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, 2025, filed with the Securities and Exchange Commission (the “SEC”) on March 18, 2026 (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 TEN Holdings, Inc. (the “Company,” “TEN Holdings,” “we,” “us,” or “our”), headquartered in Langhorne, Pennsylvania, was incorporated on February 12, 2024, in Pennsylvania to serve as the holding company for TEN Events, Inc. (“TEN Events”), an operating subsidiary incorporated in Pennsylvania in May 2011. Through TEN Events, the Company delivers technology-enabled event engagement and digital communications solutions that help organizations create, manage, and distribute virtual, hybrid, self-service, and in-person experiences. Our offerings combine proprietary software, production capabilities, and managed services to support enterprise customers throughout the event lifecycle, including content delivery, audience engagement, webinar management, and continuing education programs. Following our corporate restructuring completed during fiscal 2023, we expanded our capabilities to include in-person event production, live streaming, and multimedia content capture, further enhancing our integrated technology offering. As of the date of this Quarterly Report on Form 10-Q, we primarily generate revenue from subscriptions and usage of our technology offering, as well as related professional and managed services provided to enterprise customers. We experienced a decrease in our total revenue in the second quarter of fiscal year 2026, mainly due to less the expected revenue coming from one of our largest customers, while also having a significant number of opportunities shift to the third quarter of fiscal year 2026. For the six months ended June 30, 2026 and 2025, we had total revenue of approximately $1.6 million and $1.9 million, respectively, and net loss of approximately $5.9 and $7.6 million, respectively. For the six months ended June 30, 2026 and 2025, the revenue generated from platform usage was approximately $1.3 million and $1.6 million, respectively, accounting for approximately 79.5% and 85.6% of our total revenue, respectively; and the revenue generated from professional and managed services was approximately $0.3 million and $0.3 million, respectively, accounting for approximately 20.5% and 14.4% of our total revenue, respectively. 20 Our mission is to deliver top-tier planning, production, and broadcasting services for virtual, hybrid, self-service, 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. Key Financial Performance Indicators Revenue Our revenue is generated from our integrated technology offering and complementary professional services provided to enterprise customers. Our solutions enable organizations to plan, manage, and deliver webinars, virtual, hybrid, self-service, and in-person events, with revenue derived from platform access, technology-enabled services, and related event execution. 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 and depreciation 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 three months ended June 30, 2026 and 2025 21 The following table sets forth our statements of operations for the three months ended June 30, 2026 and 2025: (in thousands, except change % data) Three Months Ended June 30, Change (2026 vs. 2025) 2026($) 2025($) $ YoY % Revenue Platform Usage 469 855 (386 ) (45.1 )% Professional & Managed Services 262 261 1 0.4 % Total Revenue 731 1,116 (385 ) (34.5 )% Cost of revenue 104 175 (71 ) (40.6 )% Gross Profit 627 941 (314 ) (33.4 ) % Operating expenses: Selling, General and Administrative Expenses 3,609 2,153 1,456 67.6 % Depreciation expenses 11 148 (137 ) (92.6 )% Total operating expenses 3,620 2,301 1,319 57.3 % Loss from operations (2,993 ) (1,360 ) (1,633 ) 120.1 % Other income (expenses), net 36 (1,344 ) 1,380 (102.7 )% Interest expenses (28 ) (80 ) 52 (65.0 )% Loss before income taxes (2,985 ) (2,784 ) (201 ) 7.2 % Provision for income taxes - - - 0.0 % Net Loss (2,985 ) (2,784 ) (201 ) 7.2 % Revenue Revenue decreased by $0.4 million, or 34.5%, to $0.7 million. The decrease was primarily driven by less revenue from one of our largest customers, while also having a significant number of opportunities shift to the third quarter of fiscal year 2026 and the related revenue to be recognized then. Cost of Revenue Cost of revenue decreased by $0.07 million, or 40.6%, to $0.1 million, reflecting a decrease in direct costs resulting from a decrease in related revenue. Selling, General and Administrative Expenses (“SG&A expenses”) SG&A expenses increased by $1.5 million, or 67.6%, to $3.6 million, primarily due to an increase in professional fees. Depreciation Expense Depreciation and amortization expenses decreased by $0.1 million, or 92.6%, to $0.01 million. The decrease was primarily due to the impairment loss recognized on the software during the year ended December 31, 2025, as the Company no longer had any software assets subject to amortization during the three months ended June 30, 2026. 22 Other Income (Expense), net Other income (expense), net changed from expense of $1.4 million during the three months ended June 30, 2025 to income of $0.04 million during the three months ended June 30, 2026. The change primarily resulted from the expenses incurred in connection with the entry by the Company into a Settlement Agreement and Stipulation with Sunpeak Holdings Corporation (the “Settlement Agreement”) during the three months ended June 30, 2025, which were non-recurring. Interest Expenses Interest expenses decreased by $0.05 million, or 65.0%, to $0.03 million, primarily due to a lower outstanding short-term loan balance during the three months ended June 30, 2026. Net Loss As a result of the foregoing, the net loss was $3.0 million during the three months ended June 30, 2026 compared to the net loss of $2.8 million during the three months ended June 30, 2025. 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. The following table provides a reconciliation of net loss to non-GAAP net loss for the three months ended June 30, 2026 and 2025: Three Months Ended June 30, 2026 2025 (in thousands, except share data) Net Loss $ (2,985 ) $ (2,784 ) Stock-based compensation expense 584 3 Non-GAAP net loss $ (2,401 ) $ (2,781 ) Weighted average number of shares of common stock outstanding used to compute net loss per share, basic and diluted 4,279,641 1,428,399 Net loss per share – basic and diluted $ (0.70 ) $ (1.95 ) Non-GAAP net loss per share - basic and diluted $ (0.56 ) $ (1.95 ) 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. 23 We define Adjusted EBITDA as our net loss excluding: (i) interest expense, (ii) provision for income taxes, (iii) depreciation and amortization, (iv) other (income) expense, and (v) stock-based compensation expense. The following table provides a reconciliation of net loss to Adjusted EBITDA for the three months ended June 30, 2026 and 2025: Three Months Ended June 30, 2026 2025 (in thousands) Net loss $ (2,985 ) $ (2,784 ) Interest expenses 28 80 Provision for income taxes - - Depreciation and amortization 11 148 Other (income) expenses, net (36 ) 1,344 Stock-based compensation expenses 584 3 Adjusted EBITDA $ (2,398 ) $ (1,209 ) Comparison of Results of Operations for the six months ended June 30, 2026 and 2025 The following table sets forth our statements of operations for the six months ended June 30, 2026 and 2025: (in thousands, except change % data) Six Months Ended June 30, Change (2026 vs. 2025) 2026($) 2025($) $ YoY % Revenue Platform Usage 1,260 1,587 (327 ) (20.6 )% Professional & Managed Services 324 268 56 20.9 % Total Revenue 1,584 1,855 (271 ) (14.6 )% Cost of revenue 411 361 50 13.9 % Gross Profit 1,173 1,494 (321 ) (21.5 )% Operating expenses: Selling, General and Administrative Expenses 6,987 7,319 (332 ) (4.5 )% Depreciation expenses 22 296 (274 ) (92.6 )% Total operating expenses 7,009 7,615 (606 ) (8.0 )% Loss from operations (5,836 ) (6,121 ) 285 (4.7 )% Other (income) expenses, net 37 (1,350 ) 1,387 (102.7 )% Interest expenses (89 ) (149 ) 60 (40.3 )% Loss before income taxes (5,888 ) (7,620 ) 1,732 (22.7 )% Provision for income taxes - - - 0.0 % Net Loss (5,888 ) (7,620 ) 1,732 (22.7 )% Revenue Revenue decreased by $0.3 million, or 14.6%, to $1.6 million. The decrease was primarily driven by lesser expected revenue coming from one of our largest customers, while also having a significant number of opportunities shift to the third quarter of fiscal year 2026 and the related revenue to be recognized then. Cost of Revenue Cost of revenue increased by $0.05 million, or 13.9%, to $0.4 million. The increase was primarily due to a higher number of physical events held for other customers during the six months ended June 30, 2026 compared to the same period last year, which resulted in higher contract labor costs. This increase in cost of revenue occurred despite the overall decrease in revenue during the period, as the decline was concentrated on one customer’s shifted opportunities, rather than a reduction in physical events overall. Selling, General and Administrative Expenses (“SG&A expenses”) SG&A expenses decreased by $0.3 million, or 4.5%, to $7.0 million. The decrease was primarily due to lower stock-based compensation expenses recognized during the six months ended June 30, 2026, partially offset by an increase in professional fees. Depreciation Expense Depreciation and amortization expenses decreased by $0.3 million, or 92.6%, to $0.02 million. The decrease was primarily due to the impairment loss recognized on the software during the year ended December 31, 2025, as the Company no longer had any software assets subject to amortization during the six months ended June 30, 2026. 24 Other Income (Expense), net Other income (expenses), net changed from expense of $1.4 million during the six months ended June 30, 2025 to income of $0.04 million during the six months ended June 30, 2026. The change primarily resulted from the expenses incurred in connection with the entry into the Settlement Agreement during the six months ended June 30, 2025 which were non-recurring. Interest Expenses Interest expenses decreased by $0.06 million, or 40.3%, to $0.09 million, primarily due to a lower outstanding short-term loan balance during the six months ended June 30, 2026. Net Loss As a result of the foregoing, the net loss was $5.9 million during the six months ended June 30, 2026 compared to the net loss of $7.6 million during the six months ended June 30, 2025. Non-GAAP Financial Measures Non-GAAP Net Loss and Non-GAAP Net Loss per Share The following table provides a reconciliation of net loss to non-GAAP net loss for the six months ended June 30, 2026 and 2025: Six Months Ended June 30, 2026 2025 (in thousands, except share data) Net Loss $ (5,888 ) $ (7,620 ) Stock-based compensation expense 870 3,515 Non-GAAP net loss $ (5,018 ) $ (4,105 ) Weighted average number of shares of common stock outstanding used to compute net loss per share, basic and diluted 4,129,377 1,927,108 Net loss per share – basic and diluted $ (1.43 ) $ (3.95 ) Non-GAAP net loss per share - basic and diluted $ (1.22 ) $ (2.13 ) Adjusted EBITDA The following table provides a reconciliation of net loss to Adjusted EBITDA for the six months ended June 30, 2026 and 2025: Six Months Ended June 30, 2026 2025 (in thousands) Net loss $ (5,888 ) $ (7,620 ) Interest expenses 89 149 Provision for income taxes - - Depreciation and amortization 22 296 Other (income) expenses, net (37 ) 1,350 Stock-based compensation expenses 870 3,515 Adjusted EBITDA $ (4,944 ) $ (2,310 ) 25 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 June 30, 2026 and December 31, 2025, we had cash of $5.8 million and $1.6 million, 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, borrow funds from financial institutions. In addition, as we continue to grow, we expect to continue funding our operations by issuing shares of our common stock to a wider stockholder base, subject to market conditions. On June 30, 2026, we issued 7,500,000 shares of our common stock for net proceeds of $6.6 million in a registered direct offering to certain investors. 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 have incurred and continue to incur losses from operations and negative cash flows from operating activities. For the six months ended June 30, 2026, we incurred a net loss of $5.9 million and used $2.7 million of cash in operating activities. As of June 30, 2026, we had an accumulated deficit of $27.3 million and short-term related-party debt obligations of $0.4 million, all of which will mature within the next twelve months. Our ability to continue as a going concern depends upon our ability to attract and retain revenue-generating customers, acquire new customer contracts, implement cost control measures, and secure additional debt or equity financing. Management is always evaluating additional debt or equity financing alternatives, although there can be no assurance that any such financing will be available on acceptable terms or at all. Based on our current cash resources, recurring losses, negative operating cash flows, and short-term debt obligations, we will require additional liquidity to fund our operating expenses and cash obligations over the next twelve months. There can be no assurance that we will be successful in obtaining new customer contracts, receiving related-party support when needed, implementing cost reductions, or securing additional financing. If we are unable to obtain sufficient liquidity, we may be required to delay, reduce, or eliminate certain operating activities or otherwise modify our business plans. Contractual Obligations and Commitments As of June 30, 2026, the Company had a total of $0.5 million in contractual obligations for future payments. As of June 30, 2026 (in thousands) Payments due by period: Total Less than 1 year 1 - 3 years 4 - 5 years More than 5 years Short-term debt $ 430 $ 430 $ - $ - $ - Operating lease payments 98 98 - - - Total $ 528 $ 528 $ - $ - $ - As of June 30, 2026, we had outstanding short-term debt obligations of $0.5 million which mature within the next twelve months. Capital Expenditures Our capital expenditures primarily consist of acquisition of computer hardware equipment and capitalized software. During the six months ended June 30, 2026 and 2025, we spent nil and $0.5 million, respectively, on capitalized software. 26 Off-Balance Sheet Arrangements As of June 30, 2026, the Company did not have any off-balance sheet arrangements, as defined in the rules and regulations of the SEC. Cash flows for the six months ended June 30, 2026 and 2025 (in thousands) Six Months Ended June 30, 2026 2025 Cash flows from operating activities: Net loss $ (5,888 ) $ (7,620 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 22 297 Noncash lease expenses 39 37 Noncash interest expenses 86 149 Stock-based compensation 870 3,515 Loss on extinguishment of debt - 1,345 Gain on lease modification (35 ) Changes in operating assets and liabilities: Accounts receivables 196 282 Advance – related party - (4,996 ) Prepaid expenses and other assets 697 (63 ) Other assets 914 - Accounts payable 414 (217 ) Other payable and accrued expenses 302 (221 ) Deferred revenue (277 ) (50 ) Other liabilities 3 - Operating lease liabilities (39 ) (35 ) Net cash used in operating activities (2,696 ) (7,577 ) Cash flows from investing activity: Purchase of capitalized internal-use software - (530 ) Net cash used in investing activity - (530 ) Cash flows from financing activities: Proceeds from short-term loans – related party 310 1,925 Repayments of short-term loans – related party (450 ) (2,000 ) Proceeds from issuance of shares 7,138 8,900 Payment for deferred offering costs - (27 ) Net cash provided by financing activities 6,998 8,798 Net change in cash, cash equivalents and restricted cash 4,302 691 Cash, cash equivalents and restricted cash at beginning of period 1,631 48 Cash, cash equivalents and restricted cash at end of period $ 5,933 $ 739 Reconciliation of cash, cash equivalents and restricted cash Cash and cash equivalents $ 5,833 $ 739 Restricted cash 100 - Total cash, cash equivalents and restricted cash $ 5,933 $ 739 27 Operating Activities Net cash used in operating activities mainly consists of our net loss adjusted for certain noncash 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 six months ended June 30, 2026, net cash used in operating activities was $2.7 million, compared to $7.6 million during the six months ended June 30, 2025. The decrease in cash outflow was primarily due to lower net loss during the current period and a decrease in advance to related party, partially offset by lower non-cash adjustment for stock-based compensation expenses and loss on extinguishment of debt. Investing Activity Net cash used in investing activities decreased to nil for the six months ended June 30, 2026, compared to $0.5 million for the six months ended June 30, 2025. The decrease was due to the absence of purchase of property and equipment and capitalized software during the current period. Financing Activities Net cash provided by financing activities was $7.0 million for the six months ended June 30, 2026, compared to $8.8 million for the six months ended June 30, 2025. The decrease was primarily driven by lower proceeds received from the issuance of shares and short-term loans from related parties during the current period, partially offset by lower repayments for short-term loans from related parties. Critical Accounting 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.