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Item 2. Management’s Discussion and Analysis

2026-04-30 compared with 2025-11-12 · 115 added, 159 removed, 95 unchanged (74% of the section changed)

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The following discussion of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form 10-Q and with our audited consolidated financial statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025.

This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995, and involves numerous risks and uncertainties.

This discussion contains forward-looking statements within the meaning of Section 27A of the Securities Act, Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995, and involves numerous risks and uncertainties.

Forward-looking statements may include, among others, statements relating to our ability to predict revenue and reduce costs related to our products or service offerings, our ability to forecast product and services sales volumes, the sufficiency of our capital resources and the availability of debt and equity financing, the continuing impact of uncertain global economic conditions on the demand for our products and services, our ability to maintain and scale adequate and secure software platform infrastructure, the impact of competition on demand for our products and services, our competitive position, our future financial position and results of operations, and our ability to grow in new and existing markets.

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general economic conditions, including any impact from inflation;

current geopolitical conditions including conflicts in the Middle East, the ongoing Russia-Ukraine War and geopolitical tensions between China and Taiwan;

our ability to successfully implement our business strategy;

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We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events or otherwise, except as otherwise required by law.

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 Software as a Service (“SaaS”) operations as a digital service provider focused on integrating artificial intelligence and data analytics into content creation and brand management.

We historically delivered comprehensive WiFi/SaaS 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 artificial intelligence (AI), hardware, and the Internet of Things (IoT).

These acquisitions will enable us to strengthen our technological capabilities and expand our market presence.

Additionally, we are exploring entry into the Multi-Channel Network (MCN) business.

Our goal is to serve as a bridge between influencers and the global market, facilitating valuable connections and expanding our reach in this rapidly evolving digital space.

In line with our growth strategy, we are also targeting potential acquisitions in key sectors such as AI, hardware, and the Internet of Things (IoT).

The acquisitions completed in 2025 have enabled us to strengthen our technological capabilities and expand our market presence.

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 for a given product depends on a number of factors, including the type of customer to whom we were selling.

The gross margin for products sold to retailers is generally higher than for some of our other customers;

however, the cost of sales, support, returns, and other overhead costs associated with our products sold to retailers is generally higher than for some of our other customers.

Our future growth is largely dependent on our ability to acquire new customers, which is crucial for expanding our SaaS operations.

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 vary based on project complexity;

and digital authentication services, which leverage 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.

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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 SaaS offerings.

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.

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Results of Operations

The Company continues to experience losses, which in part is due to costs related to our new SaaS operating platform launched in Q1 2025.

In the three and nine months ended September 30, 2025 and 2024, we generated net sales of $2 million and $0, respectively, and $2 million and $640 thousand, respectively.

The following table sets forth certain financial data derived from our condensed consolidated statements of operations for the three and nine months ended September 30, 2025 and 2024, presented in absolute dollars and as a percentage of net sales, with dollars and percentage change period over period:

The following table sets forth certain financial data derived from our condensed consolidated statements of operations for the three months ended March 31, 2026 and 2025, presented in absolute dollars and as a percentage of revenues, with dollars and percentage change period over period:

Three months ended

Nine Months Ended

September 30,

Cost of sales

Cost of revenue

Operating expenses:

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Research and development

Vendor liability forgiveness, net of asset transfers

Total operating expenses

Operating income (loss)

Total other expense

Total other income (expense)

Income (loss) before income taxes

Net income (loss)

Comparison of the three and nine months ended September 30, 2025 to the three and nine months ended September 30, 2024

The following table sets forth our revenues by product and the changes in revenues for the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024:

Comparison of the three months ended March 31, 2026 to the three months ended March 31, 2025

The following table sets forth our revenues by product and the changes in revenues for the three months ended March 31, 2026, as compared to the three months ended March 31, 2025:

Three Months Ended

Nine Months Ended

September 30,

Cable modems & gateways

Other network products

SaaS – MCN digital services

Software services

The majority of the Company’s revenues by geographic area are earned in North America for the three and nine months ended September 30, 2024.

For the three and nine months ended September 30, 2025, the Company recognized revenue under MCN service agreements executed commencing in March 2025, which governs content creation, account operations, and commercial monetization services, along with revenue from customized software R&D contracts signed beginning in July 2025.

Our net sales increased by $2 million for the three months ended September 30, 2025 compared to the three months ended September 30, 2024.

The increase in net sales primarily reflects the Company’s strategic transition from legacy hardware operations to software-as-a-service (SaaS) solutions, with a new business focus on integrating artificial intelligence and big data into content creation and brand management.

Notably, during March 2025, the new Company successfully secured its first customer orders and generated initial sales, marking a critical milestone in the strategic pivot.

Digital authentication services

Our revenues increased by $2.1 million for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.

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 September 30, 2025,

the Company onboarded 528 customers, corresponding to service fees totaling $4.24 million, of which $1.80 million was recognized as revenue.

Building on this momentum, the

Company introduced customized software services in July 2025.

As of September 30, 2025, the Company had secured contracts totaling $480

thousand for customized software services, a portion of which was recognized as revenue in the current period based on the progress of

As of September 30, 2025, it had successfully signed contracts with 11 customers for these services, with related accounts

receivable amounting to $187,347.

Cost of Sales, Gross Margin and Gross Profit (Loss)

Cost of sales 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 sales 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;

and costs attributable to the provision of service offerings.

The increase in gross profit was attributable to lower sales in 2024, largely resulting from 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 goods sold 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 net sales and gross margin, for the periods indicated:

As of March 31, 2026, we onboarded approximately 818 customers, corresponding to SaaS – MCN digital service fees totaling $6.9 million, of which $6.4 million was recognized as revenue cumulatively, including $1.1 million recognized in the three months ended March 31, 2026.

Building on this momentum, we introduced customized software services in July 2025.

As of March 31, 2026, we secured contracts totaling $1.5 million for software services, a portion of which was recognized as revenue in the three months ended March 31, 2026 in accordance with the relevant revenue recognition models (over time or at a point in time, as applicable).

During the three months ended March 31, 2026, we added five new customers, bringing the total number of customers for these services to 17 as of March 31, 2026.

The related accounts receivable balance as of March 31, 2026 was $1.0 million.

Through the acquisition of HGK in November 2025, we added the ability to provide digital authentication services.

As of March 31, 2026, this business had generated cumulative revenue of $768 thousand, including $439 thousand recognized in the three months ended March 31, 2026, serving five corporate clients and 52 individual clients in total, with related accounts receivable amounting to $0.4 million.

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 three months ended March 31, 2026 consisted primarily of direct labor costs;

amortization of certain acquired intangible assets and software development costs;

outsourced authentication service costs;

and other costs attributable to the provision of service offerings.

Cost of revenue for the three months ended March 31, 2025 consisted primarily of the cost of direct labor.

The increase in gross profit was attributable to higher revenue in the three months ended March 31, 2026.

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:

Three Months Ended

Nine Months Ended

September 30,

Gross profit increased in the nine months ended September 30, 2025, compared to the same period in the prior fiscal year, primarily due to a notable turnaround in the Company’s profitability profile during the third quarter.

The first half of 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 profit margin was primarily contributed by the MCN digital services revenue stream.

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 the nine-month period.

The gross margin for the three and nine months ended September 30, 2025 is not representative of future trends, as the new business was in its initial launch phase during this period, incurring elevated upfront costs associated with market entry, product deployment, and operational ramp-up.

Forecasting gross margin percentages is difficult, and there are several risks related to our ability to maintain or improve our current gross margin levels.

Our cost of goods sold, as a percentage of net sales, can vary significantly based upon factors such as:

uncertainties surrounding revenue volumes, including future pricing and/or potential discounts as a result of the economy, competition, the timing of sales, and related production level variances;

and changes in technology components.

Cost of revenue

Gross margin increased significantly in the three months ended March 31, 2026, compared to the three months ended in the prior fiscal year period.

In the three months ended March 31, 2025, the Company had just launched its SaaS-based MCN digital services in March 2025 and had not yet introduced customized software services or digital authentication services, resulting in minimal revenue and negative gross profit.

the full-year development of our MCN digital services, the introduction of customized software services in July 2025, and the

acquisition of HGK in November 2025 adding digital authentication services beginning in December 2025, the Company has

transitioned to a higher-margin business model.

The improvement in gross margin was primarily driven by our MCN digital services,

which leverage AI and data analytics to reduce reliance on manual labor, resulting in higher margins compared to traditional service

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.

Selling and marketing expenses consist primarily of business promotion and corporate publicity expenses.

The following table presents sales and marketing expenses for the periods indicated:

Three Months Ended

Nine Months Ended

September 30,

Selling and marketing

Selling and marketing expenses increased by $32 thousand and decreased by $17 thousand in the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, primarily due to reductions in sales support costs in 2024 and lower operational scale during the initial phases of business development in 2025.

For the remainder of the fiscal year 2025, we expect our selling and marketing expenses to fluctuate depending on sales levels achieved as certain expenses, such as commissions, and are determined based upon the net sales achieved.

Forecasting selling and marketing expenses is highly dependent on expected net sales levels and could vary significantly depending on actual net sales achieved in any given quarter.

Marketing expenses may also fluctuate depending upon the timing, extent and nature of marketing programs.

Sales and marketing expenses increased by $34 thousand in the three months ended March 31, 2026, compared to the three months ended in the prior fiscal year period, primarily due to the Company’s business transformation.

For the three months ended March 31, 2026, selling and marketing expenses primarily reflected costs related to the expansion of our three core business lines—MCN digital services, software development services, and digital authentication services—as well as corporate branding initiatives.

For the three months ended March 31, 2025, the Company had just launched its new business lines and had not yet incurred any selling and marketing expenses.

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.

General and administrative expenses consist of salaries and related expenses for executives, finance and accounting, human resources, information technology (“IT”), professional fees, facility allocations, and other general corporate expenses.

The following table presents general and administrative expenses, for the periods indicated:

Three Months Ended

Nine Months Ended

September 30,

General and administrative

General and administrative expenses increased by $1.09 million and increased by $450 thousand in the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024, primarily due to the reallocation of our business operation from hardware - focus to software - focus and cost reduction effort in 2024, which significantly reduced expenses associated with personnel, administrative support, and related infrastructure.

Expenses from new SaaS business launched in Q1 2025 remained within projected budget for market-entry initiatives during its startup phase.

The warrant issuance to Mr.

Lazar accounted for approximately $1.07 million in stock-based compensation expenses in Q3 2025, representing over 98.5% of the total increase in general and administrative expenses for the three-month period.

General and administrative expenses increased by $656 thousand, or 192.8%, to $997 thousand for the three months ended March 31, 2026, compared to $340 thousand for the three months ended March 31, 2025.

The increase was primarily attributable to certain non-recurring professional service fees incurred during the quarter, including legal and advisory fees related to strategic initiatives.

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.

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Three Months Ended

Nine Months Ended

September 30,

Research and development

Research and development expenses decreased by $0 thousand and $66 thousand in the three and nine months ended September 30, 2025, as compared to the three and nine months ended September 30, 2024.

The R&D expense incurred in 2025 were primarily used for 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 net sales, depending on actual net sales achieved in any given year.

In 2025, we entered into a collaboration with a new vendor to develop the “FiEE All-in-One Media Operations SaaS Platform”, which is designed to provide content creation, multi-platform publishing, data analytics, and collaboration tools for media teams and individual creators.

The total contract price is $300 thousand, as of September 30, 2025, payable under the contract is $180 thousand.

Development costs incurred for internal-use software are capitalized only during the application development stage.

Research and development expenses increased by approximately $7 thousand in the three months ended March 31, 2026, compared to the three months ended in the prior fiscal year period.

The increase primarily reflects ongoing enhancements and optimizations to our system during the current period.

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.

Liquidity and Capital Resources

Our principal sources of liquidity are cash and cash equivalents.

As of September 30, 2025, we had cash and cash equivalents of $6 million as compared to $30 thousand on December 31, 2024.

On September 30, 2025, we had no borrowings outstanding and working capital of $2 million.

We have funded our operations and financing activities primarily through sale of our preferred stock and common stock.

The Company’s ability to maintain adequate levels of liquidity depends in part on our ability to generate cash from operations and its ability to raise additional funds through equity or debt financing.

The Company is evaluating options related to its liquidity.

The Company will continue to monitor its costs in relation to its sales and adjust its cost structure accordingly.

The Company’s operations have historically been primarily 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 $95.3 million.

The Company began generating operating profit in the fourth quarter of 2025 and has continued to do so thereafter During the three months ended March 31, 2026, the Company reported a net income of $352 thousand.

As of March 31, 2026, we had cash of $4.6 million as compared to $3.1 million on December 31, 2025.

On March 31, 2026, we had no outstanding borrowings and a positive working capital of $3.3 million.

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;

(1) cash used for operating activities such as personnel costs, cost of services, general office expenses, professional service fees, and other working capital needs;

(2) cash used for research and development and sales and marketing initiatives;

(3) capital expenditures related to the acquisition of property, equipment and software;

(4) cash used to repay our debt obligations and related interest expense;

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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 September 30, 2025 were prepared under the assumption that we will continue as a going concern.

Our condensed consolidated financial statements as of March 31, 2026 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 12 months.

Our consolidated financial statements as of September 30, 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.

Our condensed consolidated financial statements as of March 31, 2026 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.

The following table presents our cash flows for the periods presented:

Nine Months Ended

September 30,

Three Months Ended

Cash provided by (used in) operating activities

Cash used in investing activities

Cash provided by (used in) financing activities

Cash provided by financing activities

Effect of foreign exchange rate changes on cash

Net increase (decrease) in cash and cash equivalents

Net increase (decrease) in cash

Cash Flows from Operating Activities.

Cash provided by operating activities of $2.5 million during the nine months ended September 30, 2025 reflected our net loss of $1.3 million, adjusted for non-cash expenses, consisting primarily of $260 thousand in depreciation and amortization expense.

Uses of cash included increase in other receivables of $431 thousand, accounts receivable of $187 thousand.

Sources of cash included an increase of contract liabilities of $2.5 million.

Cash used from operating activities of $3.8 million during the nine months ended September 30, 2024 reflected our net loss of $4.4 million, adjusted for non-cash expenses, consisting primarily of $432 thousand of stock-based compensation expense, $313 thousand in depreciation and amortization expense, and $2.2 million in vendor forgiveness, net of asset transfers.

Uses of cash included a decrease in accounts payable of $3.1 million and accrued expenses of $394 thousand.

Sources of cash included primarily a decrease of accounts receivable of $731 thousand and inventories of $404 thousand.

Cash provided by operating activities of $67 thousand during the three months ended March 31, 2026 reflected our net income of $352 thousand, adjusted for non-cash expenses, consisting primarily of $344 thousand in depreciation and amortization expense.

Sources of cash were primarily from decreases in other receivables of $1.1 million and increases in accounts payable of $106 thousand.

Uses of cash were primarily from increases in accounts receivable of $1.0 million, decreases in contract liabilities of $829 thousand, and decreases in income tax payable of $116 thousand.

Cash used in operating activities of $371 thousand during the three months ended March 31, 2025 reflected our net loss of $374 thousand, adjusted for non-cash expenses, consisting primarily of $60 thousand in depreciation and amortization expense.

Uses of cash included a decrease in accounts payable of $43 thousand and other assets of $88 thousand.

Sources of cash included decrease of prepaid expenses and other current assets of $40 thousand.

Cash Flows from Investing Activities.

During the nine months ended September 30, 2025, $906 thousand was used to purchase intangible assets and equipment.

During the nine months ended September 30, 2024, the Company had no cash flows generated or used by investing activities.

During the three months ended March 31, 2026, cash used in investing activities consisted of $0.5 million for the purchase of property.

During the three months ended March 31, 2025, the Company had no cash flows generated or used by investing activities.

Cash Flows from Financing Activities.

Cash provided from financing activities during the nine months ended September 30, 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 from financing activities during the nine months ended September 30, 2024 consisted of proceeds from the issuance of preferred stock of $2.8 million and issuance of common stock of $465 thousand .

Cash provided from financing activities during the three months ended March 31, 2026 consisted of gross proceeds from issuance of Common Stock of $2.0 million, partially offset by payment of deferred financing costs of $25 thousand.

Cash provided from financing activities during the three months ended March 31, 2025 primarily consisted of proceeds from the issuance of convertible note of $300 thousand.

Future Liquidity Needs

Our primary short-term needs for capital, which are subject to change, include expenditures related to:

upgrades to our information technology infrastructure to enhance our capabilities and improve overall productivity;

Our primary short-term needs for capital, which are subject to change, include:

upgrades to our IT infrastructure to enhance our capabilities and improve overall productivity;

support of our commercialization efforts related to our current and future products, including expansion of our direct sales force and field support resources;

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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 September 30, 2025, we believe our current cash and cash equivalents may not 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 or contain expenditures and increase revenues.

At March 31, 2026, we do not believe our current cash will be sufficient to fund working capital requirements, capital expenditures and operations during the next 12 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.

The Company will continue to monitor its costs in relation to its sales and adjust accordingly.

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.

Our ability to fund our longer-term cash needs is subject to various risks, many of which are beyond our control.

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 favorable to us, if at all.

At September 30, 2025, we have Federal net operating loss carry forwards of approximately $90.6 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 September 30, 2025 and December 31, 2024, we recorded a full valuation allowance against our net deferred tax assets.

To support the Company’s strategic transition to SaaS solutions and the scaling of its AI-driven platform, management anticipates requiring approximately $10 million in total funding over the next 3 years.

The Company plans to allocate $3.0 million in 2025 to fund critical infrastructure development and initial operational scaling, laying the foundation for its SaaS transition, $4.0 million in 2026 to develop AI technology for content, build fan community and membership system, and $3.0 million in 2027 to enhance our SaaS system, and develop robust security for other IP protection technologies.

To provide for such liquidity needs over the next 3 years, on May 9, 2025, the Company entered into a Purchase Agreement with Helena Global Investment Opportunities I Ltd.

(Helena Global Investment Opportunities I Ltd., “Helena”, and such purchase agreement, “Helena Purchase Agreement”) 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 the Common Stock.

Unless terminated earlier pursuant to Section 11.02 of the Helena Purchase Agreement, at any time between May 9, 2025 and the first day of the month next following the 36-month anniversary of May 9, 2025, the Company may require Helena to purchase Common Stock by delivering an Advance Notice to Helena and, in its sole discretion, select the amount of the Advance, not to exceed the Maximum Advance Amount, it desires to issue and sell to Helena in each Advance Notice and the time it desires to deliver each Advance Notice.

In no event shall the number of shares of Common Stock issuable to Helena pursuant to an Advance 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 under the Helena Purchase Agreement to exceed 9.99% of the then issued and outstanding Common Stock.

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, at a Purchase Price 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 shall issue or cause to be issued to Helenna, as a commitment fee, shares of Common Stock, having an aggregate value of $150,000, of which (i) $75,000 of such shares were issued on May 14, 2025, and (ii) $75,000 of such shares were issued on August 11, 2025.

As of March 31, 2026, we have U.S.

federal net operating loss carry forwards of approximately $66.8 million available to reduce future U.S.

federal taxable income.

A valuation allowance has been established for the full amount of deferred tax assets recognized in our U.S.

entity as management has concluded that it is more-likely than-not that the benefits from such assets will not be realized.

As a result, as of March 31, 2026 and December 31, 2025, we recorded a valuation allowance against our net deferred tax assets to the extent that such assets were recognized in our U.S.

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 intellectual property 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 the Helena 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.

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, the Company entered into the 2026 Purchase Agreement with the Purchasers, pursuant to which the Company agreed to sell the Shares at an offering price of $5.07 per Share.

The sales made pursuant to the 2026 Purchase Agreement are exempt from the registration requirements of the Securities Act of 1933, as

amended (the “Securities Act”), pursuant to the exemption for transactions by an issuer not involving any public offering

under Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D of the Securities Act.

The Closing occurred on March 31, 2026.

Commitments and Contractual Obligations

During the nine months ended September 30, 2025, except as otherwise disclosed in this Form 10-Q, there were no material changes to our capital commitments and contractual obligations from those disclosed in our Form 10-K for the year ended December 31, 2024.

During the three months ended March 31, 2026, except as otherwise disclosed in this Quarterly Report on Form 10-Q, there were no material changes to our capital commitments and contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.

Off-Balance Sheet Arrangements

We did not have any material off-balance sheet arrangements as of September 30, 2025.

See Note 5 to the accompanying consolidated financial statements for additional disclosure.

We did not have any material off-balance sheet arrangements as of March 31, 2026.

See Note 6 to the accompanying condensed consolidated financial statements for additional disclosure.

Recent Accounting Standards

See Note 2 Summary of Significant Accounting Policies, in Notes to Unaudited Consolidated Financial Statements in Item 1 of Part 1 of this Report on 10-Q, 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.

See Note 2 to the accompanying condensed consolidated financial statements, 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.

Our condensed consolidated financial statements are prepared in accordance with U.S.

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.

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Our management evaluates its estimates, assumptions and judgments on an ongoing basis.

Our critical accounting policies and estimates, which are revenue recognition, product returns, inventory valuation and costs of goods sold, warrants, valuation of deferred tax assets are described under “Critical Accounting Policies and Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2024.

For the three and nine months ended September 30, 2025, the Company’s critical accounting policies are revenue recognition, and no critical accounting estimates were identified.

Our critical accounting policy is revenue recognition, and no critical accounting estimates were identified, as described under “Critical Accounting Policies and Estimates” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10‑K for the year ended December 31, 2025.

For the three months ended March 31, 2026, the Company’s critical accounting policy remains revenue recognition, and no critical accounting estimates were identified.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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What changed 10-Q

Item 2. Management’s Discussion and Analysis