TEN Holdings, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis should be read in conjunction with the consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form 10-Q. Forward-Looking Statements This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 175 promulgated thereunder, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 3b-6 promulgated thereunder. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to: any projections of earnings, revenue, or other financial items; any statements regarding the adequacy, availability, and sources of capital, any statements of the plans, strategies, and objectives of management for future operations; any statements concerning proposed new products, services, or developments; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may,” “might,” “will,” “should,” “would,” “could,” “likely,” “estimate,” “intend,” “continue,” “future,” “potential,” “believe,” “expect,” “plan,” “project,” “target,” “forecast,” “outlook,” or “anticipate,” and other similar words or phrases. In addition to any assumptions and other factors and matters referred to specifically in connection with such forward-looking statements, factors that could cause actual results or outcomes to differ materially from those contained in the forward-looking statements include those factors set forth in the “Risk Factors” section included in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the Securities Exchange Commission (the “SEC”) on March 28, 2025 (the “Annual Report”) . Although we believe that the expectations reflected in our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed. Our future financial condition and results of operations, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties, such as those disclosed in this Quarterly Report on Form 10-Q. We do not intend, and undertake no obligation, to update any forward-looking statement, except as required by law. The information included in this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited condensed consolidated financial statements and the notes included in this Quarterly Report on Form 10-Q, and the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Annual Report. Business Overview We are a provider of event planning, production, and broadcasting services headquartered in Pennsylvania. We mainly produce virtual and hybrid events and physical events. Virtual and hybrid events involve virtual and hybrid event planning, production and broadcasting services, and continuing education services, all of which are supported by our proprietary Xyvid Pro Platform. Physical events were added to our revenue streams, due to our corporate restructuring completed in fiscal year 2023, and mainly involve live streaming and video recording of physical events. As of the date of this Quarterly Report on Form 10-Q, we primarily generate revenue from virtual and hybrid events delivered to corporate customers. We experienced an increase in our total revenue in the third quarter of fiscal year 2025, mainly due to a higher demand in physical events during the period vs the same period last year. For the nine months ended September 30, 2025 and 2024, we had total revenue of approximately $543,000 and $535,000, respectively, and net loss of approximately $1,987,000 and $975,000, respectively. For the nine months ended September 30, 2025 and 2024, the revenue generated from virtual and hybrid events was approximately $2,059,000 and $2,462,000, respectively, accounting for approximately 86% and 92% of our total revenue, respectively; and the revenue generated from physical events was approximately $339,000 and $224,000, respectively, accounting for approximately 14% and 8% of our total revenue, respectively. Our mission is to deliver top-tier planning, production, and broadcasting services for virtual, hybrid and physical events. Our goal is to become a global leader in innovative virtual events that enhance engagement and connectivity, making impactful and memorable experiences accessible to all. 21 Key Financial Performance Indicators Revenue Our revenue is derived from the provision of virtual and hybrid events and physical events on our Xyvid Pro Platform. Cost of revenue Our cost of revenue is primarily driven by the costs paid to our employees for producing events and the costs of renting equipment and our studio. Selling, general and administrative expenses Selling, general and administrative expenses are primarily composed of personnel costs for sales and marketing staff and general corporate functions, computer and software costs, and advertising and marketing expenses. We expect general and administrative expenses to fluctuate as a result of operating as a public company. Operating profit and operating profit margin Operating profit is the difference between our revenue and cost of revenue and selling, general and administrative expenses. Operating profit margin is the profit margin as a percentage of revenue. Other income (expenses) From time to time, we have non-recurring, non-operating gains and losses which are reflected through other income (expense) such as gains/losses of assets, non-cash valuation adjustments related to the 3(a)(10), impairment and or write-offs of investments. Interest expenses Interest expenses consist of interest expenses arising from borrowings. 22 Results of Operations Comparison of Results of Operations for the three months ended September 30, 2025 and 2024 The following table sets forth our statements of operations for the three months ended September 30, 2025 and 2024: (in thousands, except change % data) Three Months Ended September 30, Change (2025 vs. 2024) 2025($) 2024($) $ YoY % Revenues Delivered events - Virtual and Hybrid 491 490 1 0.2 % Delivered events - Physical 52 45 7 15.6 % Total Revenues 543 535 8 1.5 % Cost of revenues 138 109 29 26.6 % Gross Profit 405 426 (21 ) (4.9 )% Operating expenses: Selling, General and Administrative Expenses 2,185 1,311 874 66.7 % Depreciation expenses 147 14 133 950.0 % Total operating expenses 2,332 1,325 1,007 76.0 % Loss from operations (1,927 ) (899 ) (1,028 ) 114.3 % Other expenses, net (1 ) (23 ) 22 (95.7 )% Interest expenses (59 ) (62 ) 3 (4.8 )% Loss before income taxes (1,987 ) (984 ) (1,003 ) 101.9 % Income tax credit - (9 ) 9 (100.0 )% Net Loss (1,987 ) (975 ) (1,012 ) 103.8 % Revenue Revenue increased by $8,000, or 1.5%, to $543,000. The increase was primarily driven by following factors: ● Revenue from delivered events – Virtual and Hybrid decreased by $1 8 ,000 mainly due to events shifting out of the current quarter due to shifting in event timelines from our customers. ● Revenue from delivered events – physical events increased by $2 6 ,000, mainly due to a large number of physical events taking place in the quarter from our clients allowing us to recognize all of the revenue within the period. Cost of Revenue Cost of revenue increased by $29,000, or 26.6%, to $138,000, reflecting the increase amount of physical events that took place within the period since it has a larger labor component then virtual events. Selling, General and Administrative Expenses (“SG&A expenses”) SG&A expenses increased by $874,000, or 66.7%, to $2,185,000, due to additional company related expense due to being a public entity which was not the case during the same period last year. Expenses such as quarterly reviews and yearly audits, NASDAQ fees, D&O insurance, and SEC legal expenses. Depreciation Expense Deprecation expense increased by $133,000 to $147,000 due to the continued development of Xivid Pro. Other Income (Expense), net Other expense decreased by $22,000, or 95.7%, to $1,000, primarily due to no one time items taking place in the quarter. 23 Interest Expenses Interest expenses decreased by $3,000, or 4.8%, to $59,000, primarily due to the lower outstanding short-term loans during the three months ended September 30, 2025. Net Loss As a result of the foregoing, the net loss was $1,987,000 during the three months ended September 30, 2025 compared to the net loss of $975,000 during the three months ended September 30, 2024. Non-GAAP Financial Measures Non-GAAP Net Loss and Non-GAAP Net Loss per Share We define non-GAAP net loss as GAAP net loss excluding the impact of stock-based compensation expense. Non-GAAP net loss per share is calculated by dividing non-GAAP net loss by the diluted weighted average shares of common stock outstanding. Our management believes non-GAAP net loss and non-GAAP net loss per share are key performance measures and uses such measures to evaluate our operating performance. Accordingly, we believe that the presentation of these adjusted operating results provides useful supplemental information to investors and facilitates the analysis and comparison of our operating results across reporting periods. Our calculation of non-GAAP net loss and non-GAAP net loss per share may differ from similarly titled non-GAAP measures, if any, reported by our peer companies and therefore may not serve as an accurate basis of comparison among companies. Non-GAAP net loss and non-GAAP net loss per share should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Three Months Ended September 30, 2025 2024 (in thousands, except share data) Net Loss $ (1,987 ) $ (975 ) Stock-based compensation expense 2 - Non-GAAP net loss $ (1,985 ) $ (975 ) Weighted-average number of shares of common stock outstanding used to compute net loss per share, basic and diluted 20,567,937 25,000,000 Net loss per share - basic and diluted $ (0.10 ) $ (0.04 ) Non-GAAP net loss per share - basic and diluted $ (0.10 ) $ (0.04 ) Adjusted EBITDA Adjusted EBITDA is a key measure used by our management to help us analyze our financial results, establish budgets and operating goals for managing our business, evaluate our performance and make strategic decisions. Accordingly, we believe that the presentation of Adjusted EBITDA is useful supplemental information to investors and facilitates the analysis and comparison of our operating results across reporting periods. Our calculation of Adjusted EBITDA may differ from similarly titled non-GAAP measures, if any, reported by our peer companies and therefore may not serve as an accurate basis of comparison among companies. Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. We define Adjusted EBITDA as our net loss excluding: (i) interest expense, (ii) provision for income taxes, (iii) depreciation and amortization, (iv) other expense (income), and (v) stock-based compensation expense. 24 The following table provides a reconciliation of net loss to Adjusted EBITDA: Three Months Ended September 30, 2025 2024 (in thousands) Net loss $ (1,987 ) $ (975 ) Interest expenses 59 62 Provision for income taxes - (9 ) Depreciation and amortization 147 14 Other expenses 1 23 Stock-based compensation expenses 2 - Adjusted EBITDA $ (1,778 ) $ (885 ) Comparison of Results of Operations for the nine months ended September 30, 2025 and 2024 The following table sets forth our statements of operations for the nine months ended September 30, 2025 and 2024: (in thousands, except change % data) Nine Months Ended September 30, Change (2025 vs. 2024) 2025($) 2024($) $ YoY % Revenues Delivered events - Virtual and Hybrid 2,059 2,462 (403 ) (16.4 )% Delivered events - Physical 339 224 115 51.3 % Total Revenues 2,398 2,686 (288 ) (10.7 )% Cost of revenues 499 534 (35 ) (6.6 )% Gross Profit 1,899 2,152 (253 ) (11.8 )% Operating expenses: Selling, General and Administrative Expenses 9,504 3,759 5,745 152.8 % Depreciation expenses 443 41 402 980.5 % Total operating expenses 9,947 3,800 6,147 161.8 % Loss from operations (8,048 ) (1,648 ) (6,400 ) 388.3 % Other income (expenses), net (1,351 ) (26 ) (1,325 ) 5,096.2 % Interest expenses (208 ) (136 ) (72 ) 52.9 % Loss before income taxes (9,607 ) (1,810 ) (7,797 ) 430.8 % Income tax credit - (9 ) 9 (100.0 )% Net Loss (9,607 ) (1,801 ) (7,806 ) 433.4 % 25 Revenue Revenue decreased by $288,000, or 10.7%, to $2,398,000. The decrease was primarily driven by following factors: ● Revenue from delivered events – Virtual and Hybrid decreased by $403,000 mainly due to an event series with our biggest customer that took place in the three-month ended March 31, 2024, but did not repeat in the three month ended March 31, 2025. This event is held by our biggest customer every other year. ● Revenue from delivered events – physical events increased by $115,000, mainly due to a significant amount of more deals closed and delivered within the period vs the same time period last year. Cost of Revenue Cost of revenue decreased by $3 5 ,000, or 6.6%, to $499,000, reflecting the lower direct costs associated with the lower revenue during the nine months ended September 30, 2025. Selling, General and Administrative Expenses SG&A expenses increased by $5,7 45 ,000, or 152.8%, to $9,504,000, primarily due to $3,500,000 of stock compensation expenses along with additional expenses of being a public company. Deprecation expense increased by $40 2 ,000 to $44 3 ,000 due to the continued development of Xivid Pro. Other Income (Expense), net Other expense increased by $1,32 5 ,000, or 5,096.2%, to $1,351,000, primarily due to expenses in connection with entry into the Settlement Agreement during the nine months ended September 30, 2024. Interest Expenses Interest expenses increased by $7 2 ,000, or 52.9%, to $2 08 ,000, primarily due to the increase in short-term loans during the nine months ended September 30, 2025. Net Loss As a result of the foregoing, the net loss was $9,607,000 during the nine months ended September 30, 2025 compared to the net loss of $1,801,000 during the nine months ended September 30, 2024. Non-GAAP Financial Measures Non-GAAP Net Loss and Non-GAAP Net Loss per Share We define non-GAAP net loss as GAAP net loss excluding the impact of stock-based compensation expense. Non-GAAP net loss per share is calculated by dividing non-GAAP net loss by the diluted weighted average shares of common stock outstanding. Our management believes non-GAAP net loss and non-GAAP net loss per share are key performance measures and uses such measures to evaluate our operating performance. Accordingly, we believe that the presentation of these adjusted operating results provides useful supplemental information to investors and facilitates the analysis and comparison of our operating results across reporting periods. Our calculation of non-GAAP net loss and non-GAAP net loss per share may differ from similarly titled non-GAAP measures, if any, reported by our peer companies and therefore may not serve as an accurate basis of comparison among companies. Non-GAAP net loss and non-GAAP net loss per share should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Nine Months Ended September 30, 2025 2024 (in thousands, except share data) Net Loss $ (9,607 ) $ (1,801 ) Stock-based compensation expense 3,517 - Non-GAAP net loss $ (6,090 ) $ (1,801 ) Weighted-average number of shares of common stock outstanding used to compute net loss per share, basic and diluted 31,095,401 25,000,000 Net loss per share - basic and diluted $ (0.31 ) $ (0.07 ) Non-GAAP net loss per share - basic and diluted $ (0.20 ) $ (0.07 ) Adjusted EBITDA Adjusted EBITDA is a key measure used by our management to help us analyze our financial results, establish budgets and operating goals for managing our business, evaluate our performance and make strategic decisions. Accordingly, we believe that the presentation of Adjusted EBITDA is useful supplemental information to investors and facilitates the analysis and comparison of our operating results across reporting periods. Our calculation of Adjusted EBITDA may differ from similarly titled non-GAAP measures, if any, reported by our peer companies and therefore may not serve as an accurate basis of comparison among companies. Adjusted EBITDA should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. We define Adjusted EBITDA as our net loss excluding: (i) interest expense, (ii) provision for income taxes, (iii) depreciation and amortization, (iv) other expense (income), and (v) stock-based compensation expense. 26 The following table provides a reconciliation of net loss to Adjusted EBITDA: Nine Months Ended September 30, 2025 2024 (in thousands) Net loss $ (9,607 ) $ (1,801 ) Interest expenses 2 08 136 Provision for income taxes - (9 ) Depreciation and amortization 443 41 Other expenses 1,351 26 Stock-based compensation expenses 3,517 - Adjusted EBITDA $ (4,088 ) $ (1,607 ) Liquidity and Capital Resources Sources of Liquidity Our primary liquidity needs for the next 12 months and beyond will include cash to (i) provide capital to facilitate the growth of our business, (ii) pay our short-term debt obligations, as discussed in the notes to the consolidated financial statements, and (iii) pay our operating expenses. As of September 30, 2025 and December 31, 2024, we had cash of $310,000 and $48,000, respectively. Liquidity is a measure of our ability to meet potential cash requirements. We generally fund our operations with cash flow from operations, and, when needed, borrowed funds from financial institutions and capital injections from our majority shareholders. In June 2025, we entered into a purchase agreement with Lincoln Park Capital Fund, LLC (“Lincoln Park”), giving the us the right, but not the obligation to sell to Lincoln Park up to $20.0 million worth of shares of our common stock. As of September 30, 2025, we have sold 1,520,609 shares of common stock to Lincoln Park for proceeds of $426,000, as part of the equity line financing arrangement. As of September 30, 2025, $19.6 million was available to draw pursuant to the purchase agreement with Lincoln Park. Our principal use of liquidity has been to fund our daily operations and working capital and we expect that to continue for the next 12 months and beyond. We expect that our cash and cash equivalents will be sufficient to fund our operating expenses and cash obligations for the next 12 months and beyond, although our ability to continue as a going concern depends upon our ability to attract and retain revenue generating customers, acquire new customer contracts, and secure additional financing. Contractual Obligations and Commitments As of September 30, 2025, the Company had total of $5,182,0000 contractual obligations for future payments. As of September 30, 2025 (in thousands) Payments due by period: Total Less than 1 year 1 – 3 years 4 – 5 years More than 5 years Short-term debt $ 4,572 $ 4,572 $ - $ - $ - Operating lease payments 610 26 220 238 126 Total $ 5,182 $ 4,598 $ 220 $ 238 $ 126 As of September 30, 2025, we had outstanding short-term debt obligations of $4,57 2 ,000 which matures within the next twelve months. We also have $610,000 in operating lease obligations due over the next six years. Capital Expenditures Our capital expenditures primarily consist of acquisition of computer hardware equipment and capitalized software. During the nine months ended September 30, 2025 and 2024, we spent $828,000 and $781,000, respectively, on acquisitions of computer hardware/equipment and capitalized software. 27 Off-Balance Sheet Arrangements As of September 30, 2025, the Company did not have any off-balance sheet arrangements, as defined in the rules and regulations of the SEC. Cash flows for the nine months ended September 30, 2025 and 2024 (in thousands) Nine Months Ended September 30, 2025 2024 Cash flows from operating activities: Net loss $ (9,607 ) $ (1,799 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 444 40 Noncash lease expenses 56 53 Noncash interest expenses 207 — Stock-based compensation 3,517 — Loss on extinguishment of debt 1,345 — Changes in operating assets and liabilities: Accounts receivable (23 ) (33 ) Advance - related party (4,726 ) — Prepaid expenses and other assets (11 ) 52 Income tax receivable — 91 Accounts payable (136 ) (50 ) Accrued expenses (157 ) 35 Deferred revenue 109 (105 ) Operating lease liabilities (53 ) (47 ) Net cash used in operating activities (9,035 ) (1,763 ) Cash flows from investing activities: Purchase of property and equipment - (36 ) Purchase of capitalized internal-use software (828 ) (781 ) Net cash used in investing activities (828 ) (817 ) Cash flows from financing activities: Proceeds from short-term loans - related party 2,827 3,274 Repayments of short-term loans - related party (2,000 ) - Proceed from issuance of shares 9,326 - Payment for deferred offering costs (28 ) (794 ) Net cash provided by financing activities 10,125 2,480 Net change in cash and cash equivalents 262 (100 ) Cash and cash equivalents at beginning of period 48 357 Cash and cash equivalents at end of period $ 310 $ 257 28 Operating Activities Net cash used in operating activities mainly consists of our net loss adjusted for certain non-cash items, including stock-based compensation expense and depreciation and amortization, as well as the effect of changes in operating assets and liabilities during each period. For the nine months ended September 30, 2025, net cash used in operating activities was $9,035,000, compared to $1,763,000 during the nine months ended September 30, 2024. The increase was primarily due to a higher net loss during the nine months ended September 30, 2025. Investing Activities Net cash used in investing activities increased from $817,000 during the nine months ended September 30, 2024 to $828,000 during the nine months ended September 30, 2025. The increase was mainly due to higher spending on capitalized software development costs. Financing Activities Net cash provided by financing activities increased from $2,480,000 during the nine months ended September 30, 2024 to $10,125,000 during the nine months ended September 30, 2025. The increase was primarily due to proceeds from the issuance of shares, partially offset by the repayment of short-term loans. Critical Accounting Policies and Estimates The preparation of the consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report on Form 10-Q in conformity with U.S. GAAP requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience, management’s best knowledge of current events, actions that the Company may undertake in the future, and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis of making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Our actual results could differ from these estimates under different assumptions or conditions. Refer to “Critical Accounting Policies and Estimates” contained in Part II, Item 7 of the Annual Report for a complete discussion of our critical accounting policies and estimates. There have been no material changes to our critical accounting policies and estimates since the Annual Report. Item 3. Quantitative and Qualitative Disclosures About Market Risk . As a smaller reporting company, we are not required to provide this information.