DROR 10-K & 10-Q changes, risk factors and insider trading
Dror Ortho-Design, Inc. · OTC · Dental Equipment & Supplies · CIK 1282980 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We have identified a material weakness in our internal control over financial reporting, and if we are unable to remediate the material weakness, or if we experience additional material weaknesses in the future, our business may be harmed.”
Removed heading “We cannot assure you that our common stock will become eligible for listing or quotation on any exchange and the failure to do so may adversely affect your ability to dispose of our common stock in a timely fashion.”
Removed heading “We may apply the proceeds of the Private Placement to uses that ultimately do not improve our operating results or increase the price of our common stock.”
Removed heading “If our goodwill or long-lived assets become impaired, we may be required to record a material charge to earnings.”
Removed heading “We are required to annually assess our internal control over financial reporting and any adverse results from such assessment may result in a loss of investor confidence in our financial reports and adversely affect our stock price.”
Largest changes
“Remediation efforts place a significant burden on management and add increased pressure to our financial resources and processes. …”see in full comparison
“We have identified a material weakness in our internal control over financial reporting, and if we are unable to remediate the material weakness, or if we experience additional material weaknesses in the future, our business may be harmed.”see in full comparison
“If our goodwill or long-lived assets become impaired, we may be required to record a material charge to earnings.”see in full comparison
“In addition, since the commencement of these events, there have been continued hostilities along Israel’s northern border with Lebanon (with the Hezbollah terror organization) and on other fronts from various extremist groups in region, such as the Houthis in Yemen and various rebel militia groups in Syria and Iraq. In October 2024, Israel began limited ground operations against Hezbollah in Lebanon, and in November 2024, a ceasefire was brokered between Israel and Hezbollah. …”see in full comparison
“Under GAAP, we review our goodwill and long-lived asset group for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Additionally, goodwill must be tested for impairment at least annually. The qualitative and quantitative analysis used to test goodwill are dependent upon various assumptions and reflect management’s best estimates. …”see in full comparison
“We are required to annually assess our internal control over financial reporting and any adverse results from such assessment may result in a loss of investor confidence in our financial reports and adversely affect our stock price.”see in full comparison
Full comparison: every changed paragraph (33)
In October 2023, Hamas terrorists
infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas
also launched extensive rocket attacks on Israeli population andpopulation, industrial centers located along Israel’s border with the Gaza Strip
Strip and in other areas within the State of Israel. Following the attack, Israel’s security cabinet declared war against Hamas
and a
military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. Moreover,While a ceasefire
thewas clashreached between Israel and HezbollahHamas in LebanonOctober may escalate in2025, the futuresituation intoremains a greater regional conflict.volatile.
In addition, since the commencement of these events, there have been continued hostilities along Israel’s northern border with Lebanon (with the Hezbollah terror organization) and on other fronts from various extremist groups in region, such as the Houthis in Yemen and various rebel militia groups in Syria and Iraq. In October 2024, Israel began limited ground operations against Hezbollah in Lebanon, and in November 2024, a ceasefire was brokered between Israel and Hezbollah. In addition, in April 2024 and October 2024, Iran launched direct attacks on Israel involving hundreds of drones and missiles and has threatened to continue to attack Israel and is widely believed to be developing nuclear weapons. In June 2025, in light of continued nuclear threats and intelligence assessments indicating imminent attacks, Israel launched a preemptive strike directly targeting military and nuclear infrastructure inside Iran, aimed at disrupting Iran’s capacity to coordinate or launch further hostilities against Israel, as well as to degrade its nuclear program. In response, Iran launched multiple waves of drones and ballistic missiles at Israeli cities. While most of these attacks were intercepted, several caused civilian casualties and damage to infrastructure. The Israeli military has since conducted additional operations against Iranian assets. While a ceasefire was reached between Israel and Iran in June 2025 after 12 days of hostilities, the situation remains volatile. A broader regional conflict involving additional state and non-state actors remains a significant risk. Iran is also believed to have a strong influence among extremist groups in the region, such as Hamas in Gaza, Hezbollah in Lebanon, the Houthi movement in Yemen and various rebel militia groups in Syria and Iraq. These situations may potentially escalate in the future to more violent events which may affect Israel and us. Additionally, Yemeni rebel group, the Houthis, launched series of attacks on global shipping routes in the Red Sea, causing disruptions of supply chain. Such clashes may escalate in the future into a greater regional conflict.
Any hostilities involving
Israel, or the interruption or curtailment of trade within Israel or between Israel and its trading partnerspartners, could adversely affect our
operations and results of operations and could make it more difficult for us to raise capital. Parties with whom we may do business have
sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing us to make alternative arrangements when
necessary. The conflict situation in Israel could cause situations where medical product certifying or auditing bodies could not be able
to visit manufacturing facilities of our subcontractors in Israel in order to review our certifications or clearances, thus possibly leading
leading to temporary suspensions or even cancellations of our product clearances or certifications. The conflict situation in Israel
could also
result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated to perform
their commitments
under those agreements pursuant to force majeure provisions in such agreements.
There have been travel advisories
imposed as related to travel to Israel, and restrictionrestrictions on travel, or delays and disruptions as related to imports and exports may be
imposed in the future. An inability to receive supplies and materials, shortages of materials or difficulties in procuring our materials,
among others, may adversely impact our ability to commercialize and manufacture our product candidates and products in a timely manner.
This could cause a number of delays and/or issues for our operations, including delay of the review of our product candidates by regulatory
agencies, which in turn would have a material adverse impact on our ability to commercialize our product candidates.
The Israel Defense Force
(the
“IDF”), the national military of Israel, is a conscripted military service, subject to certain exceptions. Several employees
of our vendors are subject to military service in the IDF and have been andor may be called to serve. It is possible that there will be further
further military reserve duty call-ups in the future, which may affect our business due to a shortage of skilled labor and loss of institutional
knowledge, and necessary mitigation measures we may take to respond to a decrease in labor availability, such as overtime and third-party
outsourcing, for example, which may have unintended negative effects and adversely impact our results of operations, liquidity or cash
flows.
It is currently not possible
to predict the duration or severity of the ongoing conflict or its effects on our business, operations and financial conditions. The ongoing
ongoing conflict is rapidly evolving and developing, and could disrupt our business and operations, interrupt our sources and availability of
of supplysupplies and hamper our ability to raise additional funds or sell our securities, among others.
Our business could be impacted by major
public health issues, including pandemicsfuture such as the spread of COVID-19.pandemics.
Major public health
issues, issues,
including pandemicspandemics, could in the future materially affect our business due to their impact on the global economy and regional economies,
demand for consumer products, the imposition or removal of public safety measures. Public health concerns may also limit the
movement movement
of products between regions, disrupt or delay supply chains and sales and distribution channels, resulting in interruptions
of the supply
of products.
In connection with the Private
Placement,Placement (as defined herein) that closed in August 2023, we granted the Private Placement Investors a right to participate in future
financings, until the second anniversary of the
closing of the Private Placement, that involve the issuance of our commonCommon stockStock or common stockCommon
Stock equivalents for cash consideration. Further,
the Securities Purchase Agreement entered into in connection with the Private Placement
(the “Securities Purchase Agreement”)
contains “most favored nation” provisions, which may require future amendments
to the terms of the Private Placement to give
Private Placement Investors the benefit of more favorable terms governing certain future
issuances of our commonCommon stockStock or commonCommon stock
Stock equivalents. Such participation right and “most favored nation” provisions may
restrict our ability to secure future financings
unless the Private Placement Investors waive their right to participate, the persons
providing such financing accept the participation
of the Private Placement Investors or the Private Placement Investors waive their rights
under “most favored nation” provisions,
respectively. If we are unable to obtain adequate financing or financing on terms
satisfactory to us, when we require it, our ability
to continue to pursue our business objectives and to respond to business opportunities,
challenges, or unforeseen circumstances could
be significantly limited, and our business, operating results, financial condition, and
prospects could be materially adversely affected.
Our products (both the first generation Aerodentis system and the recently cleared ZSmile Platform) (including the currently cleared version, as well as the next generation Platform for which we have not yet submitted the requisite 510(k) application to FDA) are considered medical devices and, accordingly, are subject to rigorous regulation by government agencies in the U.S. and other countries in which we intend to sell our products. Compliance with these rigorous regulations will affect capital expenditures, earnings and our competitive position. These regulations vary from country to country but cover, among other things, the following activities with respect to medical devices:
We may not receive the necessary authorizations
to market our Platform or any future new products, and any failure to timely do so may adversely affect our ability to grow our business.
OurBoth our first generation
Aerodentis Aerodentis
Systemsystem isand athe recently cleared ZSmile Platform are classified as Class II medical device,devices, which waswere cleared by FDA for commercialization
in the U.S. pursuant to the 510(k) notification process
for movement and alignment of teeth during orthodontic treatment of malocclusion
in April 2020. We are preparing to apply for 510(k)
clearance for the updated version of the currently cleared device. Such updated Platform contains new and/or different components than
the original device, which is why a new 510(k) clearance is required prior to marketing the Platform in the U.S. We have not yet filed
a 510(k) submission for the Platform,2020 and itFebruary has,2026, thus, not been found by the FDA to be substantially equivalent to the first generation
Aerodentis System.respectively.
While our first generation
Aerodentis System has received 510(k) clearance in 2020, we are preparing to apply for 510(k) clearance for the updated components of
our Platform, which must, then, be found by the FDA to be substantially equivalent to the Aerodentis System and, thus, may not be lawfully
marketed in the U.S. until FDA make a substantial equivalence determination and issues the requisite 510(k) clearance for the updated
Platform. Although the development of our Platform has been carefully monitored and documented by professionals who are experienced in
the FDA clearance process, there is no assurance that the FDA will agree that our Platform is substantially equivalent to the Aerodentis
System and allow our Platform to be marketed in the United States. The FDA may determine that the device is not substantially equivalent
and require a PMA or, more likely, a de novo reclassification, and/or require further information, such as additional test data,
including data from clinical studies, before it is able to make a determination regarding substantial equivalence. By requesting additional
information, the FDA can delay market introduction of our Platform. Delays in receipt of or failure to receive any necessary 510(k) clearance,
de novo classification, or PMA, or the imposition of stringent restrictions for our Platform could have a material adverse effect on
our business, results of operations and financial condition.
InWhile theour future,first generation
Aerodentis System and ZSmile Platform received 510(k) clearance in 2020 and 2026, respectively, we may in the future make
other modifications
to our products, including our Platform, and determine, based on our review of the applicable FDA regulations and
guidance, that in certain
instances new 510(k) clearances or other premarket submissions are not required. If FDA disagrees with our
determinations, we may be subject
to a wide range of enforcement actions, including, for example, a warning letter, among other consequences,
after which we will likely
have to cease marketing the applicable modified product and/or to recall distributed units of such modified
product until we obtain the
requisite clearance or approval.
We also cannot predict the
likelihood, nature, or extent of government regulation that may arise from future legislation or administrative or executive action, either
either in the U.S. or abroad. For example, the Trump Administration previously enacted several executive actions that could impose significant
burdens on, or otherwise materially delay, FDA’s ability to engage in routine regulatory and oversight activities. It is difficult
to predict how these executive actions and executive actions that may be taken under the Biden Administration may affect FDA’s
ability to exercise its regulatory authority. If these executive actions impose constraints on FDA’s ability to engage in oversight
and implementation activities
in the normal course, our business may be negatively impacted.
In the E.U., notified bodies
bodies must be officially designated to certify products and services in accordance with the MDR. While several notified bodies have
been designated
the COVID-19 pandemic has significantly slowed down their designation process and the current designated notified
bodies are facing a
large amount of requests with the new regulation as a consequence of which review times have lengthened although
a new regulation amending
the E.U. MDR was recently adopted in March 2023, extending existing transitional provisions. This
situation could significantly impact the ability
of notified bodies to timely review and process our regulatory submissions, which
could have a material adverse effect on our business
in the E.U. and the EEA (which consists of the 27 E.U. member states plus
Norway, Liechtenstein and Iceland).
Our first generation Aerodentis
System is a Class II medical device was cleared by FDA for commercialization in the U.S. pursuant to the 510(k) notification process for
for movement and alignment of teeth during orthodontic treatment of malocclusion in April 2020. WeIn areFebruary preparing2026, towe apply for 510(k)
clearance for the Platform. If and when our Platform receivesreceived 510(k) clearance,clearance
for itthe will be clearedPlatform for marketing in the U.S. by the FDA only for
movement and alignment of teeth during orthodontic treatment of malocclusion.
We, thus, will not be able to promote it for any other
indications for use or make any promotional claims that are inconsistent with,
or outside the scope of, such FDA clearance (often referred
to as “off-label uses”). However, the assessment of whether a
given claim is or is not consistent with a given FDA clearance
or approval can often be subjective, and we cannot guarantee that FDA will
always agree with our position regarding a particular claim
or that all of our employees, representatives, and agents will abide by our
marketing policies. If FDA determines that we have promoted
any product without the requisite clearance or approval and/or for an off-label
or unapproved use, it could take any number of enforcement
actions against us, including (among others), issuing untitled or warning letters
and/or pursuing an injunction, seizure, civil fine
and/or criminal penalties. It is also possible that other federal, state or foreign
enforcement authorities might take action under other
regulatory authority, such as laws prohibiting false claims for reimbursement, any
of which would have a material adverse effect on our
business, financial condition, and/or business as a whole.
Our commonCommon stockStock is not listed
on any stock exchange. Although our commonCommon stockStock is quoted on the OTC Pink Limited Market operated by the OTC Markets Group Inc., there
is a
limited public market for shares of our commonCommon stock,Stock, and limited trades of our commonCommon stockStock have taken place on the OTC Pink Limited
Market.
Even if the shares of our commonCommon stockStock may in the future trade greater volume on the OTC Pink Limited Market, the liquidity and
price of our
common stockCommon Stock is expected to be more limited than if such securities were quoted or listed on a national exchange. No assurances
can be
given that an active public trading market for our commonCommon stockStock will develop or be sustained. Trading volume may be limited by
the fact
that many major institutional investment funds, including mutual funds, as well as individual investors follow a policy of not
investing investing
in over the counter stocks and certain major brokerage firms restrict their brokers from recommending over the counter stocks
because because
they are considered speculative, volatile and thinly traded. Lack of liquidity will limit the price at which stockholders may
be able
to sell our commonCommon stock.Stock.
Even if our commonCommon stockStock will
will in the future trade more actively on the OTC Pink Limited Market, the price of such commonCommon stockStock could be subject to wide fluctuations,
in response to quarterly variations in our operating results, announcements by us or others, developments affecting us, and other events
or factors. In addition, the stock market has experienced extreme price and volume fluctuations in recent years. These fluctuations have
had a substantial effect on the market prices for many companies, often unrelated to the operating performance of such companies, and
may adversely affect the market prices of the securities. Such risks could have an adverse effect on the stock’s future liquidity.
We cannot assure you that our common stock
will become eligible for listing or quotation on any exchange and the failure to do so may adversely affect your ability to dispose of
our common stock in a timely fashion.
In order for our common stock
to become eligible for listing or quotation on any exchange, reverse merger companies must have had their securities traded on an over-the-counter
market for at least one year, maintained a certain minimum closing price for not less than 30 of the most recent 60 days prior to the
filing of an initial listing application and prior to listing, and timely filed with the SEC all required reports since consummation
of the reverse merger, including one annual report containing audited consolidated financial statements for a full fiscal year commencing
after the date of filing of the Current Report on Form 8-K which discloses the reverse merger. We may not be able to meet all of the
filing requirements above and may not be able to satisfy the initial standards for listing or quotation on any exchange in the foreseeable
future or at all. Even if we are able to become listed or quoted on an exchange, we may not be able to maintain a listing of the common
stock on such stock exchange.
The Sarbanes-Oxley Act and
new rules subsequently implemented by the SEC have required changes in corporate governance practices of public companies. As a public company,
company, we expect these new rules and regulations to increase our compliance costs and to make certain activities more time consuming
and costly.
As a public company, we also expect that these new rules and regulations may make it more difficult and expensive for us
to obtain director
and officer liability insurance in the future and we may be required to accept reduced policy limits and coverage
or incur substantially
higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and
retain qualified persons
to serve on our board of directors or as executive officers.
We may apply the proceeds of the Private
Placement to uses that ultimately do not improve our operating results or increase the price of our common stock.
We intend to use the net
proceeds from the Private Placement. However, our management has broad discretion in how we actually use these proceeds. These proceeds
could be applied in ways that do not ultimately improve our operating results or otherwise increase the value of our common stock.
The Securities Purchase Agreement
entered into in connection with the Private Placement contains provisions that prevent us, subject to certain exceptions, from offering
additional shares of capital stock for up to eighteen (18) months after the closing of the Private Placement, subject to the approval
of the Lead Investor. Further, inIn connection with the Share
Exchange, Private Dror shareholders are subject to the lock-up provisions
contained in the Share Exchange Agreement. These lock-up provisions
may be waived pursuant to the terms of Securities Purchase Agreement
and the Share Exchange Agreement, as applicable. If these restrictions
on future offerings and lock-up restrictions are waived, additional
shares of our commonCommon stockStock may become available for sale or resale,
subject to applicable law, including without notice, which could
reduce the price at which our commonCommon stockStock is quoted.
If our goodwill or long-lived assets become
impaired, we may be required to record a material charge to earnings.
Under GAAP, we review
our goodwill and long-lived asset group for impairment when events or changes in circumstances indicate the carrying value may not
be recoverable. Additionally, goodwill must be tested for impairment at least annually. The qualitative and quantitative analysis
used to test goodwill are dependent upon various assumptions and reflect management’s best estimates. Changes in certain
assumptions, including revenue growth rates, discount rates, earnings multiples and future cash flows may cause a change in
circumstances indicating that the carrying value of goodwill or the asset group may be impaired and assessing these assumptions and
predicting and forecasting future events can be difficult. Goodwill and purchased assets require periodic fair value assessments to
determine if they have become impaired. Consequently, we may be required to record a material charge to earnings in the financial
statements during the period in which any impairment of goodwill or long-lived asset group is determined.
We have identified a material weakness in our internal control over financial reporting, and if we are unable to remediate the material weakness, or if we experience additional material weaknesses in the future, our business may be harmed.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for evaluating and reporting on the effectiveness of our system of internal control. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with Generally Accepted Accounting Principles in the United States (“GAAP”). As a public company, we are required to comply with the Sarbanes-Oxley Act and other rules that govern public companies. In particular, we are required to certify our compliance with Section 404 of the Sarbanes-Oxley Act, which requires us to furnish annually a report by management on the effectiveness of our internal control over financial reporting.
Our management performed an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2025, and concluded our internal control over financial reporting was not effective as of December 31, 2025, due to the size of the Company and available resources, there are limited personnel to assist with the accounting and financial reporting function, which results in a lack of segregation of duties and due to the fact that the Company does not have Chief Financial Officer that can oversee day to day operations and the financial reporting function.
Remediation efforts place a significant burden on management and add increased pressure to our financial resources and processes. If we are unable to successfully remediate our existing material weakness or any additional material weaknesses in our internal control over financial reporting that may be identified in the future in a timely manner, the accuracy and timing of our financial reporting may be adversely affected; our liquidity, our access to capital markets, the perceptions of our creditworthiness may be adversely affected; we may be unable to maintain or regain compliance with applicable securities laws, the listing requirements of the NASDAQ; we may be subject to regulatory investigations and penalties; investors may lose confidence in our financial reporting; our reputation may be harmed; and our stock price may decline.
We are required to annually assess our
internal control over financial reporting and any adverse results from such assessment may result in a loss of investor confidence in
our financial reports and adversely affect our stock price.
We are required to furnish
in our Form 10-K a report by our management regarding the effectiveness of our internal control over financial reporting that includes,
among other things, an assessment of the effectiveness of our internal control over financial reporting as of the end of our fiscal year,
including a statement as to whether our internal control over financial reporting is effective. Our internal controls may become inadequate
because of changes in personnel, updates and upgrades to existing software, failure to maintain accurate books and records, changes in
accounting standards or interpretations of existing standards, and, as a result, the degree of compliance of our internal control over
financial reporting with the existing policies or procedures may become ineffective. Establishing, testing and maintaining an effective
system of internal control over financial reporting requires significant resources and time commitments on the part of our management
and our finance staff, may require additional staffing and infrastructure investments and increases our costs of doing business. If we
are unable to assert that our internal control over financial reporting is effective in any future period (or if our auditors are unable
to express an opinion on the effectiveness of our internal controls or conclude that our internal controls are ineffective), the timely
filing of our financial reports could be delayed or we could be required to restate past reports, and cause us to lose investor confidence
in the accuracy and completeness of our financial reports in the future, which could have an adverse effect on our stock price.
Management's Discussion & Analysis (MD&A)
New heading “Bridge Financings”
Removed heading “Private Placement”
Largest changes
“Each of the Debentures bear an interest rate of 0% per annum and the maturity date may be extended by the holder for subsequent periods of 60 days upon prior written notice to the Company. The Debentures also set forth certain customary events of default after which the Debentures may be declared immediately due and payable, including certain types of bankruptcy or insolvency events of default. …”see in full comparison
“In addition, pursuant to each Purchase Agreement, the Company agreed to issue (A) subject to the consummation of a public offering by the Company of its securities (the “Public Offering”), warrants to purchase up to a number of shares of Common Stock (the “Purchase Warrants”) equal to: (i) in the event the applicable Debentures are outstanding as of the date of the consummation of the Public Offering (the “Public Offering Closing Date”), 150% of the Debenture Shares (as defined herein) issued, if any; …”see in full comparison
Net cash used in operating activities wassee in full comparison$2,741,822 for the year ended December 31, 2024 as compared to $2,394,162$2,058,045 for the year ended December 31,2023.2025, as compared to $2,741,822 for the year ended December 31, 2024. The amount for the year ended December 31, 2025 primarily consisted of a net loss of $2,544,887offset by non-cash charges of $363,232 (including: Share-based compensation expense of $39,170, depreciation expense of $4,946, debt discount amortization of $309,869, and foreign exchange differences of $38,695 partially offset by $29,448 of change in fair value of derivative liability), and an increase in operating assets and liabilities excluding cash of $123,610. The amount for the year ended December 31, 2024 primarilyprimarilyconsisted of a net loss of $5,775,951 offset by non-cash charges of $2,276,771 (including: Share-based compensation expense of $2,246,033, depreciation expense of $4,035 and foreign exchange differences of $26,703), and an increase in operating assets and liabilities excluding cash of $757,358.The amount for the year ended December 31, 2023 primarily consisted of a net loss of $3,567,883 offset by non-cash charges of $1,443,684 (including: Share-based compensation expense of $2,253,793, depreciation expense of $670, partially offset by gain on retirement of royalty accrual of $720,632 and gain on foreign exchange differences of $90,147), and a decrease in operating assets and liabilities excluding cash of $269,963.
“In October 2021, the FASB issued ASU 2021-07-Compensation-Stock Compensation (Topic 718): Determining the Current Price of an Underlying Share for Equity-Classified Share-Based Awards. The measurement objective in Topic 718 for share-based awards is fair value based, and the current price input is measured at fair value. This input is used in determining an award’s fair value. …”see in full comparison
Full comparison: every changed paragraph (36)
We believe that recent rapid
advancements in technology have made traditional aligner solutions no longer the most effective treatment option for smile correction.
Our Company has developed a proprietary AI-based platform to correct people’s smiles in a discreet and less painful manner –
ZSmile (the
“Platform”). The Platform uses only one smart aligner to gently move teeth into their optimum position with pulsating
air air
while the patient is sleeping or at home. The Platform, which is based on our predecessor first generation Aerodentis System, is a
Class II medical device and received 510 (k) clearance from the FDA for commercialization in the U.S. in February 2026. Our Aerodentis
System previously received 510(k) clearance from the FDA in April 2020.
We are involved in the research
and development of an orthodontic alignment platform. We have several patents for the technology used in the Platform and is currently
in the process of preparing the prototype for FDA approval.
Our predecessor first
generation Aerodentis System is a Class II medical device, which was cleared by FDA for commercialization in the U.S. pursuant to
the 510(k) notification process for movement and alignment of teeth during orthodontic treatment of malocclusion in April 2020. The
Company is preparing to apply for 510(k) clearance for the Platform as a Class II medical device, which constitutes an updated
version of the currently cleared device. Such updated Platform contains new and/or different components than the original device,
which is why a new 510(k) clearance is required prior to marketing the Platform in the U.S. We have not yet filed a 510(k)
submission for the Platform, and it has, thus, not been found by the FDA to be substantially equivalent to the first generation
Aerodentis System.
Share Exchange
As discussed above, on July
5, 2023, we entered into a Share Exchange Agreement (as amended by that certain Amendment to Share Exchange Agreement, dated August 14,
2023, the “Share Exchange Agreement”) , and on August 13, 2023, the share exchange (the “Share Exchange”) was
consummated with Private Dror and all shareholders of Private Dror. Pursuant to the Share Exchange Agreement, on August 14, 2023, the
shareholders of Private Dror transferred all of their ordinary shares in Private Dror to us in exchange for 7,576,999 newly issued shares
of our Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), and 106,782,187
shares of our Common Stock. As a result of the Share Exchange, Private Dror became a wholly owned subsidiary of the Company.
Pursuant to the terms and
conditions of the Share Exchange Agreement:
Private Placement
In connection with the closing
of the Share Exchange, pursuant to the Purchase Agreement, the Company sold in a private placement (the “Private Placement”)
186,363,631 shares of common stock (the Private Placement Shares), 2,886,364 shares of Series A Preferred Stock and warrants to purchase
shares of common stock (the “Private Placement Warrants”), or a combination thereof, at an effective purchase price of $0.011
per Private Placement Share or share of Common Stock underlying such shares of Series A Preferred Stock to certain investors (the “Private
Placement Investors”) in connection with the Private Placement. The Company received aggregate gross proceeds of $5,025,000 in
connection with the first closing of the Private Placement on August 14, 2023 and an additional $200,000 in connection with a second
closing of the Private Placement on September 13, 2023.
The Company and the Private
Placement Investors also entered into a Registration Rights Agreement, pursuant to which the Company agreed to register, among other
registrable securities, on Form S-1 (or, if the Company is then eligible, on Form S-3) with the SEC: (i) the Private Placement Shares,
(ii) Conversion Shares issuable in connection with the Purchase Agreement, (iii) the shares of Common Stock underlying the Private Placement
Warrants issued to the Private Placement Investors, and (iv) the shares of Common Stock and Conversion Shares underlying the shares of
Series A Preferred Stock issued to the investors in the December 2021 Transaction in connection with the Share Exchange. The Company
filed a registration statement on Form S-1 covering the aforementioned securities with the SEC on February 9, 2024.
We have experienced net losses
and negative cash flows from operations since our inception. As of December 31, 2024,2025, we had cash of approximately $549,000,$228,000, working capital
deficit of approximately $268,000,$2.7 million, an accumulated deficit of approximately $19.5$22 million and used cash in operations during the twelve
months ended December 31, 20242025 of approximately $2.7$2.1 million. The Company does not currently have sufficient available liquidity to fund
its operations for at least the next 12 months. Such factors raise substantial doubt about our ability to sustain operations for at least
one year from the issuance of the audited financial statements included in this Annual Report. The accompanying financial statements do
not include any adjustments related to the recoverability and classification of asset amounts or the classification of liabilities that
might be necessary should we be unable to continue as a going concern.
Research and development expenses
expenseswere were$815,902 for the year ended December 31, 2025, compared to $1,540,097 for the year ended December 31, 2024, compared to $1,063,470 for the year ended December 31, 2023.2024. The increase
decrease in research
and development expenses of $476,627$724,195 or 45%,47%, was primarily due to increaseddecreased outsourced consulting activitiesactivity relating to
the development of our new product andprimarily
outsourced anconsulting increaseactivities indue salaries.to limited funding.
General
and administrative
expenses were $1,367,916 for the year ended December 31, 2025, compared to $1,437,832 for the year ended December 31, 2024, compared to $1,061,399 for the year ended December 31, 2023.
2024. The increase
decrease in general and administrative expenses of $376,433$69,916 or 35%,5%, was primarily due to ana increasereduction in professional fees relating to publicduring
company compliance following the Shareperiod Exchangeoffset as well asby an increase in salaries andsalary related expenses during the year ended December
31, 2024.expenses.
Share-based compensation expenses
expenseswere were$39,170 for the year ended December 31, 2025, compared to $2,246,033 for the year ended December 31, 2024, compared to $2,253,793 for the year ended December 31, 2023.2024. The decrease
in share-based
compensation expenses of $7,760$2,206,863 or 0%,98%, was consideredprimarily notdue material.to the majority of the outstanding stock options vesting in 2024.
Other income (expenses),expenses, net
Other expense was $551,989$321,899
for the year ended December 31, 2024,2025, compared to $810,779 of income$551,989 for the year ended December 31, 2023.2024. The decrease in other income,
expenses, net of
$ $1,362,768230,090 or 168%,42%, was primarily due to liquidatedthe recognition of the Liquidated damages accrual of $520,000,$520,000 noin retirement2024, which was partially offset
by debt discount amortization of royalty accrual$309,869 and exchange
ratea differencesdecrease resulting fromin the translationfair value of NISthe basedderivative assetsof and liabilities to U.S. Dollars.$29,448.
We do not have revenues to
fund operations. We anticipate that we will continue to incur significant losses as it continues to develop its product. Historically,
our primary source of cash has been proceeds from the sale of equity instruments. We raised $5.225 million through the Private Placement
and sale of the Private Placement Shares to new investors concurrent with the Share Exchange. We intend to spend approximately $1 million
over the next 12 months on software and hardware development as well as the accompanying regulatory approvals and IP protection associated
with such software and hardware projects. During the year ended December 31, 2025, the Company received $1,750,000 in the form of bridge
loans from existing investors, as further described below. On February 26, 2026 the Company received an additional $200,000 in the form of a bridge loan from existing investors,
as further described below.
Bridge Financings
On each of June 5, 2025, June 16, 2025, and July 17, 2025, the Company entered into a Securities Purchase Agreement (collectively, the “Initial Purchase Agreements”) with certain existing investors, pursuant to which, the Company agreed to sell to the purchasers in private placements (the “Private Placements”), debentures (collectively, the “Initial Debentures”) in an aggregate principal amount of $300,000 due August 5, 2025, $200,000 due August 15, 2025, and $200,000 due September 17, 2025, respectively. Each of the Initial Debentures were extended to December 13, 2025 and subsequently were extended to March 31, 2026.
On November 12, 2025, the Company entered into a securities purchase agreement (the “November 2025 Purchase Agreement”) with each of the purchasers signatory thereto (the “November 2025 Investors”), pursuant to which, the Company agreed to sell to the November 2025 Investors in a private placement, debentures in an aggregate principal amount of $600,000 due January 11, 2026 (the “November 2025 Debentures”). Pursuant to the November 2025 Purchase Agreement, the November 2025 Investors have the right to purchase additional debentures, which are subject to the same terms as the Debentures, in an aggregate principal amount of $200,000. In advance of signing the November 2025 Purchase Agreement, in September 2025, the Company received $400,000 from certain November 2025 Investors.
On December 2, 2025, the Company entered into a securities purchase agreement (the “First December 2025 Purchase Agreement”) with each of the purchasers signatory thereto (the “First December 2025 Investors”), pursuant to which, the Company agreed to sell to the First December 2025 Investors in a private placement, debentures in an aggregate principal amount of $200,000 due February 2, 2026 (the “First December 2025 Debentures”).
On December 30, 2025, the Company entered into a securities purchase agreement (the “Second December 2025 Purchase Agreement”) with each of the purchasers signatory thereto (the “Second December 2025 Investors”), pursuant to which, the Company agreed to sell to the Second December 2025 Investors in a private placement, debentures in an aggregate principal amount of $250,000 due February 28, 2026 (the “Second December 2025 Debentures”) Each of the debentures sold during the year ended December 31, 2025 were extended to March 31, 2026.
On February 26, 2026, the Company entered into a securities purchase agreement (the “February 2026 Purchase Agreement”) and, together with the Initial Purchase Agreements, the November 2025 Purchase Agreement, the First December 2025 Purchase Agreement and the Second December 2025 Purchase Agreement, the “Purchase Agreements”) with each of the purchasers signatory thereto (the “February 2026 Investors”), pursuant to which, the Company agreed to sell to the February 2026 Investors in a private placement, debentures in an aggregate principal amount of $200,000 due April 27, 2026 (the “February 2026 Debentures” and, together with the Initial Debentures, the November 2025 Debentures, the First December 2025 Debentures and the Second December 2025 Debentures, the “Debentures”).
In addition, pursuant to each Purchase Agreement, the Company agreed to issue (A) subject to the consummation of a public offering by the Company of its securities (the “Public Offering”), warrants to purchase up to a number of shares of Common Stock (the “Purchase Warrants”) equal to: (i) in the event the applicable Debentures are outstanding as of the date of the consummation of the Public Offering (the “Public Offering Closing Date”), 150% of the Debenture Shares (as defined herein) issued, if any; or (ii) in the event that each of the applicable Debentures are not outstanding as of the Public Offering Closing Date, 100% of the Debenture Shares that would have been issued, if any, as if such Debentures were outstanding as of the Public Offering Closing Date, and (B) subject to the completion of a Public Offering by the Company of warrants to purchase shares of Common Stock, additional warrants to purchase shares of Common Stock (the “Additional Warrants” and, collectively with the Purchase Warrants, the “Bridge Warrants”) equal to: (i) in the event that the applicable Debentures are outstanding as of the Public Offering Closing Date, 150% of the number of shares of Common Stock underlying the warrants issued in the Public Offering that the Purchaser would have been entitled to receive had the Purchaser participated in the Public Offering in the amount equal to the Purchaser’s subscription amount under the Purchase Agreement (the “Warrant Subscription Amount”); or (ii) in the event that the applicable Debentures are not outstanding as of the Public Offering Closing Date, 100% of the Warrant Subscription Amount.
Debentures
Each of the Debentures bear an interest rate of 0% per annum and the maturity date may be extended by the holder for subsequent periods of 60 days upon prior written notice to the Company. The Debentures also set forth certain customary events of default after which the Debentures may be declared immediately due and payable, including certain types of bankruptcy or insolvency events of default. Subject to the satisfaction of certain conditions, including applicable prior notice to the holders of the Debentures, at any time prior to the maturity date, the Company may elect to prepay all or a portion of the then-outstanding principal amount of each of the Debentures.
In the event that prior to the respective maturity date the Company consummates a Public Offering, the then-outstanding principal amount of each of the Debentures automatically converts into shares of the Company’s Common Stock (the “Debenture Shares”) at a conversion price equal to the per share price of the shares of Common Stock offered in the Public Offering. The Debenture Shares, if any, are subject to the same terms and conditions as the shares of Common Stock issued in the Public Offering, including the issuance of any accompanying warrants to purchase shares of Common Stock issued and registration rights granted, if any, to investors in the Public Offering.
Warrants
The Bridge Warrants, if issued, will be exercisable for shares of Common Stock immediately upon issuance, at an exercise price equal to the per share price of the shares of Common Stock offered in the Public Offering (the “Exercise Price”), if any, and expire five years from the date of issuance. The Exercise Price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustment.
Net cash used in
operating activities was $2,741,822 for the year ended
December 31, 2024 as compared to $2,394,162$2,058,045 for the year ended December 31, 2023.2025, as compared to $2,741,822 for the year ended December 31,
2024. The amount for the year ended December 31, 2025 primarily consisted of a net loss of $2,544,887offset by non-cash charges of
$363,232 (including: Share-based compensation expense of $39,170, depreciation expense of $4,946, debt discount amortization of
$309,869, and foreign exchange differences of $38,695 partially offset by $29,448 of change in fair value of derivative liability),
and an increase in operating assets and liabilities excluding cash of $123,610. The amount for the year ended December 31, 2024
primarily primarily
consisted of a net loss of $5,775,951 offset by non-cash charges of $2,276,771 (including: Share-based compensation
expense of $2,246,033,
depreciation expense of $4,035 and foreign exchange differences of $26,703), and an increase in operating
assets and liabilities excluding
cash of $757,358. The amount for the year ended December 31, 2023 primarily consisted of a net loss of $3,567,883 offset by non-cash charges
of $1,443,684 (including: Share-based compensation expense of $2,253,793, depreciation expense of $670, partially offset by gain on retirement
of royalty accrual of $720,632 and gain on foreign exchange differences of $90,147), and a decrease in operating assets and liabilities
excluding cash of $269,963.
Cash ProvidedUsed byin Investing Activities
During the year ended December
31, 2024,2025, net cash used byin investing activities was $25,849$966 relating to the purchase of fixed assets. During the year ended December 31,
31, 2023,2024, net cash providedused byin investing activities was $17,966$25,849 relating to the cashpurchase receivedof infixed the Share Exchange.assets.
During the year ended December 31, 2025, cash provided by investing activities was $1,750,000 relating to the bridge loans received from investors. During the year ended December 31, 2024, there was no cash provided by financing activities.
During the year ended December
31, 2024, there was no cash provided by financing activities. During the year ended December 31, 2023, net cash provided by financing
activities was $4,653,204 relating to the net proceeds from the private placement raise.
In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures” to require more detailed information about specified categories of expenses (purchases of inventory, employee compensation, depreciation, amortization, and depletion) included in certain expense captions presented on the face of the income statement. ASU 2024-03 is effective for fiscal years beginning after December 15, 2026 and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments may be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of this ASU or (2) retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating the impact of adopting this guidance on its condensed consolidated financial statements and related disclosures. The adoption of this pronouncement is not expected to have a material impact on the Company’s condensed consolidated financial statements.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures related to improvements to income tax disclosures. The amendments in this update require enhanced jurisdictional and other disaggregated disclosures for the effective tax rate reconciliation and income taxes paid. The amendments in this update are effective for fiscal years beginning after December 15, 2024. The adoption of this pronouncement did not have a material impact on the Company’s consolidated financial statements.
In October 2021, the FASB
issued ASU 2021-07-Compensation-Stock Compensation (Topic 718): Determining the Current Price of an Underlying Share for Equity-Classified
Share-Based Awards. The measurement objective in Topic 718 for share-based awards is fair value based, and the current price input is
measured at fair value. This input is used in determining an award’s fair value. The practical expedient in this Update allows
a non-public entity to determine the current price of a share underlying an equity classified share-based award using the reasonable
application of a reasonable valuation method. The practical expedient in this Update is effective prospectively for all qualifying awards
granted or modified during fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December
15, 2022. Early application, including application in an interim period, is permitted for financial statements that have not yet been
issued or made available for issuance as of October 25, 2021. The implementation of this standard did not have a material effect on our
financial statements.
What changed in the latest 10-Q
Risk Factors
Full comparison: every changed paragraph (1)
The Company’s unaudited
condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. During the three months ended MarchJune 31,30, 2026, the Company’s
cash used in operations was $404,268 leaving a cash balance of $23,802 as of MarchJune 31,30, 2026. Because the Company does not have sufficient
resources to fund our operations for the next twelve months from the date of this filing, management has substantial doubt about the Company’s
ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability
and classification of asset amounts or the classification of liabilities that might be necessary should the Company be unable to continue
as a going concern.
Management's Discussion & Analysis (MD&A)
New heading “Comparison of the Six Months Ended June 30, 2026, and the Six Months Ended June 30, 2025”
New heading “Research and development expenses”
New heading “General and administrative expenses”
New heading “Share-based Compensation Expenses”
New heading “Financial expense, net”
New heading “Change in fair value of derivative”
New heading “Debt discount amortization”
Removed heading “Private Placement”
Largest changes
“Comparison of the Six Months Ended June 30, 2026, and the Six Months Ended June 30, 2025”see in full comparison
Full comparison: every changed paragraph (42)
The following discussion
and analysis of the results of operations and financial condition of Dror Ortho-Design, Inc. (the “Company”) as of MarchJune 30,
31, 2026 and for the three months ended MarchJune 31,30, 2026 and 2025 should be read in conjunction with our financial statements and the notes to
to those financial statements that are included elsewhere in this Quarterly Report on Form 10-Q. This discussion and analysis should
be read
in conjunction with the Company’s audited financial statements and related disclosures as of December 31, 2025, which are included
included in the Form 10-K filed with the Securities and Exchange Commission (“SEC”) on February 19, 2025. References
in this Management’s
Discussion and Analysis of Financial Condition and Results of Operations to “us”, “we”,
“our” and
similar terms refer to the Company.
Share Exchange
On July 5, 2023, we entered
into that certain Share Exchange Agreement (as amended by that certain Amendment to Share Exchange Agreement, dated August 14, 2023, the
“Share Exchange Agreement”), pursuant to which, the shareholders of Private Dror transferred all of their ordinary shares
in Private Dror to us in exchange for 7,576,999 newly issued shares of our Series A Preferred Stock and 106,782,187 shares of our Common
Stock. On August 14, 2023, the Share Exchange was consummated. As a result of the Share Exchange, Private Dror became a wholly owned subsidiary
of the Company.
Pursuant to the terms and
conditions of the Share Exchange Agreement:
Private Placement
Pursuant to the terms of the
Share Exchange, the Company entered into to a Securities Purchase Agreement, by and between the Company and certain purchasers identified
therein (the “Private Placement Investors”), dated as of August 14, 2023 (the “Securities Purchase Agreement”),
pursuant to which, the Private Placement Investors received 186,363,631 shares of Common Stock (the “Private Placement Shares”),
2,886,364 shares of Series A Preferred Stock and warrants to purchase shares of Common Stock (the “Private Placement Warrants”),
or a combination thereof, at an effective purchase price of $0.011 per Private Placement Share or share of Common Stock underlying such
shares of Series A Preferred Stock (the “Private Placement”) . The Company received aggregate gross proceeds of $5,025,000
in connection with the first closing of the Private Placement on August 14, 2023, and an additional $200,000 in connection with a second
closing of the Private Placement on September 13, 2023.
The Company and the Private Placement Investors also entered into a
registration rights agreement (the “Registration Rights Agreement”), pursuant to which the Company agreed to register, among
other registrable securities, on Form S-1 (or, if the Company is then eligible, on Form S-3) with the SEC: (i) the Private Placement
Shares, (ii) the shares of Common Stock underlying the shares of Series A Preferred Stock (the “Conversion Shares” ), (iii)
the shares of Common Stock underlying the Private Placement Warrants issued to the Private Placement Investors, and (iv) the shares of
Common Stock and Conversion Shares underlying the shares of Series A Preferred Stock issued to the investors in the private placement
transaction that occurred on or about December 6, 2021 (the “December 2021 Transaction”) in connection with the Share Exchange.
The Company filed an initial registration statement on Form S-1 covering the aforementioned securities with the SEC on February 9,
2024, which was declared effective by the SEC on June 14, 2024.
The Company’s unaudited
condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. The Company is subject to a number of risks similar to those of
earlier stage commercial companies, including dependence on key individuals and products, the difficulties inherent in the development
of a commercial market, the potential need to obtain additional capital, competition from larger companies and other technologies. During
the threesix months ended MarchJune 31,30, 2026, the Company’s cash used in operations was $404,268$709,019 leaving a cash balance of $23,802$93,563 as of June
March 31,30, 2026. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve
twelve months from the issuance of these unaudited condensed consolidated financial statements. In order to have sufficient cash to fund the
the Company’s operations in the future, the Company will need to raise additional equity or debt capital and cannot provide any assurance
assurance that the Company will be successful in doing so. If the Company is unable to raise sufficient capital to fund the Company’s operations,
operations, the Company may need to delay, reduce or eliminate certain research and development programs or other operations, sell some
or all of
its assets or merge with another entity.
Comparison of the Three Months Ended MarchJune 31,30, 2026, and
the Three
Months Ended MarchJune 31,30, 2025
The following table sets forth
the results of operations of the Company for the three months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025:
Research and development expenses
were $118,410$150,769 for the three months ended MarchJune 31,30, 2026, compared to $239,604$324,068 for the three months ended MarchJune 31,30, 2025. The decrease in
in research and development expenses of $121,194$173,299 or 51%,53%, was primarily due to decreased activities relating to software development.
General and administrative
expenses were $378,784$344,997 for the three months ended MarchJune 31,30, 2026, compared to $313,629$391,494 for the three months ended MarchJune 31,30, 2025. The decrease
increase in general and administrative expenses of $65,155$46,497 or 21%,12%, was primarily due to a decrease inincreased professional fees during the three months
months ended MarchJune 31,30, 2025.2025 relating to preparations for an offering and the round of bridge loans.
Share-based compensation expenses
were $0 for the three months ended MarchJune 31,30, 2026, compared to $23,193$15,977 for the three months ended MarchJune 31,30, 2025. The decrease in share-based
compensation expenses of $23,193$15,977 or 100%, was due to nothe share-basedfull compensationvesting activity duringof the threeoutstanding monthsstock endedoptions Marchvesting 31,in 2026.2025.
Financial income,expense, net
Financial income,expense, net was $2,253
$10,967 for the three months ended MarchJune 31,
30, 2026, compared to $303 of income$15,107 for the three months ended MarchJune 31,30, 2025. The increasedecrease in financial income,
expense, net, of $1,950$4,140 or 644%,
27%, was primarily due to exchange rate differences resulting from the translation of New Israeli Shekel (“NIS”)
based assets and
liabilities to U.S. Dollars.
Change in fair value of the
derivative was $17,700a loss of $43,048 for the three months ended MarchJune 31,30, 2026, compared to $0a gain of $1,903 for the three months ended March 31,June
30, 2025. The increase
in the change in fair value of the derivative of $17,700$44,951 or 100%,2,362%, was due to the derivativeincreased liabilitynumber notof being recognizedwarrants
classified as ofderivative March
31,liabilities issued subsequent to June 30, 2025.
Debt discount amortization
was $161,425$75,362 for the three months ended MarchJune 31,30, 2026, compared to $0$14,595 for the three months ended MarchJune 31,30, 2025. The increase in debt
discount amortization of $161,425$60,767 or 100%416% was due to the debtincreased instrument not being recognized asamount of Marchdebt 31,instruments issued subsequent to June 30, 2025.
Comparison of the Six Months Ended June 30, 2026, and the Six Months Ended June 30, 2025
The following table sets forth the results of operations of the Company for the six months ended June 30, 2026 and June 30, 2025:
Research and development expenses
Research and development expenses were $269,179 for the six months ended June 30, 2026, compared to $563,672 for the six months ended June 30, 2025. The decrease in research and development expenses of $294,493, or 52%, was primarily due to decreased activities relating to software development.
General and administrative expenses
General and administrative expenses were $705,123 for the six months ended June 30, 2026, compared to $705,123 for the six months ended June 30, 2025. The increase in general and administrative expenses of $18,658, or 3%, was primarily due to salary related expenses.
Share-based Compensation Expenses
Share-based compensation expenses were $0 for the six months ended June 30, 2026, compared to $39,170 for the six months ended June 30, 2025. The decrease in share-based compensation expenses of $39,170, or 100%, was primarily due to the full vesting of the outstanding stock options vesting in 2025.
Financial expense, net
Financial expense, net was $8,714 for the six months ended June 30, 2026, compared to $14,804 for the six months ended June 30, 2025. The decrease in financial expense, net, of 6,090 or 41%, was primarily due to exchange rate differences resulting from the translation of New Israeli Shekel (“NIS”) based assets and liabilities to U.S. Dollars.
Change in fair value of derivative
Change in fair value of the derivative was a loss of $25,348 for the six months ended June 30, 2026, compared to a gain of $1,903 for the six months ended June 30, 2025. The increase in the change in fair value of the derivative of $27,251 or 2,362%, was due to the increased number of warrants classified as derivative liabilities issued subsequent to June 30, 2025.
Debt discount amortization
Debt discount amortization was $236,787 for the six months ended June 30, 2026, compared to $14,595 for the six months ended June 30, 2025. The increase in debt discount amortization of $222,192 or 1,522% was due to the increased amount of debt instruments issued subsequent to June 30, 2025.
During the threesix months ended
June March 31,30, 2026 and 2025, the Company
received $200,000$575,000 and $300,000,$500,000, respectively, in the form of bridge loans from existing investors
as further described below.
On each of June 5, 2025, June
16, 2025, and July 17, 2025, the Company entered into a Securities Purchase Agreement (collectively, the “Initial Purchase Agreements”)
with certain existing investors, pursuant to which, the Company agreed to sell to the purchasers in private placements (the “Private
Placements”), debentures (collectively, the “Initial Debentures”) in an aggregate principal amount of $300,000 due August
5, 2025, $200,000 due August 15, 2025, and $200,000 due September 17, 2025, respectively. Each of the Initial Debentures were extended
to December 13, 2025, then to March 31, 2026, and subsequentlythen to June 30, 2026, and subsequently to October 31, 2026.
On December 30, 2025, the
Company entered into a securities purchase agreement (the “Second December 2025 Purchase Agreement”) with each of the purchasers
signatory thereto (the “Second December 2025 Investors”), pursuant to which, the Company agreed to sell to the Second December
2025 Investors in a private placement, debentures in an aggregate principal amount of $250,000 due February 28, 2026 (the “Second
December 2025 Debentures”). Each of the debentures issued during the year ended December 31, 2025, were extended to March 31, 2026,2026
and, subsequentlythen to June 30, 2026, and subsequently to October 31, 2026.
On February 26, 2026, the
Company entered into a securities purchase agreement (the “February 2026 Purchase Agreement” and, together with the Initial
Purchase Agreements, the November 2025 Purchase Agreement, the First December 2025 Purchase Agreement and the Second December 2025 Purchase
Agreement the “Purchase Agreements”) with each of the purchasers signatory thereto (the “February 2026 Investors”),
pursuant to which, the Company agreed to sell to the February 2026 Investors in a private placement, debentures in an aggregate principal
amount of $200,000 due April 27, 2026 (the “February 2026 Debentures” and, together with the Initial Debentures, the November
2025 Debentures, the First December 2025 Debentures and the Second December 2025 Debentures, the “Debentures”). The maturity
date of each of the Debentures was extended to June 30, 2026.
On AprilFebruary 28,26, 2026, the
Company Company
entered into a securities purchase agreement (the “AprilFebruary 2026 Purchase Agreement” and, together with the Initial Purchase
Agreements, the November 2025 Purchase Agreement, the First December 2025 Purchase Agreement, the Second December 2025 Purchase Agreement
and February 2026 Purchase Agreement, the “Purchase Agreements”) with each of the purchasers signatory
thereto (the “April
February 2026 Investors”), pursuant to which, the Company agreed to sell to the AprilFebruary 2026 Investors in a
private placement, debentures in
an aggregate principal amount of $275,000$200,000 due JuneApril 28,27, 2026.2026 (the “February 2026 Debentures”).
On April 28, 2026, the Company entered into a securities purchase agreement (the “April 2026 Purchase Agreement” and, together with the Initial Purchase Agreements, the November 2025 Purchase Agreement, the First December 2025 Purchase Agreement, the Second December 2025 Purchase Agreement and February 2026 Purchase Agreement, the “Purchase Agreements”) with each of the purchasers signatory thereto (the “April 2026 Investors”), pursuant to which, the Company agreed to sell to the April 2026 Investors in a private placement, debentures in an aggregate principal amount of $275,000 due June 28, 2026 (the “April 2026 Debentures” and, together with the Initial Debentures, the November 2025 Debentures, the First December 2025 Debentures, the Second December 2025 Debentures and the February 2026 Debentures the “Debentures”). In June 2026, the maturity date of each of the Debentures was extended to October 31, 2026.
On June 23, 2026, the Company received $100,000 as an advance to the next round of Debentures.
ThreeSix months ended MarchJune 31,30, 2026 Compared to ThreeSix Months Ended June
March, 31,30, 2025
Net cash used in operating
activities was $404,268$709,019 for the threesix months
ended MarchJune 31,30, 2026 as compared to $499,593$984,963 for the threesix months ended MarchJune 31,30, 2025. The amount
for the threesix months ended MarchJune 31,
30, 2026 primarily consisted of a net loss of $638,666$1,263,809 partially offset by non-cash charges of $139,557$ 270,217
(including: depreciation of $ 2,629, debt discount amortization of $236,787, change in fair value of derivative of $25,348, and foreign
exchange differences of $5,453), and an increase in working capital excluding cash of $284,573. The amount for the six months ended June
30, 2025 primarily consisted of a net loss of $1,335,461 partially offset by non-cash charges of $54,312 (including: depreciation of $1,314,$2,450,
debt discount amortization of $161,425,$14,595, change in fair value of derivative of $(17,7001,903), and foreignshare-based exchangecompensation differencesexpense of $5,482$39,170),
and an increase in working capital excluding cash of $94,841.$ The amount for the three months ended March 31, 2025 primarily consisted
of a net loss of $576,123 partially offset by non-cash charges of $24,428 (including: depreciation of $1,235 and share-based compensation
expense of $23,193), and an increase in working capital excluding cash of $52,102.296,186.
During the threesix months ended
June March30, 31,2026 2026,
and 2025, net cash provided by investing activities was $0. During the three months ended March 31, 2025, net cash provided by investing activities
was $0.
During the threesix months ended
MarchJune 31,30, 2026, net cash provided by financing activities was $200,000.$575,000. During the threesix months ended MarchJune 31,30, 2025, net cash provided by
by financing activities was $300,000.$500,000.
DROR insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
No Form 4 stock transactions in this period.
Well-known investors holding DROR (13F)
None of the 59 investors we track reported a position in their latest 13F.