ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This discussion contains forward-looking statements that involve risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by such forward-looking statements as a result of many important factors, including those set forth in Part I of this Annual Report on Form 10-K under the caption “Risk Factors.” Please see “Cautionary Note Regarding Forward-Looking Statements” in Part I above. We do not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Annual Report. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” (hereafter referred to as “MD&A”) should be read in conjunction with the consolidated financial statements, including the related notes, appearing in Part II, Item 8 of this Annual Report on Form 10-K (this “Form 10-K”).
Critical Accounting Policies and Estimates
Use of Estimates – We have made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities to prepare our consolidated financial statements included in Item 8 of this Annual Report on Form 10-K in accordance with generally accepted accounting principles in the United States. These estimates have a significant impact on our valuation and reserve accounts relating to the allowance for sales returns and allowances, doubtful accounts, inventory reserves and deferred income taxes. Actual results could differ from these estimates. A complete listing of our accounting policies is under Item 8, Note 3, Summary of Significant Accounting Policies.
Overview
We are an operating company which has experienced losses since our inception. Our sources of cash to date have been capital invested by shareholders, officers, and venture capital investors/lenders.
On March 6, 2022, pursuant to a Securities Purchase Agreement (the “SPA”), Powerdyne International, Inc. (the “Company”), acquired 100% of the issued and outstanding membership interests of Creative Motion Technology, LLC, a Massachusetts limited liability company, (the “Membership Interest”). The Company continues to grow its business as customer demand continues to increase. The Membership Interest was owned by Mr. James F. O’Rourke, the principal owner and sole director and officer of the Company. The purchase price paid by the Company was 2,000,000 shares of its Series A Preferred Stock valued at $1,500,000. The Series A Preferred Stock, shall be entitled to have one thousand (1,000) votes per one (1) share, at each meeting of stockholders of the Corporation (or pursuant to any action by written consent) with respect to any and all matters presented to the stockholders of the Corporation for their action or consideration. The holders of Series A Preferred Stock shall vote together with the holders of Common Stock as a single class.
Results of Operations
The Year Ended December 31, 2025, compared to the Year Ended December 31, 2024.
Reclassifications
Certain amounts in the prior period have been reclassified to conform to the current period presentation. These reclassifications have no material effect on the reported financial results.
We generated product revenue of $1,160,976 during the year ended December 31, 2025, compared to $1,251,454 for the comparative year ended December 31, 2024. The decrease in revenues is due to lower demand from the 2025 tariff uncertainty during the year where most of the decrease is attributable to slower sales at CM Tech. CM Tech is a motor manufacturer which are primarily used in the industrial robotics for the semiconductor manufacturing industry. All of CM Tech’s product revenue is generated from the sale of their motors. Frame One provides custom framing to local schools, colleges, artist guilds, artists, interior decorators, interior decorators / designers, museums, photographers, art galleries and theatres.
Cost of revenues decreased approximately 11.65%, which is consistent with the decrease in revenues. Cost of revenues of approximately $782,549 for 2025 compared to $885,697 for 2024. The decrease is attributable to lower cost of materials due to lower sales and one less employee for 2025 compared to 2024.
Gross profit for the year ended December 31, 2025, is $378,427 with a gross profit percentage of 32.60% (Gross profit for the year ended December 31, 2024 - $365,757 – Gross profit % was 29.23%) and is expected to be maintained in a range of 29% to 35% for product revenue sold.
During the year ended December 31, 2025, total operating expenses increased 6.1% to $629,837 from $545,335 compared to the year ended December 31, 2024. The increase in operating expenses is due to the change in the Company’s auditor for the year ended 2024 and additional expenses for preparing a Form S-1 for a capital raise.
As a result of the foregoing, we recognized a net loss of $251,410 and $179,497 in 2025 and 2024, respectively.
Liquidity and Capital Resources
As of December 31, 2025, and 2024, we had working capital deficits of $504,955 and $253,544, respectively. We historically have satisfied our liquidity requirements through cash generated from operations, subordinated related party promissory notes and issuance of equity securities. However, with tariff uncertainty one of our largest clients has decreased its orders from the Company. We have obtained two new customers in 2026 and are currently adding more customers to increase revenues for our business to offset our largest customer reduction in purchases from the Company. The majority of our financing of operations comes from our CEO and majority owner. We expect that as our revenues increase our cash flow from operations and working capital positions will continue to improve. A summary of our cash flows resulting from our operating, investing, and financing activities for the years ended December 31, 2025, and 2024 were as follows:
For the year ended
For the year ended
December 31, 2025
December 31, 2024
Operating Activities
Investing Activities
Financing Activities
Cash used by operating activities decreased to $192,005 during 2025, as compared to $204,031 cash flow from operations in the prior year. The decrease was primarily due to a decrease in revenues for the year ended 2025 compared to 2024.
Cash provided by financing activities was $193,808 during 2025, as compared to $165,500 in the prior year. The Company obtained a line of credit from a local bank to assist with funding our losses due to the slow economic activity in 2024, $165,000 utilized and in 2025 $54,250 drawn on the line of credit because of the tariff uncertainty in 2024 and 2025. During 2025, we obtained a total of $87,046 from short term loans and another $40,000 in financing from a related party.
We believe that funds generated from operations, existing cash balances and, if necessary, related party short-term loans, are likely to be sufficient to finance our working capital and capital expenditure requirements for the foreseeable future. We have and continue to receive financing in the form of loans from our CEO and / or third-party financing in the form of debt or equity to provide our required working capital. Our ability to meet our obligations and continue to operate as a going concern is highly dependent on our ability to obtain additional financing. We are currently working towards filing a Form S-1 to raise additional capital, we cannot guarantee that this capital raise will be successful. We cannot predict whether this additional financing will be in the form of equity or debt. The financing for these goals could come from further equity financing or could come from sales of securities and /or loans. If we are not successful in generating sufficient liquidity from operations or in raising sufficient capital resources, on terms acceptable to us, this could have a material adverse effect on our business, results of operations liquidity and financial condition.
Inflation
In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future. However, any substantial supply side price increases will be shared with our customers.
Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations.
Cybersecurity Risks
The Company is dependent on the secure operation of our technology systems and those of our third-party service providers (such as cloud hosting, email, accounting software, and payment processors). We collect, process, and store limited amounts of sensitive data, including financial information, employee records, and customer data, which makes us a potential target for cyberattacks, such as phishing, malware, ransomware, unauthorized access attempts, denial-of-service attacks, or other malicious activities.
Given our small size, with only 9 employees and 4 consultants, we lack dedicated cybersecurity personnel or advanced in-house security infrastructure. We rely primarily on basic safeguards provided by third-party vendors, standard password protections, multi-factor authentication where available, periodic software updates, and employee awareness of common threats. These measures may not be sufficient to prevent all breaches or incidents, particularly as cyber-attack techniques continue to evolve and become more sophisticated.
A significant cybersecurity incident could result in material adverse consequences, including:
Substantial costs to investigate, remediate, and recover from the incident (such as forensic analysis, legal fees, system restoration, and potential ransom payments);
Regulatory fines, penalties, or enforcement actions from government authorities.
Legal liabilities, including class action lawsuits or claims from affected parties.
Loss of customer or partner confidence, leading to reduced business opportunities or contract terminations.
Temporary or prolonged disruption to our operations, including inability to access critical systems or data.
Theft, loss, or unauthorized disclosure of sensitive information, potentially resulting in identity theft, fraud, or competitive harm.
While we have not experienced any material cybersecurity incidents to date, there can be no assurance that our or our third-party providers’ security measures will prevent all future threats or that any incident would not have a material adverse effect on our reputation, financial condition, results of operations, or cash flows.
For a discussion of our cybersecurity risk management processes, strategy, and governance (including management and board oversight), see Item 1C, “Cybersecurity,” of this Form 10-K.
Off-Balance Sheet Arrangements
We had no material off-balance sheet arrangements that have, or are likely to have, a current or future material effect on our operations.
Recent Accounting Pronouncements
Refer to Note 3 of our consolidated financial statements for recent accounting pronouncements.
