AMCI 10-K & 10-Q changes, risk factors and insider trading

You should carefully consider the following risk factors, together with all of the other information included elsewhere in this Annual Report on Form 10-K. The value of your investment in the Company will be subject to the significant risks affecting the Company and inherent to the industry in which it operates. The risk factors described below disclose material and other risks, are not intended to be exhaustive and are not the only risks faced by the Company. Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect the business, financial condition, results of operations and cash flows in future periods of the Company. The occurrence of any of these events could cause the trading price of our Common Stock to decline, perhaps significantly, and you therefore may lose all or part of your investment. The following discussion should be read in conjunction with the financial statements and notes to the financial statements included herein.

It may be difficult to evaluate our business prospects, and our operating results may fluctuate.

Our operating results may fluctuate because of a variety of factors, many of which are outside of our control. Fluctuations in our results of operations may be due to a number of factors, including:

Our operating results may fluctuate due to seasonality.

Our quarterly and annual operating results have fluctuated in the past and likely will fluctuate in the future. The demand for our products is driven largely by the demand for the end-product applications that are powered by our products which can vary on seasonality. We expect high demand from our customers in holiday seasons such as the third and fourth quarters in a year compared to lower demand in the first and second quarters in a year.

We have a history of net losses.

We have a history of net losses. The Company incurred a net loss of $24,817,342 for the year ended December 31, 2025, and had net losses in 2024 and 2023. We have historically funded our operations and capital needs primarily through borrowings from a related party, Ants Technology (HK) Limited (“Ants”). There can be no assurance that AMC will be successful in achieving its strategic plans, that AMC’s future capital raises will be sufficient to support its ongoing operations, or that any additional financing will be available in a timely manner or with acceptable terms, if at all. If AMC is unable to raise sufficient financing or events or circumstances occur such that AMC does not meet its strategic plans, it would have a material adverse effect on AMC’s financial position, results of operations, cash flows, and ability to achieve its intended business objectives.

Failure to establish and maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business and stock price.

In connection with the audits of our consolidated financial statements as of and for the years ended December 31, 2025 and 2024, we and our independent registered public accounting firm identified four material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal controls, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.

The material weaknesses that have been identified for AMC are as follows:

(1) Lack of Experienced Accounting Team — AMC lacks qualified in-house accounting staff and resources with adequate knowledge of U.S. GAAP. A third-party consulting firm has been engaged to prepare financial statements and footnote disclosures in accordance with U.S. GAAP.

(2) Lack of Duty Segregations — The Company separates the duties at certain areas, but there is only one person responsible for various functions of the Company, including processing payments and Human Resource functions. All other individuals involved in these processes are engaged through independent contractor roles.

(3) Lack of sufficient inventory management process and control system — AMC does not have a sufficient inventory management process or control system.

(4) Lack of proper approval for related party transactions — AMC lacks a formal approval process for related party transactions.

To remediate our material weaknesses, we have begun and will continue to: (1) hire additional qualified accounting staff with appropriate knowledge and experience in U.S. GAAP and SEC financial reporting requirements, while strengthening period-end financial reporting controls and procedures; (2) establish an ongoing program to provide adequate training for financial reporting and accounting personnel, particularly on U.S. GAAP and SEC requirements; (3) assign clear roles and responsibilities to accounting staff and the management team to establish segregation of duties and improve inventory processes; and (4) implement a thorough review and approval process for related party transactions.

However, we cannot assure that we will remediate our material weaknesses in a timely manner, or at all. If we fail to implement and maintain effective internal controls to remediate the material weaknesses over financial reporting, we may be unable to accurately report our results of operations, meet our reporting obligations or prevent fraud. As a result, investors may lose confidence in the accuracy and completeness of our financial reports and the price of our Common Stock could be negatively affected. We could also become subject to investigations by the SEC, Nasdaq or other regulatory authorities, which could require additional financial and management resources. In addition, if we fail to remedy any material weakness, our financial statements could be inaccurate and we could face restricted access to capital markets.

We are exposed to risks relating to price fluctuations of hardware cost.

Prices of hardware have a significant impact on our cost of sales. In 2025, costs of hardware accounted for 78% of the final price sold in the market for the period, as compared to 81% in 2024. Parts and accessories for our products primarily include lenses, lithium batteries, infrared sensors and integrated chips. The current or expected supply of our key hardware parts and accessories may fluctuate depending on a number of factors beyond our control, including but not limited to the availability of resources in the supplier market, market demand, market disruptions, natural disasters and other factors. Government tariffs that are imposed may also impact the availability and cost of our key hardware parts and accessories. We may not be able to obtain stable, high-quality parts and accessories at reasonable prices. If prices rise, it would have a material adverse effect on our operating results.

The markets in which we participate are highly competitive and many companies, including large technology companies, are actively targeting the home automation, security monitoring and video monitoring markets. If we are unable to compete effectively with these companies, our sales and profitability could be adversely affected.

We compete in several markets, including home automation, security monitoring and video monitoring. The markets in which we participate are highly competitive and competition may intensify in the future.

Our ability to compete depends on a number of factors, including:

Consumers may prefer to purchase from their existing suppliers rather than a new supplier regardless of product performance or features. In the event a consumer decides to evaluate a new product or a solution, the consumer may be more inclined to select one of our competitors whose product offerings are broader than those that we offer.

Aggressive business tactics by our competitors may reduce our revenue.

Increased competition in the markets in which we compete may result in aggressive business tactics by our competitors, including:

Our service providers may switch and offer the products and services of competing companies, which would adversely affect our sales and profitability. Competition from other companies may also adversely affect our negotiations with service providers and suppliers, including, in some cases, requiring us to lower our prices. Opportunities to take market share using innovative products, services and sales approaches may also attract new entrants to the field. We may not be able to compete successfully with the offerings and sales tactics of other companies, which could result in the loss of service providers offering our platform and products and, as a result, our revenue and profitability could be adversely affected.

If we fail to compete successfully against our current and future competitors, or if our current or future competitors employ aggressive business tactics, including those described above, demand for our platforms and products could decline, we could experience cancellations of our services to consumers, or we could be required to reduce our prices or increase our expenses.

We receive a substantial portion of our revenue from a limited number of service providers, and the loss of, or a significant reduction in, orders from one or more of our major service providers would result in decreased revenue and profitability.

Our success is highly dependent upon establishing and maintaining successful relationships with a variety of service providers. We generally enter into agreements with our service providers outlining the terms of our relationship, including service provider pricing commitments, maintenance and support requirements. These contracts typically have an initial term of three years, with subsequent renewal terms. While we have developed a network of service providers, we receive a substantial portion of our revenue from a limited number of service providers. For the fiscal year ended December 31, 2025, one customer, Kami Vision Incorporated (“Kami”), a related party to AMC, contributed approximately 52% of AMC’s revenue and accounted for 79% of AMC’s accounts receivable at December 31, 2025. The loss of one or more key service provider, a reduction in sales through any major service provider, the inability of any customer to fulfill its financial obligations or the inability or unwillingness of any of our major service provider to pay for our products reduce our revenue and could impair our profitability. Additionally, this concentration exposes AMC to potential collection risks and could increase its vulnerability to any economic downturns or operational disruptions affecting key customers.

Mergers or other strategic transactions involving our competitors could weaken our competitive position, which could adversely affect our ability to compete effectively and harm our results of operations.

Our industry is highly fragmented, and we believe it is likely that some of our existing competitors will consolidate or be acquired. In addition, some of our competitors may enter into new alliances with each other or may establish or strengthen cooperative relationships with systems integrators, third-party consulting firms or other parties. Any such consolidation, acquisition, alliance or cooperative relationship could adversely affect our ability to compete effectively and lead to pricing pressure and our loss of market share and could result in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our business, results of operations and financial condition.

A significant decline in subscriber retention, renewal rates, or usage of services provided by our business partners would have an adverse effect on our business, financial condition and operating results.

A significant portion of our revenue is derived from arrangements with related-party service providers, including SaaS and platform-based services offered by such provider. Our revenue is therefore dependent, in part, on the number of active subscribers to these services and their level of usage of platform features. Subscribers may elect to terminate or reduce their use of such services at any time. If the related party service provider is unable to attract, retain, or expand their subscriber base, or if subscriber engagement declines, our revenue and ability to grow could be adversely affected.

We do not control the contractual relationship between the related party service provider and their subscribers, and we do not independently determine renewal rates. As a result, we have limited visibility into, and ability to influence, subscriber retention and renewal trends. Accordingly, we may not be able to accurately predict future trends in renewals, usage, or churn associated with these services.

Subscribers may choose not to renew their contracts or may reduce usage for a variety of reasons, including dissatisfaction with the service, pricing considerations, reduced discretionary spending, or a belief that competing services provide better value. In addition, subscriber behavior may be affected by factors outside of our or our business partners’ control, such as changes in economic conditions, relocation, or the dissolution of a business.

A significant decline in subscriber retention, renewal rates, or usage levels associated with this related party services would have an adverse effect on our business, financial condition, and operating results.

If we are unable to develop new products, sell our platform and products into new markets or further penetrate our existing markets, our revenue may not grow as expected.

Our ability to increase sales will depend in large part on our ability to enhance and improve our platform and products, introduce new products in a timely manner, sell into new markets and further penetrate our existing markets. The success of any enhancement or new solution or service depends on several factors, including the timely completion, introduction and market acceptance of enhanced or new products, the ability to maintain and develop relationships with service providers, the ability to attract, retain and effectively train sales and marketing personnel and the effectiveness of our marketing programs. Any new product or service we develop or acquire may not be introduced in a timely or cost-effective manner, and may not achieve the broad market acceptance necessary to generate significant revenue. Any new markets into which we attempt to sell our platform and products, including new vertical markets and new countries or regions, may not be receptive. Our ability to further penetrate our existing markets depends on the quality of our platform and products and our ability to design our platform and products to meet consumer demand.

We rely on wireless carriers to provide access to wireless networks through which we provide our wireless alarm, notification and intelligent automation services, and any interruption of such access would impair our business.

We rely on wireless carriers to provide access to wireless networks for machine-to-machine data transmissions, which are an integral part of our services. Our wireless carriers may suspend wireless service to expand, maintain or improve their networks. Any suspension or other interruption of services would adversely affect our ability to provide our services to our service providers and subscribers and may adversely affect our reputation. In addition, the inability to maintain our existing contracts with our wireless carriers or enter into new contracts with such wireless carriers could have a material adverse effect on our business, financial condition and results of operations.

Any security incident, other technology disruption, or failure to comply with laws and regulations relating to privacy and processing of personal information could result in damage to AMC’s brand and reputation, material financial penalties, and legal liability, any of which could negatively impact our business, results of operations and financial condition.

AMC’s business involves the use of computers in substantially all aspects of its business operations. AMC also uses mobile devices, social networking and other online activities to connect with its employees, suppliers, manufacturers, distributors, customers and consumers. As AMC pursues new initiatives that grow its operations, including acquisitions, AMC may also be required to expand and improve its information technologies, resulting in a larger technological presence and corresponding exposure to cybersecurity risk. Security incidents can take a variety of forms and are constantly evolving due to the increasing sophistication of threat actors, each of which increases the difficulty of detecting and successfully defending against them. If AMC fails to assess, identify, and respond to cybersecurity risks associated with the expansion and evolution of its business or the increasing sophistication of hackers, AMC may become increasingly vulnerable to such risks.

While AMC believes that it has implemented reasonable measures to prevent security incidents, there can be no assurances that such measures will be effective to protect AMC’s information technology systems and/or the relevant personal or sensitive information it processes. As an early-stage company, AMC’s resources to invest in data security protection are limited, and AMC may not be sufficiently protected against security incidents. AMC may not have sufficient resources to adequately investigate and remediate any vulnerabilities related to security incidents, or to prevent them.

In addition to breach notification laws that may be triggered by security incidents or access or exfiltration of personal information by unauthorized persons, AMC may also be contractually required to notify customers or other counterparties of a security incident. Maintaining industry standard safeguards and, if needed, addressing a security incident may be costly. Complying with the numerous and complex regulations in the event of a data security breach would be potentially expensive, and resource-intensive and failure to comply could subject us to regulatory scrutiny and potential liability, including fines, penalties, or litigation. In addition, the theft, destruction, loss, misappropriation, or release of personal information or intellectual property, or interference with AMC’s information technology systems or the technology systems of third parties on which it relies, could result in business disruption, reputational harm, violation of privacy laws, loss of customers, potential liability and competitive disadvantage, all of which could have a material adverse impact on AMC’s business, financial condition or results of operations.

We may require additional capital to support business growth, and this capital might not be available on acceptable terms, or at all.

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new features or enhance our products, improve our operating system or acquire complementary businesses and technologies. Our capital requirements will depend on many factors, including, but not limited to:

If we are unable to obtain adequate financing or financing on terms satisfactory to us, when we require it, our ability to continue to grow or support our business and to respond to business challenges could be limited.

The technology employed in our products may become obsolete, and we may need to incur significant capital expenditures to update our products for changes in technology.

Our industry is characterized by rapid technological innovation. Our platform and products interact with the hardware and software technology of systems and devices located at our subscribers’ properties. We may be required to modify or change our products or products to adapt to new technologies or changes in existing technologies in response to changing market conditions, consumer preferences or industry standards, which could require significant capital expenditures. For example, many of our products are currently working on platforms that rely on 3G/4G wireless technology. As 5G wireless technology becomes more prevalent, it may require changes to our products or products. It is also possible that one or more of our competitors could develop a significant technical advantage that allows them to provide additional or superior quality products or services, or to lower their price for similar products or services, which could put us at a competitive disadvantage. Our inability to adapt to changing technologies, market conditions or consumer preferences in a timely manner could materially and adversely affect our business, financial condition, cash flows or results of operations.

If we are unable to continue to utilize the “Yi” brand name, it could materially and adversely affect our business, financial condition and results of operations.

We currently utilize the “Yi” brand name in almost all of the products we sell. We have been granted permission by Shanghai Xiaoyi Technology Co., Ltd., the owner of the “Yi” brand name, to utilize such name in all of our products in our online sales through October 22, 2026. We cannot assure you that we will be able to extend this arrangement beyond such date. If we are unable to maintain this arrangement in the future and lose the ability to utilize the “Yi” brand name, it could materially and adversely affect our business, financial condition and results of operations.

We depend on our suppliers, and the loss of any key supplier could materially and adversely affect our business, financial condition and results of operations.

Our hardware products depend on the quality of components that we procure from related-party suppliers. Reliance on suppliers, as well as industry supply conditions, generally involves several risks, including the possibility of defective parts, which can adversely affect the reliability and reputation of our platform and products, and a shortage of components and reduced control over delivery schedules and increases in component costs, which can adversely affect our profitability. We have two related parties from which we procure hardware on a purchase order basis. If these suppliers are unable to continue to provide a timely and reliable supply, we could experience interruptions in delivery of our platform and products to service providers, which could have a material adverse effect on our business, financial condition and results of operations. If we were required to find alternative sources of supply, qualification of alternative suppliers and the establishment of reliable supplies could result in delays and a possible loss of sales, which could have a material adverse effect on our business, financial condition and results of operations.

Disruptions in the supply chain for AMC’s products could negatively impact AMC’s business.

AMC’s business has in the past been impacted by supply chain disruptions, particularly a short supply of security cameras. To address this challenge, AMC in the past purchased Ants’ remaining inventory of security cameras, which allowed it to meet customer demand without significant interruptions to its operations or revenue. While the disruption posed challenges, AMC’s proactive measures helped mitigate immediate risks to customer satisfaction and market position. AMC has implemented several strategies to address supply chain risks going forward, including diversifying its supplier base by expanding partnerships with multiple suppliers to reduce reliance on any single source, and seeking to better manage its inventory by increasing the amount of parts and accessories purchased when placing purchase orders. These mitigation efforts, while effective in addressing short-term supply chain disruptions, introduced certain other risks, including product quality and reliability risks dealing with new suppliers and higher costs to increase inventory levels. Although AMC will seek to mitigate these risks such as by conducting rigorous quality assurance processes, there can be no assurance that AMC will be successful in these efforts. If it is not, it could have a material adverse effect on AMC’s business.

AMC faces inflationary pressures which could negatively impact its business.

To date, recent inflationary pressures have not had a material impact on AMC’s business and operations. However, such pressures could increase over time and if they did, it could have a material impact on AMC’s business and operations. For instance, to date, the costs associated with procuring AMC’s hardware, raw materials and third-party services have not increased materially as AMC’s main suppliers are located in PRC where inflation has been controlled in the past year. If inflation were to increase in these locations, it could negatively impact AMC’s business.

Furthermore, inflationary pressures in the logistics sector, including higher fuel and transportation costs, could increase and further negatively impact the cost of delivering AMC’s products and products. The United States government has also recently imposed higher tariffs on products from the PRC, which could increase the prices of our products and services and could negatively impact our business. If AMC is unable to implement successful strategies to offset such inflationary pressures and/or tariffs, it could have a material adverse effect on its business and operations.

Growth of our business will depend on market awareness and a strong brand, and any failure to develop, maintain, protect and enhance our brand would hurt our ability to retain or attract subscribers.

We believe that building and maintaining market awareness, brand recognition and goodwill in a cost-effective manner is critical to our overall success in achieving widespread acceptance of our existing and future products and is an important element in attracting new service providers and subscribers. An important part of our business strategy is to increase service provider and consumer awareness of our brand and to provide marketing leadership, services and support to our service provider network. This will depend largely on our ability to continue to provide high-quality products, and we may not be able to do so effectively. While we may choose to engage in a broader marketing campaign to further promote our brand, this effort may not be successful. Our efforts in developing our brand may be hindered by the marketing efforts of our competitors and our reliance on our service providers and strategic partners to promote our brand. If we are unable to cost-effectively maintain and increase awareness of our brand, our business, results of operations and financial condition could be harmed.

Our strategy includes pursuing acquisitions, and our potential inability to successfully integrate newly-acquired technologies, assets or businesses may harm our financial results.

Forward-Looking Statements

References to the “Company,” “our,” “us” or “we” refer to AMC Robotics Corporation. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the audited financial statements and the related notes included in “Item 8. Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

Our Company and our Business Overview

AMC Robotics Corporation became publicly listed through the Business Combination with AlphaVest Acquisition Corp. in December 2025. Prior to the Business Combination, AMC Corporation, which was incorporated in the State of Washington on October 21, 2021, was the predecessor operating entity and conducted substantially all of the Company’s business activities. As the Business Combination was accounted for as a reverse recapitalization, AMC Corporation is considered the accounting acquirer, and its historical financial statements form the basis of the Company’s consolidated financial statements.

The Company distributes security cameras through e-commerce platforms across the United States, Canada, and Europe. Its product portfolio includes cameras designed for residential homes and small businesses, such as the YI dome guard, home camera, and outdoor camera.

The online stores on these e-commerce platforms in the aforementioned regions were owned by Ants, Xiaoyun, and Yishijue. Pursuant to the Authorization Agreements, these entities have authorized the Company to utilize their e-commerce platform accounts free of charge until October 20, 2026. The Authorization Agreements with Xiaoyun and Yishijue will continue until the existing inventory of the Company’s products has been sold, at which time the agreements will be terminated.

Xiaoyun and Yishijue are variable interest entities (VIEs), through contractual arrangements, holds effective control over their primary economic activities, assumes the associated risks and benefits from the economic rewards, making AMC Corporation the primary beneficiary. On December 1, 2025, AMAC Corporation terminated its contractual arrangements with Xiaoyun and Yishijue, which resulted in the loss of control over the VIE and, accordingly, the deconsolidation of the VIEs.

Recent Development and Future Objectives

Business Combination

AMC Corporation entered into the Business Combination Agreement with SPAC on August 16, 2024. In December 2025, the Company completed a business combination with AlphaVest Acquisition Corp. (the “Business Combination”), as a result of which AMC Corporation became a wholly owned subsidiary of AMC Robotics Corporation. The transaction was accounted for as a reverse recapitalization, with AMC Corporation deemed the accounting acquirer for financial reporting purposes.

Private Investment in Public Equity (“PIPE”) Financing

In connection with the Business Combination, the Company consummated a PIPE financing that generated gross proceeds of $8,000,000, which closed concurrently with the Business Combination. As part of the PIPE financing, the Company issued 2,240,000 PIPE warrants to investors.

Update of Revenue Stream

In 2025, the Company’s revenue composition changed, with a decrease in product sales and the introduction of a new revenue stream derived from a revenue-sharing arrangement with its related party, Kami Vision. Under this arrangement, the Company is entitled to 30% of the revenue generated from intelligent information services provided by Kami Vision.

Outlook of the business models

The Company intends to maintain its recurring revenue streams from existing product sales while gradually transitioning its business focus toward the development and deployment of autonomous robotic systems and intelligent security solutions. Management expects that this shift in business model will result in improved revenue margins and support the long-term growth and success of the Company’s operations.

Executive Summary of Financial Performance

The Company’s financial performance for the year ended December 31, 2025 reflects a fundamental shift in operating strategy and financial profile, transitioning from a revenue-driven model to a margin and efficiency driven model.

The 41% decline in revenue was primarily attributable to a deliberate reduction in lower-margin product sales and a contraction in e-commerce volume. While this decline reduced top-line growth, it was accompanied by a disproportionately larger reduction in cost of revenue (67%), indicating improved cost discipline and reduced exposure to inventory-related inefficiencies.

As a result, gross profit increased by approximately $2.2 million, and gross margin expanded significantly from 6% in 2024 to 48% in 2025. This margin expansion reflects a combination of (i) reduced inventory impairment, (ii) improved procurement and cost controls, and (iii) a higher contribution from revenue-sharing and service-based revenue streams.

Operating losses decreased by approximately $2.0 million, driven primarily by improved gross profitability and reduced discretionary spending, particularly in sales and marketing. Despite modest increases in general and administrative expenses associated with public company readiness, overall cost structure improved.

For the year ended December 31, 2025, the Company reported a net loss of $24,817,342, compared to a net loss of $776,960 for the year ended December 31, 2024. The increase in net loss was primarily attributable to a non-cash loss of $25,549,272 recognized from the change in fair value of the PIPE warrant liability. This loss resulted from the remeasurement of the warrant liability at fair value in accordance with ASC 815 and was significantly impacted by changes in the Company’s stock price and the contractual terms of the warrants, including reset and anti-dilution features that increased the number of underlying shares. Excluding the impact of this non-cash fair value adjustment, the Company’s operating results improved compared to the prior year, driven by higher gross margins and reduced operating losses.

Liquidity improved significantly, with cash increasing by approximately $6.6 million, primarily due to proceeds from the SPAC transaction and related financing activities. This enhanced liquidity enabled the Company to reduce outstanding obligations and improve its working capital position.

Overall, 2025 represents a transition year in which the Company prioritized profitability, cost efficiency, and balance sheet strength over revenue growth.

The Company’s results of operations for 2025 were characterized by declining revenue but significantly improved profitability, driven by changes in revenue composition, cost structure, and operational discipline.

The most significant drivers of the year-over-year changes include:

These changes reflect a broader strategic repositioning of the Company toward a more sustainable and capital-efficient operating model.

Revenue

The decline in total revenue was primarily driven by a $5.1 million decrease in product revenue, reflecting reduced sales volume and a strategic decision to scale back lower-margin product lines. This reduction indicates a shift away from revenue generated through high inventory turnover toward a more selective and margin-focused sales approach.

Product revenue from related parties increased significantly, although it remains a relatively small component of total revenue. This increase reflects expanded transactions within affiliated entities and may indicate evolving commercial arrangements.

Revenue from related parties includes amounts derived from revenue-sharing arrangements associated with cloud services and intelligent information services, which were introduced in 2025. Revenue from these arrangements increased significantly during the period and became the largest contributor to total revenue. This shift reflects the Company’s increasing reliance on collaborative revenue models, which generally involve lower cost structures and reduced working capital requirements.

The introduction of intelligent information services in 2025 represents a strategic diversification into service-based revenue streams. Although this revenue stream is currently not material relative to total revenue, management expects it to provide higher margins and recurring revenue potential over the long term.

Overall, the change in revenue composition reflects a transition toward lower-volume but higher-quality revenue streams, which is consistent with the Company’s focus on improving profitability.

Cost of Revenue and Gross Profit

The $6.4 million reduction in cost of revenue significantly exceeded the decline in revenue, resulting in a substantial increase in gross profit and margin.

A key driver of this improvement was the reduction in inventory impairment losses, which declined from approximately $1.3 million in 2024 to approximately $0.16 million in 2025. This change reflects improved inventory management practices, including better alignment of procurement with demand and reduced exposure to obsolete inventory.

In addition, lower product sales volume resulted in reduced product cost, E-commerce platform expenses, and logistics and fulfillment costs were more effectively aligned with sales activity.

The resulting increase in gross margin from 6% to 48% reflects a structural improvement in the Company’s cost profile, driven by both operational efficiencies and a higher proportion of revenue from higher-margin activities.

This margin expansion is a critical indicator of improved business sustainability and profitability.

Operating Expenses

General and administrative expenses increased by approximately $0.5 million, primarily due to incremental costs associated with becoming a public company. These include audit fees, legal expenses, compliance costs, and corporate governance infrastructure. These costs are expected to remain elevated as the Company continues to operate as a public entity.

Sales and marketing expenses decreased significantly by approximately $1.4 million, reflecting a reduction in promotional activities and a more disciplined approach to customer acquisition. This decrease suggests improved efficiency in marketing spend and a strategic shift toward profitability rather than growth.

Research and development expenses declined as the Company reduced investment in new product development and focused on optimizing existing offerings. While this supports short-term cost control, it may impact long-term innovation.

The absence of the prior-year credit loss reversal of $1.3 million contributed to the increase in operating expenses on a comparative basis. Excluding this non-recurring item, operating expenses would have decreased year over year.

Overall, the Company demonstrated improved cost discipline, with operating expenses more closely aligned with revenue levels, contributing to a significant reduction in operating losses.

Other Income (Expense)

For the year ended December 31, 2025, total other income (loss) was a loss of $24,307,524, compared to total other income of $1,784,838 for the year ended December 31, 2024. The change was primarily attributable to the recognition of a non-cash loss of $25,549,272 from the change in fair value of the PIPE warrant liability, which is presented as a separate line item in other income (loss) in the current year. This loss arose from the remeasurement of the warrant liability at fair value in accordance with ASC 815 and was significantly impacted by changes in the Company’s stock price and the contractual terms of the warrants, including reset and anti-dilution features that increased the number of underlying shares.

Excluding the impact of the fair value adjustment on the warrant liability, other income remained relatively consistent period over period, primarily consisting of other income from related parties of $1,217,586 in 2025 compared to $1,779,528 in 2024, as well as other miscellaneous income and interest income. Interest expense was $24,616 for the year ended December 31, 2025, compared to $26,942 (including related party interest) for the prior year. The Company also recognized a nominal loss on deconsolidation of $5,310 in 2025.

Liquidity Overview

As of December 31, 2025, the Company had cash and cash equivalents of approximately $7.0 million, compared to approximately $0.4 million as of December 31, 2024, representing an increase of approximately $6.6 million. This significant improvement in liquidity was primarily attributable to proceeds received from the Business Combination with AlphaVest Acquisition Corp. and related PIPE financing, as discussed in Note 1 – Organization and Nature of Business.

Working capital improved materially during 2025, driven by both increased cash balances and a reduction in outstanding liabilities, particularly related-party obligations (see Note 8 – Related Party Transactions). The Company used a portion of financing proceeds to settle historical payables and strengthen its balance sheet.

The Company’s liquidity position is influenced by several key factors:

The Company primarily distributes intelligent security camera products through e-commerce platforms serving customers in the United States, Canada, and Europe. In addition to product sales, the Company generates recurring revenue through cloud-based intelligent information services, artificial intelligence service-sharing arrangements, intelligent information services, and revenue-sharing arrangements with strategic business partners. During 2026, the Company continued to expand its emphasis on higher-margin service-based revenue while maintaining a more disciplined approach to inventory management and operating expenses.

Strategic Investment

During the second quarter of 2026, the Company invested an aggregate of $1.0 million in Etronium AI Inc. through two Simple Agreements for Future Equity (“SAFEs”). The investment reflects management’s strategy of pursuing opportunities in artificial intelligence technologies that may complement the Company’s long-term robotics and intelligent security solutions. The investment is accounted for as a long-term investment under the applicable provisions of U.S. GAAP.

The Company’s revenue mix has continued to evolve from traditional product sales toward higher-margin recurring revenue generated through cloud-based intelligent information services, artificial intelligence service offerings, and revenue-sharing arrangements with strategic partners, including Kami Vision Inc. Management believes this transition reduces working capital requirements associated with inventory-intensive product sales while supporting improved gross margins and more predictable recurring revenue.

During the six months ended June 30, 2026, the Company continued to generate a significant portion of its revenue from cloud-service revenue sharing, AI service sharing, and intelligent information service arrangements with Kami. The Company also continued to generate product revenue through sales to related and unrelated customers.

Management remains focused on expanding the Company’s intelligent security and robotics business while continuing to improve operating efficiency and profitability. Key strategic priorities include:

The Company may evaluate financing alternatives from time to time to support its working capital requirements, strategic investments, and long-term growth objectives. There can be no assurance that additional financing will be available on acceptable terms or at all.

While management believes the Company is well positioned to execute its long-term strategy, future operating results will continue to depend on customer demand, technological innovation, competitive market conditions, the successful execution of strategic initiatives, and general economic conditions.

The Company’s financial performance during the three and six months ended June 30, 2026 reflected a continued shift toward higher-margin revenue streams and improved operating efficiency. Although total revenues declined compared with the corresponding periods in 2025, gross profit increased significantly as a result of a more favorable revenue mix and substantially lower product-related costs.

For the three months ended June 30, 2026, total revenues decreased by $460,098, or 33%, to $937,177, compared with $1,397,275 for the corresponding period in 2025. The decrease was primarily attributable to lower product revenue, partially offset by an increase in revenue share and other service-based revenue included within revenue share.

Cost of revenues decreased by $944,124, or 83%, to $186,570, compared with $1,130,694 for the corresponding period in 2025. The decrease primarily reflected lower product costs, e-commerce platform expenses, delivery and freight costs, and inventory impairment losses associated with the reduction in product sales.

The Company reported a net loss of $175,730 for the three months ended June 30, 2026, compared with a net loss of $228,913 for the corresponding period in 2025, representing an improvement of $53,183. The current-year period included an income tax benefit of approximately $1,655, compared with income tax expense of approximately $1,751 in the prior-year period. The improvement in operating results was partially offset by total other expense, net, of $20,885 during the current-year quarter, compared with total other income, net, of $507,874 during the prior-year quarter. The prior-year quarter included $533,688 of other income from a related party.

For the six months ended June 30, 2026, total revenues decreased by $1,068,007, or 33%, to $2,121,793, compared with $3,189,800 for the corresponding period in 2025. The decrease was primarily attributable to lower product revenue, partially offset by increased revenue share and service-based revenue.

Cost of revenues decreased by $2,084,358, or 86%, to $350,530, compared with $2,434,888 for the corresponding period in 2025. Consequently, gross profit increased by $1,016,351, or 135%, to $1,771,263, compared with $754,912 in the prior-year period. Gross margin increased to approximately 83% for the six months ended June 30, 2026, from approximately 24% for the corresponding period in 2025.

The Company reported a net loss of $30,129 for the six months ended June 30, 2026, compared with a net loss of $306,090 for the corresponding period in 2025, representing an improvement of $275,961. Total other expense, net, was $1,724 for the first six months of 2026, compared with total other income, net, of $1,182,772 for the corresponding period in 2025. The prior-year period included $1,217,586 of other income from a related party. The Company recorded income tax expense of approximately $444 and $6,074 for the six months ended June 30, 2026 and 2025, respectively.

During the second quarter of 2026, the Company invested an aggregate of $1.0 million in Etronium AI Inc. through two Simple Agreements for Future Equity. The investment supports the Company’s long-term strategy of pursuing artificial intelligence technologies that may complement its robotics and intelligent security solutions.

Overall, the results for the first six months of 2026 reflected significantly improved gross margins, reduced sales and marketing expenditures, and a substantial reduction in operating loss, despite lower total revenues.

During the preparation of the Company’s unaudited condensed consolidated financial statements for the three months ended March 31, 2026, management identified certain immaterial errors in the Company’s previously issued consolidated financial statements as of and for the year ended December 31, 2025. The errors primarily related to the omission of accrued professional service fees.

Management evaluated the errors in accordance with applicable accounting guidance and concluded that they were not material, individually or in the aggregate, to the Company’s previously issued consolidated financial statements as of and for the year ended December 31, 2025. Accordingly, an amendment or restatement of those financial statements was not required.

Management also concluded that correcting the errors entirely in the three months ended March 31, 2026 would have materially misstated the Company’s results of operations for that interim period. Therefore, the Company revised the December 31, 2025 comparative balance sheet included in the unaudited condensed consolidated financial statements to reflect the correction of the immaterial prior-period errors.

The revisions increased accrued expenses and other current liabilities and accumulated deficit by approximately $109,000 as of December 31, 2025. The revisions had no effect on the Company’s cash flows for the year ended December 31, 2025.

The Company’s results of operations for the three and six months ended June 30, 2026 reflected continued progress in its transition toward a higher-margin, more capital-efficient business model. Although total revenues declined compared with the corresponding periods in 2025, the Company achieved significant improvements in gross profit and operating results through changes in revenue composition, disciplined cost management, and reduced product-related expenses.

Management believes these changes reflect its long-term strategy of improving profitability, reducing working capital requirements, and expanding recurring revenue streams.

Total revenues for the three months ended June 30, 2026 were $937,177, a decrease of $460,098, or 33%, compared with $1,397,275 for the same period in 2025. Total revenues for the six months ended June 30, 2026 were $2,121,793, a decrease of $1,068,007, or 33%, compared with $3,189,800 for the corresponding period in 2025.

The decrease in revenues during both periods was primarily attributable to lower third-party product sales as the Company continued to reduce its emphasis on inventory-intensive product distribution. This decline was partially offset by continued growth in revenue generated through revenue-sharing arrangements with related parties.

Revenue share from related parties increased by $272,780, or 54%, during the second quarter and by $648,242, or 60%, during the first six months of 2026. Revenue-sharing arrangements represented approximately 83% and 81% of total revenues during the three- and six-month periods ended June 30, 2026, respectively, compared with approximately 36% and 34%, respectively, during the corresponding periods in 2025.

The Company’s revenue mix continued to evolve during 2026, with revenue-sharing arrangements becoming the primary source of revenues. Management believes these arrangements generally require substantially less working capital, involve lower direct costs than traditional product sales, and support higher gross margins. The Company expects to continue pursuing opportunities that expand recurring and service-based revenue while maintaining a disciplined approach to inventory investment.

The decrease in cost of revenues during both periods was primarily attributable to lower product-related costs resulting from reduced product sales volumes, together with significant reductions in e-commerce platform expenses, product procurement costs, delivery and freight costs, and inventory impairment losses. These reductions reflect management’s continued efforts to reduce inventory-intensive operations and improve operating efficiency.

Gross profit increased to $750,607 for the three months ended June 30, 2026 from $266,581 for the corresponding period in 2025, representing an increase of $484,026, or 182%. For the six months ended June 30, 2026, gross profit increased to $1,771,263 from $754,912 for the corresponding period in 2025, representing an increase of $1,016,351, or 135%.

Gross margin improved to approximately 80% and 83% for the three- and six-month periods ended June 30, 2026, respectively, compared with approximately 19% and 24%, respectively, for the corresponding periods in 2025. The increase primarily reflected a significant change in revenue mix. Revenue-sharing and service-based arrangements, which generally have limited direct costs and are recognized on a net basis, represented approximately 83% and 81% of total revenue for the three and six months ended June 30, 2026, respectively. By comparison, product revenue declined substantially and represented a smaller portion of total revenue. Accordingly, the improvement in consolidated gross margin was primarily attributable to the increased proportion of revenue generated from higher-margin revenue-sharing and service-based activities, together with lower product-related costs and inventory impairment charges.

Management believes the continued shift toward service-based and recurring revenue, together with disciplined inventory and cost management, has strengthened the Company’s gross profitability and positioned the business for more capital-efficient growth.