What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-09-25 compared with 2026-05-12 · 290 added, 183 removed, 256 unchanged (65% of the section changed)

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

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

Please read the following discussion and analysis of our financial

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Annual Report on Form 10-K filed with the SEC on March 11, 2026, as well as other risk factors disclosed elsewhere in that filing and

in this Report.

in this Quarterly Report.

These risks and uncertainties could cause actual results to differ materially from those projected in forward-looking

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as of their respective dates (unless otherwise indicated), and we undertake no obligation to update or revise them in light of future

developments.

developments, except as required by law.

CID Holdco, Inc.

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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,

initiatives, the Company’s main focus includes areas such as Industrial IoT, Indoor and Outdoor tracking with seamless transitions,

Passive RFID (including Bluetooth and 5G), Collision Avoidance, real-time locating system, Dolly Management, and related supported software

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industries including construction, military, mining, retail, warehousing, and manufacturing.

The Company is headquartered in Las Vegas, NV with our management and

administrative staff located in Bethesda, MD for East Coast customer engagements and government lobbying activity.

The Company is headquartered in Las Vegas, NV with our management

and administrative staff located in Bethesda, MD for East Coast customer engagements and government lobbying activity.

We also manufacture

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

Our embedded development team and Design for Manufacturing (“DFM”)

capability is built around our Chief Technology Officer (“CTO”) in Worcester, MA and our core software team is in Bangalore, India.

Our development team and Design for Manufacturing (“DFM”)

capability is built around our Chief Technology Officer (“CTO”) in Worcester, MA and our core software team is in Bangalore,

However, as part of measures implemented to preserve liquidity while the Company evaluated financing opportunities, effective May

25, 2026, the Company implemented a temporary furlough of its employees and suspended its manufacturing operations.

Accordingly, as of

June 30, 2026, the Company was not conducting active manufacturing operations.

During the furlough period, the Company continued to maintain

its executive team, whose members agreed to salary deferrals and reductions, as applicable, together with a limited number of independent

contractors primarily based in India to service existing customers and support core initiatives.

The Company intends to resume operations

and recall employees as liquidity and operational circumstances permit.

Throughout this Quarterly Report, unless otherwise noted or otherwise

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after the consummation of the Business Combination.

Reverse Stock Split

On May 29, 2026, the Company effected a 1-for-25 reverse stock split

of its common stock, as previously approved by the Company’s stockholders and Board of Directors.

The Company’s common stock

began trading on a split-adjusted basis on Nasdaq on June 1, 2026.

The Reverse Stock Split reduced the Company’s outstanding common

shares from approximately 30.26 million shares to approximately 1.21 million shares and did not change the par value or authorized number

All share and per-share amounts presented in the condensed consolidated financial statements and related disclosures have been

retrospectively adjusted, where applicable, to reflect the Reverse Stock Split.

Business Combination

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All Legacy Company Common Stock was exchanged for Common Stock of the Company based upon the exchange ratio as defined in

the Business Combination Agreement as Aggregate Merger Consideration (13,000,000 CID Holdco shares) divided by the Company Fully Diluted

Common Stock (159,915,641) or 8.129%.

Stock options of Legacy Company were not exercised and remain outstanding after giving into effect

the exchange ratio.

In connection with the Business Combination, we incurred transaction costs, settled certain SUAC related party notes

through the issuance of common shares, converted SAFE notes into Common Stock of the Company, and raised cash proceeds from PIPE investors.

Additional information regarding the Business Combination and Reverse Recapitalization is provided in Note 3 to the condensed consolidated

financial statements.

the Business Combination Agreement as Aggregate Merger Consideration (13,000,000 CID Holdco shares, equivalent to 520,000 shares after

giving effect to the Company’s 1-for-25 reverse stock split.) divided by the Company’s Fully Diluted Common Stock (159,915,641,

equivalent to approximately 6,396,626 shares after giving effect to the reverse stock split).

Stock options of Legacy Company were not

exercised and remain outstanding after giving effect to the exchange ratio.

In connection with the Business Combination, we incurred transaction

costs, settled certain SUAC related party notes through the issuance of common shares, converted SAFE notes into Common Stock of the Company,

and raised cash proceeds from PIPE investors.

Additional information regarding the Business Combination and Reverse Recapitalization is

provided in Note 4 to the condensed consolidated financial statements.

Factors Affecting Our Performance

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businesses, and the success of our efforts to expand internationally.

Expanding Within Our Existing Customer Base

Expanding Within Our Existing

Customer Base

We believe that there is a significant opportunity to expand sales

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built out as our bookings increase and our channel support requirements come online.

Investments in Innovation and Future Growth

Our market leadership is supported by continuous innovation in

our Dot Cloud, our inventions in IoT data collection and our advances in applying AI to our customer problem sets.

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

As such, spending on research and development will

always be an important part of our strategy, however, the driving force that will fuel our company is market growth.

pivot to move most of our spending to Sales and Marketing shows a commitment to our go-to-market strategy.

We recognize the need to

increase adoption and expand brand awareness as we increase market share.

Investments in Innovation and

Future Growth

Our market leadership is supported by continuous innovation in our

Dot Cloud, our inventions in IoT data collection and our advances in applying AI to our customer problem sets.

We will continuously invest

in adding new applications and methods to our solutions.

As such, spending on research and development will always be an important part

of our strategy, however, the driving force that will fuel our company is market growth.

Our recent pivot to move most of our spending

to Sales and Marketing shows a commitment to our go-to-market strategy.

We recognize the need to increase adoption and expand brand awareness

as we increase market share.

Adding additional compliance and oversight resources as we grow, and

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

Currently, revenues are primarily related to the delivery of hardware

products such as bridges, labels and gateways to customers.

We also provide feasibility study reports to customers seeking to gain insight

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

Allocation of Overhead Costs

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We expect our general and administrative expenses to continue to increase in absolute dollars for

the foreseeable future to support our growth and because of additional costs associated with legal, accounting, compliance, insurance,

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

Our general and administrative expenses may fluctuate as a

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

the foreseeable future to support our growth as well as additional costs associated with legal, accounting, compliance, insurance, investor

relations, and other areas associated with being a public company.

Our general and administrative expenses may fluctuate as a percentage

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

Interest expense

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market conditions and company-specific factors.

A SAFE agreements were converted to common shares in 2025.

Results of Operations

Revenue, Cost of Goods Sold, Gross Profit, and Gross Margin

Revenue, Cost of Goods Sold, Gross

Profit, and Gross Margin

Our total revenue, cost of goods sold, gross profit, and gross margin

for the three months ended March 31, 2026 and 2025 are summarized as follows:

for the three and six months ended June 30, 2026 and 2025 are summarized as follows:

For the Three Months Ended

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Gross margin %

Revenue decreased by $340,284, or (96.5)%, for the three months ended

March 31, 2026 compared to the three months ended March 31, 2025.

Our revenue for the three months ended March 31, 2026 was comprised

of subscription service revenue, while our revenue for the three months ended March 31, 2025 was primarily comprised of $250,000 related

to the development of product specifications, $98,161 for the amortization of a customer exclusivity agreement, as well as subscription

service revenue.

Cost of goods sold decreased by $14,412, or (84.4)%, for the three

months ended March 31, 2026 compared to the three months ended March 31, 2025.

The decrease was primarily attributable to lower service

costs associated with third-party software licensing.

Our gross margin was 78.2% for the three months ended March 31, 2026

compared to 95.2% for the three months ended March 31, 2025.

The decrease in gross margin is primarily attributable to changes in the

mix of services provided during the periods.

For the Six Months Ended

Cost of goods sold

Gross margin %

Revenue decreased by $114,435, or 90.2%, and $454,719, or 94.9%, for

the three and six months ended June 30, 2026, respectively, compared to the corresponding periods in 2025.

Revenue for the three and six

months ended June 30, 2026 was primarily comprised of SaaS subscription revenue generated from the Company’s internally developed

software platform, while revenue for the corresponding periods in 2025 was primarily derived from the sale and delivery of hardware products,

including bridges, labels and gateways, as well as feasibility studies provided to customers.

Cost of goods sold decreased by $60,556, or 90.1%, and $74,968, or

89.0%, for the three and six months ended June 30, 2026, respectively, compared to the corresponding periods in 2025.

The decreases were

primarily attributable to the lower level of revenue and the related reduction in costs associated with the products and services provided

during the periods.

Gross profit decreased by $53,879, or 90.3%, and $379,751, or 96.1%,

for the three and six months ended June 30, 2026, respectively, compared to the corresponding periods in 2025.

Gross margin was 46.5%

and 62.2% for the three and six months ended June 30, 2026, respectively, compared to 47.0% and 82.4% for the corresponding periods in

The decreases in gross margin were primarily attributable to changes in the mix of revenue and related costs between the periods.

Research and Development

Research and development expenses for the three months ended March

31, 2026 and 2025 are summarized as follows:

Research and development expenses for the three and six months ended

June 30, 2026 and 2025 are summarized as follows:

For the Three Months Ended

Research and development

Research and development expense increased by $217,441, or 55.2%, for

the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

The increase was primarily driven by higher labor

expenses of $339,292 and R&D cloud costs of $73,929, partially offset by a decrease in R&D compliance and testing expenses of

Additionally, as the software was placed into service as of January 1, 2026, the Company ceased capitalizing software development

costs, which primarily consisted of labor costs, and began amortizing the related asset, contributing to higher labor costs recognized

in expense during the period.

Percentage of revenue

For the Six Months Ended

Research and development

Percentage of revenue

Research and development expense increased by $213,128, or 117.3%,

and $430,569, or 74.8%, for the three and six months ended June 30, 2026, respectively, compared to the corresponding periods in 2025.

The increases were primarily driven by higher labor and cloud-related research and development costs, partially offset by lower compliance

and testing expenses.

Sales and Marketing

Sales and marketing expenses for the three months ended March 31, 2026

Sales and marketing expenses for the three and six months ended June

30, 2026 and 2025 are summarized as follows:

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Sales and marketing

Sales and marketing expenses increased by $230,396, or 33.7%, for the

three months ended March 31, 2026 compared to the three months ended March 31, 2025.

The increase reflects our continued pivot toward

market-facing initiatives and was primarily driven by increased spending of $164,196 on brand-related marketing activities, events and

sponsorships, and $72,915 on customer relationship management and marketing software tools.

Percentage of revenue

For the Six Months Ended

Sales and marketing

Percentage of revenue

Sales and marketing expenses decreased by $396,552, or 51.5%, and

$166,156, or 11.4%, for the three and six months ended June 30, 2026, respectively, compared to the corresponding periods in 2025.

decreases were primarily attributable to lower spending on brand-related marketing activities, events and sponsorships, as well as reduced

expenditures for customer relationship management and other marketing software tools.

General and Administrative

General and administrative expenses for the three months ended March

31, 2026 and 2025 are summarized as follows:

General and administrative expenses for the three and six months ended

June 30, 2026 and 2025 are summarized as follows:

For the Three Months Ended

General and administrative

General and administrative expenses increased by $1,798,981, or 291.2%, for the three months ended March 31, 2026 compared to the three

months ended March 31, 2025.

The increase was primarily due to incremental expenses of $1,277,526 related to operating as a public company,

including legal, auditing, accounting and board of director fees, as well as higher labor costs of $443,686 associated with the continued

ramp-up of the business.

For the Three Months Ended

SAFE agreements at fair value, beginning of period

SAFE agreements issued for cash

Change in fair value

SAFE notes converted into shares

SAFE agreements at fair value, end of period

The decrease in the liability balance of SAFE agreements for the three

months ended March 31, 2026, compared to March 31, 2025, was primarily attributable to the conversion of the SAFE notes into company shares

upon the closing of the Business Combination.

Upon conversion, the related liabilities were reclassified to equity.

Percentage of revenue

For the Six Months Ended

General and administrative

Percentage of revenue

General and administrative expenses increased by $1,275,775, or 154.8%,

and $3,074,756, or 213.2%, for the three and six months ended June 30, 2026, respectively, compared to the corresponding periods in 2025.

The increases were primarily attributable to higher costs associated with operating as a public company, including legal, auditing, accounting

and board of director fees, as well as increased labor costs associated with the continued expansion of the Company’s operations.

Liquidity and Capital Resources

Funding Requirements and Going Concern

Funding Requirements and Going

Liquidity is a measure of our ability to access sufficient cash flows

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In connection with the Company’s assessment of going concern

considerations in accordance with the Financial Accounting Standards Board (“FASB”) ASC Topic 205-40, Presentation of

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

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

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

activities and meet obligations on a timely basis;

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

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

considerations in accordance with the Financial Accounting Standards Board (“FASB”) ASC Topic 205-40, Presentation of Financial

Statements — Going Concern, management anticipates the Company will continue to incur substantial operating losses for the next

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

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

and meet obligations on a timely basis;

however, there can be no assurance that sufficient funding will be available to allow us to successfully

continue our research and development activities and commercialize our products.

If the Company is unable to obtain necessary funds through its business

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condensed consolidated financial statements are issued.

As of March 31, 2026 and December 31, 2025, we had cash of $853,728

As of June 30, 2026 and December 31, 2025, we had cash of $456,069

and $865,624, respectively, deficits in working capital of $9,475,752 and $1,730,095, respectively, and accumulated deficits of $69,687,375

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Sources of Liquidity

To date, we have funded our operations primarily through proceeds from

the issuance of common shares to PIPE investors in connection with the closing of the Business Combination, totaling $10,837,643, proceeds

from bridge loans and other short-term borrowings.

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

debt financings, and improvement of cash from operations derived from selling subscriptions to our platform.

To date, we have funded our operations primarily through proceeds

from the issuance of common shares to PIPE investors in connection with the closing of the Business Combination, totaling $10,837,643,

proceeds from bridge loans and other short-term borrowings.

In the future, we expect to finance our cash needs through a combination of

equity, debt financings, and improvement of cash from operations derived from selling subscriptions to our platform.

As part of its funding efforts, on June 18, 2025, the Company entered

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or (ii) the average Nasdaq Official Closing Price for the five Trading Days immediately preceding the Effective Date.

The Company had the option to satisfy the $350,000 commitment fee under

the SEPA through the issuance of a variable number of shares of Common Stock or by payment in cash.

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

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the related number of shares to be issued constitutes a forward contract to issue shares of 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

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

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The derivative is measured at fair value, with changes in fair value recognized in

The fair value of the purchased put option was determined to be de minimis as of March 31, 2026, and therefore was not recorded

The fair value of the purchased put option was determined to be de minimis as of June 30, 2026, and therefore was not recorded

on the Company’s balance sheet as of that date.

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the Company delivered purchase notices for 30,000, 500,000, 1,000,000, and 20,000 shares, respectively, at settlement prices of $2.62,

$0.32, $0.32, and $0.26 per share.

$0.32, $0.32, and $0.26 per share, respectively.

After giving effect to the Company’s 1-for-25 reverse stock split, these amounts

are equivalent to 1,200, 20,000, 40,000, and 800 shares, respectively, at split-adjusted settlement prices of $65.50, $8.00, $8.00, and

$6.50 per share, respectively.

This resulted in gross proceeds of $78,516, $159,500, $317,000, and $5,164, respectively.

issued 30,000 shares in October 2025, 1,000,000 shares in December 2025, 500,000 shares in January 2026, and 20,000 shares in February

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.

For the three months ended March 31, 2026, the Company recorded a loss of $1,256 on the issuance of shares

in the statement of operations.

As of March 31, 2026, Edmund Nabrotzky, Chief Executive Officer of

The Company issued

30,000 shares in October 2025, 1,000,000 shares in December 2025, 500,000 shares in January 2026, and 20,000 shares in February 2026,

equivalent to 1,200, 40,000, 20,000, and 800 shares, respectively, after giving effect to the 1-for-25 reverse stock split.

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.

For the three and six months ended June 30, 2026, the Company recognized losses of $0 and $1,256, respectively, related

to share issuances under the New Circle ELOC in the condensed consolidated statements of operations.

On December 5, 2025, the Company entered into a loan agreement with

Astor”) for up to $5,000,000 in senior secured convertible loans, consisting of an initial $2,000,000

tranche and up to three additional $1,000,000 tranches.

The initial tranche was issued as a $2,000,000 convertible note, of which $1,810,000

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 $108,334 followed by eleven monthly payments of approximately $226,515, totaling $2,600,000.

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 $1,000,000 convertible note with $960,000 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 $1.69 per share, equivalent to approximately 9,231 shares at an exercise price of $42.25 per share after

giving effect to the Company’s 1-for-25 reverse stock split.

Additional tranches, if funded, would include similar convertible notes

and warrants.

The agreement also requires the use of ELOC proceeds for repayment, with 80% of such proceeds remitted directly to the lender,

and certain extraordinary receipts applied to outstanding balances.

See “Derivative Liabilities” below for further discussion

of the accounting for the warrant and embedded features.

For the three and six months ended June 30, 2026, the Company paid

$794,078 and $1,568,894, respectively, to J.J.

Including the initial repayment of $108,334 in December 2025, the Company had repaid

$1,677,228 as of June 30, 2026, leaving an outstanding balance of $922,772.

On June 23, 2026, J.J.

entered into a Note

Purchase and Assignment Agreement with LHT I, LLC, pursuant to which LHT I, LLC acquired J.J.

Astor’s remaining rights and interests

under the loan agreement and assumed the related lender obligations under the existing terms.

In connection with the assignment, LHT I,

LLC paid $924,616 directly to J.J.

Accordingly, the Company recorded the remaining obligation as a short-term loan payable to LHT

I, LLC as of June 30, 2026.

On April 17, 2026, the Company entered into a Common Stock Purchase

Agreement with White Lion, pursuant to which the Company has the right, but not the obligation, to sell to White Lion from time to time

up to an aggregate of $10.0 million of the Company’s common stock during the commitment period, subject to the terms, conditions,

and limitations set forth in the agreement.

The Company may initiate purchases by delivering either a Rapid Purchase Notice or a VWAP

Purchase Notice to White Lion.

For each purchase, the Company is required to deliver the applicable shares to White Lion’s designated

brokerage account through the Depository Trust Company’s DWAC system.

The purchase price and investment amount are determined in

accordance with the pricing provisions applicable to the selected purchase mechanism, including, for VWAP purchases, the volume-weighted

average market price of the Company’s common stock during the applicable valuation period.

Each purchase is subject to customary

closing conditions, applicable beneficial ownership limitations, and certain restricted periods during which purchase notices may not

be delivered.

Generally, White Lion is required to remit the applicable purchase amount to the Company no later than one business day

following the applicable purchase notice date or, in the case of a VWAP purchase, the applicable VWAP valuation period.

The Company may

not deliver a subsequent purchase notice until the prior purchase has closed, unless White Lion waives such restriction in writing.

Throughout June 2026, the Company delivered multiple purchase notices

to White Lion and received aggregate proceeds of $640,192 in exchange for the issuance of 329,898 shares of common stock.

shares were issued at prices determined using a discounted VWAP formula, the proceeds received were less than the fair value of the shares

on the respective issuance dates.

Accordingly, the Company measured the shares issued at fair value and recognized the difference between

the fair value of the shares and the related cash proceeds as a loss on issuance.

For both the three and six months ended June 30, 2026,

the Company recognized a loss of $600 related to share issuances under the White Lion ELOC in the condensed consolidated statements of

In addition, White Lion had exercised $180,000 of warrants, resulting in the issuance of 65,596 shares of common stock.

In addition, the Company entered into a note purchase agreement pursuant

to which White Lion agreed to purchase senior secured convertible promissory notes with an aggregate principal amount of up to $2.875

million, reflecting a 20% original issue discount on aggregate cash proceeds of up to $2.3 million.

The notes are secured by substantially

all of the Company’s assets, and are convertible into common stock at a discount to the market price, subject to further reductions

in the conversion price upon certain events of default.

In connection with the financing, White Lion is also entitled to commitment shares

valued at $120,000 and warrants to purchase up to $2.0 million of common stock at an exercise price equal to 99% of the closing market

price on the trading day immediately preceding the applicable exercise date.

Aggregate share issuances under the agreements are subject

to a 19.99% cap on the Company’s outstanding common stock unless stockholder approval is obtained.

As of June 30, 2026, White Lion had funded $690,000 to the Company

under the convertible note arrangement, net of $172,500 of issuance costs.

As of June 30, 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

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obligations and payments under the Executive Notes are subordinated to the Company’s obligations under the loan agreement with J.J.

Subsequent to the end of the first quarter, on April 17, 2026, the

Company entered into a financing arrangement with an investor consisting of an equity purchase facility and senior secured convertible

promissory notes.

Under the equity purchase facility, the Company may sell up to $10,000,000 of its common stock over time through purchase

notices, subject to specified pricing terms and ownership limitations.

In addition, the Company entered into a note purchase agreement

with the investor pursuant to which the investor agreed to purchase senior secured convertible promissory notes in an aggregate principal

amount of up to $2,875,000, reflecting a 20% original issue discount applied to aggregate loan proceeds of up to $2,300,000.

bear interest at 8% per annum and are issued at a discount.

The convertible notes are secured by substantially all of the Company’s

assets and are convertible into common stock at a discount to market price, with provisions for a reduced conversion price upon certain

events of default.

The note is currently structured as a second priority lien, subordinated to the Company’s obligations to J.J.

pursuant to a loan agreement dated December 5, 2025, until those obligations are discharged in full.

In connection with

the financing, the investor will receive commitment shares valued at $120,000 and warrants to purchase up to $2,000,000 of common stock

at an exercise price equal to 99% of the closing market price on the trading day prior to exercise.

Total share issuances under the agreements

are subject to a 19.99% cap of the Company’s outstanding shares unless stockholder approval is obtained.

The Company expects to

use the proceeds primarily for general corporate purposes, including supporting liquidity and servicing existing debt obligations.

Comparison of three months ended March 31, 2026 and 2025

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

For the Three Months Ended

Net cash provided by (used in) operating activities

$ (1,721,469 )

For additional information regarding events subsequent to June 30,

2026, refer to Subsequent event (Note 21) in the condensed consolidated financial statements.

Comparison of six months ended

June 30, 2026 and 2025

The following table shows a summary of the cash flow for the periods

For the Six Months Ended

Net cash (used in) operating activities

Net cash (used in) investing activities

Net cash (used in) provided by financing activities

Net cash provided by financing activities

Operating Activities

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

Our primary uses of cash from operating activities are for employee-related expenditures, sales and marketing expenses, inventory purchases,

and research & development activities.

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

and bridge loans.

Cash provided by operating activities was $0.1 million for the three

months ended March 31, 2026.

This consisted of a net loss of $4.5 million adjusted for non-cash charges of $0.4 million and net changes

in operating assets and liabilities of $4.2 million.

The non-cash charges were primarily driven by fair value of shares issued for services

of $0.1 million and depreciation and amortization of $0.2 million.

Our primary uses of cash in operating activities include employee-related

expenditures, sales and marketing activities, inventory purchases, and research and development activities.

We have historically supplemented

our liquidity and working capital through proceeds from the issuance of equity securities and borrowings.

Net cash used in operating activities was $1.7 million for the six

months ended June 30, 2026, compared to $6.4 million for the six months ended June 30, 2025.

For the six months ended June 30, 2026, net cash used in operating

activities consisted of a net loss of $8.2 million, partially offset by net non-cash adjustments of $1.2 million and a $5.3 million net

source of cash from changes in operating assets and liabilities.

Non-cash adjustments primarily included depreciation expense of $0.3

million, amortization of debt origination fees of $0.3 million, $0.3 million of interest expense, $0.1 million of shares issued for debt

origination fees, and $0.1 million of shares issued for services.

Changes in operating assets and liabilities were primarily attributable

to decreases in accounts receivable of $3.5 million, increases in accounts payable of $1.4 million and accrued expenses of $0.2 million,

partially offset by increase in inventory of $0.9 million.

Cash used in operating activities was $1.7 million for the three months

ended March 31, 2025.

This consisted of a net loss of $1.3 million, adjusted for non-cash charges of approximately $0.6 million and net

changes in operating assets and liabilities of approximately $0.2 million.

Non-cash charges were primarily driven by a $0.6 million change

in the fair value of SAFE notes.

Changes in operating assets and liabilities were primarily attributable to a decrease in deferred revenue

of $0.1 million and increase in interest payable of $0.2 million.

to a $3.6 million decrease in accounts receivable and a $2.5 million increase in accounts payable, partially offset by a $1.2 million

increase in inventory.

For the six months ended June 30, 2025, net cash used in operating

activities consisted of a net loss of $30.1 million, partially offset by net non-cash adjustments of $19.9 million and a $3.8 million

net source of cash from changes in operating assets and liabilities.

Non-cash adjustments were primarily attributable to a $17.4 million

change in the fair value of SAFE notes and a $5.7 million loss on debt extinguishment, partially offset by a $3.3 million adjustment related

to the reverse recapitalization transaction.

Changes in operating assets and liabilities were primarily attributable to a $3.9 million

increase in accrued taxes and a $1.0 million increase in accrued expenses, partially offset by decreases in accounts payable and

other working capital changes.

The decrease in net cash used in operating activities in 2026 compared

to 2025 was primarily attributable to the lower net loss and favorable changes in working capital, particularly collections of accounts

receivable and increases in accounts payable.

Investing Activities

There were no investing activities for the three months ended March

Cash used in investing activities was $0.3 million for the three months

ended March 31, 2025, which consisted of capital expenditures for internal-use software development costs.

Net cash used in investing activities was $39,296 for the six months

ended June 30, 2026, compared to $743,798 for the six months ended June 30, 2025, representing a decrease of $704,502, or 94.7%.

For the six months ended June 30, 2026, net cash used in investing

activities consisted entirely of $39,296 of capitalized software development costs related to qualifying development activities, including

costs associated with version 4 of the Company’s internally developed software.

For the six months ended June 30, 2025, net cash used in investing

activities consisted of $636,598 of capitalized software development costs and $107,200 of purchases of property and equipment.

in cash used in investing activities was primarily attributable to lower capitalized software development costs and the absence of property

and equipment purchases during the six months ended June 30, 2026.

Financing Activities

Cash used by financing activities was $0.1 million for the three months

ended March 31, 2026.

This consisted primarily of proceeds from issuance of short-term loans to related parties of $0.3 million, offset

by repayments of short-term loans of $0.5 million.

Cash provided by financing activities was $1.6 million for the three

months ended March 31, 2025, which consisted of proceeds from the issuance of bridge loans.

Net cash provided by financing activities was $1.3 million for the

six months ended June 30, 2026, compared to $12.9 million for the six months ended June 30, 2025.

For the six months ended June 30, 2026, net cash provided by financing

activities was primarily attributable to $1.2 million of proceeds from short-term loans, $0.6 million of proceeds from the issuance of

common stock, $0.3 million of proceeds from short-term loans from related parties, and $0.2 million of proceeds from warrant exercises,

partially offset by $1.0 million of repayments of short-term loans.

For the six months ended June 30, 2025, net cash provided by financing

activities was primarily attributable to $10.8 million of proceeds from PIPE investments, $5.6 million of proceeds from trust accounts,

and $2.85 million of proceeds from short-term loans.

These cash inflows were partially offset by $5.0 million used to purchase common

stock and $1.4 million used to repay bridge loans.

The decrease in net cash provided by financing activities for the

six months ended June 30, 2026 compared to the corresponding period in 2025 was primarily attributable to the absence of PIPE investment

and trust account proceeds received in 2025, partially offset by proceeds from short-term borrowings, common stock issuances, and warrant

exercises in 2026.

Contractual Obligations and Commitments

Our estimated future obligations consist of leases and non-cancelable

purchase commitments as of March 31, 2026.

For additional discussion on our leases and other commitments, refer to Note 13 – Leases

and Note 17 – Commitments and Contingencies to our condensed consolidated financial statements for the three months ended

March 31, 2026 included elsewhere in this Quarterly Report on Form 10-Q.

Critical Accounting Policies and Estimates

Our estimated future obligations consist of leases and non-cancellable

purchase commitments as of June 30, 2026.

For additional discussion on our leases and other commitments, refer to Note 14 –

Leases and Note 18 – Commitments and Contingencies to our condensed consolidated financial statements for the

three and six months ended June 30, 2026 included elsewhere in this Quarterly Report on Form 10-Q.

Critical Accounting Policies and

Our management’s discussion and analysis of our financial condition

1 unchanged sentence

The preparation

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

revenues, and expenses, as well as related disclosures.

Actual results may differ from those estimates under different assumptions or

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

of assets, liabilities, revenues, and expenses, as well as related disclosures.

Actual results may differ from those estimates under different

assumptions or conditions.

There have been no material changes to our critical accounting policies

2 unchanged sentences

“Critical Accounting Policies and Estimates” included in that filing for a discussion of our significant judgments and estimates.

Recently Issued and Adopted Accounting Pronouncements

Recently Issued and Adopted Accounting

Pronouncements

We describe the recently issued accounting pronouncements that apply

in Note 2 of the condensed consolidated financial statements as of and for the three months ended March 31, 2026.

in Note 2 of the condensed consolidated financial statements as of and for the three and six months ended June 30, 2026.

Emerging Growth Company Status

5 unchanged sentences

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 nonemerging 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

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

3 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis