrant to purchase the Company’s Common Stock at an exercise price of $ 11.50 per share. In connection with the Business Combination, CID Holdco filed a registration statement on Form S-4 (File No. 333-282600) with the U.S. Securities and Exchange Commission (“SEC”), as amended (the “Registration Statement”). The Registration Statement was declared effective by the SEC on June 18, 2025. Subsequently, the Company filed a registration statement on Form S-1 (File No. 333-290052), as amended, which was declared effective by the SEC on September 18, 2025. Liquidity and Going Concern The Company follows Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40, Presentation of Financial Statements — Going Concern , which requires that management evaluate whether there are relevant conditions and events that in aggregate raise substantial doubt about the entity’s ability to continue as a going concern and to meet its obligations as they become due within one year after the date that the consolidated financial statements are issued. Under the guidance, the Company must first evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern (step 1). If the Company concludes substantial doubt is raised, management also is required to consider whether its plans alleviate that doubt (step 2). The Company has a limited operating history, has incurred significant operating losses since its inception, and the revenue and income potential of the Company’s business and market are unproven. The preparation of these consolidated financial statements does not include any adjustments that may result from the outcome of this uncertainty. The Company’s consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. As of December 31, 2025, the Company had $ 865,624 in cash, a working capital deficit of $ 1,730,095 and accumulated deficit of $ 61,451,334 . To date, the Company has funded its operations primarily with the net proceeds from the issuance of convertible promissory notes and the issuance and sale of equity securities. Following June 18, 2025, the Company has also funded its operations with proceeds from the Business Combination, short-term borrowings, and proceeds from the issuance of shares under its share subscription line of credit. The Company expects to incur substantial operating losses for the next several years and has obtained additional near-term financing to continue its research and development activities. On June 18, 2025, the Company entered into a share subscription line of credit agreement under which the Company can access up to $ 50,000,000 in aggregate proceeds (see Note 9) to fund its R&D activities and its operations. F- 9 Subsequent to the year end through March 11, 2026, Edmund Nabrotzky, Chief Executive Officer of the Company, Charles Maddox, Chief Financial Officer and Chief Operating Officer of the Company, and Vijayan Nambiar, Chief Technology Officer of the Company loaned the Company an aggregate of $ 350,000 and may make additional loans to the Company up to an aggregate amount of $ 600,000 (collectively, the “Executive Loans”). 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 the Company’s business, results of operations, and prospects. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year from the date these consolidated financial statements are issued. The accompanying annual consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of these uncertainties. Note 2 - Summary of Significant Accounting Policies Principles of Consolidation The accompanying consolidated audited financial statements include the accounts of CID Holdco, and its wholly-owned subsidiaries, Dot Ai and Dot Works, which are collectively referred to as the “Company” in these consolidated financial statements. All intercompany balances and transactions have been eliminated upon consolidation. Basis of Presentation The Consolidated Financial Statements include the accounts of CID Holdco, Inc. and its subsidiaries, with all intercompany transactions and balances eliminated in consolidation. The Company has prepared the Consolidated Financial Statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), as established by the Financial Accounting Standards Board (“FASB”) through the Accounting Standards Codification (“ASC”), and in conformity with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). In the opinion of management, the Consolidated Financial Statements reflect all adjustments, consisting only of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position, results of operations, and cash flows for the periods presented. Accounting for the Business Combination The Business Combination is accounted for as a reverse recapitalization, with ShoulderUp being treated as the acquired company and the Legacy Company treated as the accounting acquirer for financial reporting purposes. This accounting treatment is equivalent to the Legacy Company issuing stock for the net assets of ShoulderUp, accompanied by a recapitalization whereby no goodwill or other intangible assets are recorded. Operations prior to the Business Combination are presented as those of the Legacy Company and the accumulated deficit of the Legacy Company has been carried forward after Closing. All periods prior to the Business Combination have been retrospectively adjusted to reflect the reverse recapitalization. In connection with the reverse recapitalization treatment of the Business Combination, all issued and outstanding securities of ShoulderUp upon Closing were treated as issuances of the Company upon the consummation of the Business Combination. Emerging Growth Company 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. F- 10 Recently Issued Accounting Pronouncements Not Yet Adopted In November 2024, the FASB issued Accounting Standards Update (“ASU”) No. 2024-03, Disaggregation of Income Statement Expenses , which requires disclosures of certain additional expense information on an annual and interim basis, including, among other items, the amounts of purchases of inventory, employee compensation, depreciation and intangible asset amortization included within each income statement expense caption, as applicable. The updated standard is effective for our annual periods beginning in fiscal year 2026 and interim periods beginning in the first quarter of fiscal year 2027. The Company is currently evaluating the impact of this guidance but does not anticipate a material impact on its consolidated financial statements or related disclosures. In November 2024, the FASB issued ASU No. 2024-04, Debt—Debt with Conversion and Other Options (Subtopic 470-20): Clarifications to Accounting for Certain Convertible Debt Instruments , which amends ASC 470-202 to clarify the requirements related to accounting for the settlement of a debt instrument as an induced conversion. The ASU is intended to improve the relevance and consistency in application of the induced conversion guidance in ASC 470-20 for (a) convertible debt instruments with cash conversion features and (b) debt instruments that are not currently convertible. The ASU removes references limiting induced conversion guidance to settlements in equity, thereby clarifying that the guidance may apply to conversions settled in equity, cash (or other assets), or a combination thereof. It also clarifies that, to qualify for induced conversion accounting, (i) the inducement offer must preserve the form and amount of consideration issuable under the original conversion privileges, (ii) the instrument must contain a substantive conversion feature at issuance and on the date the inducement offer is accepted, and (iii) the conversion must result from changed conversion privileges exercisable only for a limited period. The ASU further provides implementation guidance and examples, and clarifies that inducement expense is measured as the excess of the fair value of the consideration transferred over the fair value of the consideration issuable under the original conversion terms. The amendments in ASU No. 2024-04 are effective for fiscal years beginning after December 15, 2025, including interim periods within those fiscal years. Early adoption is permitted. The Company has not early adopted this guidance and is currently evaluating the impact that adoption may have on its consolidated financial statements and related disclosures, including the accounting for its senior secured convertible loan arrangements and any related settlement transactions. Recently Adopted Accounting Pronouncements In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , requiring public entities to disclose information about their reportable segments’ significant expenses and other segment items on an interim and annual basis. Public entities with a single reportable segment are required to apply the disclosure requirements in ASU No. 2023-07, as well as all existing segment disclosures and reconciliation requirements in ASC 280 on an interim and annual basis. The Company adopted ASU No. 2023-07 during the year ended December 31, 2024. See Note 18, Segment Reporting, in these notes to the consolidated financial statements for further detail. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which prescribes standardized categories and enhanced disaggregation of information in the rate reconciliation, requires disclosure of disaggregated income taxes paid, and modifies certain other income tax-related disclosure requirements. The standard is effective for fiscal years beginning after December 15, 2024, and was adopted by the Company in its fiscal year 2025 annual reporting period. The Company evaluated the impact of adopting this guidance and, because it continues to operate in a loss position and does not pay income taxes, the adoption did not have a material impact on its consolidated financial statements or related disclosures. Other than the accounting standards described above, the Company did not adopt any new accounting standards during the year ended December 31, 2025 that had a material impact on its consolidated financial statements. The Company has reviewed all recently issued accounting pronouncements and determined that no other standards adopted during the period materially affected its consolidated financial position, results of operations, cash flows, or related disclosures. F- 11 Risks and Uncertainties The Company’s industry is subject to rapid technological change. The introduction of new technologies will continue to have a significant effect on competitive conditions to which the Company is subject. Certain technologies and industry developments may negatively impact the Company’s ability to compete within certain industry segments. If the Company is unable to develop new solutions that provide utility to its customers and provide enhancements and new features for its existing solutions that keep pace with rapid technological and regulatory changes, the Company’s revenues and results of operations could be adversely affected. Since some of the inventory that the Company purchases include components produced in foreign countries, the Company is subject to certain risks associated with tariffs on imports that the government of the United States of America imposes, which could adversely impact the Company’s operations. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. The Company bases its estimates on historical experience, known or expected trends, and various other assumptions that are believed to be reasonable given the quality of information available as of the date of these financial statements. The results of these assumptions provide the basis for making estimates about the carrying amounts of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates. The Company believes judgment is involved in determining capitalized software development costs, useful lives of capitalized software development costs, the fair value of the SAFE agreements, warrant liabilities, embedded derivatives, share-based compensation, obsolete inventory, the put option under the equity line of credit and the valuation allowance on deferred income taxes. The Company bases these estimates on historical and anticipated results, trends, and various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to future events. Actual results could differ materially from those estimates and assumptions. Cash The Company maintains its cash deposits with major financial institutions, that at times, are greater than the FDIC limit. Fair Value Measurement Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants as of the measurement date. Applicable accounting guidance provides an established hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in valuing the asset or liability and are developed based on market data obtained from sources independent of us. Unobservable inputs are inputs that reflect our assumptions about the factors that market participants would use in valuing the asset or liability. There are three levels of input that may be used to measure fair value: ● Level 1 - Quoted prices in active markets for identical assets or liabilities that the entity can access. ● Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets and liabilities. ● Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities. F- 12 Assets and liabilities measured at fair value are classified based on the lowest level of input that is significant to the fair value measurement. The Company reviews the fair value hierarchy classification on an as needed basis. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. The Company recognizes transfers into and out of levels within the fair value hierarchy in the appropriate period in which the actual event or change in circumstances caused the transfer to occur. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets primarily consist of advance payments for goods and services to be received in future periods, including insurance premiums, software licenses, maintenance contracts, and prepaid inventories. Prepaid expenses are recorded at cost and are expensed ratably over the period the benefits are realized. Prepaid inventories are advance payments made to suppliers for inventory that the company has not yet received. The Company periodically reviews the carrying value of prepaid expenses and other current assets to determine if any amounts are no longer recoverable, and records an expense in the period such determination is made. Accounts Receivable Accounts receivable are derived from customers located primarily in North America. The Company generally does not require collateral to support customer receivables. Accounts receivable are reduced by an allowance for credit losses to reserve for potentially uncollectible amounts. The Company evaluates the collectability of its accounts receivable monthly, and amounts are written off when determined to be uncollectible by management. The maximum accounting loss from the credit risk associated with accounts receivable is the amount of the receivable recorded, which is the face amount of the receivable, net of the allowance for credit losses and deferred revenue, if any. The allowance for credit losses reflects the best estimate of probable losses. The Company writes off accounts receivable when they become uncollectible. As of December 31, 2025 and 2024, there was no accounts receivable allowance for credit losses. There were no credit losses for the years ended December 31, 2025 and 2024. Inventory Inventory consists of raw materials, work in progress and finished goods and is valued at the lower of cost or net realizable value (“NRV”), with cost determined by the first-in, first-out method. NRV is determined as the estimated selling price in the ordinary course of business less the estimated selling costs. Valuations are periodically performed by management, and a charge to operations is recorded if the carrying value of the item exceeds its estimated NRV. Management also periodically performs a valuation on allowance for excess and obsolete inventory. No valuation allowance was necessary as of December 31, 2025 and 2024. Property and Equipment Property and equipment are recorded at cost, less accumulated depreciation. Routine maintenance and repair costs are expensed as incurred, while expenditures that materially extend the useful life or improve the functionality of an asset are capitalized. Upon sale, retirement, or other disposition, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in operations. Depreciation on equipment is calculated using the straight-line method for assets with a cost exceeding $ 5,000 over their estimated useful lives, generally three to five years , except for a laser machine, which is depreciated over an estimated useful life of ten years . Leasehold improvements are depreciated over the shorter of the lease term or their estimated useful lives. F- 13 Software Development Costs In accordance with FASB ASC Topic 350-40, Intangibles-Goodwill and Other-Internal-Use Software , the Company capitalizes 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 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 and will test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. As of December 31, 2025 and 2024, and for the years then ended, no projects have been substantially completed and ready for their intended use, and no amortization was recorded in the accompanying consolidated statements of operations. Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be fully recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to their fair value, which is normally determined through analysis of the future net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount that the carrying amount of the assets exceeds the fair value of the assets. As of December 31, 2025 and 2024, and for the years then ended, no such indicators of impairment were identified, and accordingly, no impairment losses were recognized. Leases The Company accounts for leases under ASC 842, Leases . The core principle of this standard is that a lessee should recognize the assets and liabilities that arise from leases, by recognizing in the consolidated balance sheets a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The Company recognizes right-of-use (“ROU”) assets and lease liabilities for leases with terms greater than 12 months. Leases are classified as either finance or operating leases. This classification dictates whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. The Company’s leases are capitalized at the present value of the minimum lease payments not yet paid. The Company uses either the rate implicit in the lease, if readily determinable, or the Company’s incremental borrowing rate in order to calculate the net present value of the lease liability. The Company’s incremental borrowing rate for a lease is the rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms and in a similar economic environment. The Company has two operating leases for the facilities located in Bethesda, Maryland and Barceloneta, Puerto Rico. The Company has elected to not recognize ROU assets and lease liabilities for short-term leases that have a lease term of 12 months or less at lease commencement and do not include an option to purchase the underlying asset that the Company is reasonably certain to exercise. The Company recognizes lease costs associated with its short-term leases on a straight-line basis over the lease term. When contracts contain lease and non-lease components, the Company accounts for each component separately. The Company has two short-term leases located in Manati, Puerto Rico and Shirley, Massachusetts. Variable payments are included in the future lease payments when those variable payments depend on an index or a rate. F- 14 Convertible Debt The Company accounts for its convertible debt instruments in accordance with ASC 480, Distinguishing Liabilities from Equity , and other applicable authoritative guidance. Management evaluates the terms of each instrument to determine the appropriate classification. The Company has concluded that its convertible debt instruments are properly classified as liabilities because they embody contractual obligations to repay principal and interest in cash and do not meet the criteria for equity classification. In addition, the instruments do not represent mandatorily redeemable equity shares or other freestanding equity instruments; rather, they represent debt arrangements with substantive repayment obligations. Accordingly, the instruments are recorded as liabilities on the consolidated balance sheets. In connection with the short-term borrowings, the Company paid loan initiation fees to the lender. These fees are accounted for as debt issuance costs and recorded as a direct deduction from the carrying amount of the related debt liability. The net carrying amount of the debt, after giving effect to these issuance costs, is accreted to the contractual repayment amount over the term of the loan using the effective interest method, with the amortization recognized as interest expense in the consolidated statements of operations. Warrants and Embedded Derivatives The Company’s convertible debt includes a conversion feature and an embedded call option. These features were evaluated to determine whether they require bifurcation from the host debt instrument. Management concluded that the features meet the definition of derivatives under ASC 815, Derivatives and Hedging , and therefore require separation from the host contract. The embedded call option permits the Company, upon a change in control, to call the instrument, representing an additional embedded derivative feature. In assessing the conversion feature, management determined that the number of shares issuable upon conversion is contingent upon stockholder approval to remove the 4.99 % beneficial ownership limitation. Because this contingency represents an input that is not consistent with a fixed-for-fixed equity instrument under ASC 815-40-15-7, the conversion feature is not considered indexed to the Company’s common stock and does not qualify for equity classification. Accordingly, the embedded call option and conversion feature were combined and accounted for as a single embedded derivative liability measured at fair value, with changes in fair value recognized in earnings. The warrants issued in connection with the short-term loan are accounted for as a separate derivative liability. The warrants are measured at fair value at each reporting date, and changes in fair value are recognized in earnings. Business Combination The transaction was accounted for as a reverse recapitalization in accordance with ASC 805, Business Combinations . Although ShoulderUp was the legal acquirer in the transaction, the Company was determined to be the accounting acquirer based on the evaluation of the relevant accounting guidance. Accordingly, the transaction was treated for accounting purposes as a reverse recapitalization of the Company. The historical financial statements of the Company became the historical financial statements of the combined entity, and the net assets of ShoulderUp were recorded at their historical carrying amounts. No goodwill or other intangible assets were recognized in connection with the transaction. The equity structure of the combined company was adjusted to reflect the shares issued in the transaction, and transaction costs were accounted for in accordance with applicable guidance. Revenue Recognition The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers . 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. Deferred revenue consists of payments received in advance of satisfaction of a performance obligation and is recognized as the performance obligations are satisfied. The Company operates as a single reportable segment and generates revenue from an integrated offering of hardware products and related software and subscription services. Revenue is disaggregated into product and service categories. Product revenue primarily consists of sales of hardware devices that serve as the initial step in customer adoption of the Company’s cloud-based SaaS platform. Service revenue primarily consists of subscription services providing access to the Company’s software platform, along with related training, support, professional services such as onboarding and consulting, feasibility studies, and certain reseller exclusivity arrangements. The Company’s integrated hardware and software model is designed to expand customer adoption of its platform and strengthen reseller partnerships. All revenue for the periods presented was generated from customers located in the United States. (see Note 18, Segment Reporting .) 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 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. F- 15 In connection with the exclusivity agreement, the Company received a $ 2,000,000 payment from the reseller. 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. These 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. The Company pays sales commissions to its sales personnel in connection with customer contracts. As the Company’s revenue is recognized at a point in time and the commission amounts are not significant relative to the related contract period, the Company applies the practical expedient under ASC 340-40 Other Assets and Deferred Costs—Contracts with Customers , to expense incremental costs of obtaining a contract when incurred. Accordingly, all commission expenses are recognized in the period the related customer contract is executed and are not capitalized. Share-Based Compensation The Company applies ASC 718, Stock Compensation , when recording share-based compensation. The fair value of each stock option award is estimated on the date of grant using the Black-Scholes option valuation model. The assumptions used in the Black-Scholes valuation model are as follows: Grant Price - The grant price of the issuances is determined based on the estimated fair value of the shares at the date of grant. Risk-Free Interest Rate - The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury yield in effect at the time of grant. Expected Lives - Due to the Company’s insufficient history of option activity, management utilizes the simplified approach to estimate the options’ expected term, which represents the period of time that options granted are expected to be outstanding. Expected Volatility - Determined based on management’s estimate or historical volatilities of comparable companies. Expected Dividend Yield - Based on current yield at the grant date or the average dividend yield over the historical period. The Company has never declared or paid dividends and has no plans to do so in the foreseeable future. The share-based compensation expense is recognized on a straight-line basis based on the number of awards expected to vest over the requisite service period and is adjusted to reflect those awards that do ultimately vest with the offsetting credit to additional paid-in capital. For further details regarding share-based compensation (see Note 11). Research and Development Costs Expenditures related to the research and development of new products and processes are expensed as incurred. Research and development expenses consist primarily of compensation costs and fees paid to consultants and other expenses relating to the development and testing of the Company’s products. Income Taxes The Company accounts for income taxes in accordance with ASC 740, Income Taxes , using the asset and liability approach. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company records a valuation allowance against deferred tax assets as deemed necessary. F- 16 The Company accounts for the uncertainty in income taxes as prescribed by the minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. As of December 31, 2025 and 2024, the Company has not identified any uncertain tax positions and, accordingly, has not recorded any liability for unrecognized tax benefits. Basic and Diluted Net Loss Per Common Share Basic net loss per common share is computed by dividing net loss for the period by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding and potentially dilutive securities outstanding for the period using the treasury stock or if-converted method if their inclusion is dilutive. Diluted net loss per common share is the same as basic net loss per common share because the inclusion of potentially dilutive shares would be anti-dilutive to the calculation of loss and comprehensive loss per common share. The Company has only one class of shares issued and outstanding. Accordingly, basic and diluted net loss per share is not allocated among multiple classes. Basic and diluted net loss per share for all periods prior to the Closing have been retrospectively adjusted by the exchange ratio to reflect the effect of the reverse recapitalization. Prior to the Closing, the Company inherited 15,675,000 public and private warrants from ShoulderUp, each exercisable at $ 11.50 per share. These warrants were considered antidilutive and excluded from the diluted net loss per share calculation for the years ended December 31, 2025 and 2024. During the years ended December 31, 2025, 20,017 of these warrants were forfeited, resulting in a net total of 15,654,983 warrants outstanding as of December 31, 2025. Acquisition and Integration Costs The Company incurred acquisition and integration costs of $ 1,154,857 for the year ended December 31, 2025, primarily related to professional fees, legal and accounting services, severance, and other costs associated with recent Business Combinations. Transaction Costs The Company accounts for transaction costs incurred in connection with de-SPAC transactions in accordance with ASC 805, Business Combinations . 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. Other costs that are not directly related to the equity issuance, including costs associated with Business Combination activities, are expensed as incurred. The Company evaluates each cost to determine the appropriate accounting treatment based on its nature and purpose. Revisions and Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. In connection with these reclassifications, certain amounts previously reported within cost of goods sold have been reclassified to operating expense categories, including general and administrative expenses, research and development expenses, sales and marketing expenses, and acquisition and integration expenses, based on the nature of the underlying costs. These reclassifications had no impact on total revenue, loss from operations, net loss, or shareholders’ equity (deficit) for the period presented. Certain prior period amounts in the consolidated statements of cash flows have also been revised to conform to the current period presentation. Specifically, amounts previously presented as short-term debt, net have been revised to proceeds from issuance of bridge loans within financing activities. As a result of these revisions, net cash used in operating activities and net cash provided by financing activities were adjusted for the respective periods presented. These revisions had no impact on previously reported net loss, total cash flows, or the beginning and ending cash balances for any 2025 period presented. F- 17 Note 3 – Business Combination and Reverse Recapitalization Business Combination On March 18, 2024, the Company entered into a Business Combination Agreement with ShoulderUp, ShoulderUp Merger Sub, Inc., SEI Merger Sub, Inc. and the Legacy Company. On June 18, 2025, the Company consummated its Business Combination pursuant to the terms of the Business Combination Agreement. The Business Combination was structured as follows: ● At the Closing, each ordinary share of ShoulderUp that was not redeemed or converted was exchanged for one share of CID Holdco Inc. Common Stock. Each issued and outstanding unit of ShoulderUp (“Unit”) was automatically separated into (i) one ordinary share and (ii) one-half of one warrant. Each whole warrant is exercisable to purchase one ordinary share at an exercise price of $ 11.50 per share. ● A total of 506,589 shares of Common Stock were issued to the public shareholders of ShoulderUp. An additional 6,698,333 shares were issued to ShoulderUp’s officers and directors, ShoulderUp Technology Sponsor LLC (the “Sponsor”), and each transferee of founder shares. ● 1,345,001 shares of Common Stock were issued to certain original public shareholders who had previously agreed not to redeem their shares. ● 482,500 shares of Common Stock were issued to the holders of the ShoulderUp bridge loan to partially settle the outstanding loan balance at Closing. Lastly, 150,000 shares were issued to legal services provider DLA Piper LLP to partially settle outstanding service fees, pursuant to the Expense Release and Payment Agreement executed on June 3, 2025. ● All of SEE ID’s 108,975,000 Common Stock issued and outstanding immediately prior to the Closing was canceled and converted into 12,210,718 shares of the Company’s Common Stock after giving effect to the exchange ratio of 0.11205 . ● 2,909,057 shares of Common Stock were issued to the SEE ID SAFE note holders. ● 11,205 shares of Common Stock were issued in exchange for financial advisory services at Closing. ● 3,323,536 shares of Common Stock were issued to three major PIPE investors. ● The Company assumed 15,654,983 public and private warrants of ShoulderUp, net of 20,017 forfeitures. Redemption Prior to the Closing, certain public shareholders of ShoulderUp exercised their rights to redeem certain ordinary shares for funds previously held in the trust account, resulting in the redemption of 2,000 ordinary shares for an aggregate payment of approximately $ 22,019 . After redemptions, there was a total of 506,589 ordinary shares, which were converted into Common Stock in connection with the Business Combination, and approximately $ 5.58 million remained in the trust account. F- 18 Share Ownership Upon Closing The number of shares of Common Stock issued in connection with the Business Combination and subsequent equity conversion was as follows: Common Stock Ordinary shares, outstanding prior to the Business Combination 508,589 Less: Redemption of ordinary shares ( 2,000 ) Ordinary shares held by ShoulderUp’s officers and directors, the Sponsor and each transferee of founder shares 6,698,333 Ordinary shares held by non-redemption share holders 1,345,001 Ordinary shares held by ShoulderUp bridge loan holder 482,500 Ordinary shares held by DLA Piper, LLP 150,000 Common Stock issued to holders of SEE ID Inc. 12,210,718 Common Stock issued to SEE ID SAFE note holders 2,909,057 Common Stock issued to StartUpNV 11,205 Common Stock issued to PIPE investors 3,323,536 Common Stock Upon the Business Combination 27,636,939 The Legacy Company incurred $ 2,726,183 in transaction costs in connection with the Business Combination, which was determined not to be a capital-raising transaction for the Legacy Company. The $ 2,726,183 consists of the following: ● $ 1,003,500 in assumed expenses from ShoulderUp for financial advisory services provided by Cohen Capital Markets; ● $ 156,870 for financial advisory services provided by a financial advisor; ● $ 295,000 in registration fees paid to Nasdaq Corporate Solutions, LLC; ● $ 271,079 paid to Continental Stock Transfer & Trust Co.; ● $ 126,812 paid to Edgar Agents, LLC; and ● $ 872,922 in bonus expenses related to the successful closing of the Business Combination. The following tables reconcile elements of the Business Combination to the Company’s consolidated financial statements, and should be read in conjunction with the footnotes referenced above: Recapitalization Closing proceeds Proceeds from Trust account $ 5,577,304 Proceeds from PIPE investors 10,837,643 Proceeds from legacy ShoulderUp bank accounts 74,501 Closing disbursements Less: Payment to purchase founder shares ( 5,000,000 ) Net cash proceeds from the Business Combination $ 11,489,448 Noncash activities Conversion of SAFE notes to equity 40,726,793 Conversion of short-term debt to equity 8,597,749 Transaction costs paid in shares 156,870 Less: Accrued taxes assumed from ShoulderUp ( 3,913,668 ) Less: Short-term debt assumed from ShoulderUp ( 900,000 ) Net equity impact of the Business Combination $ 56,157,192 Par value of common stock issued ( 1,543 ) Total Impact of Business Combination on additional paid-in capital $ 56,155,649 F- 19 Bridge Loan Agreements For the year ended December 31, 2025, the Legacy Company entered into unsecured bridge loan agreements with two major lenders, totaling $ 2,850,000 in principal. These loans bear interest at an annual rate of 20 %, calculated on a 365-day basis, and include a minimum interest provision requiring payment of at least 8 % or 10 % of the principal amount if repaid prior to their six-month maturity dates. As of the date of Closing, the Company recorded an accrued interest liability of $ 280,000 , which was settled at Closing. Prior to the Closing of the Business Combination, one of the lenders elected to convert a portion of its outstanding principal and accrued interest into 614,125 shares of Common Stock, based on a conversion price of $ 4.00 per share. The other lender opted to receive full repayment in cash. The table below summarizes the transaction: Bridge Loans Effective Date Amount Interest at closing Payback in Cash Payback in shares at $4/share Shares Bridge loan 1* 1/29/2025 $ 1,500,000 $ 150,000 $ ( 193,500 ) $ 1,456,500 364,125 Bridge loan 2* 4/9/2025 500,000 50,000 ( 50,000 ) 500,000 125,000 Bridge loan 3* 5/7/2025 500,000 50,000 ( 50,000 ) 500,000 125,000 Bridge loan 4 3/29/2025 100,000 10,000 ( 110,000 ) - - Bridge loan 5 6/5/2025 250,000 20,000 ( 270,000 ) - - Total $ 2,850,000 $ 280,000 $ ( 673,500 ) $ 2,456,500 614,125 * Bridge loans from this investor had an aggregate principal amount of $ 2,500,000 . At the Closing of the Business Combination, the investor received a cash payment of $ 293,500 , consisting of $ 250,000 in minimum 10 % interest and $ 43,500 in principal repayment. In addition, the investor received 614,125 shares of Common Stock in exchange for $ 2,456,500 of combined principal and accrued interest, based on a per share price of $ 4.00 . In connection with the bridge loan conversion, the Company derecognized a liability of $ 2,456,500 upon issuing 614,125 shares of Common Stock and recognized a total loss on debt extinguishment of $ 6,141,250 , based on the fair value of the Common Stock at the Closing of $ 14.00 per share. PIPE Investments In connection with the Business Combination, the Company entered into a private investment in public equity (“PIPE”) financing agreement with certain accredited investors. Pursuant to the PIPE subscription agreements, these investors committed to purchase an aggregate of 2,709,411 shares of Common Stock at a price of $ 4.00 per share, for total gross proceeds of $ 10,837,643 . The PIPE investment provided additional capital to support the Company’s post-closing operations and was consummated concurrently with the Closing of the Business Combination. Following table illustrates the breakdown of all PIPE investments. PIPE Effective Date Amount Shares PIPE 1 6/16/2025 $ 2,814,500 $ 703,625 PIPE 2 6/10/2025 1,000,000 250,000 PIPE 3 6/17/2025 7,023,143 1,755,786 Total PIPE $ 10,837,643 $ 2,709,411 In connection with the Business Combination, the Company assumed an excise tax liability of $ 3,905,240 and a franchise tax liability of $ 8,428 , both of which were incurred prior to the Closing and were recorded as assumed obligations from the reverse recapitalization transaction. Accordingly, the Company recorded a total accrued tax liability of $ 3,913,668 related to the Business Combination. The U.S. Treasury issued final regulations under Section 58.4501-2(e) clarifying the application of the 1 % stock repurchase excise tax imposed by the Inflation Reduction Act. The regulations provide that redemptions of stock issued prior to August 16, 2022 are exempt from the excise tax if the shares were subject to mandatory redemption or stockholder put rights from issuance through redemption. The Company’s SPAC redemptions qualified for this exemption because the shares were issued before August 16, 2022 and were continuously subject to contractual redemption rights, including mandatory redemption and stockholder put options, which were redeemed in connection with extension votes. As a result, the previously recorded excise tax liability of $ 3,905,240 was written off as of December 31, 2025, with a corresponding adjustment to additional paid-in capital. F- 20 Note 4 - Reclassifications and Revisions of Prior Period Financial Statements Based on an analysis of FASB ASC, ASC 250- Accounting Changes and Error Corrections , Staff Accounting Bulletin 99, Materiality , and Staff Accounting Bulletin 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements , the Company determined these revisions were not material to the previously issued financial statements and as such reclassifications and revisions were necessary. For the year ended December 31, 2024, the Company revised its expense presentation by reallocating certain amounts previously reported under cost of goods sold to general and administrative, research and development, and sales and marketing expenses to better reflect the nature of the underlying costs. In addition, certain expenses were reclassified among these operating expense categories. These reclassifications had no effect on total revenue, loss from operations, net loss, or shareholders’ equity (deficit) for any period presented. The impact of these reclassifications on the Company’s consolidated statements of operations for the year ended December 31, 2024, is shown below: For the Year Ended December 31, As previously reported Reclassification As adjusted Revenue $ 172,661 $ - $ 172,661 Cost of goods sold 343,889 ( 300,255 ) 43,634 Gross profit $ ( 171,228 ) $ 300,255 $ 129,027 Operating expenses: General and administrative expenses 3,588,548 ( 2,025,220 ) 1,563,328 Research and development expenses 759,967 90,294 850,261 Sales and marketing 2,524,930 197,051 2,721,981 Acquisition and integration - 2,038,130 2,038,130 Depreciation and amortization - - - Total operating expenses 6,873,445 300,255 7,173,700 Loss from operations $ ( 7,044,673 ) $ - $ ( 7,044,673 ) Change in fair value of SAFE notes ( 14,492,176 ) - ( 14,492,176 ) Loss before income taxes $ ( 21,536,849 ) $ - $ ( 21,536,849 ) Provision for income taxes 581 - 581 Net loss $ ( 21,537,430 ) $ - $ ( 21,537,430 ) F- 21 For the six months ended June 30, 2025 and the nine months ended September 30, 2025, the Company revised the presentation of certain amounts in the consolidated statements of cash flows to conform to the current period presentation. Specifically, amounts previously presented as short-term debt, net have been revised to proceeds from issuance of bridge loans within financing activities. In addition, the reverse recapitalization transaction adjustment was revised to reflect the appropriate presentation within operating activities. As a result of these revisions, net cash used in operating activities and net cash provided by financing activities were adjusted for the respective periods presented. These revisions had no impact on previously reported net loss, total cash flows, or the beginning and ending cash balances for any period presented. The impact of these revisions on the Company’s condensed consolidated statements of cash flows for the six and nine month periods ended June 30, 2025 and September 30, 2025, respectively, are presented below: For the Six Months Ended June 30, 2025 As previously reported Revision As adjusted Reverse recapitalization transaction $ ( 4,739,169 ) $ 1,400,000 $ ( 3,339,169 ) Accrued interest 280,000 ( 280,000 ) - Short-term debt, net 3,750,000 ( 3,750,000 ) - Net cash used in operating activities $ ( 3,762,742 ) $ ( 2,630,000 ) $ ( 6,392,742 ) Proceeds from issuance of bridge loans 500,000 2,350,000 2,850,000 Repayment of bridge loans ( 1,660,545 ) 280,000 ( 1,380,545 ) Net cash provided by financing activities $ 10,278,154 $ 2,630,000 $ 12,908,154 For the Nine Months Ended September 30, 2025 As previously reported Revision As adjusted Reverse recapitalization transaction $ ( 4,739,169 ) $ 1,400,000 $ ( 3,339,169 ) Accrued interest 280,000 ( 280,000 ) - Short-term debt, net 3,750,000 ( 3,750,000 ) - Net cash used in operating activities $ ( 8,197,830 ) $ ( 2,630,000 ) $ ( 10,827,830 ) Proceeds from issuance of bridge loans 500,000 2,350,000 2,850,000 Repayment of bridge loans ( 1,660,545 ) 280,000 ( 1,380,545 ) Net cash provided by financing activities $ 10,278,154 $ 2,630,000 $ 12,908,154 Note 5 - Concentrations Concentration of Credit Risk Arising From Cash Deposits in Excess of Insured Limits The Company maintains a cash balance with a U.S. financial institution, in which the balance exceeds the FDIC insured limit of $ 250,000 . As of December 31, 2025 and 2024, the Company’s cash balance held at the financial institution exceeded the FDIC limit. The Company has not experienced losses on this account and management believes the Company is not exposed to significant risks on such account. Significant Customers A significant customer is defined as one that accounts for at least 10% of the Company’s revenue. For the year ended December 31, 2025, the Company generated 100 % of its total revenue from three customers. One customer accounted for approximately 85 % of total revenue, a second customer accounted for approximately 14 %, and the remaining customer accounted for less than 1% of total revenue. For the year ended December 31, 2024, the Company generated 100 % of its total revenue from five customers with the top three customers accounting for approximately 57 %, 21 % and 11 %, respectively. F- 22 As of December 31, 2025, the Company’s accounts receivable balance was concentrated among three customers. One customer accounted for approximately 97 % of total accounts receivable. As of December 31, 2024, the Company’s accounts receivable balance was concentrated among three customers. One customer accounted for approximately 60 % of total accounts receivable, and another customer represented approximately 38 %. The Company monitors the creditworthiness of its customers on an ongoing basis and believes that its credit risk is limited due to the financial strength and payment history of these customers. Management does not expect any material losses from these receivable concentrations and has not recorded an allowance for credit losses, as all receivables are considered highly collectible. Note 6 – Property and Equipment Property and equipment, net, as of December 31, 2025 and 2024, consisted of the following: Estimated useful life December 31, 2025 December 31, 2024 Equipment 3 to 10 years $ 665,303 $ 11,286 Leasehold improvements Lesser of lease term or estimated useful life 16,400 - Less: Accumulated depreciation and amortization ( 36,463 ) - Property and equipment, net $ 645,240 $ 11,286 For the Years Ended December 31, 2025 2024 Depreciation expense $ 36,463 $ - Note 7 - Capitalized Software Development Costs The Company capitalizes eligible costs incurred in the development of internal-use software during the application development stage, in accordance with ASC 350-40, Internal-Use Software. Capitalized software development costs include direct labor, third-party services, and other direct costs associated with the development of new software or significant upgrades and enhancements to existing software. Costs incurred during the preliminary project stage and post-implementation/operational stage are expensed as incurred. Capitalized software development costs are amortized on a straight-line basis over the estimated useful life of the software, which is typically three to five years. The Company reviews the carrying value of capitalized software for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. The Company has capitalized software development costs of $ 2,920,718 and $ 1,761,396 as of December 31, 2025 and 2024, respectively. For the years ended December 31, 2025 and 2024, there was no amortization expense recorded on capitalized software development costs as the software was not ready for its intended use. F- 23 Note 8 - Loans and Fair Value Measurements SAFE notes Prior to the Closing, SEE ID had issued Simple Agreements for Future Equity (the “SAFE agreements”) to investors for proceeds totaling $ 8,480,217 . Under the terms of these SAFE agreements, which had stated discount rates ranging from 67 % to 80 %, the following would happen upon the occurrence of these events (all capitalized terms are as defined in the SAFE agreements): (a) Equity Financing - the SAFE agreements will automatically convert into the number of shares of Safe Preferred Stock equal to the Purchase Amount divided by the Discount Price with certain SAFE agreements subject to a post-money valuation cap of $ 30,000,000 . (b) Liquidity Event - the SAFE agreements will automatically be entitled to receive a portion of Proceeds, due and payable to the Investor immediately prior to, or concurrent with, the consumption of such Liquidity Event, equal to the greater of (i) the Purchase Amount (the “Cash-Out Amount”) or (ii) the amount payable on the number of shares of Common Stock equal to the Purchase Amount divided by the Liquidity Price. (c) Dissolution Event - the Investor will automatically be entitled to receive a portion of Proceeds equal to the Cash-Out Amount, due and payable to the Investor immediately prior to the consummation of the Dissolution Event. In accordance with FASB ASC 815-40, Contracts in Entity’s Own Equity, the Company determined that the SAFE agreements represented freestanding financial instruments and, accordingly, classified them as derivative liabilities in the accompanying consolidated balance sheets. The SAFE agreements were carried at estimated fair value, which was determined by the Company via a probability-weighted expected return method. The Business Combination, which closed on June 18, 2025, as described in Note 3, 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 December 31, 2025. Short-term loans On December 5, 2025, the Company entered into a loan agreement with J.J. Astor & Co. for up to $ 5.0 million in senior secured convertible loans, consisting of an initial $ 2.0 million tranche and up to three additional $ 1.0 million tranches. The initial tranche was issued as a $ 2.0 million convertible note, of which $ 1.81 million was funded net of fees. The note matures on November 30, 2026 and is repayable in twelve monthly installments, consisting of an initial payment of $ 0.1 million followed by eleven monthly payments of approximately $ 0.2 million, totaling $ 2.6 million. Each additional tranche, if funded at the lender’s discretion and subject to specified conditions (including equity line of credit (“ELOC”) availability, Nasdaq listing, minimum stock price, and trading volume requirements), will be issued as a $ 1.0 million convertible note with $ 0.96 million funded net of fees and accompanied by a warrant. The Company is required to use proceeds from its ELOC to make monthly payments, with 80 % of ELOC proceeds remitted directly to the lender. Certain extraordinary receipts must also be applied toward repayment. In connection with the initial funding, the Company issued a warrant to purchase 230,770 shares at an exercise price of $ 1.69 per share, subject to customary adjustments and a 4.99 % beneficial ownership limitation (which may be increased to 9.99 % upon agreement). Conversions and warrant exercises are subject to Nasdaq rules. The Company also entered into a registration rights agreement requiring the filing of a resale shelf registration statement covering shares issuable upon conversion of the J.J. Astor loans following an event of default. Upon default and effectiveness of such registration statement, the loans become convertible at a price equal to 80 % of the average of the four lowest VWAPs during the 20 trading days prior to the conversion notice, subject to the 4.99 % ownership cap. Remedies upon default include acceleration, default interest at 19 % on 110 % of outstanding principal, and enforcement against collateral. F- 24 In evaluating the accounting treatment of the J.J. Astor loans, the Company concluded that the warrant, the conversion feature, and the embedded call option require bifurcation from the host debt instrument. Management determined that these features meet the definition of derivatives under ASC 815 , Derivatives and Hedging. The embedded call option provides that, upon a change in control, the note may be called, which represents an additional embedded derivative feature. In assessing the conversion feature, management determined that because the number of shares issuable upon conversion depends on stockholder approval of the removal of the 4.99 % beneficial ownership cap, and that contingency is not an input into the pricing of a fixed-for-fixed equity instrument, the conversion feature is not indexed to the Company’s common stock under ASC 815-40-15-7 and does not qualify for equity classification. Accordingly, the embedded call option and conversion feature were combined and accounted for as a single embedded derivative liability. As of the date of the loan issuance, the fair value of the warrant liability was $ 210,776 and the fair value of the combined embedded derivative liability (inclusive of the call option and conversion feature) was $ 26,100 and recorded under the caption of derivative liabilities in the consolidated balance sheet. These amounts were bifurcated from the original loan proceeds, resulting in a net initial carrying amount of the debt of $ 1,763,124 . Based on the contractual repayment terms, the effective interest rate is approximately 6.81 % per month, or 81.71 % per annum. The warrant liability and conversion derivative liability are remeasured at each reporting date, with changes in fair value recognized in the consolidated statement of operations. As of December 31, 2025, the fair value of the warrant liability decreased to $ 52,535 and was recorded under the caption of derivative liabilities in the consolidated balance sheet, and the resulting change in fair value of $ 158,241 was recorded in the consolidated statement of operations under the caption of change in fair value of derivative liabilities. As of December 31, 2025, the fair value of the embedded conversion and call option derivative liability remained unchanged at $ 26,100 . During December 2025, the Company paid $ 108,334 to J.J. Astor, of which $ 48,306 was applied to principal. The Company also capitalized $ 190,000 of loan origination fees, which are being amortized over a 12 -month term. Monthly amortization of $ 15,833 is recorded as a reduction of the deferred financing costs. As a result, the outstanding debt principal balance was $ 1,540,651 as of December 31, 2025, compared to $0 as of December 31, 2024. Derivative Liabilities Derivative instruments that are not traded on an exchange are valued using conventional valuation models that incorporate both observable and unobservable inputs. Although the Company is publicly traded, the valuation of these derivative instruments requires significant unobservable inputs, including assumptions related to expected volatility, term, probability-weighted scenarios, and other model-based estimates. Accordingly, these derivative instruments are classified within Level 3 of the fair value hierarchy. Upon completion of the Business Combination, all outstanding SAFE notes were converted into shares of the Company’s Common Stock, resulting in a significant reduction of the related derivative liabilities during the year ended December 31, 2025. In addition, during 2025, the Company entered into a new loan agreement with J.J. Astor that includes detachable warrants and embedded derivative features. These features are accounted for as derivative liabilities and are measured at fair value on a recurring basis. As reflected in the tables below, derivative liabilities are presented at fair value at the beginning and end of each reporting period. As of December 31, 2025, the Company’s derivative liabilities consist of (i) a warrant liability of $ 52,535 and (ii) an embedded conversion and call option derivative liability of $ 26,100 . The fair value of the embedded conversion and call option derivative liability is estimated using the Probability-Weighted Expected Return Method (“PWERM”) model, which incorporates significant unobservable inputs, including expected monthly installment payments, the repayment percentage, the applicable discount factor, and scenario probability assumptions. The warrant liability is measured using the Black-Scholes option pricing model, with key inputs including Company asset volatility, Company equity volatility, Company size-adjusted asset volatility, Company size-adjusted equity volatility, the risk-free interest rate, and the liquidity horizon. Changes in the fair value of these derivative instruments during the period are recognized in the consolidated statement of operations in the period in which they occur. F- 25 Description Level December 31, 2025 December 31, 2024 Derivative liabilities 3 $ 78,635 $ - SAFE notes 3 - 23,334,626 For the Years Ended December 31, 2025 2024 Fair Value - beginning of period $ 23,334,626 $ 4,602,950 Addition 260,628 4,239,500 Change in fair value of SAFE notes 17,368,415 14,492,176 Change in fair value of derivative liabilities ( 158,241 ) - SAFE notes converted into shares ( 40,726,793 ) - Fair Value - end of period $ 78,635 $ 23,334,626 Note 9 - Equity Line of Credit (“ELOC”) 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 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. 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 in cash. 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 statement of operations. The fair value of the purchased put option was determined to be de minimis as of December 31, 2025, and therefore was not recorded on the Company’s balance sheet as of that date. F- 26 On October 13, December 30, and December 31, 2025, the Company delivered purchase notices for 30,000 , 500,000 , and 1,000,000 shares at settlement prices of $ 2.62 , $ 0.32 , and $ 0.32 per share, respectively, resulting in gross proceeds received in 2025 of $ 78,516 , $ 159,500 , and $ 317,000 , respectively. The Company issued 30,000 shares in October 2025 and 1,000,000 shares in December 2025, with the remaining 500,000 shares settled and administratively issued in early January 2026. Because the shares were issued to New Circle at prices determined using a discounted VWAP formula, the cash proceeds received were below the fair value of the shares on the respective issuance dates. The Company measured the shares at fair value on the date cash was received and recognized the difference between (i) the fair value of the shares issued and (ii) the proceeds calculated pursuant to the discounted VWAP pricing terms. The difference, totaling $ 246,184 , was recorded as a loss on issuance of shares in the statement of operations. Note 10 – Shareholders’ Equity Reverse Recapitalization As described in Note 3, Business Combination and Reverse Recapitalization , all historical equity data, including stock option data, in these consolidated financial statements has been retrospectively adjusted by the Exchange Ratio to reflect the reverse recapitalization that occurred on June 18, 2025. Common Stock As of December 31, 2025, the Company had authorized 300,000,000 shares of Common Stock, par value $ 0.0001 per share. As of December 31, 2025, 29,273,321 shares of Common Stock were issued and outstanding, and 270,726,679 shares of Common Stock were reserved for future issuance. Note 11 - Equity Incentive Plan In January 2021, the Legacy Company adopted the 2021 Equity Incentive Plan (the “2021 Incentive Plan”), which provided for grants of awards in the form of incentive stock options, non-qualified stock options, and restricted stock awards to selected employees, directors, and independent contractors of the Company and its affiliates, as defined in the Incentive Plan. The Company assumed the 2021 Plan and all outstanding awards thereunder in connection with the Business Combination. Initially, the aggregate number of shares of Common Stock that may be issued by the Legacy Company under the 2021 Incentive Plan was not to exceed 4,672,506 . Following the Business Combination, no additional awards may be granted under the 2021 Incentive Plan, and no additional shares remain available for issuance under the 2021 Incentive Plan other than the 2,032,521 shares that were subject to the outstanding awards that were assumed by the Company in connection with the Business Combination. The purpose of the 2021 Incentive Plan was to encourage and enable selected participants to acquire or to increase their holdings of the Company’s Common Stock and other equity-based interests in the Company in order to promote a closer identification of their interests with those of the Company and its stockholders. The 2021 Incentive Plan is administered by the Company’s Board of Directors. As of December 31, 2025, the Company has granted awards under the 2021 Equity Incentive Plan as described in the stock options and restricted stock awards subsections below under this note. Effective as of June 18, 2025, in connection with the closing of the transactions contemplated by the Business Combination Agreement, the Company adopted the 2024 Equity Incentive Plan (the “2024 Incentive Plan”). The purpose of the 2024 Incentive Plan is to advance the interests of the Company and its stockholders by attracting, retaining and rewarding employees, consultants and directors and by motivating such persons to contribute to the growth and profitability of the Company. The 2024 Incentive Plan provides for the grant of awards in the form of stock options, stock appreciation rights, restricted stock awards, restricted stock units, performance shares, performance units, cash-based awards and other stock-based awards. Subject to adjustment, the maximum aggregate number of shares of the Company’s common stock that may be issued under the 2024 Incentive Plan is 2,032,521 shares, plus an annual increase beginning with the first fiscal year following stockholder approval and continuing for up to ten years, equal to the lesser of 10% of the outstanding shares as of the end of the immediately preceding fiscal year or such lesser amount as determined by the Board. The 2024 Incentive Plan is administered by the Board of Directors or a duly authorized committee thereof, which has the authority to determine the participants to whom awards will be granted, the type and number of awards, and the terms and conditions of each award, including vesting, subject to the provisions of the plan. The 2024 Incentive Plan will remain in effect until terminated by the Compensation Committee, provided that no awards may be granted later than ten years from the earlier of the date of Board or stockholder approval. As of December 31, 2025, no awards were granted under the 2024 Incentive Plan. F- 27 Stock Options Stock option activity pursuant to the 2021 Incentive Plan for the year ended December 31, 2025 is as follows: Shares Weighted-Average Exercise Price Weighted-Average Remaining Contractual Life (in years) Options outstanding as of December 31, 2024 2,032,521 $ 0.1151 6.22 Options granted - - - Options exercised - - - Options cancelled ( 170,715 ) 0.1759 n/a Options outstanding as of December 31, 2025 1,861,806 0.1095 5.66 Total vested as of December 31, 2025 1,816,184 $ 0.1074 5.83 For the years ended December 31, 2025 and 2024, the Company recognized share-based compensation expense relating to stock options totaling $ 37,827 and $ 90,377 , respectively. Share-based compensation expense relating to stock options is included in “General and administrative” in the accompanying consolidated statements of operations. As of December 31, 2025, there has been no stock option activity pursuant to the 2024 Incentive Plan. Restricted Stock Awards For the years ended December 31, 2025 and 2024, the Company did not grant any restricted stock awards. As of December 31, 2025 and 2024, there were no unvested restricted stock awards. For the year ended December 31, 2025, the Company did not recognize any share-based compensation relating to restricted stock awards. For the year ended December 31, 2024, the Company recognized share-based compensation relating to restricted stock awards totaling $ 106,629 . Share-based compensation relating to restricted stock awards is included in “General and administrative” in the accompanying consolidated statements of operations. As of December 31, 2025, there were no unrecognized share-based compensation costs relating to restricted stock awards. Note 12 - Net Loss Per Share Earnings per share accounting requires the presentation of both basic and diluted earnings per share on the face of the statements of operations. The Company’s basic net loss per share is computed by dividing net loss by the weighted-average number of shares of Common Stock outstanding for the period. If there are dilutive securities, diluted income per share is computed by including Common Stock equivalents which includes shares issuable upon the exercise of stock options into common shares, using the treasury stock method. In periods for which the Company reports a net loss, the Common Stock equivalents are not included, as they would be anti-dilutive. F- 28 For the years ended December 31, 2025 and 2024, shares of Common Stock underlying stock options totaling 1,861,806 and 2,032,521 , respectively, and no unvested restricted stock awards, were excluded from the calculation of diluted net loss per share because they were antidilutive. In addition, 15,654,983 warrants outstanding as of December 31, 2025 were out of the money and also excluded from the calculation of diluted net loss per share for being antidilutive. Convertible debt outstanding during the period was also excluded from the calculation of diluted net loss per share, as the effect of applying the if-converted method would have been antidilutive. Restricted stock awards can be issued to directors, executives or employees of the Company and are subject to time-based vesting. These unvested shares are excluded from the computation of basic loss per share as these shares are not considered outstanding until vested. Note 13 - Leases In June 2024, the Company entered into a non-cancelable operating lease agreement for a facility in Bethesda, Maryland. This lease commenced on July 1, 2024, has a term of 63 months, and has an initial base rent of approximately $ 7,000 that increases annually by three percent. Under the terms of this lease, the Company is also responsible for their proportionate share of expenses associated with the facility and its premises. In January 2025, the Company entered into a noncancelable operating lease agreement with an unrelated third-party for a 16,000 square foot facility in Puerto Rico. This lease commenced on February 1, 2025 on a month-to-month basis and became a long-term lease with an initial term of 5 years on June 1, 2025. The initial base rent is $ 7.00 per square foot, or $ 9,333 per month, for the first two years, increasing to $ 7.50 per square foot for the third year and increases by 3 % annually thereafter. Under the terms of this lease, the Company is also responsible for their own utilities and a proportionate share of the operating expenses of the premises, not to exceed $ 3.25 per square foot. The components of lease expense were as follows for the years ended December 31, 2025 and 2024: For the Years Ended December 31, 2025 2024 Operating lease cost $ 155,617 $ 43,106 Other short-term lease cost 117,134 35,006 Total lease cost $ 272,751 $ 78,112 F- 29 The following table summarizes the operating lease asset and liabilities recorded as of December 31, 2025 and 2024: December 31, 2025 December 31, 2024 Operating lease right-of-use asset, gross $ 824,314 $ 331,478 Accumulated amortization ( 122,436 ) ( 23,586 ) Operating lease right-of-use asset, net 701,878 307,892 Short-term operating lease liabilities 139,963 36,225 Long-term operating lease liabilities 577,656 265,413 Total operating lease liabilities $ 717,619 $ 301,638 Weighted average operating lease term 4.16 years 4.75 years Weighted average operating lease discount rate 9.53 % 11.83 % The following table summarizes future minimum lease commitments as of December 31, 2025: Year ending December 31, Operating Leases 2026 $ 200,462 2027 207,783 2028 215,950 2029 197,905 2030 42,436 Total lease payments $ 864,536 Less: imputed interest ( 146,917 ) Present value of lease liabilities $ 717,619 Note 14 - Related Party Transactions Related parties include entities that are under common ownership or control with the Company, as well as entities owned in whole or in part by members of the Company’s management, board of directors, or significant stockholders. The Company had entered into SAFE agreements with Charles Maddox, the Chief Financial Officer and a stockholder, for proceeds totaling $ 28,833 . On June 18, 2025, in connection with the Business Combination, these SAFE agreements converted into 2,156 Common Stock of the Company. In August 2024, the Company entered into a $ 1,500,000 purchase order with Pope Technologies LLC for certain products, hardware, installation, programming, subscription, and training services. As of December 31, 2024, $ 750,000 had been received and recorded as deferred revenue in the accompanying consolidated balance sheets. During the year ended December 31, 2025 the Company delivered the products and recognized $ 750,000 revenue from the deferred revenue balance. Pope Technologies LLC is owned by a director of the Company. F- 30 Effective January 1, 2022, the Company entered into a customer agreement with PRB Transportation, LLC, a related party owned in part by Charles Maddox, the Company’s Chief Financial Officer and a stockholder, and Jeff Andersen, a stockholder. Revenues recognized from this agreement totaled $ 26,302 and $ 15,145 for the years ended December 31, 2025 and 2024, respectively. As of December 31, 2025 and 2024, amounts outstanding under this agreement were $ 2,928 and $ 1,164 respectively, and are included in “Accounts receivable” on the accompanying consolidated balance sheets. Beginning on March 1, 2024, the Company began subleasing an office space in Campo Alegre Manati, Puerto Rico from Enzymatic Holdings Corp. The term of this sublease was for one year and the rent was $ 1,167 per month, plus a one-third share of the cost of utilities. Enzymatic Holdings Corp., LLC is owned, in part, by certain stockholders of the Company. This lease terminated on February 28, 2025, and was not renewed. The rent expense was $ 2,334 for the year ended December 31, 2025. Beginning on August 1, 2024, the Company began subleasing an office/warehouse space in Las Vegas, Nevada from Pope Technologies LLC. The term of this sublease is for one year and the rent is $ 1,280 per month. Pope Technologies LLC is owned by a director of the Company. The rent expense was $ 23,850 and $ 6,400 for the years ended December 31, 2025 and 2024, respectively. In September 2025, the Company paid a one-time fee of $ 13,610 to terminate the lease. The lease was terminated as of September 30, 2025. Beginning October 1, 2025, the Company entered into a month-to-month lease for the same location at a monthly rent of $ 5,813 . Note 15 – Accrued Expenses Accrued expenses as of December 31, 2025 and 2024 consisted of the following: December 31, 2025 December 31, 2024 Transaction costs accrued for Cohen Capital Market $ 1,003,500 $ - Board of directors’ fees 780,000 - Other 42,689 24,219 Total accrued expenses $ 1,826,189 $ 24,219 Note 16 - Inventory Inventory as of December 31, 2025 and 2024 consisted of the following: December 31, 2025 December 31, 2024 Raw Materials $ 1,064,464 $ 65,248 Shipping costs 64,066 - Inventory in transit 186,245 - Finished goods 116,106 - Total inventories $ 1,430,881 $ 65,248 F- 31 Note 17 – Commitment and Contingencies On May 22, 2025, the Company terminated the employment of one of its founders, who also served as the Customer Experience Officer. The former employee did not execute the termination agreement prior to its expiration during the third quarter and has subsequently filed a lawsuit against the Company on September 8, 2025. On October 23, 2025, the Company filed a motion to dismiss several causes of action and requested that the court dismiss all claims in their entirety. On December 15, 2025, the District Court of Clark County, Nevada denied the Company’s motion to dismiss with respect to the former employee’s claims for intentional interference with contract, intentional interference with prospective economic advantage, civil conspiracy/concert of action and conversion, and granted the motion with respect to the unjust enrichment claim. The former employee originally held 5,000,260 shares of the Company’s Common Stock. On December 23, 2025, pursuant to bona fide gifts for which no consideration was received, the former employee transferred an aggregate of 2,497,331 shares of Common Stock to individuals not affiliated with the former employee for purposes of beneficial ownership reporting under applicable federal securities laws. In addition, in connection with the expiration of the termination agreement during the third quarter, 170,715 stock options that were exercisable at $ 0.176 per share (after applying the 8.1 % stock option conversion ratio to the original exercise price of $ 0.0143 per share) were forfeited. The outcome of this legal matter is not known or probable at this time; accordingly, no amounts have been accrued for a potential loss. In addition to the matters described above, in the ordinary course of business, the Company may become subject to litigation, claims, and regulatory matters. Although it is not feasible to predict the outcome of these matters, the Company believes, unless otherwise indicated below, given the information currently available, that the ultimate resolution of any particular matter, or matters that have the same legal or factual issues, will not have a material adverse effect on its financial condition, results of operations and cash flows. Note 18 - Segment Reporting The Company operates a single reportable segment, which generates revenue primarily from the sale of hardware and related software solutions. Hardware sales represent the initial step in a customer’s adoption of the Company’s SaaS subscription platform and have been a primary driver of revenue growth. This segment also includes ongoing software and subscription services, as well as exclusivity arrangements with resellers that provide protection from competitive sales. The Company’s focus on this integrated hardware and software model reflects its strategy to expand customer adoption of its SaaS platform, strengthen reseller partnerships, and drive sustainable growth. Revenue by major product and service category for the years ended December 31, 2025 and 2024 is presented in the table below. Product revenue consists primarily of sales of hardware devices, such as bridges, labels, and gateways, which represent the initial step in a customer’s adoption of the Company’s SaaS subscription platform and have contributed significantly to overall revenue growth. Service revenue consists primarily of software subscription services providing access to the Company’s cloud-based platform, as well as related training, support, exclusivity arrangement services, professional services such as onboarding and consulting, and feasibility study reports provided to customers. For the year ended December 31, 2025, product revenue represented the majority of total revenue, reflecting increased hardware sales as the Company expanded customer adoption of its integrated hardware and software solution. For the year ended December 31, 2024, revenue was generated solely from services. All of the Company’s revenue for the periods presented was generated from customers located in the United States. For the Years Ended December 31, 2025 2024 Services $ 347,814 $ 172,661 Products 5,456,554 - Total Revenue $ 5,804,369 $ 172,661 As of December 31, 2025 and 2024, the Company had total deferred revenue of $ 1,984,550 and $ 2,713,215 , respectively. Of these amounts, $ 236,038 and $ 1,142,643 , respectively, were expected to be recognized as revenue within one year . The Company’s chief operating decision-makers (the “CODM”), which are the Company’s Chief Executive Officer and Chief Financial Officer, assess performance for the reportable segment and decide how to allocate resources using net income as the primary measure of profitability. The CODM are not regularly provided with specific segment expenses, but focus on revenue, gross profit, and net income/loss. Expense information, including cost of goods sold, can be easily computed from the information provided. This segment’s measures of profitability are shown in the consolidated statements of operations. The measure of segment assets is reported on the consolidated balance sheets as total assets. F- 32 Note 19 – Income Taxes Income (loss) before income taxes consists of: For the Years Ended December 31, 2025 2024 Domestic $ ( 37,841,287 ) $ ( 21,278,239 ) Foreign 1,123,216 ( 258,610 ) Income before taxes $ ( 36,718,071 ) $ ( 21,536,849 ) The components of income tax provision expense (benefit) for the years ended December 31, 2025 and 2024 were as follows: For the Years Ended December 31, 2025 2024 Current provision Federal $ - $ - State - 581 Foreign - - Current provision for income taxes $ - $ 581 Deferred provision Federal $ 124,223 $ ( 4,045,818 ) State ( 275,872 ) ( 105,464 ) Foreign 10,338 ( 10,338 ) Change in valuation allowance 141,311 4,161,621 Deferred provision for income taxes $ - $ - Total provision for income taxes $ - $ 581 The Company adopted ASU No. 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” on a prospective basis beginning with the year ended December 31, 2025. The following table presents required disclosure pursuant to ASU No. 2023-09 and reconciles the U.S. federal statutory tax amount and rate to our actual global effective amount and rate for the year ended December 31, 2025: For the Year Ended December 31, 2025 Amount Percent U.S. federal statutory tax rate $ ( 7,710,795 ) ( 21.0 )% State income taxes, net of federal income tax effect ( 282,645 ) ( 0.8 ) Foreign tax effects Puerto Rico Statutory tax rate difference between Puerto Rico and United States ( 247,107 ) ( 0.6 ) Changes in valuation allowance ( 10,338 ) - Effect of cross-border tax laws Global intangible low-tax income 22,250 0.1 Changes in valuation allowance 151,649 0.4 Nontaxable or nondeductible items Change in Fair Value of SAFE agreements 3,647,367 9.9 Transaction costs 548,015 1.5 Loss on extinguishment of debt 1,202,942 3.3 Deferred tax true-ups 2,551,581 6.9 Other adjustments Other 127,081 0.3 Effective tax rate $ - 0.0 % F- 33 Significant components of the Company’s deferred tax assets are as follows for the year ended December 31, 2025: December 31, 2025 Deferred tax assets: Research and development tax credits $ 262,178 Lease liabilities 65,554 Net operating losses 3,310,890 Other 1,367,374 Total deferred tax assets $ 5,005,996 Deferred tax liabilities: Right of use asset ( 60,330 ) Total deferred tax liabilities ( 60,330 ) Valuation allowance ( 4,945,666 ) Net deferred tax assets $ - Significant components of the Company’s deferred tax assets are as follows for the year ended December 31, 2024: December 31, 2024 Deferred tax asset (liability): Accrual to cash adjustment $ 729,287 Charitable contributions 1,618 Change in fair value of SAFE agreements 3,106,508 R&D expenditures 359,433 R&D tax credit carryovers 239,142 Right-of-use asset ( 65,999 ) Lease liability 56,893 Stock options 55,481 Federal net operating loss carryforwards 304,628 Foreign net operating loss carryforwards 10,338 State net operating loss carryforwards 7,028 Valuation allowance ( 4,804,357 ) Net deferred taxes $ - As of December 31, 2025 and 2024, the Company had a net operating loss carryforward for federal income tax purposes of $ 14.8 million and $ 1.5 million, respectively, which have indefinite carryforward periods. As of December 31, 2025 and 2024, the Company had a net operating loss carryforward for state income tax purposes of $ 8.5 million and $ 2.0 million, respectively, which have various carryforward periods and will begin to expire in 2038. As of December 31, 2025 and 2024, the Company had federal research and development tax credit carryforwards of approximately $ 262 thousand and $ 239 thousand, respectively, which begin to expire in 2042. Management has established a 100 % valuation allowance against the deferred tax assets as management does not believe it is more likely than not that these assets will be realized. The Company’s valuation allowance increased by approximately $ 141 thousand from 2024 to 2025. The Company complies with the provisions of ASC 740-10 in accounting for its uncertain tax positions. ASC 740-10 addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740-10, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company has determined that the Company has no significant uncertain tax positions requiring recognition under ASC 740-10 and therefore has not included a tabular roll forward of unrecognized tax benefits. As there are no uncertain tax positions recognized, interest and penalties have not been accrued. F- 34 The Company is subject to income tax in the United States, as well as various states and Puerto Rico. The Company has not been audited by any state tax authorities in connection with income taxes. The Company has not been audited by Puerto Rican tax authorities or any states in connection with income taxes. The Company’s tax years December 31, 2021 through December 31, 2025 generally remain open to adjustment for all federal, state and foreign tax matters until its net operating loss and tax credit carryforwards are utilized or expire prior to utilization, and the applicable statutes of limitation have expired in the utilization year. The federal and state tax authorities can generally reduce a net operating loss (but not create taxable income) for a period outside the statute of limitations in order to determine the correct amount of net operating loss which may be allowed as a deduction against income for a period within the statute of limitations. The Company recognizes interest accrued related to unrecognized tax benefits and penalties, if incurred, as a component of income tax expense. The Company made no state or foreign tax payments for the year ended December 31, 2025; therefore, no table is needed as a result of the adoption. On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OBBBA”), which resulted in the extension of many provisions of the current tax law as well as other rule changes that could impact the Company’s tax provision in 2025 or 2026. Examples of the new tax law include the following: ● Full expensing of U.S. research and development costs under Section 174A. ● Retroactive expensing of unamortized U.S. research and development costs capitalized between 2022 and 2024; either all in 2025, or over two years in 2025 and 2026. ● Return of the Section 163(j) taxable income base excluding the deductions for depreciation and amortization in 2025 (change from “Tax EBIT” to “Tax EBITDA”). ● Decrease in the Section 250 deduction for Net CFC Tested Income (formerly GILTI) to 40 % (from 50 %) in 2026, instead of the scheduled decrease to 37.5 % prior to the OBBBA. ● Decrease in the Section 250 deduction for foreign-derived income to 33.34 % (from 37.5 %) in 2026, instead of the scheduled decrease to 21.875 % prior to the OBBBA. ● Increase in the foreign tax credit rate on Net CFC Tested Income (formerly GILTI) to 90 % (from 80 %), and a 10 % disallowance on repatriation, in 2026. ● Removal of the allocation of interest expense and research and development expense to Net CFC Tested Income (formerly GILTI) in calculating the foreign tax credit limitation, effective in 2026. The Company has determined the legislation will not have a material impact on the Company’s financial statements. Note 20 - Subsequent Events Subsequent to the year end through March 11, 2026, Edmund Nabrotzky, Chief Executive Officer of the Company, Charles Maddox, Chief Financial Officer and Chief Operating Officer of the Company, and Vijayan Nambiar, Chief Technology Officer of the Company loaned the Company an aggregate of $ 350,000 and may make additional loans to the Company up to an aggregate amount of $ 600,000 (collectively, the “Executive Loans”). The Executive Loans have been made, or will be made, on the terms and conditions of an unsecured, subordinated promissory note (the “Executive Notes”). The Executive Notes will accrue interest at a rate of 7.5 % per annum, and will be paid in quarterly installments on July 1, 2026 , October 1, 2026 with a final payment by December 31, 2026. All of the Company’s obligations and payments under the Executive Notes are subordinated to the Company’s obligations under the loan agreement with J.J. Astor & Co. Additionally, on February 5, 2026, the Company received deficiency notices from Nasdaq indicating that its common stock did not meet the minimum bid price, minimum market value of listed securities, and minimum publicly held share value requirements. The Company has been provided 180 days from the dates of the notices to regain compliance with these listing standards and intends to monitor its stock price and evaluate options to resolve the deficiencies. Failure to regain compliance could result in delisting, though the Company may seek to appeal any delisting determination. F- 35 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.