CID Holdco, Inc.: Form 10-Q for the period ended Mar 31, 2026

Please read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes included in this filing. Some of the information contained in this discussion and analysis, including information regarding our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. When reviewing the discussion below, you should carefully consider the substantial risks and uncertainties that could impact our business, results of operations, and financial condition. In particular, we encourage you to review the risks and uncertainties described under “Risks Relating to Our Business and Industry” in our Annual Report on Form 10-K filed with the SEC on March 11, 2026, as well as other risk factors disclosed elsewhere in that filing and in this Report. These risks and uncertainties could cause actual results to differ materially from those projected in forward-looking statements contained in this Form 10-Q or implied by past results and trends. Forward-looking statements are statements that attempt to forecast or anticipate future developments in our business, financial condition, or results of operations. These statements speak only as of their respective dates (unless otherwise indicated), and we undertake no obligation to update or revise them in light of future developments.

Overview

CID Holdco, Inc. (the “Company”, or “CID Holdco”, or “CID”), formerly known as SEE ID Inc., dba Dot AI (the “Legacy Company” or “SEE ID”), was incorporated in Delaware with its headquarters in Las Vegas, Nevada. The Company helps businesses transform their operations by optimizing safety, security, and efficiency of operations through real-time tracking of resources. Through the Company’s extensive research and development initiatives, the Company’s main focus includes areas such as Industrial IoT, Indoor & Outdoor tracking with seamless transitions, Passive RFID (including Bluetooth and 5G), Collision Avoidance, real-time locating system, Dolly Management, and related supported software applications.

The Company is the developer of an asset tracking platform intended to push the limits of near real-time precision-based location technology. The Company’s platform leverages the technologies including the patented passive and active RFID tracking solutions, low power edge camera platforms utilizing artificial intelligence, enabling users to give accuracy to all mapping technologies in areas that are troublesome. Through its technological solutions, the Company serves multiple industries including construction, military, mining, retail, warehousing, and manufacturing.

The Company is headquartered in Las Vegas, NV with our management and administrative staff located in Bethesda, MD for East Coast customer engagements and government lobbying activity. We also manufacture hardware in Puerto Rico through our wholly owned subsidiary Dot Works. Our embedded development team and Design for Manufacturing (“DFM”) capability is built around our Chief Technology Officer (“CTO”) in Worcester, MA and our core software team is in Bangalore, India.

Throughout this Quarterly Report, unless otherwise noted or otherwise suggested by context, the “Company”, “we”, “us”, “our” refers to SEE ID and Dot Works, as applicable, prior to the consummation of the Business Combination (as defined below), and CID Holdco, SEE ID, and Dot Works, collectively, after the consummation of the Business Combination.

Business Combination

On June 18, 2025 (the “Closing Date”) the Company consummated the Business Combination transactions by and among the Company, ShoulderUp Technology Acquisition Corp (“SUAC” or “ShoulderUp”), ShoulderUp Merger Sub, Inc., SEI Merger Sub, Inc., and SEE ID, Inc. Pursuant to the Business Combination Agreement, on the Closing Date, (i) ShoulderUp Merger Sub merged with and into SUAC (the “ShoulderUp Merger”), with SUAC surviving the ShoulderUp Merger as a wholly-owned subsidiary of the Company; and (ii) simultaneously with the ShoulderUp Merger, SEI Merger Sub merged with and into SEE ID (“the SEE ID Merger”), with SEE ID surviving the SEE ID Merger as a wholly-owned subsidiary of the Company (the ShoulderUp Merger and the SEE ID Merger, together the “Mergers” and together with the other transactions contemplated by the Business Combination Agreement, the “Business Combination”).

In connection with the Business Combination, CID Holdco filed a registration statement on Form S-4 (File No. 333-282600) (as amended, the “Registration Statement”) with the U.S. Securities and Exchange Commission (the “SEC”). On June 18, 2025, the Registration Statement was declared effective by the SEC. At Closing, the assets and liabilities of Legacy Company were combined with the assets and liabilities ShoulderUp Technology Acquisition Corp on a historical cost basis. All Legacy Company Common Stock was exchanged for Common Stock of the Company based upon the exchange ratio as defined in the Business Combination Agreement as Aggregate Merger Consideration (13,000,000 CID Holdco shares) divided by the Company Fully Diluted Common Stock (159,915,641) or 8.129%. Stock options of Legacy Company were not exercised and remain outstanding after giving into effect the exchange ratio. In connection with the Business Combination, we incurred transaction costs, settled certain SUAC related party notes through the issuance of common shares, converted SAFE notes into Common Stock of the Company, and raised cash proceeds from PIPE investors. Additional information regarding the Business Combination and Reverse Recapitalization is provided in Note 3 to the condensed consolidated financial statements.

Factors Affecting Our Performance

Acquiring New Customers

We believe that we have a substantial opportunity to grow our customer base. We intend to drive new customer acquisition by continuing to invest significantly in sales and marketing to engage our prospective customers, increase brand awareness, and drive adoption of our Dot Cloud platform. Our ability to attract new customers depends on a number of factors, including the effectiveness of our sales and marketing efforts, macroeconomic factors and their impact on our customers’ businesses, and the success of our efforts to expand internationally.

Expanding Within Our Existing Customer Base

We believe that there is a significant opportunity to expand sales to existing customers following their initial adoption of our Dot Cloud. We will expand our customer base by selling more applications and expanding use of existing applications across geographies and divisions. Our ability to expand within our customer base will depend on a number of factors, including our customers’ satisfaction, pricing, competition, macroeconomic factors, and changes in our customers’ spending levels. While there are many factors involved in this expansion, the Customer Success department will be the key internal driver to retention and expansion of customer revenue. At this juncture, it is not a significant part of our operational expense but will be built out as our bookings increase and our channel support requirements come online.

Investments in Innovation and Future Growth

Our market leadership is supported by continuous innovation in our Dot Cloud, our inventions in IoT data collection and our advances in applying AI to our customer problem sets. We will continuously invest in adding new applications and methods to our solutions. As such, spending on research and development will always be an important part of our strategy, however, the driving force that will fuel our company is market growth. Our recent pivot to move most of our spending to Sales and Marketing shows a commitment to our go-to-market strategy. We recognize the need to increase adoption and expand brand awareness as we increase market share.

Adding additional compliance and oversight resources as we grow, and especially as we adapt to operating as a public entity, is a natural and essential step. In addition, our small operations team will continue to grow as the demand increases from our maturing sales pipeline.

Components of Results of Operations

Revenue

We will provide access to our Dot Cloud through subscription arrangements, where the customer is charged a per-subscription fee for access for a specified term. Subscription agreements will contain multiple service elements for one or more of our cloud-based Applications via mobile app(s) or a website that enables data collection and provides access to the cellular network, IoT devices (which we also refer to as connected devices), and support services delivered over the term of the arrangement. Our subscription contracts will typically have an initial term of three to five years and are generally non-cancellable and non-refundable, subject to limited exceptions under our standard terms of service and other exceptions for public sector customers, who are often subject to annual budget appropriations cycles. Our Connected Dot Cloud and IoT devices are highly integrated with the subscription service and together will represent a single performance obligation. Revenues attributable to this combined performance obligation are recognized over time as the services are delivered.

We also provide professional services including onboarding (implementation) services, marketing services, and product consulting. These services were evaluated to be distinct and are treated as separate performance obligations from the subscription services. Revenue related to these services are recognized over time as services are performed.

Currently, revenues are primarily related to the delivery of hardware products such as bridges, labels and gateways to customers. We also provide feasibility study reports to customers seeking to gain insight into how data driven tracking could improve their business, which is recognized upon acceptance of the feasibility report.

Allocation of Overhead Costs

Overhead costs that are not directly attributable to a specific functional group are allocated based on relative usage. These costs include expenses related to warehouse lease and cloud hosting services.

Cost of Goods Sold

Cost of goods sold consists primarily of cellular-related costs, third-party cloud infrastructure expenses, customer support costs, warranty charges, employee-related costs directly associated with our customer support and operations, including salaries, employee benefits and share-based compensation, amortization of internal-use software development, certain cloud computing implementation costs, expenses related to shipping and handling, packaging, fulfillment, warehousing, write-downs of excess and obsolete inventory, and allocated overhead costs.

As our customers expand and increase the use of our Dot Cloud driven by additional IoT devices and Applications, our cost of goods sold may vary from quarter to quarter as a percentage of our revenue due to the timing and extent of these expenses. We intend to continue to invest additional resources in our Dot Cloud and customer support and operations personnel as we grow our business. The level and timing of investment in these areas will affect our cost of goods sold in the future.

Operating Expenses

Research and development

Research and development expenses consist primarily of employee-related costs, including salaries, employee benefits and share-based compensation, depreciation and other expenses related to prototyping IoT devices, product initiatives, software subscriptions, hosting used in research and development, and allocated overhead costs. We continue to focus our research and development efforts on adding new features and products and enhancing the utility of our Dot Cloud. We capitalize the portion of our internal-use software development costs that meets the criteria for capitalization. We expect our research and development expenses to generally increase in absolute dollars for the foreseeable future as we continue to invest in research and development efforts to enhance our Dot Cloud. Our research and development expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.

Sales and marketing

Sales and marketing expenses consist primarily of employee-related costs directly associated with our sales and marketing activities, including salaries, employee benefits and share-based compensation, and sales commissions. Sales and marketing expenses also include expenditures related to advertising, media, marketing, promotional costs, free trial expenses, brand awareness activities, business development, corporate partnerships, travel, conferences and events, professional services, and allocated overhead costs. We also have a heavy reliance on contracted services in these areas which are reflected in the department spend. We plan to continue to invest in sales and marketing to grow our customer base and increase our brand awareness. As a result, we expect our sales and marketing expenses to increase in absolute dollars for the foreseeable future. Our sales and marketing expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.

General and administrative

General and administrative expenses consist of employee-related costs for executive, finance, legal, human resources, facilities, and certain IT personnel, including salaries, employee benefits and share-based compensation, professional fees for external legal, accounting, recruiting and other consulting services, credit losses, allocated overhead costs, and unallocated lease costs. We expect our general and administrative expenses to continue to increase in absolute dollars for the foreseeable future to support our growth and because of additional costs associated with legal, accounting, compliance, insurance, investor relations, and other areas associated with being a public company. Our general and administrative expenses may fluctuate as a percentage of our revenue from period to period due to the timing and extent of these expenses.

Interest expense

Interest expense consists primarily of interest incurred for our short-term loans.

Change in fair value of SAFE agreements

The change in the fair value of SAFE agreements represents the unrealized gains or losses resulting from the fluctuations in the estimated fair value of the outstanding SAFE agreements, or reevaluation of updated market conditions and company-specific factors.

Results of Operations

Revenue, Cost of Goods Sold, Gross Profit, and Gross Margin

Our total revenue, cost of goods sold, gross profit, and gross margin for the three months ended March 31, 2026 and 2025 are summarized as follows:

Revenue decreased by $340,284, or (96.5)%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. Our revenue for the three months ended March 31, 2026 was comprised of subscription service revenue, while our revenue for the three months ended March 31, 2025 was primarily comprised of $250,000 related to the development of product specifications, $98,161 for the amortization of a customer exclusivity agreement, as well as subscription service revenue.

Cost of goods sold decreased by $14,412, or (84.4)%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The decrease was primarily attributable to lower service costs associated with third-party software licensing.

Our gross margin was 78.2% for the three months ended March 31, 2026 compared to 95.2% for the three months ended March 31, 2025. The decrease in gross margin is primarily attributable to changes in the mix of services provided during the periods.

Research and Development

Research and development expenses for the three months ended March 31, 2026 and 2025 are summarized as follows:

Research and development expense increased by $217,441, or 55.2%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase was primarily driven by higher labor expenses of $339,292 and R&D cloud costs of $73,929, partially offset by a decrease in R&D compliance and testing expenses of $205,446. Additionally, as the software was placed into service as of January 1, 2026, the Company ceased capitalizing software development costs, which primarily consisted of labor costs, and began amortizing the related asset, contributing to higher labor costs recognized in expense during the period.

Sales and Marketing

Sales and marketing expenses for the three months ended March 31, 2026 and 2025 are summarized as follows:

Sales and marketing expenses increased by $230,396, or 33.7%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase reflects our continued pivot toward market-facing initiatives and was primarily driven by increased spending of $164,196 on brand-related marketing activities, events and sponsorships, and $72,915 on customer relationship management and marketing software tools.

General and Administrative

General and administrative expenses for the three months ended March 31, 2026 and 2025 are summarized as follows:

General and administrative expenses increased by $1,798,981, or 291.2%, for the three months ended March 31, 2026 compared to the three months ended March 31, 2025. The increase was primarily due to incremental expenses of $1,277,526 related to operating as a public company, including legal, auditing, accounting and board of director fees, as well as higher labor costs of $443,686 associated with the continued ramp-up of the business.

The decrease in the liability balance of SAFE agreements for the three months ended March 31, 2026, compared to March 31, 2025, was primarily attributable to the conversion of the SAFE notes into company shares upon the closing of the Business Combination. Upon conversion, the related liabilities were reclassified to equity.

Liquidity and Capital Resources

Funding Requirements and Going Concern

Liquidity is a measure of our ability to access sufficient cash flows to meet the short-term and long-term cash requirements of our business operations. To date, we have funded our operations primarily with proceeds from the issuance of shares of our Common Stock to PIPE investors contemporaneously with the close of the Business Combination, proceeds from bridge loans and other short-term borrowings. Our future capital requirements will depend on many factors, including, but not limited to, our growth, our ability to attract and retain customers, the continued market acceptance of our solution, the timing and extent of spending necessary to support our efforts to develop our Dot Cloud and meet our performance obligations related to subscription sales of the same, the expansion of sales and marketing activities, and the impact of macroeconomic conditions on us and our customers’ and partners’ businesses. Further, we may enter into arrangements to acquire or invest in businesses, products, services, and technologies. We will need to raise additional capital in the future to finance our operations and expand our business.

In connection with the Company’s assessment of going concern considerations in accordance with the Financial Accounting Standards Board (“FASB”) ASC Topic 205-40, Presentation of Financial Statements — Going Concern, management anticipates the Company will continue to incur substantial operating losses for the next several years and will need to obtain additional near-term financing in order to continue its research and development activities. Our ability to continue as a going concern is dependent on our ability to raise additional capital to fund research and development activities and meet obligations on a timely basis; however, there can be no assurance that sufficient funding will be available to allow us to successfully continue our research and development activities and commercialize our products.

If the Company is unable to obtain necessary funds through its business operations and the proceeds realized through the Business Combination, significant reductions in spending and the delay or cancellation of planned activities may be necessary. These actions would have a material adverse effect on our business, results of operations, and prospects. These conditions raise substantial doubt about our ability to continue as a going concern within one year from the date these condensed consolidated financial statements are issued.

As of March 31, 2026 and December 31, 2025, we had cash of $853,728 and $865,624, respectively, deficits in working capital of $5,828,944 and $1,730,095, respectively, and accumulated deficits of $65,916,502 and $61,451,334, respectively.

Sources of Liquidity

To date, we have funded our operations primarily through proceeds from the issuance of common shares to PIPE investors in connection with the closing of the Business Combination, totaling $10,837,643, proceeds from bridge loans and other short-term borrowings. In the future, we expect to finance our cash needs through a combination of equity, debt financings, and improvement of cash from operations derived from selling subscriptions to our platform.

As part of its funding efforts, on June 18, 2025, the Company entered into a Standby Equity Purchase Agreement (“SEPA”) with New Circle Principal Investment LLC (“New Circle”), which provides the Company the right, but not the obligation, to direct New Circle from time to time to purchase up to $50 million of shares of the Company’s Common Shares during the commitment period ending June 18, 2028, at a discount of the VWAP over a defined pricing period. Under the SEPA, the Company may sell shares to New Circle at a price based on either: option 1 – 97% of the lowest daily VWAP over the three trading days following the purchase notice, or option 2 – the greater of 85% of the VWAP or the lowest sale price on a specific trading day determined by the timing of the notice.

Any purchase would be subject to certain limitations, including that New Circle shall not purchase any shares that would result in it and its affiliates beneficially owning more than 4.99% of the then outstanding voting power or number of shares of Common Stock or any shares that would exceed 19.99% of all shares of Common Stock of the Company outstanding on the date of the SEPA, unless Company shareholder approval was obtained allowing for issuances in excess of such amount (the “Exchange Cap”). The Exchange Cap will not apply under certain circumstances, including where the average purchase price of all applicable sales of Common Shares equals or exceeds the lower of (i) the Nasdaq Official Closing Price immediately preceding the Effective Date; or (ii) the average Nasdaq Official Closing Price for the five Trading Days immediately preceding the Effective Date.

The Company had the option to satisfy the $350,000 commitment fee under the SEPA through the issuance of a variable number of shares of Common Stock or by payment in cash. On September 24, 2025, the Company paid the commitment fee through the issuance of 106,383 shares of Common Stock, valued at $3.29 per share, which was determined based on the closing price of the Common Stock on September 18, 2025, the date the Form S-1 was declared effective by the SEC. The commitment fee of $350,000 was expensed in September 2025.

Before the Company elects to sell shares by issuing a purchase notice, the SEPA represents a purchased put option on the Company’s equity. Once the Company delivers a purchase notice under the SEPA, the related number of shares to be issued constitutes a forward contract to issue shares of Common Stock. As the feature is embedded in an equity host, meets the definition of a derivative, and does not qualify for the equity scope exception under ASC 815, Derivatives and Hedging, it must be bifurcated and accounted for separately as a derivative asset or liability, depending on changes in the underlying stock price relative to the pegged discounted VWAP. The derivative is measured at fair value, with changes in fair value recognized in net income. The fair value of the purchased put option was determined to be de minimis as of March 31, 2026, and therefore was not recorded on the Company’s balance sheet as of that date.

On October 13, December 30, December 31, 2025, and February 10, 2026, the Company delivered purchase notices for 30,000, 500,000, 1,000,000, and 20,000 shares, respectively, at settlement prices of $2.62, $0.32, $0.32, and $0.26 per share. This resulted in gross proceeds of $78,516, $159,500, $317,000, and $5,164, respectively. The Company issued 30,000 shares in October 2025, 1,000,000 shares in December 2025, 500,000 shares in January 2026, and 20,000 shares in February 2026. Because the shares were issued to New Circle at prices determined using a discounted VWAP formula, the cash proceeds received were below the fair value of the shares on the respective issuance dates. The Company measured the shares at fair value on the date cash was received and recognized the difference between (i) the fair value of the shares issued and (ii) the proceeds calculated pursuant to the discounted VWAP pricing terms. For the three months ended March 31, 2026, the Company recorded a loss of $1,256 on the issuance of shares in the statement of operations.

As of March 31, 2026, Edmund Nabrotzky, Chief Executive Officer of the Company, Charles Maddox, Chief Financial Officer and Chief Operating Officer of the Company, and Vijayan Nambiar, Chief Technology Officer of the Company loaned the Company an aggregate of $349,996 and may make additional loans to the Company up to an aggregate amount of $600,000 (collectively, the “Executive Loans”). The Executive Loans have been made, on the terms and conditions of an unsecured, subordinated promissory note (the “Executive Notes”). The Executive Notes accrue interest at a rate of 7.5% per annum, and will be paid in quarterly installments on July 1, 2026, October 1, 2026 with a final payment by December 31, 2026. All of the Company’s obligations and payments under the Executive Notes are subordinated to the Company’s obligations under the loan agreement with J.J. Astor & Co.

Subsequent to the end of the first quarter, on April 17, 2026, the Company entered into a financing arrangement with an investor consisting of an equity purchase facility and senior secured convertible promissory notes. Under the equity purchase facility, the Company may sell up to $10,000,000 of its common stock over time through purchase notices, subject to specified pricing terms and ownership limitations. In addition, the Company entered into a note purchase agreement with the investor pursuant to which the investor agreed to purchase senior secured convertible promissory notes in an aggregate principal amount of up to $2,875,000, reflecting a 20% original issue discount applied to aggregate loan proceeds of up to $2,300,000. The notes bear interest at 8% per annum and are issued at a discount. The convertible notes are secured by substantially all of the Company’s assets and are convertible into common stock at a discount to market price, with provisions for a reduced conversion price upon certain events of default. The note is currently structured as a second priority lien, subordinated to the Company’s obligations to J.J. Astor & Co. pursuant to a loan agreement dated December 5, 2025, until those obligations are discharged in full. In connection with the financing, the investor will receive commitment shares valued at $120,000 and warrants to purchase up to $2,000,000 of common stock at an exercise price equal to 99% of the closing market price on the trading day prior to exercise. Total share issuances under the agreements are subject to a 19.99% cap of the Company’s outstanding shares unless stockholder approval is obtained. The Company expects to use the proceeds primarily for general corporate purposes, including supporting liquidity and servicing existing debt obligations.

Cash Flows

Comparison of three months ended March 31, 2026 and 2025

The following table shows a summary of our cash flow for the periods presented:

Operating Activities

Our largest source of operating cash is investments made by our shareholders. Our primary uses of cash from operating activities are for employee-related expenditures, sales and marketing expenses, inventory purchases, and research & development activities. We have supplemented working capital through net proceeds from the sale of equity securities and bridge loans.

Cash provided by operating activities was $0.1 million for the three months ended March 31, 2026. This consisted of a net loss of $4.5 million adjusted for non-cash charges of $0.4 million and net changes in operating assets and liabilities of $4.2 million. The non-cash charges were primarily driven by fair value of shares issued for services of $0.1 million and depreciation and amortization of $0.2 million. Changes in operating assets and liabilities were primarily attributable to decreases in accounts receivable of $3.5 million, increases in accounts payable of $1.4 million and accrued expenses of $0.2 million, partially offset by increase in inventory of $0.9 million.

Cash used in operating activities was $1.7 million for the three months ended March 31, 2025. This consisted of a net loss of $1.3 million, adjusted for non-cash charges of approximately $0.6 million and net changes in operating assets and liabilities of approximately $0.2 million. Non-cash charges were primarily driven by a $0.6 million change in the fair value of SAFE notes. Changes in operating assets and liabilities were primarily attributable to a decrease in deferred revenue of $0.1 million and increase in interest payable of $0.2 million.

Investing Activities

There were no investing activities for the three months ended March 31, 2026.

Cash used in investing activities was $0.3 million for the three months ended March 31, 2025, which consisted of capital expenditures for internal-use software development costs.

Financing Activities

Cash used by financing activities was $0.1 million for the three months ended March 31, 2026. This consisted primarily of proceeds from issuance of short-term loans to related parties of $0.3 million, offset by repayments of short-term loans of $0.5 million.

Cash provided by financing activities was $1.6 million for the three months ended March 31, 2025, which consisted of proceeds from the issuance of bridge loans.

Contractual Obligations and Commitments

Our estimated future obligations consist of leases and non-cancelable purchase commitments as of March 31, 2026. For additional discussion on our leases and other commitments, refer to Note 13 – Leases and Note 17 – Commitments and Contingencies to our condensed consolidated financial statements for the three months ended March 31, 2026 included elsewhere in this Quarterly Report on Form 10-Q.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, as well as related disclosures. Actual results may differ from those estimates under different assumptions or conditions.

There have been no material changes to our critical accounting policies and estimates from those disclosed in our Annual Report on Form 10-K filed with the SEC on March 11, 2026. Refer to the section titled “Critical Accounting Policies and Estimates” included in that filing for a discussion of our significant judgments and estimates.

Recently Issued and Adopted Accounting Pronouncements

We describe the recently issued accounting pronouncements that apply in Note 2 of the condensed consolidated financial statements as of and for the three months ended March 31, 2026.

Emerging Growth Company Status

Section 102(b)(1) of the JOBS Act exempts emerging growth companies from being required to comply with new or revised financial accounting standards until private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of the extended transition period and comply with the requirements that apply to nonemerging growth companies but any such election to opt out is irrevocable. The Company has elected not to opt out of such extended transition period which means that when an accounting standard is issued or revised and it has different application dates for public or private companies, the Company, as an emerging growth company, can adopt the new or revised accounting standard at the time private companies adopt the new or revised standard.

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our current management, including our CEO and CFO, we evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of March 31, 2026. Based on this evaluation of our disclosure controls and procedures, our CEO and CFO have concluded that our disclosure controls and procedures were not effective as of March 31, 2026 because of certain material weaknesses in our internal control over financial reporting, as further described below.

Notwithstanding the conclusion by our CEO and CFO that our disclosure controls and procedures as of March 31, 2026 were not effective, and notwithstanding the material weaknesses in our internal control over financial reporting described below, management believes that the condensed consolidated financial statements and related financial information included in this Quarterly Report on Form 10-Q fairly present in all material respects our financial condition, results of operations, and cash flows as of the dates presented, and for the periods ended on such dates, in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

Material Weaknesses

Accounting Personnel and Financial Reporting Controls. Management determined that the Company does not currently maintain sufficient accounting personnel and has not fully designed and implemented the processes and internal controls necessary to support accurate and timely financial reporting. These deficiencies (i) limit the Company’s ability to effectively review and approve certain material journal entries and properly adopt new accounting pronouncements, increasing the risk that a material misstatement of interim or annual financial statements may not be prevented or detected on a timely basis, and (ii) have resulted in an insufficient segregation of duties between the preparation, review, and approval of certain material reconciliations and other financial reporting controls.

For the year ended December 31, 2025, management identified that the Company did not initially accrue all Board of Director compensation earned during the year ended December 31, 2025. During the year-end audit process, management recorded the appropriate accrual and related Board of Director compensation expense for the year ended December 31, 2025.

In addition, management identified presentation revisions in the statements of cash flows for the six months ended June 30, 2025 and the nine months ended September 30, 2025. Certain items were reclassified between operating and financing activities, including amounts related to short-term debt and proceeds from bridge financing arrangements, and certain components associated with the reverse recapitalization transaction were adjusted for proper presentation. These revisions affected the classification of cash flows between operating and financing activities but had no impact on total change in cash, net loss, or previously reported balance sheet amounts.

Management evaluated the quantitative and qualitative factors associated with these matters and concluded that the corrections were not material to any previously issued annual or interim financial statements. Accordingly, the Company has reflected these changes in the affected prior-period financial statements in this Quarterly Report to reflect these reclassifications as immaterial reclassifications to previously issued financial statements.

Fair Value Calculation Controls. In addition, management identified a material weaknesses in the design of internal controls related to the review of the fair value calculation of SAFE notes performed by a third-party valuation specialist. The controls lacked the precision needed to detect inappropriate inputs that could materially impact valuation.

The Company is actively working to develop and implement remediation plans related to the material weakness identified in this section. Remediation efforts include enhancing the design and implementation of controls over the accounting for financial instruments and hiring additional qualified accounting personnel.

Internal Control over Financial Reporting

There were no other changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As of the date of this Quarterly Report, there have been no material changes to the risk factors previously disclosed in our Form 10-K filed on March 11, 2026, and our Closing Form 8-K filed on June 26, 2025, other than as provided below. Any of these factors could have a material adverse effect on our results of operations or financial condition. Additional risks not currently known to us or that we presently consider immaterial may also adversely affect our business or results of operations.

The issuance of shares of our Common Stock to White Lion under the Common Stock Purchase Agreement will dilute the ownership interest of our existing stockholders.

We may sell up to $10,000,000 of our Common Stock to White Lion Capital, LLC (“White Lion” or the “Selling Securityholder”) under the Common Stock Purchase Agreement. The shares will be sold to White Lion at a discount to the then-prevailing market price. To the extent we sell shares to White Lion under the Common Stock Purchase Agreement dated April 17, 2026 between us and White Lion (the “Common Stock Purchase Agreement” or “ELOC Agreement”), additional shares of our Common Stock will be issued, which will result in dilution to the holders of our Common Stock. In addition, the lower our stock price is at the time we elect to sell shares, the more shares we would need to issue for any given dollar amount of proceeds, resulting in greater dilution to our existing stockholders. Our existing stockholders may experience substantial dilution as a result of issuances of shares under the Common Stock Purchase Agreement, and such dilution could cause the trading price of our Common Stock to decline.

It is not possible to predict the actual number of shares we will sell to White Lion under the ELOC Agreement, or the actual gross proceeds resulting from those sales. We may not have access to the full amount available under the ELOC Agreement.

On April 17, 2026, we entered into the Common Stock Purchase Agreement with White Lion, pursuant to which White Lion committed to purchase up to $10,000,000 of our Common Stock, subject to certain limitations and conditions set forth in the Common Stock Purchase Agreement. The Common Stock that may be issued under the Common Stock Purchase Agreement may be sold by us to White Lion at our discretion, from time to time, over a period ending December 31, 2028, commencing on the date of the ELOC Agreement. We generally have the right to control the timing and amount of any sales of our Common Stock to White Lion under the ELOC Agreement. Sales of our Common Stock to White Lion under the ELOC Agreement will depend upon market conditions as well as other factors to be determined by us. We may ultimately decide to sell to White Lion all or a portion of the shares of our Common Stock that may be available pursuant to the ELOC Agreement, or decide to terminate the ELOC Agreement or not sell to White Lion any Common Stock that may be available for us to sell to White Lion thereunder.

Because the purchase price per share to be paid by the White Lion for the shares of Common Stock that we may elect to sell to White Lion under the ELOC Agreement will fluctuate based on the market prices of our Common Stock during the applicable pricing period for each purchase, it is not possible for us to predict the number of Common Stock that we will sell to White Lion under the ELOC Agreement, the purchase price per share that the White Lion will pay for shares purchased from us under the ELOC Agreement, or the aggregate gross proceeds that we will receive from those purchases by the White Lion under the ELOC Agreement.

Although the ELOC Agreement provides that we may sell up to an aggregate of $10,000,000 of shares of Common Stock to White Lion, only 15,000,000 shares of Common Stock that may be issued to White Lion under the ELOC Agreement are registered for resale by White Lion.

If we elect to sell to White Lion all of the 15,000,000 shares of Common Stock registered for resale by White Lion, depending on the market prices of our Common Stock during the applicable pricing period for each purchase made pursuant to the ELOC Agreement, the actual gross proceeds from the sale of all such shares may be substantially less than the $10,000,000 total commitment originally available to us under the ELOC Agreement.

In addition, White Lion will not be required to purchase any shares of Common Stock if such sale would result in White Lion’s beneficial ownership exceeding 4.99% of the then-outstanding voting power or shares of Common Stock; provided, that the beneficial ownership limitation may be increased to 9.99% upon the mutual written agreement of the Company and White Lion, effective not less than sixty-one (61) days after such mutual written agreement. Any issuance and sale by us under the ELOC Agreement of a substantial amount of shares of our Common Stock in addition to the 15,000,000 shares of Common Stock registered for resale by White Lion could cause additional substantial dilution to our stockholders. The number of shares of Common Stock ultimately offered for resale by White Lion is dependent upon the number of shares of Common Stock we ultimately sell to White Lion under the ELOC Agreement. Our inability to access a portion or the full amount available under the ELOC Agreement, in the absence of any other financing sources, could have a material adverse effect on our business.

The issuance of certain securities under the Common Stock Purchase Agreement, the common stock purchase warrant issued to White Lion (the “Commitment Warrant”), and the Note Purchase Agreement is contingent upon us obtaining stockholder approval pursuant to Nasdaq Rule 5635 (“Stockholder Approval”). If we do not obtain the Stockholder Approval, these securities may never become issuable and/or exercisable.

If it becomes necessary for us to issue and sell to White Lion Common Stock in excess of the exchange cap under the Common Stock Purchase Agreement in order to receive aggregate gross proceeds equal to $10,000,000 under the Common Stock Purchase Agreement, then for so long as the Exchange Cap continues to apply to issuances and sales of Common Stock under the Common Stock Purchase Agreement, we must first obtain Stockholder Approval. In addition, no tranche of the convertible notes may be funded until Stockholder Approval has been obtained. If we are unable to obtain the required Stockholder Approval, these securities will not be issuable and/or exercisable, and will have little to no value.

The Company has agreed to use commercially reasonable efforts to duly call, give notice of, convene, and hold a stockholder meeting (the “Stockholder Meeting”) as soon as reasonably practicable, but in no event later than May 15, 2026, for the purposes of obtaining Stockholder Approval. If the Company fails to hold a Stockholder Meeting by May 15, 2026, it shall pay liquidated damages to White Lion, as more fully described in the Common Stock Purchase Agreement. In the event Stockholder Approval is not obtained at the first Stockholder Meeting, the Company is obligated to cause an additional Stockholder Meeting to be held every one hundred eighty (180) days during the period beginning on such date and continuing seven hundred twenty (720) days thereafter, until Stockholder Approval is obtained.

Investors who buy shares at different times will likely pay different prices.

Pursuant to the ELOC Agreement, we will have discretion, subject to market demand, to vary the timing, prices, and numbers of shares sold to the White Lion. If and when we do elect to sell shares of Common Stock to the White Lion under the ELOC Agreement, after the White Lion has acquired such shares, the White Lion may resell all or a portion of such shares at any time or from time to time in its discretion and at different prices. As a result, investors who purchase shares from the White Lion at different times will likely pay different prices for those shares, and so may experience different levels of dilution and in some cases substantial dilution and different outcomes in their investment results. Investors may experience a decline in the value of the shares they purchase from the White Lion as a result of future sales made by us to the White Lion at prices lower than the prices such investors paid for their shares.

The sale and issuance of our Common Stock to the Selling Securityholder will cause dilution to our existing stockholders, and the sale of the shares acquired by the Selling Securityholder, or the perception that such sales may occur, could cause the price of our Common Stock to decline.

Sales of a substantial number of shares of our Common Stock in the public market could occur at any time, subject to the restrictions and limitations described below. If our shareholders sell, or the market perceives that our shareholders intend to sell, substantial amounts of shares of our Common Stock in the public market following this offering, the market price of shares of our Common Stock could decline significantly.

The Selling Securityholder can resell up to 51,000,000 shares. After the Selling Securityholder has acquired the shares, the Selling Securityholder may resell all, some, or none of those shares at any time or from time to time in its discretion. Therefore, sales to the Selling Securityholder by us could result in substantial dilution to the interests of other holders of our Common Stock. Additionally, sales of a substantial number of shares of our Common Stock in the public market by the Selling Securityholder and/or by our other existing stockholders, or the perception that those sales might occur, could depress the market price of our Common Stock and could impair our ability to raise capital through the sale of additional equity securities in the future at a time and at a price that we might otherwise wish to effect sales.

We have broad discretion in the use of the net proceeds we receive from the sale of shares to the Selling Securityholder and may not use them effectively.

Our management will have broad discretion in the application of the proceeds we receive from the Selling Securityholder pursuant to sales of Common Stock under the Common Stock Purchase Agreement, if any, and you will not have the opportunity as part of your investment decision to assess whether our management is using the proceeds appropriately. Because of the number and variability of factors that will determine our use of our proceeds from the Selling Securityholder, their ultimate use may vary substantially from their currently intended use. The failure by our management to apply these funds effectively could result in financial losses that could have a material adverse effect on our business and cause the price of our Common Stock to decline. Pending their use, we may invest the proceeds from the Selling Securityholder in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders.

The convertible notes issuable to White Lion will be secured by substantially all of our assets, and a default could result in White Lion foreclosing on our assets.

Our obligations under the convertible notes will be secured by a security interest in all of our assets and personal property, including our intellectual property. If we default under the convertible notes, White Lion could foreclose on our assets, which could force us to curtail or cease our operations.

White Lion has the right to require us to apply a portion of our financing proceeds toward repayment of the convertible notes.

Under the terms of the Note Purchase Agreement with White Lion, White Lion has the right to require us to apply up to 10% of all cash proceeds received from the issuance of securities pursuant to the Common Stock Purchase Agreement, the exercise of the Commitment Warrant, or the issuance of any other securities of the Company, toward repayment of the convertible notes. This could reduce the amount of proceeds available to us for working capital and other corporate purposes.

The exercise price of the Commitment Warrant is subject to full ratchet anti-dilution adjustment, which could result in additional dilution to our stockholders.

The Commitment Warrant issued to White Lion includes a full ratchet anti-dilution provision, pursuant to which the exercise price of the Commitment Warrant will be reduced to the effective price per share of any new issuance of Common Stock or Common Stock equivalents below the then-current exercise price (subject to exceptions for exempt issuances). Because the exercise price is initially set at 99% of the closing sales price of the Common Stock on the trading day prior to the exercise date and is subject to downward adjustment, any future dilutive issuance by the Company could result in a reduction of the exercise price and a corresponding increase in the number of shares issuable upon exercise, resulting in additional dilution to our existing stockholders.