Item 7. Management’s Discussion and Analysis
Item
7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The
following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial
statements and related notes included elsewhere in this Annual Report.
Overview
We
are a provider of event planning, production, and broadcasting services headquartered in Langhorne, Pennsylvania. We produce virtual,
hybrid, self-service and physical events. Virtual, hybrid and self-service events could 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 and TEN
Pro platform. Physical events mainly involve live streaming and video recording of physical events.
As
of the date of this Annual Report, we primarily generate revenue from virtual and hybrid events delivered to corporate customers. We
experienced a decrease in our total revenue in the fiscal year ended December 31, 2025 compared to the fiscal year ended December 31,
2024, 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 months ended March 31, 2025. This event is held by our biggest customer every other year. For the fiscal years ended December
31, 2025 and 2024, we had total revenue of approximately $3.1 million and $3.5 million, respectively, and net loss of approximately $19.5
million and $3.0 million, respectively. For the fiscal years ended December 31, 2025 and 2024, the revenue generated from virtual and
hybrid events was approximately $2.7 million and $3.2 million, respectively, accounting for approximately 88.2% and 91.9% of our total
revenue, respectively; and the revenue generated from physical events was approximately $0.4 million and $0.3 million, respectively,
accounting for approximately 11.8% and 8.1 % of our total revenue, respectively.
Our
mission is to deliver top-tier planning, production, and broadcasting services for virtual, hybrid and physical events. Our goal is to
become a global leader in innovative virtual events that enhance engagement and connectivity, making impactful and memorable experiences
accessible to all.
29
Key
Financial Performance Indicators
Revenue
Our
revenue is derived from the provision of virtual and hybrid events and physical events on our Xyvid Pro platform.
Cost
of revenue
Our
cost of revenue is primarily driven by the costs paid to our employees for producing events and the costs of renting equipment and our
studio.
Selling,
general and administrative expenses
Selling,
general and administrative expenses are primarily composed of personnel costs for sales and marketing staff and general corporate functions,
computer and software costs, and advertising and marketing expenses.
We
expect general and administrative expenses to fluctuate as a result of operating as a public company.
Operating
profit and operating profit margin
Operating
profit is the difference between our revenue and cost of revenue and selling, general and administrative expenses. Operating profit margin
is the operating profit as a percentage of revenue.
Other
income (expenses)
From
time to time, we have non-recurring, non-operating gains and losses which are reflected through other income (expenses).
Interest
expenses
Interest
expenses consist of interest expenses arising from borrowings.
Results
of Operations
Comparison
of Results of Operations for the years ended December 31, 2025 and 2024
The
following table sets forth our statements of operations for the years ended December 31, 2025 and 2024:
(in thousands, except change % data)
Years Ended
December 31,
Change
(2025 vs. 2024)
2025 ($)
2024($)
$
YoY %
Revenue
Delivered events - Virtual and Hybrid
2,737
3,219
(482
)
(15.0
%)
Delivered events - Physical
367
285
82
28.8
%
Total Revenue
3,104
3,504
(400
)
(11.4
%)
Cost of revenue
( 663
)
(652
)
11
1.7
%
Gross Profit
2,441
2,852
(411
)
(14.4
%)
Operating expenses:
Selling, General and Administrative Expenses
15,276
5,390
9,886
183.4
%
Depreciation expenses
591
190
401
211.1
%
Total operating expenses
15,867
5,580
10,287
184.4
%
Loss from operations
(13,426
)
(2,728
)
(10,698
)
392.2
%
Other income (expenses), net
(5,799
)
(30
)
(5,769
)
NM
Interest expenses
(284
)
(210
)
(74
)
35.2
%
Loss before income taxes
(19,509
)
(2,968
)
(16,541
)
557.3
%
Provision for income taxes
-
-
-
0.0
%
Net Loss
(19,509
)
(2,968
)
(16,541
)
557.3
%
NM
= not meaningful
30
Revenue
Revenue
decreased by approximately $0.4 million, or 11%, to approximately $3.1 million. The decline was primarily driven by following factors:
● Virtual
& Hybrid events decreased by $0.5 million, mainly due to an event series with our biggest
customer that took place in the three-months ended March 31, 2024, but did not repeat in
the three months ended March 31, 2025. This event is held by our biggest customer every other
year.
● Physical
events increased by $0.1 million 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 increased by approximately $0.01 million, or 1.7%, to approximately $0.7 million. Cost of revenue remained relatively
flat while physical events revenue increased mainly due to continued efficiencies in the way events are delivered so equipment and
staff are maximized within the specific region or location of events.
Selling,
General and Administrative Expenses (“SG&A expenses”)
SG&A expenses increased by approximately $9.9 million, or 183%, to
approximately $15.3 million, of which $10 million were non-cash related expenses for items such as stock-based-compensation. The company also incurred $1.7 million in expenses related to being a public company, while the remaining came from $3.1
million of payroll and $0.4 million in business operations.
Depreciation
Expense
Depreciation
expense increased by $0.4 million to $0.6 million due to continued development of TEN Pro during the 2025 calendar year.
Other
Income (Expense), net
Other
income (expense) increased by approximately $5.8 million to approximately $5.8 million primarily due to an impairment loss
recognized on our software and loss on debt restructuring.
Interest
Expense
Interest
expense increased by approximately $0.1 million, or 35%, to approximately $0.3 million primarily due to interest owed to V-Cube Inc.
for loans made to us .
Net
Loss
As
a result of the foregoing, the net loss was approximately $19.5 million during the year ended December 31, 2025, compared to the net
loss of approximately $3.0 million during the year ended December 31, 2024.
Liquidity
and Capital Resources
As
of December 31, 2025 and 2024, we had cash of approximately $1.6 million and $0.05 million, respectively. Liquidity is a measure of our
ability to meet potential cash requirements. As of December 31, 2025, the Company had access to $18.0 million of liquidity through our
ELOC. We generally have funded our operations with cash flow from operations, and, when needed, borrowing from financial institutions
and capital injections from our principal stockholders. V-Cube acted as one of our main sources of funding in 2025. As TEN continues
to grow, it expects to continue funding its operations by issuing shares to a wider stockholder base and/or accessing the ELOC for additional
capital subject to market conditions. Our principal use of liquidity has been to fund our daily operations and working capital. We expect
that our cash and cash equivalents will be sufficient to fund our operating expenses and cash obligations for the next 12 months, 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. We expect we will require additional financing through debt and equity investments to fund
our operating expenses and cash obligations beyond the next 12 months. See “Contractual Obligations and Commitments” for
a discussion of our material cash requirements and “Cash flows for the years ended December 31, 2025 and 2024” for a discussion
of the anticipated sources of funds needed to satisfy those cash requirements.
Other
than as disclosed in the consolidated financial statements and the related notes included elsewhere in this Annual Report, we are not
aware of any other trends, demands, uncertainties, commitments or events that are reasonably likely to have a material adverse effect
on our net revenue, income, profitability, liquidity or capital resources, including the mix and relative cost of such capital resources,
or cause such financial statements to be not necessarily indicative of future operations results or financial condition.
31
Cash
flows for the years ended December 31, 2025 and 2024
The
following tables summarizes our cash flows for the periods presented:
(in thousands)
Year Ended December
31,
2025
2024
Cash flows from operating
activities:
Net loss
$ (19,509 )
$ (2,968 )
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
591
190
Non-cash lease expenses
75
71
Non-cash interest expenses
2 41
218
Stock-based compensation
4,857
—
Loss on extinguishment
of debt
1,599
—
Impairment loss on intangible assets
4,194
—
Changes in operating
assets and liabilities:
Accounts receivable
(120 )
(156 )
Prepaid expenses and
other current assets
(1,536 )
(90 )
Income tax receivable
—
91
Other assets
(914 )
—
Accounts payable
(291 )
(85 )
Payable due to related
party
(156 )
108
Other payable and accrued expenses
6 93
326
Deferred revenue
282
(127 )
Operating lease liabilities
(71 )
(63 )
Net cash used in
operating activities
(1 0 ,065 )
(2,484 )
Cash flows from investing
activities:
Purchase of property and equipment
—
(38 )
Purchase of capitalized
internal-use software
(850 )
(999 )
Net cash used in investing
activities
(850 )
(1,037 )
Cash flows from financing
activities
Proceeds from short-term loans - related
party
2,826
4,244
Repayments of short-term loans - related
party
(2,000 )
—
Proceeds from issuance of shares
11,926
—
Payment for Issuance of shares in settlement of claims
(254
)
—
Payment for deferred offering costs
—
(1,031 )
Net cash provided by
financing activities
1 2 ,498
3,213
Net change in cash and cash equivalents
1,583
(309 )
Cash and cash equivalents
at beginning of period
48
357
Cash and cash equivalents
at end of period
$ 1,631
$ 48
32
Operating
Activities
Net
cash used in operating activities increased from approximately $2.5 million during the year ended December 31, 2024 to approximately
$1 0 .1 million during the year ended December 31,
2025. The increase in cash outflows was primarily driven
by higher operating expense associated with the Company’s transition to a public company, including increased professional
fees, payroll, and other corporate infrastructure cost, as well as the higher net loss reported in the year ended December 31,
2025 .
Investing
Activities
Net
cash used in investing activities decreased from approximately $1.0 million during the year ended December 31, 2024 to approximately
$0.9 million during the year ended December 31, 2025. The decrease in cash outflows was primarily due to lower expenditures on the purchase
of property and equipment and capitalized internal-use software during the year ended December 31, 2025.
Financing
Activities
Net
cash provided by financing activities increased from approximately $3.2 million during the year ended December 31, 2024 to
approximately $1 2 .5 million during the year ended
December 31, 2025. The increase was primarily attributable to proceeds from the issuance of shares and short-term loans, partially
offset by repayment of short-term loans during the year ended December 31, 2025.
Contractual
Obligations and Commitments
As
of December 31, 2025, the Company had a total of approximately $6.2 million contractual obligations for future payments.
As
of December 31, 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
$ 5,617
$ 5,617
$ —
$ —
$ —
Operating lease payments
584
108
229
247
—
Total
$ 6,201
$ 5,725
$ 229
$ 247
$ —
Capital
Expenditures
Our
capital expenditure primarily consists of acquisition of computer hardware equipment and capitalized software.
During
the fiscal years ended December 31, 2025 and 2024, we spent $0.9 million and $1.0 million, respectively, on acquisitions of computer
hardware / equipment and capitalized software.
Off-Balance
Sheet Arrangements
As
of December 31, 2025, the Company did not have any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.
33
Critical
Accounting Estimates
The
preparation of the consolidated financial statements and accompanying notes included elsewhere in this Annual Report requires us to make
estimates 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 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. We have identified certain accounting policies that are significant to the preparation
of our consolidated financial statements. These accounting policies are important for an understanding of our financial condition and
results of operation. Critical accounting policies are those that are most important to the portrayal of our financial conditions and
results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make
estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates
are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting
the estimate may differ significantly from management’s current judgments. While our significant accounting policies are more fully
described in Note 2 to the consolidated financial statements included elsewhere in this prospectus, we believe the following critical
accounting policies involve the most significant estimates and judgments used in the preparation of our consolidated financial statements.
Use
of Estimates
The
preparation of the consolidated financial statements in conformity with the U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities as of the reporting date,
and the reported amounts of revenue and expense during the reporting period. These estimates are based on management’s best knowledge
of current events and actions that the Company may undertake in the future and include, but are not limited to, allowance for credit
losses, useful lives of property and equipment and capitalized software, the carrying value of operating lease right-of-use assets, impairment
of long-lived assets, and valuation allowance against net deferred tax assets. Actual results could differ from those estimates.
The
following critical accounting policies rely upon assumptions and estimates and were used in the preparation of our financial statements:
Revenue
Recognition
The
Company applies ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”) for all periods presented in the consolidated
financial statements. To determine the appropriate amount of revenue to be recognized in accordance with ASC 606, the Company follows
a five-step model as follows:
1
- Identification of the contract with a customer
2
- Identification of the performance obligation in the contract
3
- Determination of the transaction price
4
- Allocation of the transaction price to the performance obligation in the contract
5
- Recognition of revenue when, or as, a performance obligation is satisfied
Hybrid,
virtual and physical event revenue
Revenue
from hybrid, virtual and physical events is generated from producing and delivering hybrid or virtual events using the Company’s
platform, the Xyvid Pro platform, or delivering physical events. Virtual events are online events and conferences where participants
interact in an online environment, and physical events are events where participants meet in a physical location.
34
The
transaction price is determined based on the consideration to which the Company expects to be entitled in exchange for transferring services
to the customer. The transaction price is generally fixed at contract inception and is based on the agreed upon rates stated in the contract
which indicates the amount of consideration the Company expects to be entitled to in exchange for satisfaction of performance obligation
(i.e., delivering events). The amount on the final invoice depends on the actual work performed and might differ from the amount stated
in the initial contract. When there is variable consideration included in the transaction price if, in the management’s judgment,
it is probable that a significant future reversal of cumulative revenue recognized under the contract will not occur, the Company and
the customer agree on the price on the final invoice, and revenue is recognized based on the amount on the final invoice. None of our
contracts contain a significant financing component. Revenue is recognized net of any taxes collected from customers, which are subsequently
remitted to government entities.
Revenue
is recognized at the time the related performance obligation is satisfied by transferring the promised services to the customer, which
is upon completion of the event. Revenue is recognized in an amount that reflects the consideration that the Company expects to receive
in exchange for those services.
The
Company sometimes enters into the contract with a bundle of events. Contracts that contain multiple performance obligations require an
allocation of the transaction price to each performance obligation based on each performance obligation’s relative standalone selling
price. The Company’s contracts with multiple performance obligations are generally sold over the same contract terms as that of
the contract with single performance obligation and have the same pattern of transferring services to the customer, and therefore, they
are accounted for as one combined performance obligation in the context of the contract.
From
time to time, the Company engages subcontractors for delivering events. The Company assesses and records revenue on a gross basis as
a principal versus on a net basis as an agent in the presentation of revenue and expenses. For events delivered with subcontractors,
the Company has concluded that gross reporting is appropriate because the Company (i) has the risk of identifying and hiring qualified
vendors, (ii) has the discretion to select the vendors and establish their price and duties, and (iii) bears the risk for services that
are not fully paid for by its customers.
Property
and Equipment, Net
Property
and equipment are recorded at the cost less accumulated depreciation. Depreciation is computed using the straight-line method. The estimated
useful lives of assets are as follows:
Property
and Equipment
Estimated
Useful Life
Computer
and equipment
7
years
Furniture
and fixture
10
years
Leasehold
improvement
Shorter
of 10 years or lease term
Repair
and maintenance costs are expensed as incurred.
Intangible
Assets
Intangible
assets consist of capitalized software. The Company accounts for its software development costs in accordance with the guidance in
ASC 350-40, Internal-use software. The costs incurred prior to the application development stage and post implementation are
expensed as incurred. Direct and incremental internal and external costs incurred during the application development stage are
capitalized until the application is substantially complete and ready for its intended use, at which point amortization begins.
Training, data conversion and maintenance costs are expensed as incurred. Costs of capitalized software are amortized on a
straight-line basis over the estimated period of benefit, which is approximately five to seven years, and are recorded in cost of
revenue in the Consolidated Statements of Operations.
Impairment
or Disposal of Long-Lived Assets
Long-lived
assets used in operations are reviewed for impairment whenever events or changes in circumstances indicate that carrying amounts may
not be recoverable. For long-lived assets to be held and used, the Company recognizes an impairment loss only if the carrying amount
is not recoverable when compared to the Company’s undiscounted cash flows, and the impairment loss is measured based on the difference
between the carrying amount and fair value. Long-lived assets held for sales are reported at the lower of cost or fair value less costs
to sell.
35
Item
7A. Quantitative and Qualitative Disclosures About Market Risk.
As
a “smaller reporting company,” we are not required to provide the information required by this item.
Item
8. Financial Statements and Supplementary Data.
Please
see the financial statements beginning on page F-1 following the signature pages in this Annual Report and incorporated herein by reference.
Item
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.