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

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes appearing elsewhere in this report.

In addition to our United States generally accepted accounting principles ("U.S. GAAP") results, the following discussion includes EBITDA as a supplemental measure of our performance. We present EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use EBITDA in developing our internal budgets, forecasts, and strategic plan; in analyzing the effectiveness of our business strategies in evaluating potential acquisitions; making compensation decisions; and in communications with our board of directors concerning our financial performance. EBITDA is not a recognized measurement under U.S GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flow from operating activities as a measure of liquidity. We define EBITDA as net income (loss), plus interest expense, tax expense, and depreciation and amortization.

The following discussion also includes the use of gross billing, a key performance indicator and metric. Gross billing represents invoiced amounts to distributors and retailers, excluding sales adjustments. Gross billing may include deductions from MSRP or "list price", where applicable, and excludes promotional costs of generating such sales. Management utilizes gross billing to monitor operating performance of products and salespersons, which performance can be masked by the effect of promotional or other allowances. Management believes that the presentation of gross billing provides a useful measure of Reed's operating performance.

Amounts presented in the discussion below are in thousands, except share and per share amounts.

Results of Operations

Overview

During the year ended December 31, 2025, the Company continued its focus on profitable sales growth, improving gross margin, reducing freight costs, and optimizing selling, general & administrative expenses. The sales growth initiatives include channel expansion, in-store product placements, new product innovation and improved sales execution. The gross margin enhancement initiatives include product portfolio optimization, equitable supplier negotiations, streamlining co-packer processes, and efficient inventory management. Underpinning these initiatives is a focus on optimizing delivery and handling and selling, general & administrative expenses.

During the year ended December 31, 2025, the Company began an expansion into new geographic markets in the Asia Pacific region. The Company formed a wholly owned subsidiary Reed's (Asia) Limited (BVI). Reed's (Asia) Limited subsequently formed five additional wholly owned subsidiaries, Reed's (Hong Kong) Limited, Reed's (Japan) Limited, Jiangzhi Beverage (Hainan) Co. Limited, Reed's Beverages (Singapore) PTE Limited, and Shenshen Jiangzi Beverage Co. Limited. These subsidiaries are an early part of the Company's strategic expansion in the Asia Pacific region. The Company expects continued investment in its Asia Pacific growth initiative. Reed's (Asia) Limited did not generate sales in the year ended December 31, 2025.

Recent Trends - Market Conditions

Although the U.S. economy continued to grow in 2025, inflation, actions by the Federal Reserve to address inflation, fluctuations in energy prices, and the potential impacts of tariffs, trade tensions and geopolitical events create uncertainty about the future economic environment which will continue to evolve and may impact our business in future periods. We have experienced supply chain challenges, including increased lead times, as well as inflation of raw materials, logistics and labor costs due to availability constraints and high demand. Although we regularly monitor vendors in our supply chain, and use alternative suppliers when necessary and available, supply chain constraints could cause a disruption in our ability to obtain raw materials required to manufacture our products and adversely affect our operations.

During the year ended December 31, 2025, the average cost of delivery and handling was $2.75 per case, consistent with the year ended December 31, 2024. The Company has experienced increases in freight costs and there remains a volatile pricing environment, including due to the armed conflict in Iran. The Company will continue to monitor pricing and availability in transportation and has implemented plans designed to manage this risk. In the past, the Company has been negatively impacted by supply chain challenges affecting our ability to benefit from strong demand for, and increased sales of our product. Any disruption caused by labor shortages, significant raw material cost inflation, logistics issues, increased freight costs, or port congestion, may adversely impact margins in the future.

Through December 31, 2025, we continued to finance our operations through existing cash balances, cash generated from operations, public and private issuance of common stock, and credit lines from financial institutions. As we seek additional financing, there can be no assurance that such financing will be available to us on favorable terms or at all. Our ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, our operating performance and investor sentiment with respect to us and our industry.

Recent Developments

Underwritten Public Offering

On December 4, 2025, we entered into an underwriting agreement (the "Underwriting Agreement") with A.G.P./Alliance Global Partners, as representative of the underwriters (the "Underwriters"), pursuant to which we agreed to sell and issue to the Underwriters, in a public offering (the "Offering"), an aggregate of (i) 2,500,000 shares of common stock and (ii) warrants to purchase up to 2,500,000 shares of common stock. The Offering closed on December 8, 2025. Each share of common stock and accompanying warrant to purchase one share of common stock were sold together at a combined public offering price of $4.00 less underwriting discounts and commissions. Additionally, the Company granted the Underwriters a 45-day option (the "Overallotment Option") to purchase up to an additional 375,000 shares of common stock and/or warrants at the public offering price, less underwriting discounts and commissions.

On December 5, 2025, the Underwriters notified us of their determination to partially exercise the Overallotment Option for warrants to purchase an aggregate of 375,000 shares of common stock. On December 12, 2025, the Underwriters notified us of their determination to exercise the remaining Overallotment Option to purchase an aggregate of 375,000 shares of common stock. All of the securities in the Offering, including the Overallotment Option, were sold by the Company.

The net proceeds to the Company from the Offering, including the partial exercise of the Overallotment Option, were approximately $10.2 million, after deducting underwriting discounts and commissions and certain offering expenses. The Company currently intends to use the net proceeds from the Offering, together with its existing cash and cash equivalents, to fund growth initiatives, working capital and other general corporate purposes, which may include repayment of debt.

Each warrant issued in the Offering has an exercise price per share of common stock equal to $4.50, subject to certain adjustments. The warrants are immediately exercisable upon issuance and will expire on December 8, 2030 (the "Expiration Date"), provided that the holder will be prohibited, subject to certain exceptions, from exercising the warrant for shares of the Company's common stock to the extent that immediately after giving effect to such exercise, the holder, together with its affiliates and other attribution parties, would own more than 4.99% or 9.99% (as elected by the holder) of the total number of shares of the Company's common stock then issued and outstanding, which percentage may be changed at the holder's election to a higher or lower percentage not in excess of 9.99% upon 61 days' prior notice from the holder to the Company subject to the terms of the warrants. If, and only if, there is no effective registration statement at the time of exercise, the warrants may be exercised cashlessly.

Reverse Stock Split

On October 31, 2025, the Company effected a 1-for-6 reverse stock split (the "Reverse Stock Split") of the Company's issued and outstanding shares of common stock. The Reverse Stock Split reduced the number of shares of the Company's issued and outstanding common stock, as well as the number of shares subject to then-outstanding warrants and the exercise price thereof and the number of shares available for future issuance under the Company's equity plans, the number of shares subject to such awards and purchase rights and the exercise and purchase price of, and other terms and conditions relating to, such awards and purchase rights. The conversion terms of the Preferred Stock have also been adjusted automatically such that each share of Series A Convertible Preferred Stock will be convertible into the number of shares of common stock that would have been issuable if all of the outstanding shares of Preferred Stock were converted into common stock immediately prior to the Reverse Stock Split. No fractional shares were distributed as a result of the Reverse Stock Split, and stockholders were entitled to a cash payment in lieu of fractional shares. The Reverse Stock Split did not affect the par value or total number of authorized shares of common stock. The share and per share amounts included in this Annual Report on Form 10-K have been adjusted to account for the Reverse Stock Split.

Amended Senior Secured Loan

On September 26, 2025, the Company entered into the Amended Loan Agreement governing the Senior Secured Loan with certain funds affiliated with Whitebox Advisors LLC, as lenders, and Cantor Fitzgerald Securities, as administrative agent and collateral agent. The Amended Loan Agreement (i) reduced the aggregate principal amount of the revolving credit commitment to $9,250 from $10,000, (ii) changed interest payments on the revolving loan to be due monthly in arrears from quarterly in arrears, (iii) and extended the maturity date to September 30, 2026.

Private Placement

On September 12, 2025, we entered into a securities purchase agreement with six accredited investors for the issuance and sale in a private placement of 833,330 shares of our common stock, at a purchase price of $6.00 per share, for aggregate gross proceeds of $5,000 (the "September 2025 Private Placement"). The September 2025 Private Placement closed on September 15, 2025 (the "September 2025 PIPE Closing Date").

In connection with the September 2025 Private Placement, we entered into a registration rights agreement, dated as of September 12, 2025, with the investors, pursuant to which we agreed to prepare and file a registration statement with the SEC registering the resale of the shares issued in September 2025 Private Placement. The registration statement was filed with the SEC on September 19, 2025, and declared effective on September 29, 2025.

Results of Operations - Years Ended December 31, 2025 and December 31, 2024

The following table sets forth key statistics for the years ended December 31, 2025, and 2024:

		Year Ended December 31,								Pct.
		2025				2024				Change
Gross billing (A)		$	40,847			$	44,316				-8	%
Less: Promotional and other allowances (B)			6,782				6,362				7	%
Net sales		$	34,065			$	37,954				-10	%
Cost of goods sold			27,103				26,578				2	%
% of Gross billing			66	%			60	%
% of Net sales			80	%			70	%
Gross profit		$	6,962			$	11,376				-39	%
% of Net sales			20	%			30	%
Expenses
Delivery and handling		$	5,374			$	5,863				-8	%
% of Net sales			16	%			15	%
Dollar per case ($)			2.75				2.75
Selling and marketing			5,271				4,405				20	%
% of Net sales			15	%			12	%
General and administrative			11,296				9,109				24	%
% of Net sales			33	%			24	%
Provision for receivable with former related party			169				115				47	%
% of Net sales			0	%			0	%
Total Operating expenses			22,110				19,492				13	%
Loss from operations		$	(15,148	)		$	(8,116	)			87	%
Interest expense and other expense		$	(694	)		$	(5,036	)			-86	%
Net loss		$	(15,842	)		$	(13,152	)			20	%
Loss per share - basic and diluted		$	(1.91	)		$	(9.81	)			-81	%
Weighted average shares outstanding - basic & diluted			8,301,904				1,340,249				519	%

(A) We define gross billing as the total sales for the Company unadjusted for costs related to generating those sales. Management utilizes gross billing as an indicator of and to monitor operating performance of products and salespersons before the effect of any promotional or other allowances, which are determined in accordance with U.S. GAAP, and can mask certain performance issues. We believe that the presentation of gross billing provides a useful measure of our operating performance. Additionally, gross billing may not be comparable to similarly titled measures used by other companies, as gross billing has been defined by our internal reporting practices.

(B) We define promotional and other allowances as costs deducted from gross billing that are associated with generating those sales. Management utilizes promotional and other allowances as an indicator of and to monitor operating performance of products, salespersons, and customer agreements. We believe that the presentation of promotional and other allowances provides a useful measure of our operating performance. The presentation of promotional and other allowances facilitates an evaluation of their impact on the determination of net sales and the spending levels incurred or correlated with such sales. The expenditures described in this line item are determined in accordance with U.S. GAAP and meet U.S. GAAP requirements, however the disclosure thereof does not conform to U.S. GAAP presentation requirements. Additionally, our definition of promotional and other allowances may not be comparable to similar items presented by other companies. Promotional and other allowances primarily include consideration given to the Company's distributors or retail customers including, but not limited to the following: (i) reimbursements given to the Company's distributors for agreed portions of their promotional spend with retailers, including slotting, shelf space allowances and other fees for both new and existing products; (ii) the Company's agreed share of fees given to distributors and/or directly to retailers for in-store marketing and promotional activities; (iii) the Company's agreed share of slotting, shelf space allowances and other fees given directly to retailers; (iv) incentives given to the Company's distributors and/or retailers for achieving or exceeding certain predetermined sales goals; and (v) discounted or free products. Promotional and other allowances constitute a material portion of our marketing activities. The Company's promotional allowance programs with its numerous distributors and/or retailers are executed through separate agreements in the ordinary course of business. These agreements generally provide for one or more of the arrangements described above and are of varying durations, ranging from one week to one year.

Sales, Cost of Sales, and Gross Margins

The following table sets forth key statistics for the Company's sales, cost of sales, and gros margins for the years ended December 31, 2025, and 2024:

		Total				Total								Per Case				Per Case
		2025				2024				vs PY				2025				2024				vs PY
Cases:
Reed's			1,325				1,373				-3	%
Virgil's			626				760				-18	%
Total			1,951				2,133				-9	%
Gross Billing:		$	40,847			$	44,316				-8	%			20.94				20.78				1	%
Discounts:		$	(6,782	)		$	(6,362	)			7	%		$	(3.48	)		$	(2.98	)			17	%
COGS:		$	(27,103	)		$	(26,578	)			2	%		$	(13.89	)		$	(12.46	)			11	%
Gross Margin:		$	6,962			$	11,376				-39	%		$	3.57			$	5.33				33	%
as % Net Sales			20	%			30	%

Sales, Cost of Sales, and Gross Margins

Gross billing decreased by 8% to $40,847 during the year ended December 31, 2025, compared to $44,316 during the prior year, driven by Reed's volume decline of 3%, and Virgil's volume decline of 18%. Price on our brands increased 1% to $20.94 per case.

Discounts as a percentage of gross sales were 17% during the year ended December 31, 2025, compared to 14% in the prior year. Net sales decreased 10% during the year ended December 31, 2025, to $34,065, compared to $37,954 in the prior year driven by lower volumes with recurring national customers and higher promotional and other allowances.

Cost of Goods Sold

Cost of goods sold increased $525 during the year ended December 31, 2025, as compared to the prior year. As a percentage of net sales, cost of goods sold for the year ended December 31, 2025, was 80% as compared to 70% for the prior year. The increase in cost of goods sold was primarily driven by inventory write-offs related to changes in product portfolio optimization made by new management, in an amount of $2,013.

The total cost of goods per case increased to $13.89 per case in the year ended December 31, 2025, from $12.46 per case for the prior year.

Gross Margin

Gross margin was 20% for the year ended December 31, 2025, compared to 30% for the prior year.

Operating Expenses

Delivery and Handling Expenses

Delivery and handling expenses consist of delivery costs to customers and warehousing costs incurred for handling our finished goods after production. Delivery and handling expenses decreased by $489 in the year ended December 31, 2025, to $5,374 from $5,863 in the prior year, primarily driven by lower transportation costs. Delivery costs in the year ended December 31, 2025, were 16% of net sales and $2.75 per case, compared to 15% of net sales and $2.75 per case during the prior year.

Selling and Marketing Expenses

Marketing expenses consist of direct marketing, marketing labor, and marketing support costs. Selling expenses consist of all other selling-related expenses including personnel and contractor support. Total selling and marketing expenses were $5,271 during the year ended December 31, 2025, compared to $4,405 during the prior year. The increase was primarily driven by higher employee related costs and marketing expenditures. As a percentage of net sales, selling and marketing expenses were 15% of net sales during the year ended December 31, 2025, as compared to 12% of net sales during the prior year.

General and Administrative Expenses

General and administrative expenses consist primarily of the cost of executive, administrative, and finance personnel, as well as professional fees. General and administrative expenses were $11,296 during the year ended December 31, 2025, an increase of $2,187 over the prior year. As a percentage of net sales, general and administrative expenses were 33% during the year ended December 31, 2025, as compared to 24% during the prior year. The increase was driven by contract proceedings costs and the Company's investments in personnel and related services to support growth initiatives.

Loss from Operations

The loss from operations was $15,148 for the year ended December 31, 2025, as compared to a loss of $8,116 in the prior year driven by lower gross profit and higher operating expenses discussed above.

Interest and Other Expense

Interest and other expense for the year ended December 31, 2025, consisted of $1,108 of interest expense offset by $414 of other income. During the prior year, interest and other expense consisted of $5,481 of interest expense offset by $445 of other income.

EBITDA

In addition to our U.S. GAAP results, we present EBITDA as a supplemental measure of our performance. However, EBITDA is not a recognized measurement under U.S. GAAP and should not be considered as an alternative to net income, income from operations or any other performance measure derived in accordance with U.S. GAAP, or as an alternative to cash flow from operating activities as a measure of liquidity. We define EBITDA as net income (loss), plus interest expense, tax expense, and depreciation and amortization.

Management considers our core operating performance to be that which our managers can affect in any particular period through their management of the resources that affect our underlying revenue and profit generating operations during that period. Non-GAAP adjustments to our results prepared in accordance with U.S. GAAP are itemized below. You are encouraged to evaluate these adjustments and the reasons we consider them appropriate for supplemental analysis. In evaluating EBITDA, you should be aware that in the future we may incur expenses that are the same as or similar to some of the adjustments in this presentation. Our presentation of EBITDA should not be construed as an inference that our future results will be unaffected by unusual or non-recurring items.

Set forth below is a reconciliation of net loss to EBITDA for the years ended December 31, 2025, and 2024:

		Year Ended December 31,
		2025				2024
Net loss		$	(15,842	)		$	(13,152	)
EBITDA adjustments:
Interest expense			1,108				5,481
Tax expense			(84	)			111
Depreciation and amortization			206				293
Total EBITDA adjustments		$	1,230			$	5,885
EBITDA		$	(14,612	)		$	(7,267	)

We present EBITDA because we believe it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of our core operating performance. In addition, we use EBITDA in developing our internal budgets, forecasts and strategic plan; in analyzing the effectiveness of our business strategies in evaluating potential acquisitions; making compensation decisions; and in communications with our board of directors concerning our financial performance. EBITDA has limitations as an analytical tool, which includes, among others, the following:

	●	EBITDA does not reflect our cash expenditures, or future requirements, for capital expenditures or contractual commitments;
	●	EBITDA does not reflect changes in, or cash requirements for, our working capital needs;
	●	EBITDA does not reflect future interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; and
	●	Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements.

Liquidity

As reflected in the financial statements included elsewhere in this Annual Report on Form 10-K, for the year ended December 31, 2025, the Company recorded a net loss of $15,842 and used cash in operations of $17,037. Cash used in operations was primarily from our operating losses, working capital, and investment in strategic growth initiatives. As of December 31, 2025, we had a cash balance of $10,424 and no remaining availability under our Senior Secured Loan.

Historically, we have financed our operations through existing cash balances, cash generated from operations, public and private issuance of common stock, preferred stock, convertible debt instruments, term loans and credit lines from financial institutions.

On December 4, 2025, we entered into the Underwriting Agreement with the Underwriters, pursuant to which the Company agreed to sell and issue to the Underwriters, in the Offering, an aggregate of (i) 2,500,000 shares of common stock and (ii) warrants to purchase up to 2,500,000 shares of common stock. The Offering closed on December 8, 2025. Each share of common stock and accompanying warrant to purchase one share of common stock were sold together at a combined public offering price of $4.00 less underwriting discounts and commissions. Additionally, the Company granted the Underwriters the Overallotment Option to purchase up to an additional 375,000 shares of common stock and/or warrants at the public offering price, less underwriting discounts and commissions.

On December 5, 2025, the Underwriters notified us of their determination to partially exercise the Overallotment Option for warrants to purchase an aggregate of 375,000 shares of common stock. On December 12, 2025, the Underwriters notified us of their determination to exercise the remaining Overallotment Option to purchase an aggregate of 375,000 shares of common stock. All of the securities in the Offering, including the Overallotment Option, were sold by the Company.

The net proceeds to the Company from the Offering, including the partial exercise of the Overallotment Option, were approximately $10.2 million, after deducting underwriting discounts and commissions and certain offering expenses. The Company currently intends to use the net proceeds from the Offering, together with its existing cash and cash equivalents, to fund growth initiatives, working capital and other general corporate purposes, which may include repayment of debt.

Each warrant issued in the Offering has an exercise price per share of common stock equal to $4.50, subject to certain adjustments. The warrants are immediately exercisable upon issuance and will expire on December 8, 2030 (the "Expiration Date"), provided that the holder will be prohibited, subject to certain exceptions, from exercising the warrant for shares of the Company's common stock to the extent that immediately after giving effect to such exercise, the holder, together with its affiliates and other attribution parties, would own more than 4.99% or 9.99% (as elected by the holder) of the total number of shares of the Company's common stock then issued and outstanding, which percentage may be changed at the holder's election to a higher or lower percentage not in excess of 9.99% upon 61 days' prior notice from the holder to the Company subject to the terms of the warrants. If, and only if, there is no effective registration statement at the time of exercise, the warrants may be exercised cashlessly.

On September 26, 2025, the Company entered into the Amended Loan Agreement governing the Senior Secured Loan with certain funds affiliated with Whitebox Advisors LLC, as lenders, and Cantor Fitzgerald Securities, as administrative agent and collateral agent. The Amended Loan Agreement (i) reduced the aggregate principal amount of the revolving credit commitment to $9,250 from $10,000, (ii) changed interest payments on the revolving loan to be due monthly in arrears from quarterly in arrears, (iii) and extended the maturity date to September 30, 2026. The Senior Secured Loan accrues interest at a per annum rate equal to 8.00% on the principal amount outstanding, payable monthly in arrears. The Senior Secured Loan also accrues an unused fee at a rate per annum equal to 3.00% on the excess, if any, of the revolving credit commitment over the average principal amount outstanding from time to time during the preceding fiscal quarter, payable monthly in arrears. The Senior Secured Loan is secured by substantially all of the Company's assets, including all intellectual property.

In connection with the entry into the Amended Loan Agreement, the Company repaid $650 of the aggregate outstanding principal balance, plus accrued interest.

As of December 31, 2025, the principal amount outstanding on the Senior Secured Loan was $9,250 and the remaining availability was $0.

The financing agreement with Whitebox includes customary restrictions that limit our ability to engage in certain types of transactions. Additionally, the agreement contains a financial covenant that requires us to meet a certain minimum cash balance and liquidity threshold as of the end of each month. We were in compliance with the terms of our agreement with Whitebox as of December 31, 2025.

The Company incurred $410 of direct costs associated with the Senior Secured Loan transaction, consisting primarily of broker, bank and legal fees. These costs have been deferred and are being amortized over the life of the agreement. The unamortized debt discount balance was $329 at December 31, 2024. For the year ended December 31, 2025, the Company incurred $34 of additional fees, and the amortization of debt discount was $295. The unamortized debt discount balance was $68 at December 31, 2025. Additionally, in connection with the Amended Loan Agreement, the Company incurred $40 of direct costs, which were expensed.

On September 15, 2025, the Company completed a private placement with certain accredited investors, pursuant to which the Company issued and sold to the investors an aggregate of 833,330 common shares for total consideration of $5,000.

Management expects that the Company's existing cash of $10,424, cash generated from operations, and access to committed financing will be sufficient to fund the Company's operating plan, which was approved by the board of directors in February 2026, for at least twelve months from the date of issuance of the financial statements included elsewhere in this Annual Report on Form 10-K; however, if the Company's management and board of directors approve additional growth initiatives and related investment in human resources, working capital, new geographic markets, information technology, and other uses of cash, the Company may require additional funding.

To alleviate any funding considerations, management periodically evaluates various funding alternatives and may seek to raise additional funds through the issuance of equity, mezzanine or debt securities, through arrangements with strategic partners, strategic transactions, or through obtaining credit from financial institutions. As we seek additional sources of financing, there can be no assurance that such financing will be available to us on favorable terms or at all. Our ability to obtain additional financing in the debt and equity capital markets is subject to several factors, including market and economic conditions, our performance and investor sentiment with respect to us and our industry.

We are also continuing to take actions to improve the Company's operating performance and cash generated from operations, including product portfolio optimization, implementing strategies to increase sales, streamlining operations, improving supply chains, negotiating equitable vendor contracts, and managing product price architecture. However, we may be unsuccessful in executing these actions in a timely manner or at all.

If the Company is unable to raise additional capital whenever necessary or otherwise improve its operating performance or generation of cash from operations, it may be forced to decelerate or curtail certain of its operations until such time as additional capital becomes available.

Cash Flows

Net cash used in operating activities totaled $17,037 for the year ended December 31, 2025, compared to $6,124 for the year ended December 31, 2024. The increase in net cash used in operating activities was primarily driven by operating losses, working capital, and investment in strategic growth initiatives.

Net cash used in investing activities totaled $253 for the year ended December 31, 2025, compared to $167 for the year ended December 31, 2024. The increase in net cash used in investing activities was primarily driven by purchases of property and equipment.

Net cash provided by financing activities totaled $17,323 for the year ended December 31, 2025, compared to $16,079 for the year ended December 31, 2024. The net cash provided by financing activities in the year ended December 31, 2025 was primarily driven by proceeds from the sale of common stock in two private placements and one public offering. The net cash provided by financing activities in the year ended December 31, 2024 was primarily driven by proceeds from the issuance of a SAFE agreement and two private placements.

Critical Accounting Policies and Estimates

The preparation of the Company's financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates under different assumptions or conditions. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable in relation to the financial statements taken as a whole under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Management regularly evaluates the key factors and assumptions used to develop the estimates utilizing currently available information, changes in facts and circumstances, historical experience and reasonable assumptions. After such evaluations, if deemed appropriate, those estimates are adjusted accordingly. Actual results could differ from those estimates. Significant estimates include those related to assumptions used in estimates for reserves of uncollectible accounts, inventory obsolescence, depreciable lives of property and equipment, analysis of impairments of recorded long-term tangible and intangible assets, realization of deferred tax assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services.

Recent Accounting Pronouncements

See Note 2 of the financial statements for a discussion of recent accounting pronouncements.