What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-27 compared with 2025-02-19 · 171 added, 156 removed, 150 unchanged (69% of the section changed)

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requires, references in this MD&A to “Dror,” “we”, “us”, “our”, and the “Company”

are intended to refer to (i) following the Share Exchange (as defined below), the business and operations of Dror Ortho-Design,

are intended to refer to (i) following the Share Exchange (as defined below), the business and operations of Dror Ortho-Design, Inc.

and its consolidated subsidiaries, and (ii) prior to the Share Exchange, Dror Ortho-Design Ltd.

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wholly owned subsidiary of Dror Ortho-Design, Inc.).

All dollar amounts in

this registration statement refer to U.S.

All dollar amounts in this

registration statement refer to U.S.

dollars unless otherwise indicated.

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in the State of New Mexico in April 1999.

On February 26, 2002, we changed our state of incorporation to Delaware

by merging with Novint Technologies, Inc., a Delaware corporation.

On July 5, 2023, we entered into a share exchange agreement with the

shareholders of Dror Ortho-Design, Ltd.

(“Private Dror”), pursuant to which the shareholders of Private Dror agreed to exchange

all of their outstanding ordinary shares Private Dror for shares of our Common Stock and convertible preferred stock (the “Share

On February 26, 2002, we changed our state of incorporation to Delaware by

merging with Novint Technologies, Inc., a Delaware corporation.

On July 5, 2023, we entered into a share exchange agreement with the shareholders

of Dror Ortho-Design, Ltd.

(“Private Dror”), pursuant to which the shareholders of Private Dror agreed to exchange all of

their outstanding ordinary shares Private Dror for shares of our Common Stock and convertible preferred stock (the “Share Exchange”).

On August 14, 2023 the Share Exchange was consummated and we changed our name to “Dror Ortho-Design, Inc.”

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counterproductively slows down tooth movement.

All-day aligner solutions are also intrusive, as patients need to conduct their lives

at work or school wearing the plastic aligners.

In addition, most existing aligner therapies require multiple visits to an orthodontist

to monitor the progress of treatment plans through intraoral scanning, physical examination and patient testimony.

All-day aligner solutions are also intrusive, as patients need to conduct their lives at

work or school wearing the plastic aligners.

In addition, most existing aligner therapies require multiple visits to an orthodontist to

monitor the progress of treatment plans through intraoral scanning, physical examination and patient testimony.

We believe that recent rapid

advancements in technology have made traditional aligner solutions no longer the most effective treatment option for smile correction.

Our Company has developed a proprietary AI-based platform to correct people’s smiles in a discreet and less painful manner (the

The Platform uses only one smart aligner to gently move teeth into their optimum position with pulsating air

while the patient is sleeping or at home.

We are involved in the research

and development of an orthodontic alignment platform.

We have several patents for the technology used in the Platform and is currently

in the process of preparing the prototype for FDA approval.

Our predecessor first

generation Aerodentis System is a Class II medical device, which was cleared by FDA for commercialization in the U.S.

the 510(k) notification process for movement and alignment of teeth during orthodontic treatment of malocclusion in April 2020.

Company is preparing to apply for 510(k) clearance for the Platform as a Class II medical device, which constitutes an updated

version of the currently cleared device.

Such updated Platform contains new and/or different components than the original device,

which is why a new 510(k) clearance is required prior to marketing the Platform in the U.S.

We have not yet filed a 510(k)

submission for the Platform, and it has, thus, not been found by the FDA to be substantially equivalent to the first generation

Aerodentis System.

The Company currently does

not generate revenues to fund operations and anticipates that it will continue to incur significant losses as it continues to develop

the Platform.

Please refer to “Risk Factors - We are in the development stage, are not generating revenues and have no operating

history in the manufacturing and distribution of orthodontic medical devices or platforms for consumer use.” for additional information.

The Company intends to spend approximately $2.5 million over the next 18 months on software and hardware development as well as the accompanying

regulatory approvals and IP protection associated with such software and hardware projects.

Share Exchange

As discussed above, on July

5, 2023, we entered into a Share Exchange Agreement (as amended by that certain Amendment to Share Exchange Agreement, dated August 14,

2023, the “Share Exchange Agreement”) , and on August 13, 2023, the share exchange (the “Share Exchange”) was

consummated with Private Dror and all shareholders of Private Dror.

Pursuant to the Share Exchange Agreement, on August 14, 2023, the

shareholders of Private Dror transferred all of their ordinary shares in Private Dror to us in exchange for 7,576,999 newly issued shares

of our Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), and 106,782,187

shares of our Common Stock.

As a result of the Share Exchange, Private Dror became a wholly owned subsidiary of the Company.

Pursuant to the terms and

conditions of the Share Exchange Agreement:

The shareholders of Private

Dror transferred 235,088 ordinary shares of Private Dror to us in exchange for 7,576,999 shares of Series A Convertible Preferred

Stock and 106,782,187 shares of Common Stock (the “Share Exchange”).

In connection with the

Share Exchange, we assumed all of Private Dror’s obligations under Private Dror’s outstanding share options.

All outstanding Series

A-4 Warrants to purchase Private Dror’s ordinary shares were assumed by the Company and converted into Share Exchange Warrants

(as defined below).

Simultaneously with the

Share Exchange, the board of directors and certain officers of the Company resigned, and a new board of directors, comprised of Private

Dror’s legacy board of directors, and new officers were appointed for the Company.

The Company’s new board of directors

consists of Eliyahu (Lee) Haddad, Chaim Hurvitz, Moshe Shvets, Chaim Ravad and Yehuda Englander.

In addition, immediately following

the Share Exchange, Mr.

Haddad was appointed as the Company’s chief executive officer, Mr.

Shvets as Chief Technology Officer,

Hurvitz as chairman of the board of directors.

Private Placement

In connection with the closing

of the Share Exchange, pursuant to the Purchase Agreement, the Company sold in a private placement (the “Private Placement”)

186,363,631 shares of common stock (the Private Placement Shares), 2,886,364 shares of Series A Preferred Stock and warrants to purchase

shares of common stock (the “Private Placement Warrants”), or a combination thereof, at an effective purchase price of $0.011

per Private Placement Share or share of Common Stock underlying such shares of Series A Preferred Stock to certain investors (the “Private

Placement Investors”) in connection with the Private Placement.

The Company received aggregate gross proceeds of $5,025,000 in

connection with the first closing of the Private Placement on August 14, 2023 and an additional $200,000 in connection with a second

closing of the Private Placement on September 13, 2023.

The Company and the Private

Placement Investors also entered into a Registration Rights Agreement, pursuant to which the Company agreed to register, among other

registrable securities, on Form S-1 (or, if the Company is then eligible, on Form S-3) with the SEC:

(i) the Private Placement Shares,

(ii) Conversion Shares issuable in connection with the Purchase Agreement, (iii) the shares of Common Stock underlying the Private Placement

Warrants issued to the Private Placement Investors, and (iv) the shares of Common Stock and Conversion Shares underlying the shares of

Series A Preferred Stock issued to the investors in the December 2021 Transaction in connection with the Share Exchange.

filed a registration statement on Form S-1 covering the aforementioned securities with the SEC on February 9, 2024.

Our Company has developed a proprietary AI-based platform to correct people’s smiles in a discreet and less painful manner –

ZSmile (the “Platform”).

The Platform uses only one smart aligner to gently move teeth into their optimum position with pulsating

air while the patient is sleeping or at home.

The Platform, which is based on our predecessor first generation Aerodentis System, is a

Class II medical device and received 510 (k) clearance from the FDA for commercialization in the U.S.

in February 2026.

Our Aerodentis

System previously received 510(k) clearance from the FDA in April 2020.

The Company currently does not generate revenues to fund operations

and anticipates that it will continue to incur significant losses as it continues to develop the Platform.

Please refer to “Risk

Factors - We are in the development stage, are not generating revenues and have no operating history in the manufacturing and distribution

of orthodontic medical devices or platforms for consumer use.” for additional information.

The Company intends to spend approximately

$1 million over the next 12 months on software and hardware development as well as the accompanying regulatory approvals and IP protection

associated with such software and hardware projects.

Going Concern

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As of December 31, 2025, we had cash of approximately $228,000, working capital

deficit of approximately $268,000, an accumulated deficit of approximately $19.5 million and used cash in operations during the twelve

deficit of approximately $2.7 million, an accumulated deficit of approximately $22 million and used cash in operations during the twelve

months ended December 31, 2025 of approximately $2.1 million.

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Comparison of the Years Ended December 31, 2025 and 2024

The following table sets

forth the results of our operations for the years ended December 31, 2024 and 2023:

The following table sets forth

the results of our operations for the years ended December 31, 2025 and 2024:

Years Ended December 31,

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Share-based compensation

Other income (expense), net

$ (2,206,863 )

Other expense, net

Research and Development Expenses

Research and development

expenses were $1,540,097 for the year ended December 31, 2024, compared to $1,063,470 for the year ended December 31, 2023.

in research and development expenses of $476,627 or 45%, was primarily due to increased outsourced consulting activities relating to

the development of our new product and an increase in salaries.

Research and development expenses

were $815,902 for the year ended December 31, 2025, compared to $1,540,097 for the year ended December 31, 2024.

The decrease in research

and development expenses of $724,195 or 47%, was primarily due to decreased activity relating to the development of our new product primarily

outsourced consulting activities due to limited funding.

General and Administrative Expenses

General and administrative

expenses were $1,437,832 for the year ended December 31, 2024, compared to $1,061,399 for the year ended December 31, 2023.

in general and administrative expenses of $376,433 or 35%, was primarily due to an increase in professional fees relating to public

company compliance following the Share Exchange as well as an increase in salaries and related expenses during the year ended December

and administrative expenses were $1,367,916 for the year ended December 31, 2025, compared to $1,437,832 for the year ended December 31,

The decrease in general and administrative expenses of $69,916 or 5%, was primarily due to a reduction in professional fees during

the period offset by an increase in salary related expenses.

Share-based Compensation Expenses

Share-based compensation

expenses were $2,246,033 for the year ended December 31, 2024, compared to $2,253,793 for the year ended December 31, 2023.

in share-based compensation expenses of $7,760 or 0%, was considered not material.

Other income (expenses), net

Share-based compensation expenses

were $39,170 for the year ended December 31, 2025, compared to $2,246,033 for the year ended December 31, 2024.

The decrease in share-based

compensation expenses of $2,206,863 or 98%, was primarily due to the majority of the outstanding stock options vesting in 2024.

Other expenses, net

Other expense was $321,899

for the year ended December 31, 2024, compared to $810,779 of income for the year ended December 31, 2023.

The decrease in other income,

net of $1,362,768 or 168%, was primarily due to liquidated damages accrual of $520,000, no retirement of royalty accrual and exchange

rate differences resulting from the translation of NIS based assets and liabilities to U.S.

for the year ended December 31, 2025, compared to $551,989 for the year ended December 31, 2024.

The decrease in other expenses, net of

$ 230,090 or 42%, was primarily due to the recognition of the Liquidated damages accrual of $520,000 in 2024, which was partially offset

by debt discount amortization of $309,869 and a decrease in the fair value of the derivative of $29,448.

Liquidity and Capital Resources

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our primary source of cash has been proceeds from the sale of equity instruments.

We raised $5.225 million through the Private Placement

and sale of the Private Placement Shares to new investors concurrent with the Share Exchange.

We intend to spend approximately $1 million

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with such software and hardware projects.

During the year ended December 31, 2025, the Company received $1,750,000 in the form of bridge

loans from existing investors, as further described below.

On February 26, 2026 the Company received an additional $200,000 in the form of a bridge loan from existing investors,

as further described below.

We will need to raise additional

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titled “MD&A—Going Concern.”

each of June 5, 2025, June 16, 2025, and July 17, 2025, the Company entered into a Securities Purchase Agreement (collectively, the “Initial

Purchase Agreements”) with certain existing investors, pursuant to which, the Company agreed to sell to the purchasers in private

placements (the “Private Placements”), debentures (collectively, the “Initial Debentures”) in an aggregate principal

amount of $300,000 due August 5, 2025, $200,000 due August 15, 2025, and $200,000 due September 17, 2025, respectively.

Each of the Initial

Debentures were extended to December 13, 2025 and subsequently were extended to March 31, 2026.

November 12, 2025, the Company entered into a securities purchase agreement (the “November 2025 Purchase Agreement”) with

each of the purchasers signatory thereto (the “November 2025 Investors”), pursuant to which, the Company agreed to sell to

the November 2025 Investors in a private placement, debentures in an aggregate principal amount of $600,000 due January 11, 2026 (the

“November 2025 Debentures”).

Pursuant to the November 2025 Purchase Agreement, the November 2025 Investors have the right

to purchase additional debentures, which are subject to the same terms as the Debentures, in an aggregate principal amount of $200,000.

In advance of signing the November 2025 Purchase Agreement, in September 2025, the Company received $400,000 from certain November 2025

December 2, 2025, the Company entered into a securities purchase agreement (the “First December 2025 Purchase Agreement”)

with each of the purchasers signatory thereto (the “First December 2025 Investors”), pursuant to which, the Company agreed

to sell to the First December 2025 Investors in a private placement, debentures in an aggregate principal amount of $200,000 due February

2, 2026 (the “First December 2025 Debentures”).

December 30, 2025, the Company entered into a securities purchase agreement (the “Second December 2025 Purchase

Agreement”) with each of the purchasers signatory thereto (the “Second December 2025 Investors”), pursuant to

which, the Company agreed to sell to the Second December 2025 Investors in a private placement, debentures in an aggregate principal

amount of $250,000 due February 28, 2026 (the “Second December 2025 Debentures”) Each of the debentures sold during the

year ended December 31, 2025 were extended to March 31, 2026.

On February 26, 2026, the

Company entered into a securities purchase agreement (the “February 2026 Purchase Agreement”) and, together with the Initial

Purchase Agreements, the November 2025 Purchase Agreement, the First December 2025 Purchase Agreement and the Second December 2025 Purchase

Agreement, the “Purchase Agreements”) with each of the purchasers signatory thereto (the “February 2026 Investors”),

pursuant to which, the Company agreed to sell to the February 2026 Investors in a private placement, debentures in an aggregate principal

amount of $200,000 due April 27, 2026 (the “February 2026 Debentures” and, together with the Initial Debentures, the November

2025 Debentures, the First December 2025 Debentures and the Second December 2025 Debentures, the “Debentures”).

addition, pursuant to each Purchase Agreement, the Company agreed to issue (A) subject to the consummation of a public offering by the

Company of its securities (the “Public Offering”), warrants to purchase up to a number of shares of Common Stock (the “Purchase

Warrants”) equal to:

(i) in the event the applicable Debentures are outstanding as of the date of the consummation of the Public

Offering (the “Public Offering Closing Date”), 150% of the Debenture Shares (as defined herein) issued, if any;

the event that each of the applicable Debentures are not outstanding as of the Public Offering Closing Date, 100% of the Debenture Shares

that would have been issued, if any, as if such Debentures were outstanding as of the Public Offering Closing Date, and (B) subject to

the completion of a Public Offering by the Company of warrants to purchase shares of Common Stock, additional warrants to purchase shares

of Common Stock (the “Additional Warrants” and, collectively with the Purchase Warrants, the “Bridge Warrants”)

(i) in the event that the applicable Debentures are outstanding as of the Public Offering Closing Date, 150% of the number

of shares of Common Stock underlying the warrants issued in the Public Offering that the Purchaser would have been entitled to receive

had the Purchaser participated in the Public Offering in the amount equal to the Purchaser’s subscription amount under the Purchase

Agreement (the “Warrant Subscription Amount”);

or (ii) in the event that the applicable Debentures are not outstanding as

of the Public Offering Closing Date, 100% of the Warrant Subscription Amount.

of the Debentures bear an interest rate of 0% per annum and the maturity date may be extended by the holder for subsequent periods of

60 days upon prior written notice to the Company.

The Debentures also set forth certain customary events of default after which the Debentures

may be declared immediately due and payable, including certain types of bankruptcy or insolvency events of default.

Subject to the satisfaction

of certain conditions, including applicable prior notice to the holders of the Debentures, at any time prior to the maturity date, the

Company may elect to prepay all or a portion of the then-outstanding principal amount of each of the Debentures.

the event that prior to the respective maturity date the Company consummates a Public Offering, the then-outstanding principal amount

of each of the Debentures automatically converts into shares of the Company’s Common Stock (the “Debenture Shares”)

at a conversion price equal to the per share price of the shares of Common Stock offered in the Public Offering.

The Debenture Shares,

if any, are subject to the same terms and conditions as the shares of Common Stock issued in the Public Offering, including the issuance

of any accompanying warrants to purchase shares of Common Stock issued and registration rights granted, if any, to investors in the Public

Bridge Warrants, if issued, will be exercisable for shares of Common Stock immediately upon issuance, at an exercise price equal to the

per share price of the shares of Common Stock offered in the Public Offering (the “Exercise Price”), if any, and expire five

years from the date of issuance.

The Exercise Price is subject to customary adjustments for stock dividends, stock splits, reclassifications

and the like, and subject to price-based adjustment.

Private Placement

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Years ended December 31,

Cash provided (used) in

Cash provided by (used) in

Operating activities

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Foreign exchange differences on cash

Net increase (decrease) in cash and cash equivalents

Net decrease in cash and cash equivalents

$ (2,798,399 )

Cash Used in Operating Activities

Net cash used in operating activities was $2,741,822 for the year ended

December 31, 2024 as compared to $2,394,162 for the year ended December 31, 2023.

The amount for the year ended December 31, 2024 primarily

consisted of a net loss of $5,775,951 offset by non-cash charges of $2,276,771 (including:

Share-based compensation expense of $2,246,033,

depreciation expense of $4,035 and foreign exchange differences of $26,703), and an increase in operating assets and liabilities excluding

cash of $757,358.

The amount for the year ended December 31, 2023 primarily consisted of a net loss of $3,567,883 offset by non-cash charges

of $1,443,684 (including:

Share-based compensation expense of $2,253,793, depreciation expense of $670, partially offset by gain on retirement

of royalty accrual of $720,632 and gain on foreign exchange differences of $90,147), and a decrease in operating assets and liabilities

excluding cash of $269,963.

Cash Provided by Investing Activities

Net cash used in

operating activities was $2,058,045 for the year ended December 31, 2025, as compared to $2,741,822 for the year ended December 31,

The amount for the year ended December 31, 2025 primarily consisted of a net loss of $2,544,887offset by non-cash charges of

$363,232 (including:

Share-based compensation expense of $39,170, depreciation expense of $4,946, debt discount amortization of

$309,869, and foreign exchange differences of $38,695 partially offset by $29,448 of change in fair value of derivative liability),

and an increase in operating assets and liabilities excluding cash of $123,610.

The amount for the year ended December 31, 2024

primarily consisted of a net loss of $5,775,951 offset by non-cash charges of $2,276,771 (including:

Share-based compensation

expense of $2,246,033, depreciation expense of $4,035 and foreign exchange differences of $26,703), and an increase in operating

assets and liabilities excluding cash of $757,358.

Cash Used in Investing Activities

During the year ended December

31, 2024, net cash used by investing activities was $25,849 relating to the purchase of fixed assets.

31, 2025, net cash used in investing activities was $966 relating to the purchase of fixed assets.

During the year ended December 31,

31, 2023, net cash provided by investing activities was $17,966 relating to the cash received in the Share Exchange.

2024, net cash used in investing activities was $25,849 relating to the purchase of fixed assets.

Cash Provided by Financing Activities

During the year ended December

31, 2024, there was no cash provided by financing activities.

During the year ended December 31, 2023, net cash provided by financing

activities was $4,653,204 relating to the net proceeds from the private placement raise.

31, 2025, cash provided by investing activities was $1,750,000 relating to the bridge loans received from investors.

During the year ended

December 31, 2024, there was no cash provided by financing activities.

Effects of Inflation

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Off-Balance Sheet Arrangements

We currently do not have

any off-balance sheet arrangements or financing activities with special-purpose entities.

We currently do not have any

off-balance sheet arrangements or financing activities with special-purpose entities.

Critical Accounting Policies and Use of Estimates

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critical accounting policies as the ones that are most important to the portrayal of our financial condition and results of operations

and which require us to make our most difficult and subjective judgments, often as a result of the need to make estimates of matters

that are inherently uncertain.

and which require us to make our most difficult and subjective judgments, often as a result of the need to make estimates of matters that

are inherently uncertain.

Based on this definition,

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GAAP requires management to make estimates or assumptions that affect the reported amounts of assets

and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts

of revenue and expenses during the reporting periods.

and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of

revenue and expenses during the reporting periods.

Actual results could vary from those estimates.

Management utilizes various other

estimates, including but not limited to accrued royalties, estimated lives of long-lived assets, the valuation of stock-based compensation,

the valuation allowance for deferred tax assets and other contingencies.

The results of any changes in accounting estimates are reflected

in the financial statements in the period in which the changes become evident.

Estimates and assumptions are reviewed periodically, and

the effects of revisions are reflected in the period that they are determined to be necessary.

Management utilizes various other estimates,

including but not limited to accrued royalties, estimated lives of long-lived assets, the valuation of stock-based compensation, the valuation

allowance for deferred tax assets and other contingencies.

The results of any changes in accounting estimates are reflected in the financial

statements in the period in which the changes become evident.

Estimates and assumptions are reviewed periodically, and the effects of

revisions are reflected in the period that they are determined to be necessary.

Recent Accounting Pronouncements

In October 2021, the FASB

issued ASU 2021-07-Compensation-Stock Compensation (Topic 718):

Determining the Current Price of an Underlying Share for Equity-Classified

Share-Based Awards.

The measurement objective in Topic 718 for share-based awards is fair value based, and the current price input is

measured at fair value.

This input is used in determining an award’s fair value.

The practical expedient in this Update allows

a non-public entity to determine the current price of a share underlying an equity classified share-based award using the reasonable

application of a reasonable valuation method.

The practical expedient in this Update is effective prospectively for all qualifying awards

granted or modified during fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December

Early application, including application in an interim period, is permitted for financial statements that have not yet been

issued or made available for issuance as of October 25, 2021.

The implementation of this standard did not have a material effect on our

In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense

Disaggregation Disclosures” to require more detailed information about specified categories of expenses (purchases of inventory,

employee compensation, depreciation, amortization, and depletion) included in certain expense captions presented on the face of the income

ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and for interim periods within fiscal years beginning

after December 15, 2027.

Early adoption is permitted.

The amendments may be applied either (1) prospectively to financial statements issued

for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements.

The Company is currently evaluating the impact of adopting this guidance on its condensed consolidated financial statements and related

The adoption of this pronouncement is not expected to have a material impact on the Company’s condensed consolidated

financial statements.

Quantitative and Qualitative Disclosures About Market

In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures

related to improvements to income tax disclosures.

The amendments in this update require enhanced jurisdictional and other disaggregated

disclosures for the effective tax rate reconciliation and income taxes paid.

The amendments in this update are effective for fiscal years

beginning after December 15, 2024.

The adoption of this pronouncement did not have a material impact on the Company’s consolidated

financial statements.

Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

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-K

Item 7. Management’s Discussion and Analysis