FiEE, Inc. 10-K

ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of our financial condition and results of operations should be read in conjunction with the financial statements and related notes included in this Annual Report. This discussion may contain forward-looking statements based upon current expectations that involve risks and uncertainties including those discussed under Part I, Item 1A, “Risk Factors.” These risks and uncertainties may cause actual results to differ materially from those discussed in the forward-looking statements. Overview We historically delivered comprehensive WiFi/Software as a Service platform to make everyone’s connected home safe and supportive for life and work. We continue to grow and expand our SaaS operations as a digital service provider focused on integrating AI and data analytics into content creation and brand management. In addition to our SaaS solutions, we now also offer customized software development services and digital authentication services. As part of our ongoing strategic initiatives, we are actively planning to develop and integrate blockchain technology into our operations in the future. Through the acquisition of HGK, we have successfully applied blockchain technology to our digital authentication services. This advancement is aimed at enhancing the security, transparency, and efficiency of our services and systems. In line with our growth strategy, we are also targeting potential acquisitions in key sectors such as AI, hardware, and the IoT. The acquisitions completed in 2025 have enabled us to strengthen our technological capabilities and expand our market presence. These strategic initiatives reflect our commitment to innovation and expansion, positioning us for long-term growth and success in emerging industries. Additionally, we are exploring entry into the MCN business. Our goal is to serve as a bridge between influencers or content creators and the global market, facilitating valuable connections and expanding our reach in this rapidly evolving digital space. These strategic initiatives reflect our commitment to innovation and expansion, positioning us for long-term growth and success in emerging industries. Key Factors Affecting Our Performance Generally, our gross margin depends on a number of factors, including the type of service and customer category. Digital content services tend to have higher gross margins but require ongoing investments; software development services have gross margins that depend on project complexity; digital authentication services, leveraging AI and blockchain technologies, have high gross margin potential. Our future growth is largely dependent on our ability to acquire new customers, which is crucial for expanding our SaaS - MCN digital services, software services, and digital authentication services. This will rely on the effectiveness of our marketing and sales efforts to reach teams and organizations across diverse industries. The success of our growth strategy, as well as our future prospects, hinges on our ability to attract and retain new customers. While we see a substantial market opportunity in the MCN business, continued investment in sales and marketing, research and development, and customer support will be essential to further grow our international customer base. In order to sustain and expand our existing customer base, we prioritize ensuring that our customers continue to derive value from our services. By building long-term, meaningful relationships, we aim to help customers leverage our services to establish stronger connections in the global marketplace. As they increasingly recognize the value we provide, we expect them to expand their usage and upgrade their service plans, driving revenue growth within our current customer base. This approach underpins our strategy to enhance both customer retention and revenue growth over time. 18 Results of Operations The following table sets forth certain financial data derived from our consolidated statements of operations for the years ended December 31, 2025 and 2024 presented in absolute dollars and as a percentage of revenues, with dollars and percentage change year over year. There can be no assurance that the current trend will continue in future periods. Years ended December 31, Change 2025 2024 $ % Revenues $ 6,193,616 100.0 % $ 639,893 100.0 % $ 5,553,723 867.9 % Cost of revenue 840,018 13.6 432,634 67.6 407,384 94.2 Gross profit 5,353,598 86.4 207,259 32.4 5,146,339 2,483.0 Operating expenses: 　 　 　 Selling and marketing 418,011 6.7 66,171 10.3 351,840 531.7 General and administrative 3,337,649 53.9 2,062,441 322.3 1,275,208 61.8 Research and development 47,419 0.8 113,294 17.7 (65,875 ) (58.1 ) Vendor liability forgiveness, net of asset transfers - - 2,200,929 344.0 (2,200,929 ) (100.0 ) Total operating expenses 3,803,079 61.4 4,442,835 694.3 (639,756 ) (14.4 ) 　 　 　 Operating income (loss) 1,550,519 25.0 (4,235,576 ) (661.9 ) 5,786,095 (136.6 ) 　 　 　 Total other income (expense) (29,881 ) (0.5 ) 82 - (29,963 ) (36,540.2 ) 　 　 　 Income (loss) before income taxes 1,520,638 24.6 (4,235,494 ) (661.9 ) 5,756,132 (135.9 ) 　 　 　 Income taxes 448,204 7.2 (11,216 ) (1.8 ) 459,420 (4,096.1 ) Net income (loss) $ 1,072,434 17.3 % $ (4,224,278 ) (660.2 )% $ 5,296,712 (125.4 )% Comparison of Fiscal Years 2025 and 2024 The following table sets forth our revenues by product and the changes in revenues for fiscal year ended December 31, 2025, as compared to fiscal year ended December 31, 2024: Years ended December 31, 2025 2024 $ Change % Change Cable Modems & gateways $ - $ 638,804 $ (638,804 ) (100.0 )% Other networking products - 1,089 (1,089 ) (100.0 ) SaaS – MCN digital services 5,275,761 - 5,275,761 N/A Software services 588,811 - 588,811 N/A Digital authentication services 329,044 - 329,044 N/A Total $ 6,193,616 $ 639,893 $ 5,553,723 867.9 % 19 Revenues Our total revenues increased year-over-year by $5.6 million or 867.9%. The increase in revenues primarily reflects the Company’s strategic transition from legacy hardware operations to SaaS solutions, with a new business model focusing on integrating AI and big data into content creation and brand management. Notably, during March 2025, we successfully secured our first customer orders and generated initial sales, marking a critical milestone in the strategic pivot. Our target clients are individuals or entities seeking to grow their online presence as influencers or content creators. As of December 31, 2025, we onboarded approximately 800 customers, corresponding to SaaS – MCN digital service fees totalling $6.8 million, of which $5.3 million was recognized as revenue. Building on this momentum, we introduced customized software services in July 2025. As of December 31, 2025, we secured contracts totalling $1.2 million for customized software services, a portion of which was recognized as revenue in the current period based on the progress of completion. As of December 31, 2025, we successfully signed contracts with 13 customers for these services, with related accounts receivable amounting to $589 thousand. Through the acquisition of HGK in November 2025, we added the ability to provide digital authentication services. As of December 31, 2025, digital authentication services generated $329 thousand in revenue, serving one corporate client and 38 individual clients. This business leverages AI and blockchain technology to provide authentication, certification, and display services for artworks, further diversifying our revenue streams. Cost of Revenue and Gross Margin Cost of revenue for the year ended December 31, 2024 consisted primarily of the following: the cost of direct labor; the cost of finished products from our third-party manufacturers; overhead costs, including purchasing, product planning, inventory control, warehousing and distribution logistics; third-party software licensing fees; inbound freight; import duties/tariffs; warranty costs associated with returned goods; write-downs for excess and obsolete inventory; and costs attributable to the provision of service offerings. Cost of revenue for the year ended December 31, 2025 consisted primarily of the following: the cost of direct labor; amortization of certain acquired intangibles and software development costs, outsourced authentication service costs, and costs attributable to the provision of service offerings. The increase in gross profit was attributable to higher revenue in 2025, largely resulting from the lack of revenue in 2024 due to the termination of the Motorola license. Our gross margin can be affected by a number of factors, including fluctuation in labor cost, foreign exchange rates, sales returns, changes in average selling prices, end-user customer rebates and other channel sales incentives, changes in our cost of revenue due to fluctuations and increases in prices paid for components, overhead costs, inbound freight and duty/tariffs, conversion costs, and charges for excess or obsolete inventory. The following table presents revenues and gross margin, for the periods indicated: Years ended December 31, 2025 2024 $ Change % Change Revenues $ 6,193,616 $ 639,893 $ 5,553,723 867.9 % Cost of revenue $ 840,018 $ 432,634 $ 407,384 94.2 % Gross margin 86.44 % 32.4 % Gross margin increased in fiscal 2025 compared to the prior fiscal year, primarily due to a notable turnaround in the Company’s profitability since the third quarter of fiscal 2025. The first half of fiscal 2025 was characterized by an initial investment and strategic positioning phase, with the implementation of increased operational capacity and a successful diversification into new, higher-margin service lines commencing in July 2025. The improvement in gross margin was primarily contributed by the MCN digital services revenue stream, which leverage AI and other technologies to reduce reliance on human labor, resulting in significantly higher margins compared to traditional service models. As a result, the Company achieved a substantial increase in its gross margin. The benefits of this strategic shift and enhanced scale are clearly reflected in the consolidated results for fiscal 2025. 20 Selling and Marketing Selling and marketing expenses consist primarily of advertising, trade shows, corporate communications and other marketing expenses, product marketing expenses, outbound freight costs, amortization of certain intangibles, personnel expenses for sales and marketing staff, technical support expenses, and facility allocations. The following table presents sales and marketing expenses, for the periods indicated: Years ended December 31, 2025 2024 $ Change % Change Selling and marketing $ 418,011 $ 66,171 $ 351,840 531.7 % Sales and marketing expenses increased by $352 thousand in fiscal 2025, as compared to the prior year, primarily due to the Company’s business transformation. In 2024, the Company was in a transition period with reduced legacy operations, resulting in low sales support costs. In 2025, with the full launch of new business operations, the Company increased marketing activities and investments to promote its digital content services, software development services, and digital authentication services. General and Administrative General and administrative expenses consist of salaries and related expenses for executives, finance and accounting, human resources, information technology, professional fees, including legal costs associated with defending claims against us, allowance for doubtful accounts, facility allocations, and other general corporate expenses. The following table presents general and administrative expenses, for the periods indicated: Years ended December 31, 2025 2024 $ Change % Change General and administrative $ 3,337,649 $ 2,062,441 $ 1,275,208 61.8 % General and administrative expenses increased by $1.3 million, or 61.8%, to $3.3 million for the year ended December 31, 2025, compared to $2.0 million for the year ended December 31, 2024. This increase was primarily driven by $1.1 million in non-cash warrant issuance costs recognized in the third quarter of 2025. The remaining increase was attributable to expanded business operations following our strategic transformation, including higher professional fees and personnel costs associated with launching and scaling our new digital content, software development, and digital authentication services. These increases were partially offset by continued cost discipline and operational efficiencies realized from our transition away from legacy hardware operations. Future general and administrative expense increases or decreases in absolute dollars are difficult to predict due to the lack of visibility of certain costs, including legal costs associated with defending claims against us, and other factors. Research and Development Research and development expenses consist primarily of personnel expenses, payments to suppliers for design services, safety and regulatory testing, product certification expenditures to qualify our products for sale into specific markets, prototypes, IT, and other consulting fees. Research and development expenses are recognized as they are incurred. Our research and development organization is focused on enhancing our ability to introduce innovative and easy-to-use products and services. The following table presents research and development expenses, for the periods indicated: Years ended December 31, 2025 2024 $ Change % Change Research and development $ 47,419 $ 113,294 $ (65,875 ) (58.1 )% 21 Research and development expenses decreased by $66 thousand in fiscal 2025, as compared to the prior year. The research and development expenses incurred in 2025 were primarily related to software subscriptions and support costs. Research and development expenses may fluctuate depending on the timing and number of development activities and could vary significantly as a percentage of revenues, depending on actual revenues achieved in any given year. Other Income (Expense) Years ended December 31, 2025 2024 $ Change % Change Other income (expense) $ (29,881 ) $ 82 $ (29,963 ) (36,540.2 )% Other income (expense), net was an expense of $29,881 in fiscal 2025 and income of $82 in fiscal 2024, primarily due to increased foreign currency exchange losses resulting from significantly more foreign currency transactions in 2025 as the Company expanded its operations in Hong Kong and Japan. Income Tax Expense (Benefit) Years ended December 31, 2025 2024 $ Change % Change Income tax expense (benefit) $ 448,204 $ (11,216 ) $ 459,420 (4,096.1 )% Income tax expense (benefit) was an expense of $448,204 in fiscal 2025 and benefit of $11,216 in fiscal 2024. This significant change was primarily due to the profitability of the Company’s Hong Kong subsidiary in 2025, resulting in Hong Kong Profits Tax. In 2024, the Company was in a business transition period with losses from legacy operations, resulting in an income tax benefit. Liquidity and Capital Resources The Company’s operations have historically been financed through the issuance of common stock and preferred stock. Since inception, the Company has incurred significant losses and negative cash flows from operation and an accumulated deficit of $95.6 million. The Company began generating operating profit in the fourth quarter of 2025. During the year ended December 31, 2025, the Company reported a net income of $1.1 million, a positive working capital of $2.4 million. As of December 31, 2025, we had cash of $3.1 million as compared to $30 thousand on December 31, 2024. On December 31, 2025, we had no borrowings outstanding and had a working capital of $2.4 million. Previously, we have funded our operations and financing activities primarily through the sale of our preferred stock and Common Stock. Our ability to maintain adequate levels of liquidity depends in part on our ability to generate cash from operations and our ability to raise additional funds through equity or debt financing. We are evaluating options related to our liquidity and will continue to monitor our costs in relation to our sales and adjust our cost structure accordingly. Our historical cash outflows have primarily been associated with: (1) cash used for operating activities such as the purchase and growth of inventory, expansion of our sales and marketing and research and development infrastructure and other working capital needs; (2) expenditures related to increasing our manufacturing capacity and improving our manufacturing efficiency; (3) capital expenditures related to the acquisition of equipment; (4) cash used to repay our debt obligations and related interest expense; and (5) cash used for acquisitions. Fluctuations in our working capital due to timing differences of our cash receipts and cash disbursements also impact our cash inflows and outflows. Our consolidated financial statements as of December 31, 2025 were prepared under the assumption that we will continue as a going concern. The going concern assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. However, substantial doubt exists about our ability to continue as a going concern, and we will require additional liquidity to continue operations beyond the next twelve months. Our consolidated financial statements as of December 31, 2025 do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if we were unable to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our financial statements, and it is likely that investors will lose all or part of their investment. 22 Cash Flows The following table presents our cash flows for the periods presented: Years ended December 31, 2025 2024 Cash provided by (used in) operating activities $ 3,636,620 $ (3,772,008 ) Cash used in investing activities (4,873,399 ) 11,642 Cash provided by (used in) financing activities 4,300,000 3,081,206 Effect of foreign exchange rate changes on cash (8,922 ) - Net increase (decrease) in cash $ 3,054,299 $ (679,160 ) Cash Flows from Operating Activities. Cash provided by operating activities of $3.6 million during 2025 reflected our net income of $1.1 million, adjusted for non-cash expenses, consisting primarily of: $0.5 million in depreciation and amortization expense, $0.1 million in stock-based compensation expense, $1.1 million in value of warrants issued, $9 thousand in non-cash interest expense, and $7 thousand in loss on disposal of fixed assets. Uses of cash included increases in accounts receivable of $0.6 million, other receivables of $1.1 million, prepaid and other current assets of $27 thousand, and other long-term assets of $59 thousand, as well as decreases in operating lease liabilities of $51 thousand. Sources of cash included increases in accounts payable of $0.2 million, contract liabilities of $1.5 million, income tax payable of $0.4 million and accrued expenses and other current liabilities of $0.6 million. Cash used in operating activities of $3.7 million for 2024 reflected our net loss of $4.2 million, adjusted for non-cash expenses, consisting primarily of $0.4 million of depreciation and amortization, $0.9 million of stock-based compensation expense, $(0.3) million credit losses, and $2.2 million in vendor forgiveness, net of asset transfers. Uses of cash included a reduction in accounts payable of $3.2 million, accrued expenses and other liabilities of $0.8 million, and prepaid expenses and other current assets of $0.1 million. Sources of cash included a decrease of accounts receivable of $1.0 million and inventory of $0.4 million. Cash Flows from Investing Activities. In 2025, the Company used $4.9 million in investing activities, primarily consisting of $4.7 million for acquisition of assets and $0.2 million for purchases of property, equipment and software. In 2024, the Company had $12 thousand generated in investing activities related to sales of property and equipment. Cash Flows from Financing Activities. Cash provided from financing activities in 2025 consisted of proceeds from issuance of Common Stock of $4 million, net proceeds from the issuance of a convertible note of $300 thousand. Cash provided in financing activities in 2024 consisted of proceeds of issuance of preferred stock of $3.1 million. Future Liquidity Needs Our primary short-term needs for capital, which are subject to change, include: ● upgrades to our information technology infrastructure to enhance our capabilities and improve overall productivity; 23 ● support of our commercialization efforts related to our current and future products, including expansion of our direct sales force and field support resources; ● the continued advancement of research and development activities. Our capital expenditures are largely discretionary and within our control. We expect that our product sales and the resulting operating loss, as well as the status of each of our product development programs, will significantly impact our cash management decisions. At December 31, 2025, we do not believe our current cash will be sufficient to fund working capital requirements, capital expenditures and operations during the next twelve months. Our ability to continue as a going concern will depend on our ability to obtain additional equity or debt financing, attain further operating efficiencies, reduce expenditures and increase revenues. Based on these factors, management determined that there is substantial doubt regarding our ability to continue as a going concern. We will continue to monitor our costs in relation to our sales and adjust accordingly. Our future liquidity and capital requirements will be influenced by numerous factors, including the extent and duration of any future operating losses, the level and timing of future sales and expenditures, the results and scope of ongoing research and product development programs, working capital required to support our sales growth, funds required to service our debt, the receipt of and time required to obtain regulatory clearances and approvals, our sales and marketing programs, our need for infrastructure to support our sales growth, the continuing acceptance of our products in the marketplace, competing technologies and changes in the market and regulatory environment. Our ability to fund our longer-term cash needs is subject to various risks, many of which are beyond our control—See “Risk Factors—We may require significant additional capital to pursue our growth strategy, and our failure to raise capital when needed could prevent us from executing our growth strategy.” Should we require additional funding, such as additional capital investments, we may need to raise the required additional funds through bank borrowings or public or private sales of debt or equity securities. We cannot guarantee that such funding will be available in needed quantities or on terms favourable to us, if at all. At December 31, 2025, we have Federal net operating loss carry forwards of approximately $68.2 million available to reduce future taxable income. A valuation allowance has been established for the full amount of deferred income tax assets as management has concluded that it is more-likely than-not that the benefits from such assets will not realize the benefits of our deferred tax assets. As a result, as of December 31, 2025 and December 31, 2024, we recorded a full valuation allowance against our net deferred tax assets. To support our strategic transition to SaaS solutions and the scaling of our AI-driven platform, management anticipates requiring approximately $10 million in total funding over the next three years. We plan to allocate (1) $4.0 million in 2026 to develop AI technology for content, build fan community and membership system, (2) $3.0 million in 2027 to enhance our SaaS system, and develop robust security for other IP protection technologies, and (3) $3.0 million in 2028 to advance AI media development and expand content creation capabilities. To provide for such liquidity needs over the next three years, on May 9, 2025, we entered into a Purchase Agreement with Helena, whereby we have the right to issue and sell to Helena, from time to time, and Helena shall purchase from us, up to $15,000,000 of the Common Stock. In no event shall the number of shares of Common Stock issuable to Helena cause the aggregate number of shares of Common Stock beneficially owned by Helena and its affiliates as a result of previous issuances and sales of Common Stock to Helena to exceed 9.99% of the then issued and outstanding Common Stock. The purchase price is based on 95% of the lowest VWAP during the three (3) Trading Days following Helena’s receipt of the shares. On May 9, 2025, the Company also entered into, and simultaneously closed the transactions under, a Securities Purchase Agreement with Cao Yu, whereby the Company sold 1,585,366 shares of the Company’s Common Stock to Cao Yu, for an aggregate purchase price of $2,600,000. 24 On May 9, 2025, the Company also entered into, and simultaneously closed the transactions under, a Securities Purchase Agreement with Hu Bin, whereby the Company sold 853,659 shares of Common Stock to Hu Bin, for an aggregate purchase price of $1,400,000. On January 30, 2026, we entered into a Securities Purchase Agreement with certain investors to issue an aggregate of 394,476 shares of Common Stock at $5.07 per share for gross proceeds of approximately $2 million. The transaction is expected to close at the end of the first quarter of 2026. Commitments and Contractual Obligations For a description of our operating leases, refer to Note 6 and for a description of our license agreement and purchase commitments, refer to Note 7 in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report. Off-Balance Sheet Arrangements We did not have any material off-balance sheet arrangements as of December 31, 2025. Please refer to Note 7 in the Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report. Recent Accounting Standards Please refer to Note 2 Summary of Significant Accounting Policies, in Notes to the Consolidated Financial Statements in Part II, Item 8 of this Annual Report, for a full description of recent accounting standards, including the expected dates of adoption and estimated effects on the financial condition and results of operations, which are hereby incorporated by reference. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in accordance with U.S. GAAP. These accounting principles require us to make certain estimates and judgments that can affect the reported amounts of assets and liabilities as of the date of the financial statements, as well as the reported amounts of revenue and expenses during the periods presented. Management bases its estimates, assumptions and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. To the extent there are material differences between these estimates and actual results, our financial statements may be affected. Our management evaluates its estimates, assumptions and judgments on an ongoing basis. Following is a discussion of what we view as our more significant accounting policies and estimates pertaining to the operations of the Company. As described below, management judgments and estimates must be made and used in connection with the preparation of our consolidated financial statements. Management considers revenue recognition to be a critical accounting policy because it requires significant judgment in identifying performance obligations and determining the appropriate timing and pattern of revenue recognition for service contracts. The application of this policy involves evaluating contract terms, including the nature of promised services and the period over which control is transferred to the customer, which could materially affect the amount and timing of revenue recognized. Revenue Recognition We adopted ASC 606, Revenue from Contracts with Customers, which requires a five-step model to recognize revenue from customer contracts. The five-step model requires entities to exercise judgment when considering the terms of contracts, including: (1) identifying the contracts or agreements with a customer; (2) identifying the performance obligations in the contract or agreement; (3) determining the transaction price; (4) allocating the transaction price to the separate performance obligations; and (5) recognizing revenue as each performance obligation is satisfied. We apply the five-step model to contracts only when it is probable that we will collect the consideration to which it is entitled in exchange for the services it transfers to our clients. Revenues from SaaS service before the end of 2024 Revenue recognized for each distinct performance obligation as control is transferred to the customer. Revenue attributable to hardware products bundled with SaaS offerings are recognized at the time control of the product transfers to the customer. The transaction price allocated to the SaaS offering was recognized ratably beginning when the customer was expected to activate their account and over a three-year period that we estimated based on the expected replacement of the hardware. 25 Revenues from SaaS service- MCN Digital Service in 2025 We expand SaaS operations as a digital service provider, delivering full-cycle services to brand clients through legally binding agreements since March 2025. We offer full-service account management, content production, and targeted promotion to grow followers across key platforms. Service packages customizable via the SaaS portal. Customers may purchase value-added services with or after their purchases of basic package. Our services comprise two distinct performance obligations: (1) the basic service, which represents a single performance obligation as the promises for account setup, SaaS platform access, account management, and basic digital content creation and publishing are highly interdependent and bundled together; and (2) the value-added services, which represents a performance obligation for additional digital content created and customized to meet the customer’s special request. Each with a standalone transaction price. We recognize revenues from basic services ratably over the contract term beginning on the commencement date of each contract. The revenues from value-added services are recognized at a point in time when customers approve or accept the value-added services or system automatically approves whichever is later. We require an upfront payment for the services, which is non-refundable upon execution of the contract. Customers retain the right to terminate the contract prior to its expiration date, subject to the early termination fees, including information transfer fee and fan development fee. Revenues from Software Service in 2025 We enter into bundled arrangements that typically include the sale of on-premise software licenses, customized modules, and maintenance and support (“M&S”) services. These arrangements are evaluated to determine whether the promises represent distinct performance obligations. The customized modules are highly interdependent and interrelated with the software license and are therefore combined with the license as a single performance obligation, while the M&S services are capable of being distinct and are accounted for as a separate performance obligation. The M&S services are provided free of charge for a specified contract period, typically encompassing the first year of service following software delivery. The transaction price is allocated to each performance obligation based on their relative stand-alone selling prices (“SSP”). The SSP for the combined software license and customized modules, and M&S services is determined using the adjusted market assessment approach, which considers market conditions, competitive pricing, our market position, expected profit margins, and cost structure. Contracts include retention fees that represent variable consideration, as their payment is contingent upon no major defects being identified within a specified period. These retention fees are excluded from the initial transaction price. The related revenue is recognized only when it’s probable that a significant reversal will not occur. Contracts for software licensing and M&S services generally include a renewal option for M&S services; however, the renewal option to acquire additional services is neither offered free of charge nor at a discount and accordingly does not represent a material right. We provide assurance-type warranties to ensure that the delivered software complies with agreed-upon specifications. These warranties do not constitute a separate performance obligation as they cannot be purchased separately and do not provide a service beyond remedying defects to bring the software to the specified standard. Our contracts typically specify a payment schedule whereby payments from the customer are linked to the signing of the contract and the achievement of specific milestones. Contracts are generally fixed price, and we have elected the practical expedient not to adjust the promised consideration for the effects of a significant financing component when the period between transfer of goods or services and customer payment is one year or less. Revenue from the combined software license and customized modules is recognized over time as we fulfil its performance obligations by developing and enhancing the software assets throughout the project period. We recognize revenue using the output method based on the measurements of the value of the services transferred to date in relation to total performance obligation promised. Revenue from maintenance and support services is recognized over time on a straight-line basis over the M&S contract period. This recognition pattern reflects the continuous transfer of services to the customer, who simultaneously receives and consumes the benefits of these services throughout the service period. 26 Revenues from Digital Authentication Service in 2025 We provide digital authentication services for artworks, leveraging AI and blockchain technology. Services include microstructure analysis, AI image comparison, authenticity determination, blockchain registration, and issuance of digital authentication reports. Service packages are offered in Standard and Expedited editions, with fees calculated based on artwork area and payable in full in advance. Our services comprise a single performance obligation, as the promised services are highly interdependent and integrated to deliver a conclusive authentication outcome. The transaction price is fixed at contract inception. Revenue is recognized at a point in time upon delivery of the final digital authentication report and blockchain certificate to the client, when the client obtains control of the completed authentication package. Management has evaluated the Company’s accounting policies and estimates and determined that there were no critical accounting estimates for the year ended December 31, 2025. While the preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, such estimates did not involve a high degree of subjectivity, judgment, or uncertainty that would be reasonably likely to result in a material impact to the Company’s financial condition or results of operations. Accordingly, management concluded that no estimates met the definition of a critical accounting estimate for the period presented. ITEM 7A. – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not required. 27 ITEM 8 – CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA FiEE, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES Page Report of Independent Registered Public Accounting Firm (PCAOB ID 1195 ) F-2 – F-4 Consolidated Balance Sheets as of December 31, 2025 and 2024 F-5 Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2025 and 2024 F-6 Consolidated Statements of Stockholders’ Deficit for the years ended December 31, 2025 and 2024 F-7 Consolidated Statements of Cash Flows for the years ended December 31, 2025 and 2024 F-8 Notes to Consolidated Financial Statements F-9 – F-29 F- 1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the board of directors of FiEE, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheet of FiEE, Inc and its subsidiaries (the “Company”) as of December 31, 2025, and the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity (deficit), and cash flows for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the 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. Substantial Doubt about the Company’s Ability to Continue as a Going Concern The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, although the Company had liquidity for the year ended December 31, 2025, the historical losses and negative cash flows raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s 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 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 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 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 financial statements. We believe that our audit provides a reasonable basis for our opinion. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. F- 2 Valuation of Acquired Technology-Related Intangible Assets As described in Note 4 to the financial statements, during the year ended December 31, 2025, the Company completed the acquisition of a group of assets, and a significant portion of the purchase price was allocated to technology-related intangible assets. The fair value of the acquired technology was estimated using a multi-period excess earnings method (MPEEM), which required management to make significant estimates and assumptions, including projected revenues, discount rates, and the economic useful life of the intangible assets. We identified the valuation of the acquired technology-related intangible assets as a critical audit matter because auditing management’s estimate involved especially challenging auditor judgment due to the significant estimation uncertainty and the sensitivity of the valuation to changes in key assumptions. The primary procedures we performed to address this critical audit matter included, among others, evaluating the reasonableness of management’s valuation methodology and testing the significant assumptions used in the valuation model. We evaluated the projected revenues, costs, and expenses by comparing them to actual performance and other relevant information, such as the cost-to-revenue ratio. With the assistance of our valuation specialists, we evaluated the appropriateness of the valuation methodology and assessed the reasonableness of certain key assumptions, including the discount rate and contributory asset charges. We also performed sensitivity analyses to evaluate the impact of changes in key assumptions on the estimated fair value of the intangible assets. In addition, we tested the completeness and accuracy of the underlying data used in the valuation and evaluated the adequacy of the related financial statement disclosures. /s/ UHY LLP We have served as the Company’s auditor since 2025. Irvine, California March 20, 2026 F- 3 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the shareholders and the board of directors of FiEE, Inc. Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of FiEE, Inc. f/k/a Minim, Inc. (the “Company”) as of December 31, 2024 and 2023, the related statements of operations, stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2024, 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 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States. 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’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s 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 audits, 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. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the consolidated financial statements that were communicated or are required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Beckles & Co (PCAOB ID 7116 ) We served as the Company’s auditor from 2024 to 2025. West Palm Beach, FL April 9, 2025 400 Columbia Drive, Suite 101 West Palm Beach, FL 33409 Ph.561 689-4093 Fax: 954 827-0968 F- 4 FIEE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS As of December 31, 2025 and 2024 2025 2024 ASSETS Current assets Cash $ 3,084,461 $ 30,162 Accounts receivable 2,110,715 - Other receivable 1,217,692 - Prepaid expenses and other current assets 199,309 134,757 Total current assets 6,612,177 164,919 Property, equipment and software, net 366,439 119,871 Intangible assets 3,529,835 Operating lease right-of-use assets, net 31,004 - Other assets 231,680 22,245 Total assets $ 10,771,135 $ 307,035 LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) Current liabilities Accounts payable $ 511,206 $ 143,414 Contract liabilities 1,497,721 - Accrued expenses and other current liabilities 1,169,737 293,613 Income tax payables 972,743 Current maturities of operating lease liabilities 30,350 - Total current liabilities 4,181,757 437,027 Total liabilities 4,181,757 437,027 Commitments and Contingencies (Note 7) Stockholders’ equity (deficit) Preferred Stock, authorized: 10,000,000 shares at $ 0.001 par value, including 3,000,000 shares designated as Series A Convertible Preferred Stock at $ 0.001 par value; 2,305,357 Series A shares issued and outstanding at December 31, 2025 and 2024, respectively. 1,639,779 1,639,779 Common Stock, authorized: 60,000,000 shares at $ 0.01 par value; issued and outstanding: 7,934,122 shares at December 31, 2025 and 3,713,792 shares at December 31, 2024, respectively 79,341 37,138 Additional paid-in capital 100,500,280 94,886,147 Accumulated deficit ( 95,621,579 ) ( 96,694,013 ) Accumulated other comprehensive (loss) income ( 8,443 ) 957 Total stockholders’ equity (deficit) 6,589,378 ( 129,992 ) Total liabilities and stockholders’ equity (deficit) $ 10,771,135 $ 307,035 The accompanying notes are an integral part of these consolidated financial statements. F- 5 FIEE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) Years Ended December 31, 2025 and 2024 2025 2024 Revenues $ 6,193,616 $ 639,893 Cost of revenues 840,018 432,634 Gross profit 5,353,598 207,259 Operating expenses: Selling and marketing 418,011 66,171 General and administrative 3,337,649 2,062,441 Research and development 47,419 113,294 Vendor liability forgiveness, net of asset transfers - 2,200,929 Total operating expenses 3,803,079 4,442,835 Operating income (loss) 1,550,519 ( 4,235,576 ) Other income (expense): Interest income (expense), net ( 8,953 ) 82 Foreign currency exchange loss ( 14,315 ) - Other, net ( 6,613 ) Total other income (expense) ( 29,881 ) 82 Income (loss) before income taxes 1,520,638 ( 4,235,494 ) Income tax expense (benefit) 448,204 ( 11,216 ) Net income (loss) $ 1,072,434 $ ( 4,224,278 ) Allocation to participating preferred stock ( 391,125 ) - Net Income (loss) attributable to common stockholders 681,309 ( 4,224,278 ) Basic earnings (loss) per common share 0.12 ( 1.34 ) Diluted earnings (loss) per common share $ 0.10 $ ( 1.34 ) Weighted-average number of common shares outstanding: Basic 5,622,077 3,159,061 Diluted 7,080,633 3,159,061 Net income (loss) $ 1,072,434 $ ( 4,224,278 ) Other comprehensive income (loss), net of tax: Foreign currency translation adjustment ( 9,400 ) - Total comprehensive income (loss) $ 1,063,034 $ ( 4,224,278 ) The accompanying notes are an integral part of these consolidated financial statements. F- 6 FIEE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT) Years Ended December 31, 2025 and 2024 Preferred Stock Common Stock Additional Paid In Accumulated Accumulated Other Comprehensive Shares Amount Shares Amount Capital Deficit Income Total Balance at December 31, 2023 - $ - 2,789,020 $ 27,890 $ 92,556,805 $ ( 92,469,735 ) $ 957 $ 115,917 Net loss - - - - - ( 4,224,278 ) - ( 4,224,278 ) Preferred stock issuance 2,305,357 1,639,779 - - - - - 1,639,779 Issuance of warrants - - - - 1,441,427 - - 1,441,427 Stock-based compensation - - 924,772 9,248 887,915 - - 897,163 Balance at December 31, 2024 2,305,357 $ 1,639,779 3,713,792 $ 37,138 $ 94,886,147 $ ( 96,694,013 ) $ 957 $ ( 129,992 ) Net income - - - - - 1,072,434 - 1,072,434 Foreign currency translation - - - - - - ( 9,400 ) ( 9,400 ) Issuance of warrants for service - - - - 1,074,716 - - 1,074,716 Stock-based compensation - - - - 122,667 - - 122,667 Common Stock Issuance - - 2,582,169 25,822 4,124,178 - - 4,150,000 Conversion of Convertible Note - - 1,235,814 12,358 296,595 - - 308,953 Warrants exercised - - 402,347 4,023 ( 4,023 ) - - - Balance December 31, 2025 2,305,357 $ 1,639,779 7,934,122 $ 79,341 $ 100,500,280 $ ( 95,621,579 ) $ ( 8,443 ) $ 6,589,378 The accompanying notes are an integral part of these consolidated financial statements. F- 7 FIEE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2025 and 2024 2025 2024 Cash flows from operating activities: Net income (loss) $ 1,072,434 $ ( 4,224,278 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 441,434 347,671 Amortization of right-of-use assets 49,912 22,512 Non-cash interest expense 8,953 - Stock-based compensation 122,667 897,163 Issuance of warrants for service 1,074,716 - Loss on disposal of fixed assets 6,613 - Provision for accounts receivable allowances - ( 312,983 ) Vendor liability forgiveness, net of asset transfers - 2,200,929 Changes in operating assets and liabilities: Accounts receivable ( 588,915 ) 1,014,360 Other receivable ( 1,145,125 ) - Inventories - 404,299 Prepaid expenses and other current assets ( 26,737 ) ( 98,990 ) Other assets ( 59,435 ) 33,384 Accounts payable 217,927 ( 3,249,333 ) Contract liabilities 1,497,721 - Income tax payable 446,666 - Accrued expenses and other current liabilities 568,354 ( 784,230 ) Operating lease liabilities ( 50,565 ) ( 22,512 ) Net cash provided by (used in) operating activities 3,636,620 ( 3,772,008 ) Cash flows from investing activities: Purchase of property, equipment and software ( 186,095 ) - Sales or property and equipment - 11,642 Asset acquisition - Yixuntong (Note 4) ( 1,200,000 ) - Asset acquisition - HGK, net of cash acquired (Note 4) ( 3,487,304 ) - Net cash (used in) provided by investing activities ( 4,873,399 ) 11,642 Cash flows from financing activities: Proceeds from preferred stock issuance - 3,081,206 Proceeds from the issuance of common stock 4,000,000 - Proceeds from the issuance of convertible note 300,000 - Net cash provided by financing activities 4,300,000 3,081,206 Effect of foreign exchange rate changes on cash ( 8,922 ) - Net change in cash 3,054,299 ( 679,160 ) Cash - Beginning 30,162 709,322 Cash - Ending $ 3,084,461 $ 30,162 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ - $ - Income taxes $ - $ 11,125 Supplemental disclosures of non-cash investing and financing activities: Non-cash common stocks issued that were recognized in deferred offering costs $ 150,000 $ - Settlement of convertible note to equity $ 308,953 $ - Obtaining right-of-use assets in exchange for operating lease liability $ 82,600 $ - Purchase of property, equipment and software through increase in other payables $ 89,354 $ - Asset acquisition through increase in other payables $ 204,969 $ - The accompanying notes are an integral part of these consolidated financial statements. F- 8 FIEE, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements Years Ended December 31, 2025 and 2024 (1) NATURE OF OPERATIONS AND BASIS OF PRESENTATION FiEE, Inc. (formerly, Minim, Inc.) was founded in 1977 as a networking company and pivoted into delivering intelligent software to protect and improve the WiFi connections we depend on to work, learn, and live. FiEE held the exclusive global license to design, manufacture, and sell consumer networking products under the Motorola brand until 2023. Our cable and WiFi products, with an intelligent operating system and bundled mobile app, were sold in leading retailers and e-commerce channels in the United States (“U.S.”). Our AI-driven cloud software platform and applications make network management and security simple for home and business users, as well as the service providers that assist them—leading to higher customer satisfaction and decreased support burden. On February 27, 2025, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment to its Amended and Restated Certificate of Incorporation (the “Certificate of Amendment”) to change the name of the Company from Minim, Inc. to FiEE, Inc., effective as of February 27, 2025. FiEE, Inc. and its wholly owned subsidiaries—FiEE (HK) Limited (incorporated in March 2025), Houren-Geiju Kabushikikaisha (acquired in November 2025), MTRLC LLC, and Minim Asia Private Limited—are herein collectively referred to as “FiEE” or the “Company.” We continue to grow and expand our operations as a digital service provider focused on integrating AI and data analytics into content creation and brand management. We offer a range of SaaS solutions through a cloud-based platform designed to support our clients in developing, managing, and optimizing their digital presence across global platforms, including customized graphic and posts, short videos, and editorial calendars aligned with brand goals. Additionally, we offer comprehensive software development and maintenance services, delivering custom software solutions from system design and development to deployment and post-launch maintenance. On November 30, 2025, we completed the acquisition of Houren-Geiju Kabushikikaisha (“HGK”), a Japanese technology company specializing in digital authentication services for artworks, leveraging AI and blockchain technology to provide artwork authentication, certification, and display services for individual and corporate clients. This acquisition introduces AI image recognition and blockchain authentication technologies to the Company’s service portfolio, further bolstering our technological capabilities and optimizing our comprehensive brand management solutions for customers. Basis of Presentation The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding financial reporting. The consolidated financial statements of the Company include the accounts of FiEE Inc. and its subsidiaries. All significant intercompany balances and transactions have been eliminated in the consolidation. Use of Estimates The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make judgments, estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expense during the reporting period. These judgments, estimates and assumptions made by the Company include, but are not limited to revenue recognition, expected credit losses; contract liabilities; valuation allowance for deferred income tax assets; fair value of acquired assets; valuation of warrants and stock-based compensation. The Company evaluates its estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results may differ from those estimates under different assumptions or conditions and the differences may be material. F- 9 Liquidity The Company’s operations have historically been financed through the issuance of common stock and preferred stock. Since inception, the Company has incurred significant losses and negative cash flows from operations. The Company began generating operating profit in the fourth quarter of 2025. During the year ended December 31, 2025, the Company reported a net income of $1.1 million, a positive working capital of $ 2.4 million and an increase in cash of $3.1 million. The increase in cash was primarily attributable to $3.6 million of cash provided by operating activities and $4.3 million of cash provided by financing activities, partially offset by $4.9 million of cash used in investing activities. As of December 31, 2025, the Company had an accumulated deficit of $95.6 million and a cash of $3.1 million. Although the Company generated net income, a positive working capital and operating cash flows during 2025 following changes in management and business strategy, the Company has incurred significant losses in prior years and has a limited operating history of profitability. These conditions raise substantial doubt about the Company’s ability to continue as a going concern one year from the date the consolidated financial statements were issued. The Company will strengthen its liquidity and expand its access to capital through public offering of common stock and related private placements. The Company’s consolidated financial statements as of December 31, 2025, do not include any adjustments to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable to continue as a going concern. If the Company is unable to raise additional capital and is therefore unable to continue as a going concern, it may have to liquidate its assets and may receive less than the value at which those assets are carried on its consolidated financial statements, and it is likely that investors will lose all or part of their investment. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Functional Currency The functional currency of FiEE (HK) Limited is the Hong Kong dollar (HKD). The functional currency of HGK (Japanese entity) is the Japanese Yen (JPY). Foreign currency transactions are translated into their respective functional currencies using exchange rates at the transaction dates, while monetary assets and liabilities denominated in foreign currencies are remeasured at period-end rates. The functional currency of all other entities of the Company is U.S. Dollar (USD), the same as the reporting currency. Assets and liabilities of the Company denominated in functional currency other than USD are translated into USD at fiscal year-end exchange rates. Equity accounts other than earnings generated in the current period are translated into USD at the appropriate historical rates. The results of operations and the statements of cash flows denominated in functional currency other than USD are translated into USD at the average exchange rates during the reporting period. Translation adjustments arising from these are reported as cumulative translation adjustments and are shown as a separate component of accumulated other comprehensive income (loss) in the consolidated statements of changes in stockholders’ equity (deficit). Cash The Company considers all highly liquid investments purchased with an original maturity of three months or less at the date of purchase to be cash equivalents. As of December 31, 2025 and 2024, the Company had no cash equivalents. The Company maintains cash balances with financial institutions located in the U.S., and Japan, as well as in Hong Kong with a non-bank payment service provider used to facilitate international payment transactions. Cash balances held in financial institutions in the U.S. are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to applicable limits, while balances held in other jurisdictions may be subject to different regulatory protections. In addition, balances held with the non-bank payment service provider are not insured by the FDIC or similar government agencies. The Company has not experienced any credit losses on its cash account through December 31, 2025 and believes it is not exposed to significant credit risk with respect to these balances. F- 10 Accounts Receivable Accounts receivable are recorded at invoice value, net of any allowance for credit losses. The Company’s accounts receivable were $ 2,110,715 and $ 0 as of December 31, 2025 and 2024, respectively. The balance as of December 31, 2025 consisted primarily of trade receivables acquired in connection with the purchase of HGK, and trade receivables from software services provided during the year. The allowance for credit losses is estimated using a forward-looking expected credit loss model that considers available information about past events, current conditions, and reasonable and supportable forecasts of future economic conditions. Given that all accounts receivable as of December 31, 2025 were originated during 2025 following the Company’s business transformation, limited historical payment data is available. The Company assesses credit risk based on the age of receivables, customer creditworthiness, estimated future economic conditions and their impact on the customer’s financial capabilities. Based on management’s assessment, and ongoing collection efforts, the Company believes that all outstanding receivables are fully collectible in 2026. No allowance for credit losses was recorded as of December 31, 2025. The amount received in subsequent period is $613 thousand before the consolidated financial statements were issued. The Company will continue to monitor the aging of receivables and customer payment patterns and will establish an allowance if future conditions indicate that expected credit losses may occur. Deferred Offering Costs Offering costs directly attributable to a potential private offering of equity securities are accounted for in accordance with Accounting Standards Codification (“ASC”) 340-10-S99-1 and the SEC Staff Accounting Bulletin (“SAB”) Topic 5.A – Expenses of Offering. The Company’s offering costs primarily consist of commitment fees incurred through the balance sheet date, which have been deferred and recorded as a non-current asset, as the offering had not been completed as of the reporting date. As of December 31, 2025, the Company had $ 150,000 in deferred offering costs related to the Helena Purchase Agreement (see Note 12), which were included in other assets. Upon successful completion of the private offering, such costs will be charged against the proceeds and recorded as a reduction to stockholders’ equity. If the offering is ultimately unsuccessful or abandoned, the deferred offering costs will be expensed in the period in which the offering is terminated. Property, Equipment and Software Property, equipment and software primarily consisted of equipment, vehicles, and internal-use software customized by a vendor, which are stated at cost, and are depreciated or amortized on a straight-line basis over their estimated useful lives, which is generally three to five years. Maintenance and repairs are charged to expense as incurred. Significant improvements that substantially enhance the useful life of an asset are capitalized and depreciated. When assets are retired or disposed of, the cost together with related accumulated depreciation is removed from the balance sheet and any resulting gain or loss is reflected in the Company’s statements of operations in the period realized. Costs incurred to develop internal-use software are capitalized only during the application development stage. Schedule of property, equipment and software useful life Category Estimated useful life Internal use software 3 years Equipment 3 - 5 years Vehicles 5 years Intangible Assets Intangible assets primarily consisted of acquired group of proprietary software, which are stated at cost and are amortized on a straight-line basis over their estimated useful lives. The estimated useful life of the Company’s intangible assets is 3 years. F- 11 Impairment of Long-Lived Assets The Company reviews long-lived assets, including property, equipment, software, and intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. No impairment of long-lived assets was recognized for the years ended December 31, 2025 and 2024. Assets Acquisition The Company evaluates acquisitions of entities or assets to assess whether or not the transaction should be accounted for as a business combination or asset acquisition by first applying a screen test to determine whether substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets. If this screen criterion is met, the transaction is accounted for as an asset acquisition. If not, further determination is required as to whether or not the Company has acquired inputs and processes that have the ability to create outputs which would meet the definition of a business. The Company measures and recognizes asset acquisitions that are not deemed to be business combinations based on the cost to acquire the assets, which includes transaction costs. Goodwill is not recognized in an asset acquisition. Any consideration in excess of net assets acquired is allocated to acquired nonfinancial assets on a relative fair value basis. Fair Market Value The Company complies with ASC 820, “Fair Value Measurements and Disclosures,” for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually. Fair value is defined as the price that would be received for sale of an asset or paid for transfer of a liability, in an orderly transaction between market participants at the measurement date. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include: ● Level 1, defined as observable inputs such as quoted prices (unadjusted) for identical instruments in active markets; ● Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable such as quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active; and ● Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. Income Taxes The Company accounts for income taxes under ASC 740, Income Taxes. Provision for income taxes consisted of current income taxes and deferred income taxes. Current income taxes are provided for in accordance with the laws of the relevant tax authorities and calculated using tax rates that have been enacted as of the balance sheet date. F- 12 Deferred income taxes are provided using assets and liabilities method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities are determined on the basis of the differences between financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are recognized to the extent that these assets are more likely than not to be realized. In making such a determination, the management consider all positive and negative evidence, including future reversals of projected future taxable income and results of recent operation. Deferred tax assets are then reduced by a valuation allowance through a charge to income tax expense when, in the opinion of management, it is more likely than not that a portion of or all of the deferred tax assets will not be realized. The Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of the benefit to be recognized. An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination based solely on the technical merits of the position assuming a review by tax authorities having all relevant information. The amount of the benefits that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. Interest and penalties on income taxes will be classified as a component of the provisions for income taxes. The Company did no t recognize any income tax due to uncertain tax position or incur any interest and penalties related to potential underpaid income tax expenses for the years ended December 31, 2025 and 2024. The Company accounts for Global Intangible Low-Taxed Income (“GILTI”) in accordance with ASC 740. The Company has elected to account for the tax effects of GILTI as a period cost when incurred rather than recognizing deferred taxes for basis differences expected to reverse as GILTI in future periods. Accordingly, GILTI tax expense is recognized in the period in which the related income is included in the U.S. taxable income. In December 2023, the FASB issued ASU 2023-09, Income Taxes (ASC 740): Improvements to Income Tax Disclosures, which includes amendments that further enhance income tax disclosures, primarily through standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The amendments are effective for all public entities for fiscal years beginning after December 15, 2024, and early adoption is permitted. The Company adopted ASU 2023-09 in the fiscal year ended December 31, 2025, and the adoption primary affects the Company’s income tax disclosures (see Note 13). Operating and Finance Leases The Company has operating leases primarily for office space. The determination of whether an arrangement is a lease or contains a lease is made at inception by evaluating whether the arrangement conveys the right to use (“ROU”) an identified asset and whether the Company obtains substantially all of the economic benefits from and has the ability to direct the use of the asset. The Company does not have any finance leases. Leases with a term greater than one year are recognized on the consolidated balance sheets in the line items cited above. The Company has elected not to recognize leases with terms of one year or less on the consolidated balance sheets. Lease obligations and their corresponding ROU assets are recorded based on the present value of lease payments over the expected lease term. As the interest rate implicit in lease contracts is typically not readily determinable, the Company utilizes the materially approximate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. The lease term may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. F- 13 Segment reporting The Company operates as a single operating segment. The Company’s chief operating decision maker (“CODM”), its Chief Executive Officer, reviews financial information on an aggregate basis for the purposes of allocating resources and evaluating financial performance. The measure of segment profit or loss reviewed by the CODM is operating income. The Company’s primary operations were historically in the U.S., and prior to the end of 2024, it derived substantially all of its revenue from sales to customers in the U.S. Beginning in March 2025, following the expansion of its operations in Hong Kong, the Company has derived all its revenues from Hong Kong. As of December 31, 2024, the Company had no significant long-lived assets. As of December 31, 2025, the Company’s long-lived assets are mainly located in U.S. and Hong Kong. In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires that an entity disclose significant segment expenses impacting profit and loss that are regularly provided to the chief operating decision maker. The update is required to be applied retrospectively to prior periods presented, based on the significant segment expense categories identified and disclosed in the period of adoption. The amendments in ASU 2023-07 are required to be adopted for fiscal years beginning after December 15, 2023 for public entities. The Company adopted ASU 2023-07 effective January 1, 2024. For the year ended December 31, 2025 and 2024, significant segment expenses that are regularly provided to the CODM and included in this measure consist of cost of revenues, selling, general, and administrative expenses. These expenses are consistent with the amounts presented in the consolidated statements of operations. There are no other segment items as there are no significant assets or operations not regularly reviewed by the CODM. Recently Issued Accounting Standards In November 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”) which requires detailed disclosures in the notes to financial statements disaggregating specific expense categories and certain other disclosures to provide enhanced transparency into the nature and function of expenses. The FASB further clarified the effective date in January 2025 with the issuance of ASU 2025-01, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”). ASU 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027, with early adoption permitted. The requirements should be applied on a prospective basis while retrospective application is permitted. The Company is currently evaluating the impact related to the new standard. (3) REVENUE AND OTHER CONTRACTS WITH CUSTOMERS The Company adopted ASC 606, Revenue from Contracts with Customers, which requires a five-step model to recognize revenue from customer contracts. The five-step model requires entities to exercise judgment when considering the terms of contracts, including: (1) identifying the contracts or agreements with a customer; (2) identifying the performance obligations in the contract or agreement; (3) determining the transaction price; (4) allocating the transaction price to the separate performance obligations; and (5) recognizing revenue as each performance obligation is satisfied. The Company applies the five-step model to contracts only when it is probable that the Company will collect the consideration to which it is entitled in exchange for the services it transfers to its clients. Revenues from SaaS service before the end of 2024 Revenue recognized for each distinct performance obligation as control is transferred to the customer. Revenue attributable to hardware products bundled with Software-as-a-Service (“SaaS”) offerings are recognized at the time control of the product transfers to the customer. The transaction price allocated to the SaaS offering was recognized ratably beginning when the customer was expected to activate their account and over a three-year period that the Company estimated based on the expected replacement of the hardware. F- 14 Revenues from SaaS service- MCN Digital Service in 2025 The Company expands SaaS operations as a digital service provider, delivering full-cycle services to brand clients through legally binding agreements since March 2025. The Company offers full-service account management, content production, and targeted promotion to grow followers across key platforms. Service packages customizable via the SaaS portal. Customers may purchase value-added services with or after their purchases of basic package. The Company’s services comprise two distinct performance obligations: (1) the basic service, which represents a single performance obligation as the promises for account setup, SaaS platform access, account management, and basic digital content creation and publishing are highly interdependent and bundled together; and (2) the value-added services, which represents a performance obligation for additional digital content created and customized to meet the customer’s special request. Each with a standalone transaction price. The Company recognizes revenues from basic services ratably over the contract term beginning on the commencement date of each contract. The revenues from value-added services are recognized at a point in time when customers approve or accept the value-added services or system automatically approves whichever is later. The Company requires an upfront payment for the services, which is non-refundable upon execution of the contract. Customers retain the right to terminate the contract prior to its expiration date, subject to the early termination fees, including information transfer fee and fan development fee. Revenues from Software Service in 2025 The Company enters into bundled arrangements that typically include the sale of on-premise software licenses, customized modules, and maintenance and support (“M&S”) services. These arrangements are evaluated to determine whether the promises represent distinct performance obligations. The customized modules are highly interdependent and interrelated with the software license and are therefore combined with the license as a single performance obligation, while the M&S services are capable of being distinct and are accounted for as a separate performance obligation. The M&S services are provided free of charge for a specified contract period, typically encompassing the first year of service following software delivery. The transaction price is allocated to each performance obligation based on their relative stand-alone selling prices (“SSP”). The SSP for the combined software license and customized modules, and M&S services is determined using the adjusted market assessment approach, which considers market conditions, competitive pricing, the Company’s market position, expected profit margins, and cost structure. Contracts include retention fees that represent variable consideration, as their payment is contingent upon no major defects being identified within a specified period. These retention fees are excluded from the initial transaction price. The related revenue is recognized only when it’s probable that a significant reversal will not occur. Contracts for software licensing and M&S services generally include a renewal option for M&S services; however, the renewal option to acquire additional services is neither offered free of charge nor at a discount and accordingly does not represent a material right. The Company provides assurance-type warranties to ensure that the delivered software complies with agreed-upon specifications. These warranties do not constitute a separate performance obligation as they cannot be purchased separately and do not provide a service beyond remedying defects to bring the software to the specified standard. The Company’s contracts typically specify a payment schedule whereby payments from the customer are linked to the signing of the contract and the achievement of specific milestones. Contracts are generally fixed price, and the Company has elected the practical expedient not to adjust the promised consideration for the effects of a significant financing component when the period between transfer of goods or services and customer payment is one year or less. Revenue from the combined software license and customized modules is recognized over time as the Company fulfils its performance obligations by developing and enhancing the software assets throughout the project period. The Company recognizes revenue using the output method based on the measurements of the value of the services transferred to date in relation to total performance obligation promised. Revenue from maintenance and support services is recognized over time on a straight-line basis over the M&S contract period. This recognition pattern reflects the continuous transfer of services to the customer, who simultaneously receives and consumes the benefits of these services throughout the service period. F- 15 Revenues from Digital Authentication Service in 2025 The Company provides digital authentication services for artworks, leveraging AI and blockchain technology. Services include microstructure analysis, AI image comparison, authenticity determination, blockchain registration, and issuance of digital authentication reports. Service packages are offered in Standard and Expedited editions, with fees calculated based on the dimensions of the artwork and required to be fully paid in advance. The Company’s services comprise a single performance obligation, as the promised services are highly interdependent and integrated to deliver a conclusive authentication outcome. The transaction price is fixed at contract inception. Revenue is recognized at a point in time upon delivery of the final digital authentication report and blockchain certificate to the client, when the client obtains control of the completed authentication package. Remaining Performance Obligations The remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. Unsatisfied and partially unsatisfied performance obligations consist of contract liabilities, in-transit orders with destination terms, and non-cancellable backlog. Non-cancellable backlog includes goods for which customer purchase orders have been accepted, that are scheduled or in the process of being scheduled for shipment, and that are not yet invoiced. Prior years’ performance obligations were all satisfied and recognized as revenue in the periods before the end of 2024. As of December 31, 2025, the remaining performance obligation related to MCN digital services purchased and paid for in advance by customers for basic and value-added packages amounted to $ 1,497,721 , equalling the balance of contract liabilities. This amount is expected to be recognized as revenue within the next 12 months. The remaining performance obligation for software service as of December 31, 2025 was $ 521,082 , excluding retention fee. This amount relates to unsatisfied performance obligations for the combined software license and customized modules, which are expected to be recognized as revenue upon the completion and customer acceptance of specific milestones, predominantly within the next 3 months. As of December 31, 2025, there was no remaining performance obligation for digital authentication services, as all services have been fully completed. Contract Costs The Company recognizes the incremental costs of obtaining a contract with a customer if the Company expects the benefit of those costs to be longer than one year. The Company has determined that certain sales commissions meet the requirements to be capitalized, and the Company amortizes these costs on a consistent basis with the pattern of transfer of the goods and services in the contract. Total capitalized costs to obtain a contract were immaterial during the periods presented and are included in other current and long-term assets on our condensed consolidated balance sheets if any. The Company applies a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period is one year or less. These costs include sales commissions on SaaS contracts with a contract period of one year or less as sales commissions on contract renewals are commensurate with those paid on the initial contract. Contract Balances The Company records accounts receivable when it has an unconditional right to the consideration. The accounts receivable balances were $ 2,110,715 and $ 0 as of December 31, 2025 and December 31, 2024, respectively. Contract liabilities are recorded when customers remit payment prior to revenue recognition, representing the Company’s obligation to transfer services in the future. Liabilities arise upon customer order placement. The Company did not have contract liabilities at December 31, 2024, while the ending balance at December 31, 2025 was $ 1,497,721 . F- 16 Disaggregation of Revenue The following table sets forth our revenues by distribution channel: Schedule of disaggregation of revenue Years ended December 31, 2025 2024 Retailers $ - $ 638,904 Other online and offline channels 6,193,616 989 $ 6,193,616 $ 639,893 The following table sets forth our revenues by product: Schedule of revenues Years ended December 31, 2025 2024 Cable Modems & gateways $ - $ 638,804 Other networking products - 1,089 SaaS – MCN digital services 5,275,761 - Software services 588,811 - Digital authentication services 329,044 - $ 6,193,616 $ 639,893 The following table sets forth our revenues by the timing of revenue recognition: Schedule of revenue recognized Years ended December 31, 2025 2024 Recognized at a point in time $ 5,183,731 $ 639,893 Recognized over time 1,009,885 - $ 6,193,616 $ 639,893 (4) ASSET ACQUISITIONS Acquisition of assets from Yixuntong On June 30, 2025, FiEE (HK) Limited (“FiEE HK”) entered into and simultaneously closed an Asset Purchase Agreement with Hongyan Sun, Lin Lin, and Suzhou Yixuntong Network Technology Co., Ltd. (“Yixuntong”). Pursuant to the agreement, FiEE HK acquired a group of assets from Yixuntong with a total purchase price of $1.4 million in cash. The transaction was accounted for as an asset acquisition in accordance with ASC 805-50 and SEC Regulation S-X Rule 11-01(d). In evaluating the transaction, the Company applied the initial screen test and concluded that substantially all of the fair value of the gross assets acquired was concentrated in a group of proprietary software assets, including software source codes and related patents. The software copyrights and patents are used together to generate software service revenues and other potential SaaS-related revenues, and therefore, were considered a group of similar identifiable assets for purposes of the screen test. Accordingly, the transaction did not meet the definition of a business and was accounted for as an asset acquisition, with the total purchase consideration allocated to the acquired assets on a relative fair value basis. F- 17 The fair value of the proprietary software was determined using the multi-period excess earnings method (“MPEEM”) with the assistance of a third-party valuation specialist. As a result, approximately $1.3 million of the total purchase consideration was allocated to proprietary software and recognized as an intangible asset, while approximately $0.1 million of the total purchase consideration was allocated to vehicles and computers. The fair value measurement was based on significant assumptions, including projected revenues and cash flows, discount rates, contributory asset charges, and the estimated useful life of the asset, etc. The proprietary software is being amortized using the straight-line method over its estimated useful life of 3 years (see Note 5). Acquisition of HGK On November 30, 2025, FiEE, Inc. completed the acquisition of HGK through two simultaneously executed agreements: (i) a Share Purchase Agreement to acquire 100% of the outstanding equity interests for $500,000, and (ii) a Technology Transfer Agreement to acquire all core technology assets, including software copyrights and patents, for $3,000,000. The aggregate purchase price was $3,500,000. The total acquisition cost, including transaction costs, amounted to $3,522,907. In accordance with ASC 810-10-40-6, the two agreements were entered into in contemplation of one another and were essentially a single transaction designed to achieve an overall commercial effect. Accordingly, the Share Purchase Agreement and the Technology Transfer Agreement have been combined and accounted for as a single transaction for financial reporting purposes. The Company evaluated the transaction in accordance with the guidance in ASC 805 and determined that the acquired set of assets and liabilities did not meet the definition of a business because it did not include a substantive process that, together with the acquired inputs, would significantly contribute to the ability to create outputs. At the acquisition date, HGK had only one administrative employee and did not have an organized workforce with the necessary skills, knowledge, or experience to perform a substantive process. The seller possessed the underlying assets, technology, processes, and customer relationships prior to the acquisition and was not employed by the Company subsequent to the transaction. Accordingly, no substantive process was acquired, and the transaction was accounted for as an asset acquisition. The total purchase consideration of the transaction, which is comprised of the cash consideration and transaction costs, was allocated to the assets acquired and the liabilities assumed, as well as the technology-based intangible assets on a relative fair value basis, as follows: Schedule of asset acquisitions Cash consideration $ 3,500,000 Transaction costs 22,907 Total purchase consideration $ 3,522,907 Cash $ 35,603 Accounts receivable 1,521,800 Other assets 112,742 Accounts payable ( 149,865 ) Income tax payable ( 526,077 ) Other liabilities ( 5,734 ) Net assets acquired $ 988,469 Intangible assets acquired 2,534,438 Total costs of acquisition allocated $ 3,522,907 The acquired intangible asset represents a group of proprietary software assets, including software copyrights, patents, and other intellectual property related to digital authentication services for artworks, which was amortized using the straight-line method over the estimated useful life of 3 years (see Note 5). The fair value of these intangible assets was determined using valuation techniques that incorporated significant unobservable inputs, including projected revenues, discount rates, and estimated useful lives, etc. The fair values of financial assets and liabilities, including accounts receivable, prepaid expenses, and accrued liabilities, approximated their respective carrying amounts at the acquisition date due to their short-term nature. F- 18 (5) BALANCE SHEET COMPONENTS Property, equipment and software, net Property, equipment and software, net consisted of the following: Schedule of equipment December 31,  2025 2024 Internal use software $ 271,088 $ - Equipment 8,137 2,621,706 Vehicles 133,852 - Total property, equity and software 413,077 2,621,706 Accumulated depreciation and amortization ( 46,638 ) ( 2,501,835 ) Total property, equipment and software, net $ 366,439 $ 119,871 Depreciation expense was $ 160 thousand and $ 282 thousand for the years ended December 31, 2025 and 2024, respectively. During the year ended December 31, 2025, the Company wrote off certain legacy equipment with an original cost of $ 2,621,707 and accumulated depreciation of $ 2,615,094 , resulting in a net book value of $ 6,613 . The Company recorded a loss on disposal of $ 6,613 , which is included in other income (expense) in the consolidated statements of operations and comprehensive income (loss). Intangible assets As part of the asset acquisitions completed on June 30, 2025 and November 30, 2025 (see Note 4), the amount allocated to the intangible assets acquired was approximately $ 1.3 million and $ 2.5 million, respectively, primarily consisting of acquired proprietary software, which represent a group of copyrights and associated patents that are expected to provide future economic benefits to the Company. The allocation of the purchase price was performed on a relative fair value basis in accordance with ASC 805-50. The acquired group of proprietary software is being amortized over 3 years, its estimated useful life. Intangible assets consisted of the following at December 31, 2025 and 2024: Schedule of intangible assets As of December 31, 2025 As of December 31, 2024 Gross Carrying Amount Accumulated Amortization Net Gross Carrying Amount Accumulated Amortization Net Acquired group of proprietary software $ 3,811,598 $ ( 281,763 ) $ 3,529,835 $ - $ - $ - $ 3,811,598 $ ( 281,763 ) $ 3,529,835 $ - $ - $ - Amortization expense was $ 282 thousand and $ 33 thousand in the years ended December 31, 2025 and 2024, respectively. Estimated amortization expenses for the future years are as follows: Schedule of Amortization Years ending December 31, Amortization 2026 1,266,852 2027 1,266,852 2028 996,131 Total $ 3,529,835 F- 19 Prepaid and other current assets Prepaid and other current assets consisted of the following: Schedule of inventories December 31, 2025 2024 Insurance fee $ 53,015 $ 119,757 Cloud hosting fee 78,414 - Prepayment for property purchase 44,613 - Other 23,267 15,000 Total prepaid and other current assets $ 199,309 $ 134,757 Accrued expenses and other current liabilities Accrued expenses and other current liabilities consisted of the following: Schedule of accrued expenses December 31, 2025 2024 Payroll & related benefits $ 305,789 $ - Professional fees 271,501 185,000 Sales allowances 26,905 26,905 Sales and use tax 81,708 81,708 Other payable to Yixuntong (1) 435,957 - Other (2) 47,877 - $ 1,169,737 $ 293,613 (1) As of December 31, 2025, other payables to Yixuntong primarily included $205 thousand for the assets acquisition, $89 thousand for a software development, $122 thousand for software maintenance and $20 thousand for advanced cloud hosting fee. (2) There was a balance of $7,232 due to a stockholder of the Company, Cao Yu, which represents the amount paid by Cao Yu to support the Company’s normal operating activities. The remaining balance was primary for the reimbursement payable to employees. (6) LEASES The Company’s newly established Hong Kong subsidiary executed new office lease agreements in March 2025 and the Company’s newly acquired Japan subsidiary executed office lease agreements since October 2024, which expire in July and September 2026, respectively. The Company recognizes lease expense for these leases on a straight-line basis over the lease term. ROU assets and lease liabilities are recorded on the balance sheet for all leases, except leases with an initial term of 12 months or less. The components of lease expenses were as follows: Schedule of components of lease costs Years ended December 31, 2025 2024 Operating lease costs $ 51,978 $ 22,512 Short-term lease costs - 14,050 Total lease costs $ 51,978 $ 36,562 Cash paid for amounts included in the measurement of lease liabilities 57,786 22,512 F- 20 The weighted-average remaining lease term and discount rate were as follows: Schedule of weighted average remaining lease term and discount rate Years ended December 31, 2025 2024 Operating leases: Weighted average remaining lease term (years) 0.51 0.0 Weighted average discount rate 4.63 % 0.0 % The Company leased office space from an affiliate entity owned by the Company’s former Chairman of the Board. The lease expired and was not renewed in the first quarter of 2024. (7) COMMITMENTS AND CONTINGENCIES (a) Commitments License agreement and settlement with Motorola The Company was a party to a license agreement with Motorola Mobility LLC pursuant to which the Company has an exclusive license to use certain trademarks owned by Motorola Trademark Holdings, LLC for the manufacture, sale and marketing of consumer cable modem products, consumer routers, WiFi range extenders, MoCa adapters, cellular sensors, home powerline network adapters, and access points worldwide through a wide range of authorized sales channels. The license agreement had a term ending December 31, 2025 prior to its cancellation in 2023. In connection with the license agreement, the Company had committed to reserve a certain percentage of wholesale prices for use in advertising, merchandising and promotion of the related products. Additionally, the Company was required to make quarterly royalty payments equal to a certain percentage of the preceding quarter’s revenues with minimum annual royalty payments. Following the Company’s agreement with Motorola Mobility LLC on January 22, 2024, as mentioned below. The Company’s quarterly royalty payments, in addition to current and future obligations, were satisfied in exchange for certain assets of the Company. The Company did not incur royalty expenses under the License Agreement for the year ended December 31, 2025 and 2024. On January 22, 2024, the Company, entered into a Letter Agreement re Product Purchase (the “Letter Agreement”) and a Debt Settlement Agreement (the “Settlement Agreement,” and the Letter Agreement, the “Agreements”) with Motorola Mobility, LLC (“Motorola”). Pursuant to the Letter Agreement, the Company (A) initially transferred a portion of its inventory to Motorola and (B) agreed to transfer the reminder of such inventory upon receipt of certain funding in order to satisfy liabilities owed to Motorola, while agreeing to continue to provide certain customer and technical support. Pursuant to the Settlement Agreement, the Company agreed (i) to pay Motorola a settlement amount of $1,167,071 and (ii) to transfer additional funds as collected from the Company’s customers in an amount up to $263,752. The Company believes that the Agreements, together with arrangements it has finalized with other major vendors, will allow the Company to streamline its operations while reducing its current liabilities. Property purchase agreement in Japan In December 2025, HGK entered into a property purchase agreement with a third-party seller to acquire a property located in Osaka, Japan, for a total purchase price of JPY87,000,000 (approximately $0.5 million). As of December 31, 2025, HGK had made an upfront payment of JPY 7,000,000 (approximately $45 thousand), with the remaining balance of JPY 80,000,000 (approximately $0.5 million) due and was paid in March 2026. F- 21 (c) Contingencies Vendor Obligation Releases In its efforts to manage its liquidity and cash-flow position, the Company negotiated and executed liability release agreements with certain vendors in the fourth quarter of 2023 who comprised $ 5.0 million of outstanding accounts payable as of December 31, 2023. In aggregate, the executed release agreements resulted in a reduction of outstanding accounts payable obligations by $3.6 million from $5.0 million to $1.4 million. The executed release agreements became effective and are contingent upon payment of the $ 1.4 million negotiated amounts received during the period of the first quarter of 2024. In addition, the Company agreed to pay certain vendors an additional $0.4 million contingent upon successful collection of customer receivables. After the collection of customer receivables, the contingent amount was amended to $ 0.3 million during the period ended June 30, 2024. In July 2024, the Company paid the contingent amount of $ 0.3 million to its vendors. Contingencies on potential lawsuits The Company is party to various lawsuits and administrative proceedings arising in the ordinary course of business. The Company evaluates such lawsuits and proceedings on a case-by-case basis, and its policy is to vigorously contest any such claims which it believes are without merit. The Company reviews the status of its legal proceedings and records a provision for a liability when it is considered probable that both a liability has been incurred and the amount of the loss can be reasonably estimated. This review is updated periodically as additional information becomes available. If both criteria are not met, the Company reassesses whether there is at least a reasonable possibility that a loss, or additional losses, may be incurred. If there is a reasonable possibility that a loss may be incurred, the Company discloses the estimate of the amount of the loss or range of losses - that the amount is not material, or that an estimate of the loss cannot be made. At December 31, 2025, the Company is not currently a party to any legal proceedings that, if determined adversely to the Company, in management’s opinion, are currently expected to individually or in the aggregate have a material adverse effect on the Company’s business, operating results or financial condition taken as a whole. The Company expenses its legal fees as incurred. In the ordinary course of its business, the Company is subject to lawsuits, arbitrations, claims, and other legal proceedings in connection with their business. Some of the legal actions include claims for substantial or unspecified compensatory and/or punitive damages. A substantial adverse judgment or other unfavorable resolution of these matters could have a material adverse effect on the Company’s financial condition, results of operations, and cash flows. Management believes that the Company has adequate legal defenses with respect to the legal proceedings to which it is a defendant or respondent, and that the outcome of these pending proceedings is not likely to have a material adverse effect on the financial condition, results of operations, or cash flows of the Company. However, the Company is unable to predict the outcome of these matters. Uncertainty on the business operations For the year ended December 31, 2025, the Company’s operations depended in part on the continued service of its senior management, whose relationships with artists support the expansion and development of the Company’s primary customer base. The loss of key management or technical personnel could adversely affect the Company’s ability to maintain these relationships and develop its technology-driven services. (8) SIGNIFICANT CUSTOMER AND DEPENDENCY ON KEY SUPPLIERS During the year ended December 31, 2025, the Company had one customer, with outstanding accounts receivable balance that accounted for around 75 % of the Company’s total accounts receivable. Most of this accounts receivable was acquired through the Company’s acquisition of its Japanese subsidiary, HGK, on November 30, 2025, and contributed 1% to the Company’s revenue for the year ended December 31, 2025. Other than this customer, the Company did not have sales or outstanding accounts receivable balance that accounted for 10% or greater individually of the Company’s total revenues and accounts receivable, respectively. The Company’s primary customers for the year ended December 31, 2025 are artists. F- 22 (9) CONVERTIBLE NOTE PAYABLE TO RELATED PARTY The Company entered into an unsecured promissory note (the “Convertible Note”) effective February, 18, 2025, with David Lazar, a stockholder holding more than 10% of the Company’s outstanding shares and a former officer and director. Under the terms of the Convertible Note, the Company agreed to pay Mr. Lazar a principal amount of $ 300,000 , bearing interest at an annual rate of approximately 4.34 % , with the full principal and interest balance due on or before December 31, 2025. Upon stockholders’ approval, the Convertible Note will automatically convert into shares of the Company’s common stock at a conversion price of $ 0.25 per share. The Convertible Note to related party is accounted for as a single liability in accordance with Accounting Standards Update (ASU) 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. On October 27, 2025, at the Company’s 2025 Annual Meeting of Stockholders, stockholders approved the conversion of the Convertible Note. Pursuant to the terms of the Convertible Note, it automatically converted into 1,235,814 shares of common stock. As of December 31, 2025, the Convertible Note had no outstanding balance. (10) RELATED PARTY TRANSACTION The Company had the following related party transactions during the year ended December 31, 2025 and 2024: ● Lease from the Company’s former officer, see Note 6 for details. ● Amount paid by a stockholder for operating activities and the balance due as of December 31, 2025. See Note 5 for details. ● Convertible note issued to a related party. See Note 9 for details. ● Equity transactions with stockholders. See Note 12 for details. (11) EARNINGS (LOSS) PER SHARE The Company's Series A Preferred Stock is considered a participating security because it has the right to participate in dividends with common shareholders on an as-converted basis. Accordingly, the Company applies the two-class method to compute basic and diluted earnings (loss) per share. Under the two-class method, net income is allocated between common shareholders and participating securities based on their respective rights to receive dividends as if all earnings for the period had been distributed. Net losses are not allocated to the Series A Preferred Stock, as holders do not have a contractual obligation to share in losses. Diluted earnings (loss) per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Potentially dilutive securities include convertible preferred stock, warrants, and restricted shares. Warrants and restricted shares are included in diluted EPS using the treasury stock method. For convertible preferred stock that is a participating security, diluted EPS is calculated using the more dilutive of the two-class method or the if-converted method in accordance with ASC 260. Under the two-class method, the numerator used in diluted EPS is consistent with that used in basic EPS. Potential common shares are included only to the extent they are dilutive, and anti-dilutive securities are excluded. F- 23 Earnings (loss) per share for the year ended December 31, 2025 and 2024, respectively, are as follows: Schedule of net income (loss) per share Years ended December 31, 2025 2024 Basic earnings per common share: Net income (loss) $ 1,072,434 $ ( 4,224,278 ) Less: Preferred stock dividend declared - - Income (loss) available for distribution 1,072,434 $ ( 4,224,278 ) Less: Income allocated to participating securities ( 391,125 ) - Net income (loss) available to common stockholders $ 681,309 ( 4,224,278 ) Weighted average basic shares outstanding 5,622,077 3,159,061 Basic earnings (loss) per common share $ 0.12 $ ( 1.34 ) Diluted earnings per common share: Net income (loss) available to common stockholders $ 681,309 $ ( 4,224,278 ) Weighted average basic shares outstanding $ 5,622,077 3,159,061 Dilutive effect related to warrants 1,370,399 - Dilutive effect related to restricted stocks with service conditions 88,157 - Weighted average diluted shares outstanding $ 7,080,633 3,159,061 Diluted earnings (loss) per common share $ 0.10 $ ( 1.34 ) Diluted loss per common share for the year ended December 31, 2025 and 2024 excludes the effects of 3,227,500 and 5,536,126 common share equivalents respectively, since such inclusion would be anti-dilutive. The common share equivalents consist of shares of common stock issuable upon the exercise or conversion of outstanding Series A preferred stock, warrants, and restricted shares with a service condition. (12) EQUITY Preferred Stock and Warrants On January 23, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with David Lazar (“Lazar”), a member of our Board of Directors, whereby, at the closing of the transactions contemplated by the Purchase Agreement (the “Closing”), the Company sold and Lazar (or to any transferee of Lazar’s which acquires the Securities Purchase Rights, as defined below, hereinafter a “Lazar Transferee”) purchased 2,000,000 shares of the Company’s preferred stock, $ 0.001 par value per share (the “Preferred Stock”), at a price per share of $ 1.40 , for an aggregate purchase price of $2,800,000, subject to the conditions described below, pursuant to the exemptions afforded by the Securities Act and Regulation S thereunder. Under the Purchase Agreement, the Company agreed to designate 2,000,000 of the Preferred Stock as Series A Preferred Stock (the “Series A Preferred Stock”) for the sale to Lazar (or a Lazar Transferee). Each share of Series A Preferred Stock shall be convertible, at the option of the holder, into 1.4 shares of common stock of the Company, $0.01 par value per share (the “Common Stock”), and vote on an “as-if-converted” basis and shall have full ratchet protection in any subsequent offerings. Pursuant to the Purchase Agreement, the Company shall also issue Lazar (or a Lazar Transferee) warrants to purchase up to an additional 2,800,000 shares of Common Stock, with an exercise price equal to $1.00 per share, subject to adjustment therein (the “Warrants,” and together with the Series A Preferred Stock, the “Purchased Securities”). The Company evaluated the Series A Preferred Stock and Warrants for liability or equity classification in accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity , and determined that equity treatment was appropriate because neither the Series A Preferred Stock nor the Warrants met the definition of liability instruments. F- 24 The Warrants are classified as component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permit the holder to receive a fixed number of shares of common stock upon exercise. In addition, the Warrants do not provide any guarantee of value or return. The Company valued the Warrants at issuance using the Black-Scholes option pricing model and determined the fair value of the Warrants to purchase 2,800,000 shares of the Company’s common stock at $ 4.7 million. The key inputs to the valuation model included a weighted average volatility of 162.0 % and an expected term of 3.0 years. The proceeds from the issuance of the Series A Preferred Stock to the Company were allocated based on the relative fair value of the Warrants as compared to the fair value of the Series A Preferred Stock. The fair value of the Warrants incorporates assumptions regarding our common stock price, dividend yield, stock price volatility, as well as assumptions regarding the risk-free interest rate. Using this model, the Warrants was valued at $ 1.4 million at January 23, 2024 and was included in additional paid in capital on our condensed consolidated balance sheet. The fair value of the Series A Preferred Stock was determined based on assumptions that incorporated our common stock price and dividend rate. The Company valued the Series A Preferred Stock at $ 4.5 million. Based on the fair value model to allocate the Series A Preferred Stock proceeds, the Series A Preferred Stock was valued at $ 1.4 million at January 23, 2024 and was included in Series A Preferred Stock on our condensed consolidated balance sheet. On February 26, 2024, the Company held a special meeting of stockholders, who voted and approved (i) the issuance of shares of our Common Stock upon conversion of Series A Preferred Stock or exercise of the Warrants to be issued at Closing of the Purchase Agreement, which conversions or exercise would result in a “change of control” of the Company under the applicable rules of Nasdaq and (ii) an amendment to the Company’s Amended and Restated Certificate of Incorporation (the “Existing Charter”) to effect the increase in authorized shares of Preferred Stock to 10,000,000 . Except for stock dividends or distributions for which adjustments are to be made pursuant to the Existing Charter, Holders of Series A Preferred Stock shall be entitled to receive, and the Company shall pay, dividends on shares of Series A Preferred Stock equal (on an as-if-converted-to-Common-Stock basis, without regard to conversion limitations herein) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. No other dividends shall be paid on shares of Series A Preferred Stock. On February 18, 2025, the Company entered into a Securities Purchase Agreement (the “February 18, 2025 SPA”) with David Lazar (“Seller”), and Cao Yu, Hu Bin, and Youxin Consulting Limited (collectively, the “Purchasers”), which was subsequently amended on May 9, 2025. Pursuant to the February 18, 2025 SPA and its amendment, Seller, a former director and officer of the Company, sold to the Purchasers (i) 2,219,447 shares of Series A Preferred Stock, (ii) a warrant to purchase up to 2,800,000 shares of Common Stock at an exercise price of $1.00 per share, subject to adjustment (the “Warrant”), and (iii) certain receivables owed by the Company to Seller associated with the transaction (the “Lazar Receivables”). On April 10, 2025, Seller transferred an additional 31,258 shares of Series A Preferred Stock to the Purchasers (together with the previously transferred shares and the Warrant, the “Securities”). The aggregate purchase price for the Securities and the Lazar Receivables was $500,000, of which $300,000 was directed by Seller to be paid to the Company in exchange for a convertible note (see Note 9). The Purchasers also paid a $3.4 million earn-out payment to Seller for his efforts related to the Company’s successful relisting on Nasdaq as of June 30, 2025. As of June 30, 2025, the Lazar Receivables were forgiven for the benefit of the Company, and the Warrant was amended and restated to eliminate the beneficial ownership limitations previously contained therein. Securities Purchase Agreements On May 9, 2025, the Company entered into, and simultaneously closed the transactions under, Securities Purchase Agreements with Cao Yu and Hu Bin, pursuant to which the Company sold an aggregate of 2,439,025 shares of its common stock— 1,585,366 shares to Cao Yu for a purchase price of $ 2,600,000 and 853,659 shares to Hu Bin for a purchase price of $ 1,400,000 . F- 25 Helena Purchase Agreement On May 9, 2025, the Company entered into a Purchase Agreement (the “Helena Purchase Agreement”) with Helena Global Investment Opportunities I Ltd. (“Helena”) whereby the Company shall have the right to issue and sell to Helena, from time to time, and Helena shall purchase from the Company, up to $15,000,000 of Common Stock, during the period commencing on May 9, 2025 and ending on the first day of the month immediately following the 36-month anniversary of May 9, 2025. The closing of each Advance and each sale and purchase of Common Stock related to each Advance (each, a “Closing”) shall take place on the applicable Settlement Date (as defined in the Helena Purchase Agreement), at a Purchase Price (as defined in the Helena Purchase Agreement) based on 95% of the lowest VWAP for the Common Stock, in respect of any Advance, during the three (3) trading days commencing on the date of Helena’s receipt of the shares of Common Stock relating to such Advance. In consideration for Helena’s execution and delivery of the Helena Purchase Agreement, the Company issued to Helena, as a commitment fee, shares of Common Stock (the “Commitment Fee Shares”), having an aggregate value of $150,000, of which (i) 71,572 shares were issued on May 14, 2025, and (ii) 71,572 shares were issued on August 11, 2025. The Commitment Fee Shares were fully earned as of the agreement date, and the issuance of the Commitment Fee Shares was not contingent upon any other event or condition. The number of the Commitment Fee Shares issued in each tranche was determined by dividing $75,000 by the lowest Volume Weighted Average Price (VWAP) of the Company’s common stock during the five trading days immediately preceding the agreement date. July 2025 Warrant On July 2, 2025, the Company issued a warrant to purchase 404,002 shares of Common Stock with an exercise price of $ 0.01 per share, subject to stockholder approval (the “July 2025 Warrant”), to David Lazar. This warrant was issued as compensation for services provided by David Lazar. In accordance with the accounting requirements of ASC 718, “Compensation—Stock Compensation,” and ASC 505-50, “Equity—Equity-Based Payments to Non-Employees,” the Company measured this equity instrument at fair value and recognized the compensation cost immediately on the grant date. Using the Black-Scholes option pricing model, with key inputs including a fair value of the underlying common stock of $ 2.67 , an exercise price of $ 0.01 per share, an expected term of 0.405 years, a risk-free interest rate of 4.33 % , expected volatility of 90 % , and a dividend yield of 0 % , the fair value of this warrant was determined to be $ 1,074,715 .55 as of July 2, 2025. On the grant date, the Company recognized the compensation expense with a corresponding credit to APIC. On November 12, 2025, David Lazar exercised the warrant through a cashless exercise mechanism. Pursuant to the cashless exercise, 402,347 shares of common stock were issued. The warrant was fully settled upon this exercise and no longer remains outstanding. Stock-Based Compensation On April 29, 2025, the Company entered into Director Agreements with two independent directors, pursuant to which each director is entitled to receive 100,000 shares of the Company’s common stock, provided they remain a director for one year from the effective date of the Director Agreements. The grant date for these equity awards was April 29, 2025, with a one-year service period ending on April 29, 2026. Compensation expense is recognized on a straight-line basis over the service period. For the year ended December 31, 2025, the Company recognized $122,667 of stock-based compensation expense related to these awards, representing the portion of the service period completed during 2025. This amount is recorded as an increase to additional paid-in capital and is included in general and administrative expenses in the consolidated statements of operations. F- 26 (13) INCOME TAXES The components of income (loss) before income taxes were as follows: Schedule of provision for income tax 2025 2024 Domestic $ ( 2,209,175 ) $ ( 4,235,494 ) Foreign 3,729,813 - Income (loss) before income taxes $ 1,520,638 $ ( 4,235,494 ) Income tax expense (benefit) consisted of: Schedule of income tax expense benefit Current Deferred Total Year Ended December 31, 2025: U.S. Federal $ - $ - $ - State and local - - - Foreign 448,204 - 448,204 $ 448,204 $ - $ 448,204 Year Ended December 31, 2024: U.S. Federal $ - $ - $ - State and local ( 11,216 ) - ( 11,216 ) Foreign - - - $ ( 11,216 ) $ - $ ( 11,216 ) The Company is subject to taxation in certain foreign jurisdictions. Earnings from non-U.S. activities are subject to local country income tax. Entity incorporated in Hong Kong is subject to Hong Kong Profits Tax at a rate of 8.25 % on the first HKD 2 million of assessable profits and at 16.5% thereon. There are no withholding taxes on the payment of dividends by entities incorporated in Hong Kong to their stockholders. Entities incorporated in Japan are subject to Japanese corporate income tax at an effective rate of approximately 37 % (including national and local taxes). For the year ended December 31, 2025, the Company recorded an income tax expense of $ 448,204 , consisting primarily of current Hong Kong Profits Tax of $698,799 attributable to the profitable operations of the Hong Kong subsidiary, net of an income tax benefit of $ 250,595 for the net operating loss incurred by the Japan subsidiary in December 2025. No income tax provision has been made for the U.S. corporation due to the net operating losses carryover, and no income tax benefit related to the net operating losses is recognized, as a full valuation allowance is established for the U.S. corporation. As of December 31, 2025, the balance of income tax payable of the Company was approximately $ 1.0 million, of which $ 0.5 million was related to the acquisition of HKG (see Note 4). The Company paid nil for income taxes for each of the year ended December 31, 2025 and 2024. F- 27 The principal components of deferred tax assets, net, were as follows: Schedule of deferred income tax assets As of December 31 2025 2024 Deferred income tax assets: Net operating loss and tax credit carry forwards 14,327,056 14,629,440 Stock compensation 25,762 - Total deferred income tax assets 14,352,818 14,629,440 Valuation allowance ( 14,352,818 ) ( 14,629,440 ) Net deferred tax assets $ - $ - As of December 31, 2025, the Company had Federal net operating loss (“NOL”) carryforwards of approximately 68.2 million, which are available to offset future taxable income. These NOL carryforwards expire in varying amounts beginning in 2026 through 2045. The Company has recorded a full valuation allowance against its deferred tax assets, as management has determined that it is more likely than not that the tax benefits associated with these deferred tax assets will not be realized. The valuation allowance changed by $ 276,622 during the year ended December 31, 2025, primarily due to the expiration of certain net operating loss carryforwards, the utilization of net operating loss carryforwards against taxable income generated during the year, and an increase in deferred tax assets related to share-based compensation recognized during the period. During the year ended December 31, 2024, the change in valuation allowance was primarily attributable to net operating losses incurred during the year and the expiration of certain net operating loss carryforwards. The differences between income taxes expected at the U.S. federal statutory income tax rate and income taxes reported were as follows: Schedule of reconciliation of federal statutory tax rate 2025 $ % Income before income taxes $ 1,520,638 U.S. Federal Statutory Tax Rate 319,334 21.0 % Foreign Tax Effects Hong Kong Statutory tax rate difference between Hong Kong and United States ( 220,262 ) - 14.5 % Japan Statutory tax rate difference between Japan and United States ( 108,220 ) - 7.1 % Other ( 6,575 ) - 0.4 % Effect of Cross-Border Tax Laws Global intangible low-taxed income 917,111 60.3 % Changes in Valuation Allowances ( 276,622 ) - 18.2 % Other Adjustments ( 176,562 ) - 11.6 % Effective Tax Rate $ 448,204 29.5 % F- 28 The material jurisdictions where the Company is subject to potential examination by tax authorities include the U.S., Hong Kong and Japan. Tax years after 2021 remain subject to examination for both U.S. Federal and state tax reporting purposes. For the Company’s Hong Kong subsidiary, which was established in March 2025, all tax years since its incorporation remain subject to examination. For the Company’s Japanese subsidiary, which was established in October 2024 and acquired in November 2025, all tax years since its incorporation remain subject to examination. (14) SUBSEQUENT EVENTS The Company has evaluated subsequent events from December 31, 2025 through the date of this filing and has determined that there are no additional events requiring recognition or disclosure in the financial statements except for the events as disclosed below: Private Placement On January 30, 2026, the Company entered into a securities purchase agreement with certain accredited investors for the sale and issuance of 394,476 shares of the Company’s common stock in a private placement. The shares were sold at a price of $ 5.07 per share, resulting in expected gross proceeds of approximately $ 2.0 million, before deducting offering expenses. The Company intends to use the net proceeds for potential future acquisitions and general corporate purposes. The closing of the private placement is expected to occur no later than 60 calendar days following January 30, 2026. In connection with the private placement, the Company has agreed to file a resale registration statement with the SEC covering the shares within 60 days of the closing of the transaction. F- 29 ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE The information required by this Item was previously reported in the Company’s Current Report on Form 8-K filed with the SEC on July 16, 2025.