Annual Report for Fiscal Year Ending DECEMBER 31, 2025 (Form 10-K)

The following discussion of our financial condition and results of operations for 2025 and 2024 should be read in conjunction with the consolidated financial statements and the notes to those statements that are included elsewhere in this report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under Cautionary Statement Regarding Forward Looking Information, Item 1A. Business and Item 1A. Risk Factors in this report. We use words such as "anticipate," "estimate," "plan," "project," "continuing," "ongoing," "expect," "believe," "intend," "may," "will," "should," "could," and similar expressions to identify forward-looking statements.

Going concern

For 2025, we reported a net consolidated loss of $13,043,195 and net cash used in operations of $4,269,253. At December 31, 2025, we had cash on hand of $8,914,107 and an accumulated deficit of $47,789,247. The report of our independent registered public accounting firm on our consolidated financial statements for the year ended December 31, 2025 contains an explanatory paragraph regarding our ability to continue as a going concern based upon our cash balances and no source of revenues which are sufficient to cover our operating costs. These factors, among others, raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. There are no assurances we will be successful in our efforts to raise capital, develop a source of revenue, report profitable operations or continue as a going concern, in which event investors would lose their entire investment in our company.

Results of operations

Our total operating expenses for 2025 increased 21.80% over those reported for the same period in 2024. This increase is attributable to an increase in research and development expenses of 30.84% relating to increased engineering services. An increase in general and administrative expenses of 98.15%, primarily related to compensation expense, further contributed to this increase. An increase in professional fees of 9.06% rounded out this overall increase in operating expenses in 2025 versus 2024.

We expect that our operating expenses will increase as we continue to develop our business and we devote additional resources toward our product development and business opportunities, promoting that growth, most notably reflected in anticipated increases in general overhead, salaries for personnel and technical resources, as well as increased costs associated with our SEC reporting obligations, and our work to secure PMTA . However, as set forth elsewhere in this report, our ability to continue to develop our business and achieve our operational goals is dependent upon our ability to raise significant additional working capital. As the availability of this capital is unknown, we are unable to quantify the expected increases in operating expenses in future periods.

Liquidity and capital resources

Liquidity is the ability of a company to generate sufficient cash to satisfy its needs for cash. As of December 31, 2025, we had $8,914,107 in cash and cash equivalents and a working capital surplus of $7,427,664 compared to $4,596,556 in cash and cash equivalents and a working capital surplus of $1,575,975 at December 31, 2024. Our current liabilities decreased $1,282,915 from December 31, 2024, reflecting a decrease in our accounts payable, decrease in investor deposits, decrease in our accrued expenses, and an increase in related party loans. Our source of operating capital in 2025 came from the sale of 577,500 shares of our commons stock raising $10,700,000 and applied the investor deposit balance at December 31, 2024 of $850,000, borrowing from related parties of $339,650 and repayment to related party loan of $100,000 compared to the same period in 2024 where our source of operating capital came from the sale of 343,400 shares of our common stock raising $6,868,000 and a related party loan of $112,467.

The ability of the Company to continue as a going concern is dependent upon the Company obtaining adequate capital to fund operating losses until it becomes profitable. As the company is not generating revenues, continued activities and expenditures to bring product(s) to market as soon as we are able is important. Management believes the currently available funding will be insufficient to finance the Company's operations for a year from the date of these consolidated financial statements and to satisfy our obligations as they become due.

In 2024 we borrowed funds from Xten Capital Group, a related party, and in 2025 we repaid a small portion. As a result on December 31, 2025, we owed Xten $900,000. The loan is non-interest bearing and due upon demand. The funds are being used for working capital.

We raised $10,700,000 from the sale of our securities in 2025 and applied the investor deposit balance at December 31, 2024 of $850,000 and $6,868,000 from the sale of our securities during 2024. We believe we have sufficient capital to fund the next 12 months, however there is no assurance we will have sufficient funds for commercialization. There is no assurance we will have sufficient funds due to circumstances beyond our control including government shutdown, regulatory changes, delays or additional requirements. In that event, our ability to continue as a going concern is in jeopardy.

During the first quarter of 2026 we sold an aggregate of 6,000 shares of common stock to two accredited investors for gross proceeds of $120,000. Proceeds from the sales are being used for working capital.

Summary of cash flows

Our cash used in operating activities increased 33.65% in 2025 compared to 2024. In both years we used cash primarily to fund our net losses.

In 2025, our cash used in investing activities was $2,345,913 with $512,005 from capitalization of intellectual property related to legal fees and $1,833,908 from additions to property, plant and equipment. In 2024 our cash used in investing activities was $390,027 with $362,182 from capitalization of intellectual property related to legal fees and $27,845 from additions to property, plant and equipment.

Net cash provided by financing activities in 2025 consisted of $10,700,000 from sale of our common stock, $339,650 in borrowing from related parties and $100,000 in repayment to related parties. Net cash provided by financing activities in 2024 consisted of $6,868,000 raised from the sale of 343,400 shares of common stock and $112,467 in borrowing from related parties.

Critical accounting policies

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of expenses during the reported periods. We also have other key accounting policies, none of these policies are deemed to be critical accounting policies or critical estimates.

Recent accounting pronouncements

In December 2023, the financial Standards Board (FASB) issued Accounting Standards Update (ASU) 2023-09 "Income Taxes (Topic 740)," to enhance the transparency and decision usefulness of income tax disclosures that would provide information for investors to better assess how an entity's operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows. Any additional disclosures are presented in the income taxes section of the notes to the consolidated financial statements.

On November 4, 2024, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2024-03 which issues new guidance requiring disclosure of the disaggregation of income statement expenses (DISE) by public business entities (PBE's) and is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact of adopting the standard. The Company does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying consolidated financial statements.

Off balance sheet arrangements

As of the date of this report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term "off-balance sheet arrangement" generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have any obligation arising under a guarantee contract, derivative instrument or variable interest or a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.