Twin Vee PowerCats, Co.: Form 10-Q for the period ended Jun 30, 2026

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes included in this Quarterly Report on Form 10-Q. The following discussion contains forward-looking statements that involve risks and uncertainties. See “Forward-Looking Statements.” Our actual results and the timing of certain events could differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those discussed below and elsewhere in this Quarterly Report on Form 10-Q. This discussion should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes thereto. You should also review the disclosure under the heading “Risk Factors” in this Quarterly Report on Form 10-Q and under Part 1, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2025 for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.

All share amounts and exercise or conversion prices in this Quarterly Report on Form 10-Q have been adjusted retrospectively for our 1-for-10 reverse stock split (the “2025 Reverse Stock Split”), which was effective on April 7, 2025 and our 1-for-37 reverse stock split (the “2026 Reverse Stock Split” and together with the 2025 Reverse Stock Split, the “Reverse Stock Split”), which was effective on May 4, 2026.

OVERVIEW

Twin Vee PowerCats Co. (“Twin Vee”, “we”, “us” or the “Company”) is a designer, manufacturer and marketer of recreational and commercial power boats. We believe our company, founded in 1996, has been an innovator in the recreational and commercial power catamaran industry. Our twin-hull catamaran running surface, known as a symmetrical catamaran hull design, adds to the Twin Vee ride quality by reducing drag, increasing fuel efficiency and offering users a stable riding boat. Our home base operations in Fort Pierce, Florida is a 7.5-acre facility with several buildings totaling approximately 100,000 square feet, including a recently completed 30,000 square foot expansion which began in mid-2024. We currently employ approximately 80 people.

Our products are marketed under two brands: Twin Vee for our catamarans, or dual hull vessels, and Bahama Boats and Bimini for our “V”-hull boats. Consumers can use our boats for a wide range of recreational activities including fishing, diving and water skiing and commercial activities including transportation, eco tours, fishing and diving expeditions. We believe that the performance, quality and value of our boats position us to achieve our goal of increasing our market share and expanding the power-boat market. We currently primarily sell our boats through a network of 22 independent boat dealers across North America, the Caribbean and Central America who resell our boats to the end user Twin Vee customers. We continue efforts to recruit high quality boat dealers to join our network and seek to establish new dealers and distributors domestically and internationally to distribute our boats as we grow our production and introduce new models. Our boats are currently outfitted with gas-powered outboard combustion engines. During 2024, Forza X1, Inc. (“Forza”), our then minority owned electric boat subsidiary, determined to cease production of electric boats, and on November 26, 2024, Forza was merged into Twin Vee Merger Sub, Inc., our wholly-owned subsidiary, and became a wholly owned subsidiary.

Revenue from the sale of our boats accounted for nearly 100% of our net revenue in the second quarter of 2026 and 2025. Our boats are manufactured in Fort Pierce, Florida. We believe our company has been an innovator in the recreational and commercial power boat industry. We currently have 11 Twin Vee models in production ranging in size from 22-foot to 40-foot, and 6 monohull Bahama models in or nearing production ranging in size from 31-foot to 41-foot, and three Bimini monohull models ranging in size from 21-foot to 29-foot.

During the quarter ended June 30, 2026, four individual dealers each represented over 10% of our total sales and together represented 88% of total sales. During the quarter ended June 30, 2025, three individual dealers each represented over 10% of our total sales and together represented 70% of total sales.

Our unaudited condensed consolidated financial statements for the three and six months ended June 30, 2026 were prepared under the assumption that we will continue as a going concern; however, we have incurred significant losses from operations to date and we expect our expenses to increase in connection with our ongoing activities. These factors raise substantial doubt about our ability to continue as a going concern for one year after the condensed consolidated financial statements included in this Quarterly Report are issued.

Recent Developments

Nasdaq Compliance

As previously disclosed, on April 2, 2026, the Company received written notice (the “Notification Letter”) from the staff of the Listing Qualifications Department (the “Staff”) of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that it no longer satisfies the $1.00 bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of thirty (30) consecutive business days (collectively, the “Bid Price Rule”). Based on the closing bid price of the Company’s common stock for the thirty (30) consecutive business days from February 18, 2026 to March 31, 2026, the Company no longer satisfied the Bid Price Rule. While companies are typically afforded a 180-calendar day compliance period to comply with the Bid Price Rule, the Notification Letter stated that, pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(iv), the Company was not eligible for any compliance period specified in Nasdaq Listing Rule 5810(c)(3)(A) due to the fact that the Company effected a reverse stock split over the prior one-year period. The Company effected a 1-for-10 reverse stock split on April 7, 2025. The Notification Letter stated that the Company’s securities will be subject to delisting from Nasdaq unless the Company timely requested a hearing before the Nasdaq Hearings Panel (the “Panel”), which was timely requested and subsequently scheduled for May 7, 2026.

To that end, on April 30, 2026, the Company filed a Certificate of Change with the Nevada Secretary of State (the “Certificate of Change”) to amend its Nevada Articles of Incorporation to effect a 1-for-37 reverse stock split of the Company’s authorized shares of common stock, accompanied by a corresponding decrease in the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”), effective as of 12:01 a.m. Eastern Time on May 4, 2026, purportedly pursuant to Nevada Revised Statutes (“NRS”) 78.207. On June 17, 2026, the Panel found that Twin Vee is in compliance with the Listing Rules of The Nasdaq Stock Market.

In light of the Company’s defective reincorporation from Delaware to Nevada (see “Defective State of Nevada Reincorporation” below) the Company is in process of seeking stockholder approval for ratification of the Reverse Stock Split in the State of Delaware, which Reverse Stock Split is expected to remain effective as of 12:01 a.m. Eastern Time on May 4, 2026 following such ratification. The ratification of the defective corporate acts is being pursued pursuant to Section 204 of the Delaware General Corporation Law and will not be effective unless and until the Company’s stockholders approve such ratification. See “Defective Reverse Stock Split” below and “PART II. OTHER INFORMATION - ITEM 1A. RISK FACTORS - We are seeking stockholder approval to ratify certain actions pursuant to Section 204 of the Delaware General Corporation Law and expect to file a Certificate of Validation with the Secretary of State of the State of Delaware in the event stockholders provide such approval.”

Defective State of Nevada Reincorporation

On April 10, 2026, the Company purported to complete its reincorporation from the State of Delaware to the State of Nevada. On August 4, 2026, after discovering that the reincorporation was not approved by a sufficient vote of shares of the Company’s common stock, the Company filed Certificates of Correction (a) in the State of Nevada to revoke the previously filed Nevada Articles of Conversion/Exchange/Merger and Nevada Articles of Incorporation and (b) in the State of Delaware to revoke the previously filed Delaware Certificate of Conversion. Separately, the Company is seeking stockholder approval to ratify the articles of incorporation amendment, which were filed with the State of Nevada on April 30, 2026 with an effective date of May 4, 2026, to effect the reverse stock split referred to elsewhere in this Quarterly Report. In light of the defective corporate acts referred to above, the Company did not effectively reincorporate to Nevada. See “PART II. OTHER INFORMATION - ITEM 1A. RISK FACTORS - We are seeking stockholder approval to ratify certain actions pursuant to Section 204 of the Delaware General Corporation Law and expect to file a Certificate of Validation with the Secretary of State of the State of Delaware in the event stockholders provide such approval.”

Executive Compensation

On April 21, 2026, the Compensation Committee of the Board of Directors (the “Committee”) of the Company approved an increase in the base salary of Preston Yarborough, the Company’s Vice President, to $250,000 per annum, and on April 22, 2026, the Company entered into an amendment (the “Yarborough Amendment”) to the employment agreement, effective as of July 23, 2021, by and between the Company and Preston Yarborough, reflecting such increase in base salary.

On May 17, 2026, the Company delivered a notice of non-renewal pursuant to the terms of the Employment Agreement, effective as of July 23, 2021, with Joseph Visconti. The non-renewal was not due to any disagreement between Mr. Visconti and the Company on any matter. Following July 23, 2026, Mr. Visconti will continue to serve as the Company’s Chief Executive Officer and President on an at-will basis.

Defective Reverse Stock Split

On April 30, 2026, the Company filed a Certificate of Change with the Nevada Secretary of State (the “Certificate of Change”) to amend its invalidly filed Nevada Articles of Incorporation to effect a 1-for-37 reverse stock split of the Company’s authorized shares of common stock, accompanied by a corresponding decrease in the Company’s issued and outstanding shares of common stock (the “Reverse Stock Split”), effective as of 12:01 a.m. Eastern Time on May 4, 2026, purportedly pursuant to Nevada Revised Statutes (“NRS”) 78.207. Because the Nevada reincorporation was not validly approved by the requisite vote of Company stockholders, as described more fully elsewhere in this Quarterly Report, the Company never legally became a Nevada corporation. The Company is in process of seeking stockholder approval of the ratification of the Reverse Stock Split and the Reverse Stock Split is expected to remain effective as of 12:01 a.m. Eastern Time on May 4, 2026 under applicable Delaware law. The ratification of the defective corporate act is being pursued pursuant to Section 204 of the Delaware General Corporation Law and will not be effective unless and until the Company’s stockholders approve such ratification. See “PART II. OTHER INFORMATION - ITEM 1A. RISK FACTORS - We are seeking stockholder approval to ratify certain actions pursuant to Section 204 of the Delaware General Corporation Law and expect to file a Certificate of Validation with the Secretary of State of the State of Delaware in the event stockholders provide such approval.”

On April 10, 2026, the board of directors of the Company approved the Reverse Stock Split by unanimous written consent. Since the Reverse Stock Split was purportedly effectuated pursuant to NRS 78.207 by a proportionate decrease in both the authorized and issued and outstanding shares of the entire class, no stockholder approval of the Reverse Stock Split was required under the NRS. After the effective time of the Reverse Stock Split, the Company’s common stock began trading under the existing trading symbol “VEEE” on the Nasdaq Capital Market on a reverse split-adjusted basis when the market opened on May 4, 2026. At the effective time of the Reverse Stock Split, every 37 shares of common stock issued and outstanding automatically converted into one issued and outstanding share of common stock and the total number of shares of common stock authorized for issuance under the Articles of Incorporation was reduced by a corresponding proportion from approximately 19.6 million shares to approximately 0.5 million shares.

In addition, as a result of the Reverse Stock Split, proportionate adjustments were made to the number of shares of common stock underlying the Company’s outstanding equity awards and warrants. The total number of shares of the Company’s preferred stock authorized for issuance under the Articles of Incorporation remained at 10,000,000.

Results of Operations

Comparison of the Three Months Ended June 30, 2026 and 2025.

The following table provides certain selected financial information for the periods presented:

Net Sales and Cost of Sales

Our net sales decreased by $1,627,244, or 34%, to $3,128,374 for the three months ended June 30, 2026, from $4,755,618 for the three months ended June 30, 2025. This decrease was due primarily to market conditions of elevated interest rates and higher gas prices impacting consumer behavior and demand. During the second quarter of 2026, we sold 15 boats at an average selling price of approximately $209,000 per unit, compared to 31 units in the second quarter of 2025 with an average selling price of approximately $153,000. The increase in the average sales price is primarily due to a change in the product mix of boats sold, specifically, in the second quarter of 2025, 18 boats of 24 feet or less were sold versus in the second quarter of 2026 8 boats of 24 feet or less were sold.

Gross profit

Gross profit declined by $836,721, or 128%, to a negative $182,668 for the three months ended June 30, 2026, from $654,053 for the three months ended June 30, 2025. Gross (loss) profit as a percentage of sales for the three months ended June 30, 2026 was -5.8% compared to 13.8% in the second quarter of 2025. The decline in gross profit of 19.6 percentage points, is primarily due to an increase in labor related to the completion and re-launch of the new Bahama Boat line of boats at the Palm Beach International Boat Show and the unfavorable leverage effect of lower boat sales on fixed overhead costs.

During the second quarter of 2026, the Company recorded a non-cash impairment charge of approximately $701,223 related to capitalized software development costs. The software platform was developed and commercialized during 2025 with the expectation of generating future revenues through licensing, subscription arrangements, customer access fees, and other commercialization opportunities. Following commercialization, management actively pursued customer adoption, strategic partnerships, and other monetization initiatives. After evaluating market demand, expected future investment requirements, strategic priorities, and the absence of supportable future revenue opportunities, management determined during the second quarter of 2026 to discontinue commercialization efforts and abandon the software as a revenue-generating initiative. As a result, the Company concluded that the carrying value of the software was no longer recoverable and recorded a full impairment charge of approximately $701,223, representing the remaining net book value of the asset.

Operating Expenses

During the three months ended June 30, 2026 and 2025, total operating expenses were $2,838,869 and $2,329,859, respectively, an increase of $509,010, or 22%. Second quarter of 2026 includes an impairment charge related to capitalized software of $701,223. Before the impact of this charge, operating expenses would be down $192,213 or 8.2%

Selling, general, and administrative expenses decreased by approximately 1%, or $5,167, to $600,106 for the three months ended June 30, 2026, compared to $605,273 for the three months ended June 30, 2025.

Salaries and wage related expenses decreased 22%, or $232,125, to $822,978 for the three months ended June 30, 2026, compared to $1,055,103 for the three months ended June 30, 2025. The decrease in salaries and wages is across the board, including salaries, director expenses, and benefits due to ongoing resource management, in addition, the retirement of our prior CFO resulted in a reduction in salaries, bonus accruals as well as stock based compensation expenses.

Professional fees increased by 35%, or $66,482, to $256,989 for the three months ended June 30, 2026, compared to $190,507 for the three months ended June 30, 2025, primarily due to expenses related to the proposed merger with USFM.

Depreciation and amortization expense increased by 8%, or $33,534 to $459,085 for the three months ended June 30, 2026, as compared to $425,551 for the three months ended June 30, 2025. This increase is due to the capitalization of Ft. Pierce building expansion and the 5-axis C&C machine installed in late 2025.

Other income increased by $101,789 to $123,524 for the three months ended June 30, 2026, as compared to $21,735 for the three months ended June 30, 2025. This increase was due primarily to an increase in dividend and interest income from higher cash and cash equivalent balances, following the three equity sale transactions in the first quarter of 2026 and interest income related to the Company’s note receivable on the former building in North Carolina.

Net Loss

Net loss for the three months ended June 30, 2026 was $2,898,012, as compared to $1,654,071 for the three months ended June 30, 2025, a reduction of $1,243,941 or 75%. The overall year-over-year increase in the reported loss for the period was primarily due to the reduction in gross margin and an increase in SG&A as described above, which included the write off of capitalized software of $701,223. Basic and dilutive loss per share of Common Stock for the three months ended June 30, 2026, adjusted for the May 4, 2026 1 for 37 reverse stock split, was ($5.07), as compared to ($32.22) for the three months ended June 30, 2025, an improvement of 84%.

Comparison of the Six Months Ended June 30, 2026 and 2025

The following table provides certain selected financial information for the periods presented:

32

Net Sales and Cost of Sales

Our net sales decreased by $1,274,829, or 15% to $7,093,080 for the six months ended June 30, 2026 from $8,367,909 for the six months ended June 30, 2025. This decrease was due primarily to market conditions of elevated interest rates and higher gas prices impacting consumer behavior and demand. We sold 36 and 45 boats during the first six months of 2026 and 2025, respectively. The average unit price per boat was approximately $197,000 in the first six months of 2026 compared to $186,000 in the first six months of 2025. This increase is due primarily to the sale of a 35’ and a 37’ Bahama in 2026 versus none in 2025.

Gross Profit

Gross profits decreased by $1,177,498 or 99%, to $13,669 for the six months ended June 30, 2026, from $1,191,167 for the six months ended June 30, 2025. Gross profit as a percentage of sales, for the six months ended June 30, 2026 and 2025, was 0.2% and 14.2% respectively. The decline in gross profit of 14 percentage points, is primarily due to an increase in labor related to the completion and re-launch of the new Bahama Boat line of boats at the Palm Beach International Boat Show and the unfavorable leverage effect of lower boat sales on fixed overhead costs.

During the second quarter of 2026, the Company recorded a non-cash impairment charge of approximately $701,223 related to capitalized software development costs. The software platform was developed and commercialized during 2025 with the expectation of generating future revenues through licensing, subscription arrangements, customer access fees, and other commercialization opportunities. Following commercialization, management actively pursued customer adoption, strategic partnerships, and other monetization initiatives. After evaluating market demand, expected future investment requirements, strategic priorities, and the absence of supportable future revenue opportunities, management determined during the second quarter of 2026 to discontinue commercialization efforts and abandon the software as a revenue-generating initiative. As a result, the Company concluded that the carrying value of the software was no longer recoverable and recorded a full impairment charge of approximately $701,223, representing the remaining net book value of the asset.

Operating Expenses

During the six months ended June 30, 2026, operating expenses were $5,171,140 compared to $4,546,067 in the same period in 2025, an increase of $625,073 or 14%. The six month period ended June 30, 2026 includes an impairment charge related to capitalized software of $701,223. Before the impact of this charge, operating expenses would be down $76,150 or 2.0%

Selling, general, and administrative expenses increased by approximately 21%, or $256,832, to $1,460,657 for the six months ended June 30, 2026, compared to $1,203,825 for the six months ended June 30, 2025. The increase was driven by both property taxes and Delaware franchise taxes as well as approximately $168,000 of penalties assessed by the Internal Revenue Service related to section 6721 and 6722 for the tax year 2022. The Company is actively seeking to resolve this disagreement with the IRS. Included in salaries and wage related expenses for the six months ended June 30, 2026 and 2025 was stock-based compensation expense of $130,010 and $115,597, respectively.

Salaries and wage related expenses decreased 15%, or $313,582, to $1,708.483 for the six months ended June 30, 2026, compared to $2,022,065 for the six months ended June 30, 2025. The decrease in salaries and wages is across the board, including salaries, director expenses, and benefits due to ongoing resource management, in addition, the retirement of our prior CFO resulted in a reduction in salaries and bonus accruals.

Professional fees increased by 12% or $39,525, to $376,043 for the six months ended June 30, 2026, compared to $336,518 for the six months ended June 30, 2025. This increase is primarily due to expenses related to the proposed merger with USFM.

Depreciation and amortization expense increased by 7%, or $59,023, to $926,246 for the six months ended June 30, 2026, as compared to $867,223 for the six months ended June 30, 2025. This increase is due to the capitalization of Ft. Pierce building expansion and the 5-axis C&C machine installed in late 2025.

Other income increased by $74,591 to $165,180 for the six months ended June 30, 2026, as compared to $90,589 for the six months ended June 30, 2025. This increase was due primarily to an increase in dividend and interest income from higher cash and cash equivalent balances, following the three equity sale transactions in the first quarter of 2026 and interest income related to the Company’s note receivable on the former building in North Carolina.

Net Loss

Net loss for the six months ended June 30, 2026 was $4,992,290, as compared to $3,264,311 for the six months ended June 30, 2025, a reduction of $1,727,979 or 53%. The overall year-over-year increase in the reported loss for the period was primarily due to the reduction in gross margin and an increase in SG&A as described above, which included the write off of capitalized software of $701,223. Basic and dilutive loss per share of Common Stock for the six months ended June 30, 2026, adjusted for the May 4, 2026 1 for 37 reverse stock split, was ($12.85), as compared to ($71.27) for the six months ended June 30, 2025, an improvement of 82%.

Liquidity

Going Concern

For the year ended December 31, 2025, we incurred a loss from operations of $8,781,299 and a net loss of $8,607,273. For the six months ended June 30, 2026, we incurred a loss from operations of $5,157,471 and a net loss of $4,992,290. As of June 30, 2026, we had accumulated deficits of $38,992,518. To address these conditions:

• We closed three equity offerings during the first quarter of 2026 totaling 468,863 shares of common stock for total net proceeds of $5,800,025.
• As of June 30, 2026, we maintain a cash, cash equivalents and restricted cash balance of $3,929,427.
• During the fourth quarter of 2025, we completed the sale of our Marion, North Carolina facility, generating $500,000 in cash in the fourth quarter of 2025, and expected cash payments of $500,000 in 2026 and $3,250,000 in 2027, plus interest at 5%.
• Management continues to implement cost controls, operational improvements, and revenue initiatives to further strengthen our financial position.

Despite our ongoing efforts to mitigate these conditions, there can be no assurance that our expenses will not increase in future periods or that the cash generated from operations in future periods will be sufficient to satisfy our operating needs. If we need to raise additional capital to fund our continued operations, there can be no assurance that funding will be available on acceptable terms on a timely basis, or at all. The various ways that we could raise capital carry potential risks. Any additional sources of financing will likely involve the issuance of our equity securities, which will have a dilutive effect on our stockholders. Any debt financing, if available, may involve restrictive covenants that may impact our ability to conduct our business. If we do not succeed in raising additional funds on acceptable terms or at all, we may be unable to fill new orders and develop new products. As such, we cannot conclude that such plans will be effectively implemented within one year after the date that the condensed consolidated financial statements included in this Quarterly Report are filed with the SEC, and there is uncertainty regarding our ability to maintain liquidity sufficient to operate our business effectively, which raises substantial doubt about our ability to continue as a going concern. If we are unable to generate sufficient revenue from operations and/or raise capital when needed or on attractive terms, we may be forced to delay, reduce or eliminate efforts to expand our dealer network or develop new models and may be forced to cease operations or liquidate assets.

A primary source of funds for the three and six months ended June 30, 2026 was net cash received from our three follow-on equity offerings closed during the first quarter of 2026, and revenue generated from operations. Our primary use of cash was related to funding our operations including capital improvements, and development of the Bahama Boat lineup.

During the six months ended June 30, 2026, the Company completed multiple equity offerings resulting in aggregate gross proceeds of $7,192,640 and aggregate net proceeds of $5,800,025, after deducting placement agent fees and expenses and the Company’s offering expenses.

In connection with these offerings, the Company issued as compensation to the placement agent warrants to purchase shares of its common stock. The warrants are exercisable immediately and are classified as equity instruments. As a result, the issuance of these warrants did not result in any remeasurement adjustments or impact to the Company’s statements of operations.

The Company intends to use the net proceeds from these offerings for working capital and general corporate purposes.

Selected Balance Sheet Information

The following table provides selected financial data about us as of June 30, 2026 and December 31, 2025.

As of June 30, 2026, we had $3,929,427 of cash, cash equivalents, and restricted cash, total current assets of $8,576,146 and total assets of $20,651,788. Our total liabilities were $6,246,232. Our total liabilities were comprised of current liabilities of $3,633,980, which included accounts payable and accrued liabilities of $2,637,237, lease liabilities of $470,943 and contract liability of $525,800. Long term liabilities were $2,612,252. As of December 31, 2025, we had $1,646,695 of cash, cash equivalents, and restricted cash, total current assets of $4,897,217 and total assets of $16,234,369. Our total current liabilities were $2,244,513 and total liabilities were $2,766,558.

The accumulated deficit was $38,992,518 as of June 30, 2026 compared to accumulated deficit of $34,000,228 as of December 31, 2025.

Our working capital increased by $2,289,462 to $4,942,166 as of June 30, 2026, compared to $2,652,704 on December 31, 2025 primarily due to the three first quarter 2026 equity offerings totaling 468,863 shares, netting approximately $5,800,025 after fees and expenses, partially offset by continued operating losses incurred in the period.

Cash Flow

Cash Flow from Operating Activities

For the six months ended June 30, 2026 net cash used in operating activities was $3,271,122, compared to $2,481,889 during the six months ended June 30, 2025. The use of cash in operating activities for the six months ended June 30, 2026 was due primarily to a $5,157,471 operating loss adjusted for non-cash depreciation and amortization of $926,246, stock-based compensation of $130,010, and asset impairment losses of $699,711.

Cash Flow from Investing Activities

During the six months ended June 30, 2026, cash used in investing activities was $235,477, due to investments in property, plant and equipment, primarily related to contingent consideration capitalized as Bahama Boat Works boat hulls. This compares to use of cash in investing activities of $1,536,522 in the six months ended June 30, 2025 resulting from purchase of property and equipment.

Cash Flows from Financing Activities

For the six months ended June 30, 2026, net cash provided by financing activities was approximately $5,789,331 due primarily to the three first quarter 2026 equity offerings totaling 468,863 shares, netting approximately $5,800,025 after fees and expenses. For the six months ended June 30, 2025, net cash used in financing activities was approximately $2,449,992.

USFM Merger Impact to Our Liquidity

As described in note 15 to our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, the Company entered into the USFM Merger Agreement on July 12, 2026, which sets forth the terms associated with the USFM Merger. Among other things, pursuant to the USFM Merger Agreement, the Company must consummate the Pre-Closing CVR Restructuring, pursuant to which the Company must to transfer all of the Company Assets and Liabilities (which includes all of the Company’s cash in excess of $1,500,000) to Assetco.

CRITICAL ACCOUNTING ESTIMATES

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as “critical” because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates—which also would have been reasonable—could have been used, which would have resulted in different financial results.

Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of our consolidated financial statements 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. On an ongoing basis, we evaluate our estimates based on historical experience and make various assumptions, which management believes to be reasonable under the circumstances, which form the basis for judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

The notes to our unaudited condensed consolidated financial statements contained herein contain a summary of our significant accounting policies. We consider the following accounting policies critical to the understanding of the results of our operations:

Revenue Recognition

The Company accounts for revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 606 which was adopted at the beginning of fiscal year 2018 using the modified retrospective method. The Company did not recognize any cumulative-effect adjustment to retained earnings upon adoption as the effect was immaterial.

Payment received for the future sale of a boat to a customer is recognized as a customer deposit, which is included in contract liabilities on the condensed consolidated balance sheets. Customer deposits are recognized as revenue when control over promised goods is transferred to the customer.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Included in those estimates are assumptions about allowances for inventory obsolescence, useful life of fixed assets, and warranty reserves.

Inventories

Inventories are valued at the lower of cost and net realizable value, with cost determined using the weighted average cost method on a first-in first-out basis. Net realizable value is defined as sales price less cost of completion, disposable and transportation and a normal profit margin. Production costs, consisting of labor and overhead, are applied to ending finished goods inventories at a rate based on estimated production capacity. Excess production costs are charged to cost of products sold. Provisions have been made to reduce excess or obsolete inventories to their net realizable value.

Product Warranty Costs

As required by FASB ASC Topic 460, Guarantees, the Company is including the following disclosure applicable to its product warranties.

The Company accrues for warranty costs based on the expected material and labor costs to provide warranty replacement products. The methodology used in determining the liability for warranty cost is based upon historical information and experience. The Company’s warranty reserve is calculated as the gross sales multiplied by the historical warranty expense return rate.

OFF-BALANCE SHEET ARRANGEMENTS

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules.

We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2026. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “SEC”). Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. We have adopted and maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is collected, recorded, processed, summarized, and reported within the time periods specified in the rules of the SEC. Our disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2026, our Chief Executive Officer and Interim Chief Financial Officer concluded that, as of such a date, our disclosure controls and procedures were not effective due to the material weaknesses in our internal control over financial reporting, related to not yet having retained sufficient staff or engaged sufficient outside consultants with appropriate experience in GAAP presentation, especially of complex instruments, to devise and implement effective disclosure controls and procedures over internal controls.

Remediation Plan

Management has developed and is executing a remediation plan to address the previously disclosed material weaknesses, due to inadequate staffing levels. We have retained a full-time controller and have promoted our former Chief Financial & Administrative Officer and SEC reporting consultant, Michael P. Dickerson, to be our Interim Chief Financial Officer. We have also implemented a robust operating system and we are utilizing the assistance of outside advisors where appropriate.

To remediate the existing material weaknesses, additional time is required to demonstrate the effectiveness of the remediation efforts. The material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. As of June 30, 2026, controls and procedures have been implemented to remediate the material weakness, however testing of controls continues.

Changes in Internal Control over Financial Reporting

Other than as set forth in this paragraph, there have been no changes in internal control over financial reporting during the three and six months ended June 30, 2026 that have materially affected or are reasonably likely to materially affect our control over financial reporting.

Investing in our securities involves a high degree of risk. You should consider carefully the following risks, together with all the other information in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and notes thereto. If any of the following risks actually materializes, our operating results, financial condition and liquidity could be materially adversely affected. The following information updates, and should be read in conjunction with, the information disclosed in Part I, Item 1A, ”Risk Factors,” contained in our Annual Report on Form 10-K for the year ended December 31, 2025. Except as disclosed below, there have been no material changes from the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.

Risks Related to Our Business

There is substantial doubt about our ability to continue as a going concern.

For the year ended December 31, 2025, we incurred a loss from operations of $8,781,299 and a net loss of $8,607,273. For the six months ended June 30, 2026, we incurred a loss from operations of $5,157,471 and a net loss of $4,992,290. As of June 30, 2026, we had accumulated deficits of $38,992,518. To address these conditions:

• We closed three equity offerings during the first quarter totaling 17,347,900 pre-Reverse Stock Split shares of common stock for a total net proceeds of $5,800,025.
• As of June 30, 2026, we maintain a cash, cash equivalents and restricted cash balance of $3,929,427.
• During the fourth quarter of 2025, we completed the sale of our Marion, North Carolina facility, generating $500,000 in cash in the fourth quarter of 2025, and expected cash payments of $500,000 in 2026 and $3,250,000 in 2027, plus interest at 5%.
• Management continues to implement cost controls, operational improvements, and revenue initiatives to further strengthen our financial position.

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Despite our ongoing efforts to mitigate these conditions, there can be no assurance that our expenses will not increase in future periods or that the cash generated from operations in future periods will be sufficient to satisfy our operating needs. If we need to raise additional capital to fund our continued operations, there can be no assurance that funding will be available on acceptable terms on a timely basis, or at all. The various ways that we could raise capital carry potential risks. Any additional sources of financing will likely involve the issuance of our equity securities, which will have a dilutive effect on our stockholders. Any debt financing, if available, may involve restrictive covenants that may impact our ability to conduct our business. If we do not succeed in raising additional funds on acceptable terms or at all, we may be unable to fill new orders and develop new products. As such, we cannot conclude that such plans will be effectively implemented within one year after the date that the financial statements included in this Report are filed with the SEC, and there is uncertainty regarding our ability to maintain liquidity sufficient to operate our business effectively, which raises substantial doubt about our ability to continue as a going concern. If we are unable to generate sufficient revenue from operations and/or raise capital when needed or on attractive terms, we may be forced to delay, reduce or eliminate efforts to expand our dealer network or develop new models and may be forced to cease operations or liquidate assets.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures, and internal control over financial reporting.

As of June 30, 2026, we do not yet have effective disclosure controls and procedures, or internal controls over all aspects of our financial reporting. We are continuing to develop and refine our disclosure controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and in accordance with GAAP. Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. We will be required to expend time and resources to further improve our internal controls over financial reporting, including by expanding our staff. However, we cannot assure you that our internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future.

We will be required to expend time and resources to further improve our internal controls over financial reporting, including by expanding our staff. However, we cannot assure you that our internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future.

Management has developed and is executing a remediation plan to address the previously disclosed material weaknesses, due to inadequate staffing levels. We have retained a full-time controller and are utilizing the services of experienced SEC reporting consultants as necessary. We have recently hired our former CFO to act as Interim CFO. We have also selected and implemented a robust operating system and we are utilizing the assistance of outside advisors where appropriate. We cannot assure you that management will be successful in locating and retaining appropriate candidates; that newly engaged staff or outside consultants will be successful in remedying material weaknesses thus far identified or identifying material weaknesses in the future; or that appropriate candidates will be located and retained prior to these deficiencies resulting in material and adverse effects on our business.

Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business, including increased complexity resulting from our international expansion. Further, weaknesses in our disclosure controls or our internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting could also adversely affect the results of management reports and independent registered public accounting firm audits of our internal control over financial reporting that we will eventually be required to include in our periodic reports that will be filed with the SEC. Ineffective disclosure controls and procedures, and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the market price of our Common Stock.

Our independent registered public accounting firm is not required to audit the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on our business and operating results and cause a decline in the market price of our common stock.

We are currently, and may in the future be, subject to substantial litigation, regulatory actions, government investigations, proceedings and similar actions that could cause us to incur significant legal expenses and which could have a material adverse effect on our business, operating results or financial condition.

In light of the Company’s defective reincorporation from the State of Delaware to the State of Nevada, we are seeking stockholder approval to ratify the 1-for-37 reverse stock split purportedly effectuated under Nevada law. The defective reincorporation and the associated ratification (and any failure of the stockholders to approve such ratification) exposes the Company to risk of litigation and regulatory actions, any of which may have a material adverse impact on the Company’s business, financial condition and results of operation, and may impact the Company’s ability to consummate the USFM Merger.

On August 4, 2026, our Board of Directors authorized the Company to seek stockholder approval to ratify certain actions pursuant to Section 204 (“Section 204”) of the Delaware General Corporation Law, which, in certain circumstances, allows a Delaware corporation to ratify a defective corporate act retroactive to the date the corporate act was originally taken. The ratification is being sought for a 1-for-37 stock split (the “Reverse Stock Split”) reflected in a Certificate of Change Pursuant to NRS 78.209 (the “NV Charter Amendment”), which was improperly filed by the Company with the Secretary of State of the State of Nevada (the “NV Secretary of State”) on April 30, 2026, with a stated effective time of 12:01 am ET on May 4, 2026. The NV Charter Amendment was filed with the NV Secretary of State following the prior improper filings of (a) Articles of Conversion/Exchange/Merger with the NV Secretary of State on April 9, 2026 (the “NV Conversion Filing), (b) Articles of Incorporation with the NV Secretary of State on April 9, 2026 (the “NV Articles”), and (c) a Certificate of Conversion with the Secretary of State of the State of Delaware (the “DE Secretary of State”) on April 7, 2026 (the “DE Conversion Filing”). On August 4, 2026, the Company submitted for filing (x) a Certificate of Correction with the NV Secretary of State to revoke the NV Conversion Filing (the “NV Certificate of Correction”) and (y) a Certificate of Correction with the DE Secretary of State to revoke the DE Conversion Filing (the “DE Certificate of Correction” and, together with the NV Certificate of Correction, the “Certificates of Correction”).

In the event our stockholders approve the ratification referred to above, the Company will file a Certificate of Validation with the DE Secretary of State (the “DE Certificate of Validation”) promptly following receipt of such stockholder approval, which will include an amendment to the Company’s Delaware certificate of incorporation reflecting the Reverse Stock Split, effective as of 12:01 am ET on May 4, 2026. The ratification of the Reverse Stock Split would remove uncertainty regarding the validity of the Reverse Stock Split and confirm the effectiveness of the Reverse Stock Split in the State of Delaware, effective as of 12:01 am ET on May 4, 2026.

Under Section 155 of the DGCL, when an act or transaction would result in fractional shares outstanding and the corporation determines not to issue fractions of shares, the corporation may (i) arrange for the disposition of fractional interests by those entitled thereto, (ii) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined or (iii) issue scrip or warrants in registered form (either represented by a certificate or uncertificated) which shall entitle the holder to receive a full share upon the surrender of such scrip or warrants aggregating a full share. As originally approved and effected, the Reverse Stock Split involved rounding up fractional shares into whole shares, a practice not permitted under Delaware law. Because of the complexity required to unwind any rounded-up shares, on August 4, 2026, the Board of Directors determined, with the advice of counsel, to provide in the Certificate of Amendment that will be attached to the DE Certificate of Validation and as part of the ratification of the Reverse Stock Split that, with respect to any holder who would have been entitled to receive a fraction of a share as a result of the Reverse Stock Split, the 1-for-37 exchange ratio applicable to the Reverse Stock Split would be automatically adjusted solely with respect to such holder so that at the effective time of the Reverse Stock Split, such holder would receive the next higher whole number of shares. This design will replicate the rounding-up of shares contemplated by the Nevada filings that purportedly effected the Reverse Stock Split while complying with the technical requirements of Delaware law.

Furthermore, in accordance with Section 204, on August 4, 2026, our Board of Directors ratified the Reverse Stock Split and approved (a) the submission to the stockholders of the Company a proposal for ratification and approval of Reverse Stock Split; and (b) in the event the Company receives such stockholder ratification and approval, the filing with the DE Secretary of State of the DE Certificate of Validation. On August 5, 2026, the Company filed with the SEC a preliminary proxy statement related to the special meeting of stockholders that will be called for purposes of, among other things, stockholder approval of the ratification of the Reverse Stock Split. Please review the preliminary proxy statement and the other documents that the Company will file with the SEC (including a definitive proxy statement) for more information regarding the defective reincorporation and Reverse Stock Split.

Although we believe we have fully complied with the procedures and requirements of Section 204 as of the date of this Quarterly Report on Form 10-Q, there can be no assurance that (a) our stockholders will approve the ratification of the Reverse Stock Split, (b) there will be no claims that the Reverse Stock Split, the NV Charter Amendment, the NV Articles, the NV Conversion Filing, the DE Conversion Filing, the Certificates of Correction, the purported reincorporation of the Company in Nevada, and/or all subsequent or related defective or noncompliant corporate acts (including the Reverse Stock Split) are void or voidable due to the failures to comply with applicable law, (c) the Delaware Court of Chancery will not declare in its discretion that the ratification pursuant to Section 204 is not effective or is effective only on certain conditions, or (d) the Company and its officers and directors will not face other claims or liabilities related to any of the foregoing matters or, if asserted, such claims will not be successful. Under Section 204, claims opposing the ratification of a defective corporate act must be brought within 120 days after the filing of the applicable Certificate of Validation. If the ratification pursuant to Section 204 is ultimately not effective, then the Reverse Stock Split would be invalid and the Company and its officers and directors could have liability to holders of the common stock, the Nasdaq Stock Market, other regulators, and other third parties related to the Reverse Stock Split, the invalid Nevada reincorporation, and/or any of the aforementioned matters. The outcome of any such claims or regulatory actions is impossibly to predict, however, any such claims or actions would likely have a material and adverse impact on the Company and its business, financial condition, and results of operation and any such claims or actions would significantly divert attention of the Company’s management.

In addition, if the ratification referred to above is not approved by the requisite vote of our stockholders, the ratification of the Reverse Stock Split will not become effective in accordance with Section 204, which provides for a non-exclusive method to ratify an act or transaction. The DGCL specifically states that compliance with Section 204 is not the exclusive means of ratifying any transaction or act. The failure to approve the ratification may leave us exposed to potential claims that (i) the Reverse Stock Split did not receive requisite stockholder approval, (ii) the Reverse Stock Split therefore was not validly adopted, (iii) as a result, the Company’s outstanding stock should revert to the pre-split share numbers, (iv) issuances of common stock or warrants, options, or other equity grants subsequent to the Reverse Stock Split may not be valid, and (v) we would not be able to validate our total outstanding shares of common stock in connection with any strategic transaction that our Board of Directors may determine is advisable, including, without limitation, the sale of the Company pursuant to the USFM Merger Agreement, any other business combination, merger or reverse merger, or a license or other disposition of corporate assets of the Company, or in connection with potential future transactions, including, without limitation, capital-raising transactions, exchanges of outstanding warrants, options, or other derivative securities, and other strategic transactions. Any inability to issue Common Stock in the future and any invalidity of past issuances of Common Stock could expose us to significant claims and have a material adverse effect on our operations and liquidity, which could result in material business interruptions and our filing for bankruptcy or an involuntary petition for bankruptcy being filed against us. Among other things, the Company avoided having its shares delisted from Nasdaq, in part, based on assertions the Company made to Nasdaq that it had legally consummated a reverse stock split. Furthermore, in the event the USFM Merger Agreement is not amended, we may face claims from USFM that the Company has breached its representations and other obligations under the USFM Merger Agreement. Any such claims could have a material adverse effect on our financial condition and results of operations.

Risks Related to the USFM Merger

Failure to complete, or delays in completing, the pending USFM Merger could materially and adversely affect the Company’s results of operations, business, financial results, and/or stock price.

On July 12, 2026, the Company and USFM Corporation entered into the USFM Merger Agreement, pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the USFM Merger Agreement, Merger Sub will merge with and into the Company, with the Company continuing as a wholly owned subsidiary of USFM Corporation and the surviving corporation of the USFM Merger. Consummation of the USFM Merger is subject to certain closing conditions, a number of which are not within the Company’s control. Any failure to satisfy these required conditions to closing may prevent, delay or otherwise materially adversely affect the completion of the USFM Merger. The Company cannot predict with certainty whether or when any of the required closing conditions will be satisfied or if another uncertainty may arise and cannot assure you that it will be able to successfully consummate the USFM Merger as currently contemplated under the USFM Merger Agreement or at all.

The Company’s efforts to complete the USFM Merger could cause substantial disruptions in, and create uncertainty surrounding, its business, which may materially adversely affect its results of operation and its business. This uncertainty has been compounded due to the Section 204 defective corporate act ratification and defective Nevada reincorporation matter described more fully elsewhere in this Quarterly Report. Uncertainty as to whether the USFM Merger will be completed in a timely manner or at all may affect the Company’s ability to retain and motivate existing employees. Uncertainty as to whether the USFM Merger will be completed in a timely manner or at all could adversely affect the Company’s business and its relationship with dealers, financing sources, suppliers, vendors, regulators, and other business partners. The adverse effects of the pendency of the USFM Merger could be exacerbated by any delays in completion of the USFM Merger or termination of the USFM Merger Agreement.

If the conditions to the USFM Merger are not satisfied or waived, the USFM Merger may not occur.

Even if the USFM Merger is approved by the stockholders of the Company and USFM Corporation, specified conditions must be satisfied or, to the extent permitted by applicable law, waived to complete the USFM Merger. These conditions are set forth in the USFM Merger Agreement and described further in note 15 “Subsequent Events” to the condensed consolidated financial statements set forth elsewhere in this Quarterly Report on Form 10-Q and in other documents the Company and USFM Corporation has filed and will file with the SEC (including a registration statement on Form S-4 to be filed by USFM Corporation). The Company cannot assure you that all of the conditions to the consummation of the USFM Merger will be satisfied or waived. If the conditions are not satisfied or waived, the USFM Merger may not occur or the closing may be delayed. Furthermore, unless such breaches of the USFM Merger Agreement are waived by USFM Corporation, USFM Corporation may have claims against the Company for breach of its representations and other obligations set forth in the USFM Merger Agreement resulting from the defective corporate acts referred to above.

The Company and USFM Corporation may mutually agree to waive the condition to the USFM Merger requiring approval for listing of USFM Corporation’s common stock on NYSE American or another national securities exchange, and if such condition is waived, USFM Corporation’s stock may not be listed on NYSE American or another national securities exchange following completion of the USFM Merger.

Pursuant to the USFM Merger Agreement, each of the Company’s and USFM Corporation’s obligation to complete the USFM Merger is subject to the satisfaction or waiver by each of the parties of various conditions, including that the shares of USFM Corporation common stock to be issued to the Company’s stockholders in the USFM Merger have been approved for listing on NYSE American or certain other national securities exchanges as of the closing of the USFM Merger. In the event that the shares of USFM Corporation’s common stock to be issued in the USFM Merger are not approved for listing on NYSE American or such other national securities exchange, it is possible that the Company and USFM Corporation may mutually agree to waive the applicable condition and nonetheless proceed with completing the USFM Merger. If such condition is waived, neither the Company nor USFM Corporation will recirculate an updated proxy statement/prospectus, nor will it solicit a new vote of the Company’s stockholders prior to proceeding with the USFM Merger. If the Company proceeds with the USFM Merger in these circumstances, the USFM Corporation stock issued to the Company’s stockholders may not be listed on NYSE American, Nasdaq, or any other national securities exchange.

If the USFM Corporation stock is not listed on NYSE American or another national securities exchange following completion of the USFM Merger, trading of the shares of USFM Corporation capital stock could be conducted in the over-the-counter market or on an electronic bulletin board established for unlisted securities such as the Pink Sheets or the OTC Bulletin Board. In such event, it is likely that there would be significantly less liquidity in the trading of the USFM Corporation common stock; decreases in institutional and other investor demand for such shares, coverage by securities analysts, market making activity and information available concerning trading prices and volume; and fewer broker dealers willing to execute trades in the USFM Corporation common stock. Also, it may be difficult for USFM Corporation to raise additional capital if the USFM Corporation common stock is not listed on a major exchange. The occurrence of any of these events could result in a further decline in the market price of the USFM Corporation common stock and could have a material adverse effect on USFM Corporation and the trading price of the shares of USFM Corporation issued to the Company’s stockholders upon consummation of the USFM Merger.

The exchange ratio for the USFM Merger will not change or otherwise be adjusted based on the market price of the Company’s common stock.

The Company’s stockholders are entitled to receive a fixed 10% of the issued and outstanding USFM Corporation common stock immediately following the Effective Time (calculated on a fully diluted basis). Any changes in the market price of the Company’s common stock before the completion of the USFM Merger will not affect the number of shares USFM Corporation common stock that the Company’s stockholders will be entitled to receive pursuant to the USFM Merger Agreement. The USFM Merger Agreement does not include a price-based termination right. Therefore, the value of the USFM Corporation common stock issued to the Company’s stockholders will fluctuate, possibly materially, based on market conditions.

The issuance of USFM Corporation common stock to the Company’s stockholders pursuant to the USFM Merger Agreement must be approved by USFM Corporation’s stockholders, and the USFM Merger Agreement and transactions contemplated thereby must be approved by the Company’s stockholders. Failure to obtain these approvals would prevent the closing of the USFM Merger.

Before the USFM Merger can be completed, USFM Corporation stockholders must approve, among other things, the issuance of USFM Corporation common stock to the Company’s stockholders pursuant to the USFM Merger Agreement, and the Company’s stockholders must adopt the USFM Merger Agreement and approve the USFM Merger and the related transactions. Failure to obtain the required stockholder approvals may result in a material delay in, or the abandonment of, the USFM Merger. Any delay in completing the USFM Merger may materially adversely affect the timing and benefits that are expected to be achieved from the USFM Merger.

The USFM Merger may be completed even though a material adverse effect may result from the announcement of the USFM Merger, industry-wide changes or other causes.

In general, neither USFM Corporation nor the Company is obligated to complete the USFM Merger if there is a material adverse effect affecting the other party between July 12, 2026, the date of the USFM Merger Agreement, and the closing of the USFM Merger. However, certain types of causes are excluded from the concept of a “material adverse effect.” Such exclusions include, but are not limited to, changes in general economic or political conditions, industry-wide changes, changes resulting from the announcement of the USFM Merger, natural disasters, pandemics, other force majeure events and changes in U.S. generally accepted accounting principles. Therefore, if any of these events were to occur and adversely affect USFM Corporation or the Company, the other party would still be obliged to consummate the closing of the USFM Merger notwithstanding such material adverse effect. If any such adverse effects occur and the parties consummate the closing of the USFM Merger, the USFM Corporation stock price may suffer. This in turn may reduce the value of the USFM Merger to the stockholders of USFM Corporation, the Company or both.

If the USFM Merger is not completed, the Company’s stock price may decline significantly.

The market price of the Company’s common stock is subject to significant fluctuations. The market price of the Company’s common stock will likely be volatile based on whether stockholders and other investors believe that the Company can complete the USFM Merger or otherwise raise additional capital to support the Company’s operations if the USFM Merger is not consummated and another strategic transaction cannot be identified, negotiated and consummated in a timely manner, if at all. The volatility of the market price of the Company’s common stock has been and may be exacerbated by low trading volume and public announcement of the defective Nevada reincorporation and related matters. Additional factors that may cause the market price of the Company’s common stock to fluctuate include:

• the entry into, or termination of, key agreements;
• announcements by commercial partners or competitors of new products, significant contracts, commercial relationships or capital commitments;
• the loss of key employees;
• future sales of the Company’s common stock;
• general and industry-specific economic conditions that may affect the Company’s operating expenses; and
• period-to-period fluctuations in financial results.

Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of the Company’s common stock. In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against such companies. Such litigation or other disputes may arise in connection with the USFM Merger and/or the defective Nevada reincorporation described more fully elsewhere in this Quarterly Report.

USFM Corporation may need to raise additional capital by issuing equity securities or debt, which may cause significant dilution to the interests of its stockholders, including the Company’s stockholders following the consummation of the USFM Merger, or restrict USFM Corporation’s operations.

Additional financing may not be available to USFM Corporation when it is needed or may not be available on favorable terms. To the extent that USFM Corporation raises additional capital by issuing equity securities, such financing will cause additional dilution to all securityholders of USFM Corporation, including the Company’s pre-closing securityholders and USFM Corporation’s pre-closing securityholders. It is also possible that the terms of any new equity securities may have preferences over USFM Corporation’s common stock. Any debt financing USFM Corporation issues may involve covenants that restrict its operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of USFM Corporation’s assets, as well as prohibitions on its ability to create liens, pay dividends, redeem its stock or make investments.

In addition, as a result of USFM Corporation’s assumption of the Company’s outstanding warrants and other Company Convertible Securities (as defined in the USFM Merger Agreement) in connection with the USFM Merger, USFM Corporation will be obligated to issue additional shares of USFM Corporation common stock upon exercise of any such warrants or Company Convertible Securities. Such warrants and other Company Convertible Securities assumed by USFM Corporation will result in further dilution to all securityholders of USFM Corporation.

Some of the Company’s and USFM Corporation’s directors and executive officers have interests in the USFM Merger that are different from yours.

Directors and executive officers of the Company and USFM Corporation have interests in the USFM Merger that are different from, or in addition to, the interests of other the Company’s stockholders generally. These interests with respect to the Company’s directors and executive officers may include, among others, retention bonus payments, severance payments if employment is terminated in a qualifying termination in connection with the USFM Merger and rights to continued indemnification, expense advancement and insurance coverage. The Registration Statement on Form S-4 which USFM Corporation will file in connection with the USFM Merger, and other documents that the Company and USFM Corporation file with the SEC from time to time, will describe these interests of the Company’s officers and directors in detail. Please review such filings for more information.

Further, certain current members of the Company’s Board of Directors will continue as directors of USFM Corporation after the Effective Time and will be eligible to be compensated as non-employee directors of USFM Corporation pursuant to USFM Corporation’s non-employee director compensation policy that is expected to be in place following the Effective Time.

The Company’s Board of Directors was aware of and considered those interests, among other matters, in reaching their decisions to approve and adopt the USFM Merger Agreement, approve the USFM Merger, and recommend the approval of the USFM Merger Agreement to the Company’s stockholders.

USFM Corporation’s stockholders, including the Company’s stockholders following the USFM Merger, may not realize benefits from the USFM Merger commensurate with the ownership dilution they will experience in connection with the USFM Merger.

If USFM Corporation is unable to realize the full strategic and financial benefits currently anticipated from the USFM Merger, USFM Corporation’s and the Company’s stockholders will have experienced substantial dilution of their ownership interests without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent USFM Corporation is able to realize only part of the strategic and financial benefits currently anticipated from the USFM Merger.

USFM Corporation’s stockholders, including the Company’s stockholders following the USFM Merger, will generally have a reduced ownership and voting interest in, and will exercise less influence over the management of, USFM Corporation following the completion of the USFM Merger as compared to their current ownership and voting interests in the respective companies.

After the completion of the USFM Merger, the Company’s current shareholders will own a substantially smaller percentage of USFM Corporation than their ownership of the Company prior to the USFM Merger. Immediately after the USFM Merger, the Company’s stockholders as of immediately prior to the USFM Merger will own 10% of the outstanding shares of capital stock of USFM Corporation (on a fully-diluted basis), and former holders of USFM Corporation’s securities will own 90% of the outstanding shares of capital stock USFM Corporation (on a fully-diluted basis). This reduced ownership interest will make it more difficult for significant Company stockholders to approve matters that are submitted to the stockholders of USFM Corporation for approval.

Certain provisions of the USFM Merger Agreement may discourage third parties from submitting competing proposals, including proposals that may be superior to the transactions contemplated by the USFM Merger Agreement.

While the USFM Merger Agreement is in effect, the Company is generally prohibited from, among other things, soliciting, initiating or knowingly encouraging, inducing or facilitating the communication, making, submission or announcement of any acquisition proposal or acquisition inquiry. In addition, one stockholder of the Company entered into a support agreement pursuant to the terms of the USFM Merger Agreement, as an inducement to USFM Corporation’s willingness to enter into the USFM Merger Agreement, by which such stockholder agreed to vote all of its shares of the Company’s capital stock in favor of the USFM Merger Agreement and the transactions contemplated thereby and against any competing proposals, subject to certain limited exceptions. Pursuant to the terms of the USFM Merger Agreement, the Company is obligated to pay a termination fee in the amount of $1,500,000 in the event the USFM Merger Agreement is terminated in connection with the Company’s approval of a competing offer. These provisions could discourage a potential competing acquirer from considering or proposing an acquisition or merger, even if it were prepared to pay consideration with a higher value than that implied by the merger consideration in the USFM Merger Agreement.

Because the lack of a public market for USFM Corporation common stock makes it difficult to evaluate the fair market value of its capital stock, the value of USFM common stock to be issued to the Company’s stockholders may be more or less than the fair market value of the Company’s common stock.

The outstanding capital stock of USFM Corporation is currently privately held and is not traded on any public market. The lack of a public market makes it difficult to determine the fair market value of USFM Corporation’s capital stock. Because the percentage of USFM Corporation’s equity to be issued to the Company’s stockholders was determined based on negotiations between the parties, it is possible that the value of USFM Corporation common stock to be issued to the Company’s stockholders will be more or less than the fair market value of the Company’s capital stock.

Lawsuits may be filed against USFM Corporation, the Company, or any of the members of their respective boards of directors or officers arising out of the USFM Merger, which may delay or prevent the USFM Merger.

Putative stockholder complaints, including stockholder class action complaints, and other complaints may be filed against USFM Corporation, the USFM Corporation Board of Directors, the Company, the Company’s Board of Directors and others in connection with the transactions contemplated by the USFM Merger Agreement. The outcome of litigation is uncertain, and USFM Corporation or the Company may not be successful in defending against any such future claims. Lawsuits that may be filed against USFM Corporation, the USFM Corporation Board of Directors, the Company, or the Company’s Board of Directors could delay or prevent the USFM Merger, divert the attention of USFM Corporation’s and the Company’s management and employees from their day-to-day business and otherwise adversely affect USFM Corporation and the Company financially.

USFM Corporation has never paid and does not intend to pay any cash dividends in the foreseeable future.

USFM Corporation has never paid cash dividends on any of its capital stock. USFM Corporation does not currently anticipate declaring or paying cash dividends on its capital stock in the foreseeable future. No assurances can be provided regarding when, if ever, the shares of USFM Corporation common stock issued to the Company’s stockholders in the USFM Merger will yield any dividends.

If the Company does not successfully consummate the USFM Merger or another strategic transaction, the Company’s Board of Directors may decide to pursue a dissolution and liquidation of the Company. In such an event, the amount of cash available for distribution to the Company’s stockholders, if any, will depend heavily on the timing of such liquidation as well as the amount of cash that will need to be reserved for commitments and contingent liabilities, as to which the Company can give you no assurance.

There can be no assurance that the USFM Merger will be completed. If the USFM Merger is not completed, the Company’s Board of Directors may decide to pursue a dissolution and liquidation of the Company. In such an event, the amount of cash available for distribution to the Company’s stockholders, if any, will depend heavily on the timing of such decision and, ultimately, such liquidation, since the amount of cash available for distribution continues to decrease as the Company funds its operations while pursuing the USFM Merger and ratification of the defective corporate acts referred to elsewhere in this Quarterly Report. In addition, if the Company’s Board of Directors were to approve and recommend, and the Company’s stockholders were to approve, a dissolution and liquidation of the Company, the Company would be required under applicable law to pay the Company’s outstanding obligations, as well as to make reasonable provision for contingent and unknown obligations, prior to making any distributions in liquidation to stockholders. The Company’s commitments and contingent liabilities may include obligations under the Company’s employment and related agreements with certain employees that provide for severance and other payments following a termination of employment occurring for various reasons, including a change in control of the Company, litigation against the Company, and other various claims and legal actions arising in the ordinary course of business, and other unexpected and/or contingent liabilities. As a result of this requirement, a portion of the Company’s assets would need to be reserved pending the resolution of such obligations.

In addition, the Company may be subject to litigation or other claims related to a dissolution and liquidation of the Company. If a dissolution and liquidation were to be pursued, the Company’s Board of Directors, in consultation with the Company’s advisors, would need to evaluate these matters and make a determination about a reasonable amount to reserve. Accordingly, holders of the Company’s common stock could lose all or a significant portion of their investment in the event of liquidation, dissolution or winding up of the Company. A liquidation would be a lengthy and uncertain process with no assurance of any value ever being returned to the Company’s stockholders.

USFM Corporation’s stockholders, including the Company’s stockholders following the USFM Merger, will not have any right to make damage claims against USFM Corporation or the Company for the breach of any representation, warranty or covenant made by the Company in the USFM Merger Agreement following the consummation of the USFM Merger, subject to limited exceptions.

The USFM Merger Agreement provides that all of the representations, warranties and covenants of the parties contained therein shall not survive the closing of the USFM Merger, with limited exceptions. Accordingly, there are no remedies available to the parties with respect to any breach of the representations, warranties, covenants or agreements of the parties to the USFM Merger Agreement after the closing of the USFM Merger, with limited exceptions. As a result, the parties to the USFM Merger Agreement and its stockholders will have no remedy available to them if the USFM Merger is consummated and it is later revealed that there was a breach of any of the representations, warranties and covenants made by the USFM Corporation or the Company at the time of the USFM Merger.

Additionally, USFM Corporation cannot assure you that the due diligence conducted in relation to the Company has identified all material issues or risks associated with the Company, its business or the industry in which it competes. Furthermore, USFM Corporation cannot assure you that factors outside of its or the Company’s control will not later arise, or that any previously identified risks will not materialize in a manner inconsistent with the preliminary analysis. As a result of these factors, following the closing of the USFM Merger, USFM Corporation may be exposed to liabilities and incur additional costs and expenses and it may be forced to later write-down or write off assets, restructure its operations, or incur impairment or other charges. If any such actions were to occur, the value of the USFM Corporation common stock issued to the Company’s stockholders pursuant to the USFM Merger Agreement may decrease, perhaps substantially. USFM Corporation and its stockholders have no indemnification rights against the Company or its stockholders under the USFM Merger Agreement. Accordingly, stockholders of USFM Corporation (including Company stockholders who receive shares of USFM Corporation common stock at closing of the USFM Merger) could suffer a reduction in the value of their securities. Such stockholders are unlikely to have a remedy for such reduction in value unless they are able to successfully claim that the reduction was due to the breach by USFM Corporation’s or the Company’s directors or officers of a duty of care or other fiduciary duty owed to them, or if they are able to successfully bring a private claim under securities laws that the registration statement or proxy statement/prospectus relating to the USFM Merger contained an actionable material misstatement or material omission.

The Company’s stockholders potentially may not receive any payment on the CVRs and the CVRs may otherwise expire valueless.

The USFM Merger Agreement contemplates that, prior to the closing of the USFM Merger, the Company, Assetco and the Trust will consummate the Pre-Closing CVR Restructuring. As part of the Pre-Closing CVR Restructuring, the Company will cause the distribution of contingent value rights interests (“CVRs”) from the Company to the Company’s pre-closing stockholders. Each CVR holder is entitled to certain rights to receive a pro rata portion of the proceeds, if any, received as a result of the disposition of the Company Assets and Liabilities (as such term is defined in the USFM Merger Agreement). Such proceeds will be subject to certain permitted deductions. The right of the Company’s pre-closing stockholders to derive any value from the CVRs will be contingent solely upon the disposition of such Company Assets and Liabilities.

The Trust and Assetco may not be able to achieve successful results from the disposition of such Company Assets and Liabilities as described above. If this is not achieved for any reason, no payments will be made under the CVRs.

The tax treatment of the CVRs is uncertain.

USFM Corporation and the Company intend that, for U.S. federal income tax purposes (and, to the extent permitted, for applicable state and local income tax purposes), the Assetco Contribution (as defined in the USFM Merger Agreement) be treated as an exchange of the Company Assets and Liabilities for Assetco stock described in Section 1001 of the Internal Revenue Code and the CVR Interests Distribution (as defined in the USFM Merger Agreement) be treated as a distribution of property described in Section 301 of the Code. However, the U.S. federal income tax treatment of the CVRs is uncertain. There is no legal authority directly addressing the U.S. federal income tax treatment of contingent value rights with characteristics similar to the CVRs. Therefore, it is possible that the issuance of the CVRs may be treated as a distribution of equity with respect to the Company’s capital stock, as an “open transaction,” or as a “debt instrument” for U.S. federal income tax purposes, and such questions are inherently factual in nature.

The Company’s stockholders potentially may not receive any value from the USFM Corporation common stock issued to them upon consummation of the USFM Merger.

The sole consideration offered to the Company’s stockholders upon consummation of the USFM Merger consists of shares of USFM Corporation common stock and the contingent value rights interests to be issued to Company stockholders in connection with the Pre-Closing CVR Restructuring. The value of such USFM Corporation common stock could decrease, possibly materially, following closing of the USFM Merger. The USFM Corporation common stock may not have a liquid trading market and it may be difficult for Company stockholders to sell shares of USFM Corporation common stock received by them pursuant to the USFM Merger Agreement at the time or at the price desired by such Company stockholders. USFM Corporation will be subject to various risk factors which are in addition to those stated in this Quarterly Report. It is possible that Company stockholders will receive no cash value whatsoever with respect to the shares of USFM Corporation common stock issued to Company stockholders at the closing of the USFM Merger, which would result in a complete loss on such Company stockholders initial investment in the Company. Please carefully review the USFM Corporation registration statement on Form S-4 when it is filed, together with all other documents filed by the Company and USFM Corporation with the SEC, before making any investment decision regarding the Company’s or USFM Corporation’s common stock.