Dror Ortho-Design (DROR) posts Q1 loss and warns on going concern amid bridge debt
Dror Ortho-Design, Inc. reported a first-quarter 2026 net loss of $638,666 as it continues developing its orthodontic alignment platform with no material revenues. Operating expenses were $497,194, mainly research and development and general and administrative costs.
Cash fell to $23,802 at March 31, 2026, while total liabilities reached $3,566,158 against total assets of $253,781, resulting in a stockholders’ deficit of $3,312,377. Management disclosed substantial doubt about the company’s ability to continue as a going concern and is relying on bridge debentures from existing investors and future capital raises to fund operations.
The company is advancing an AI-based orthodontic platform and expects to spend about $1.5 million over 18 months on development and regulatory work. It also noted regional war risks in Israel, though impacts to date were described as immaterial. In April 2026, it added new bridge financing and appointed Ran Israeli as Chief Financial Officer.
Positive
- None.
Negative
- Going-concern uncertainty and severe undercapitalization: Q1 2026 cash was only $23,802 against operating cash use of $404,268, a stockholders’ deficit of $3,312,377, and management’s explicit statement of substantial doubt about the company’s ability to continue as a going concern.
Insights
Deep losses, minimal cash, heavy bridge debt and a going-concern warning make funding risk the central issue.
Dror Ortho-Design remains pre-revenue, posting a Q1 2026 net loss of $638,666 with assets of just $253,781 and a stockholders’ deficit of $3,312,377. Cash dropped to $23,802 while operating cash outflow was $404,268, highlighting a very tight liquidity position.
To bridge this gap, the company has issued non‑interest-bearing debentures totaling $1,950,000 principal, extended to June 30, 2026, and added $275,000 more in April 2026. These instruments carry embedded warrant features recorded as a $789,788 derivative liability, increasing balance-sheet complexity and future potential dilution.
Management explicitly states “substantial doubt” about continuing as a going concern, and future operations depend on raising additional capital, securing regulatory clearances and eventually commercial acceptance of its orthodontic platform. Subsequent filings will show whether further financings reduce this liquidity strain or lead to restructuring.
Key Figures
Key Terms
going concern financial
derivative liability financial
Registration Rights Agreement liability financial
bridge debentures financial
Secured Overnight Financing Rate financial
510(k) clearance regulatory
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from ____ to ____
Commission File No.
(Exact name of registrant as specified in its charter)
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Indicate by check mark whether the registrant
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| ☒ | Smaller reporting company | ||
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
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The number of shares outstanding of the registrant’s common stock,
par value $0.0001 per share, as of May 13, 2026 was
Dror Ortho-Design, Inc.
Quarter Ended March 31, 2026
TABLE OF CONTENTS
| Page | ||
| PART I. FINANCIAL INFORMATION | 1 | |
| Item 1. | Financial Statements (Unaudited) | 1 |
| Notes to Unaudited Condensed Consolidated Financial Statements | 5 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 12 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 21 |
| Item 4. | Controls and Procedures | 21 |
| PART II. OTHER INFORMATION | 22 | |
| Item 1. | Legal Proceedings | 22 |
| Item 1A. | Risk Factors | 22 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 23 |
| Item 3. | Defaults Upon Senior Securities | 23 |
| Item 4. | Mine Safety Disclosures | 23 |
| Item 5. | Other Information | 23 |
| Item 6. | Exhibits | 23 |
| Signatures | 24 | |
i
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
DROR ORTHO-DESIGN, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(U.S. dollars)
| March 31, 2026 | December 31, 2025 | |||||||
| Unaudited | Audited | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Receivables and prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Non-current Assets: | ||||||||
| Property and equipment at cost, net of accumulated depreciation | ||||||||
| Total Assets | ||||||||
| Liabilities And Stockholders’ DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other payables | ||||||||
| Convertible promissory notes, net | ||||||||
| Derivative liability | ||||||||
| Registration Rights Agreement liability | ||||||||
| Total Current Liabilities | ||||||||
| Non-current Liabilities: | ||||||||
| Accrued severance | ||||||||
| Total Liabilities | ||||||||
| Commitments and Contingencies (Note 7) | ||||||||
| Stockholders’ Deficit | ||||||||
| Preferred A Stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Stockholders’ Deficit | ( | ) | ( | ) | ||||
| Total Liabilities and Stockholders’ Deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
DROR ORTHO-DESIGN, INC.
CONDENSED STATEMENTS OF OPERATIONS
(U.S. dollars)
| Three Months Ended | ||||||||
| March 31, 2026 | March 31, 2025 | |||||||
| Unaudited | ||||||||
| Operating Expenses | ||||||||
| Research and development | $ | $ | ||||||
| General and administrative expenses | ||||||||
| Share-based compensation | - | |||||||
| Total Operating Expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Financial income, net | ||||||||
| Change in fair value of derivative | - | |||||||
| Debt discount amortization | ( | ) | - | |||||
| Total other income | ( | ) | ||||||
| Loss before provision for income taxes | ( | ) | ( | ) | ||||
| Provision for income taxes | — | — | ||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss per Common Stock | ||||||||
| Basic and Diluted | ( | ) | ( | ) | ||||
| Weighted-average Common Stock outstanding | ||||||||
| Basic and Diluted | ||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
DROR ORTHO-DESIGN, INC.
CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
(U.S. dollars)
(Unaudited)
| Series A Preferred Stock | Common Stock | Treasury Stock | Additional Paid-In | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||
| Balance at January 1, 2025 | $ | $ | — | $ | — | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | — | $ | — | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||
| Balance at January 1, 2026 | $ | $ | — | $ | — | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||
| Shares issued in respect of future services | — | — | — | — | — | |||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||
| Balance at March 31, 2026 | $ | $ | — | $ | — | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
DROR ORTHO-DESIGN, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(U.S. dollars)
| For the Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| (Unaudited) | ||||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock-based compensation expense | - | |||||||
| Depreciation | ||||||||
| Debt discount amortization | ||||||||
| Change in fair value of derivative | ( | ) | ||||||
| Foreign exchange differences | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Receivables and prepaid expenses | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses and other payables | ( | ) | ||||||
| Accrued severance | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ||||||||
| Net cash used in investing activities | — | — | ||||||
| Net Cash flows from financing activities: | ||||||||
| Proceeds from convertible promissory notes, net | ||||||||
| Net cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash and cash equivalents | ( | ) | — | |||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash, beginning of period | ||||||||
| Cash, end of period | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| Cash paid for interest | $ | — | $ | — | ||||
| Cash paid for taxes | $ | — | $ | — | ||||
| Non cash transactions: | ||||||||
| Shares issued in respect of future services | $ | $ | — | |||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
DROR ORTHO-DESIGN INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1 – Organization and Basis of Presentation
Organization
Dror Ortho-Design, Inc., a Delaware corporation (the “Company”), was incorporated as Novins Technologies, Inc. in the State of New Mexico in April 1999. On February 26, 2002, the Company changed its state of incorporation to Delaware by merging with Novint Technologies, Inc., a Delaware corporation. On August 14, 2023, the Company changed its name from “Novint Technologies, Inc.” to “Dror Ortho-Design, Inc.” On that date, the Company succeeded the business of Dror Ortho-Design, Ltd. (“Private Dror”) as its sole line of business. The Company is involved in the research and development of an orthodontic alignment platform and has not yet reached the sales stage for its product.
The Company’s stock is quoted on the OTC Pink Market under the symbol “DROR.”
Going Concern and Management’s Plans
The financial statements are
presented on a going concern basis. The Company has not yet generated any material revenues, has suffered recurring losses from operations
with an accumulated deficit of $
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements were prepared using accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, these unaudited condensed consolidated financial statements do not include all information or notes required by U.S. GAAP for annual consolidated financial statements and should be read in conjunction with the Company’s annual financial statements for the year ended December 31, 2025 included within the Company’s Current Report on Form 10-K, originally filed with the SEC on February 27, 2026.
In the opinion of management, the unaudited consolidated condensed financial statements included herein contain all adjustments necessary to present fairly the Company’s financial position and the results of its operations and cash flows for the interim periods presented. Such adjustments are of a normal recurring nature. The results of operations for the three months ended March 31, 2026 may not be indicative of results for the full year.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates or assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could vary from those estimates. Management utilizes various other estimates, including but not limited to Registration Rights Agreement liability, accrued royalties, accrued expenses, the fair value of derivative liabilities, expected maturity of convertible promissory notes, the valuation of stock-based compensation, the valuation allowance for deferred tax assets and other contingencies. The results of any changes in accounting estimates are reflected in the financial statements in the period in which the changes become evident. Estimates and assumptions are reviewed periodically and the effects of revisions are reflected in the period that they are determined to be necessary.
5
Functional Currency
The Company accounts for foreign
currency transactions pursuant to ASC 830, “Foreign Currency Matters.” The functional currency of the Company and its subsidiary
is the United States Dollar (“U.S. Dollar”) as the U.S. Dollar is the currency of the primary economic environment in which
the Company operates. The accompanying financial statements have been expressed in the U.S. Dollar. Transactions denominated in currencies
other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transaction.
Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency
using the applicable exchange rates at the balance sheet dates. The resulting exchange differences are recorded in the statements of operations.
The exchange rate of the U.S. Dollar to the Israeli Shekel was
Cash
The Company’s cash is held with financial institutions in the
United States and Israel. Management believes that the financial institutions that hold the Company’s cash are financially sound
and, accordingly, minimal credit risk exists with respect to these investments. Account balances held in the United States may, at times,
exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limit. As of March 31, 2026 and December 31, 2025, the
Company had $
Basic and Diluted Net Loss Per Common Stock
The Company computes net loss per share in accordance with ASC 260, “Earnings per Share,” which requires presentation of both basic and diluted earnings per share (“EPS”) on the face of the income statement. Basic loss per share of Common Stock is computed by dividing the loss for the period applicable to holders of Common Stock by the weighted average number of shares of Common Stock outstanding during the period. Diluted net loss per shares of Common Stock is computed by dividing the net loss by the weighted average number of shares of Common Stock outstanding for the period and, if dilutive, potential shares of Common Stock outstanding during the period. Potentially dilutive securities consist of the incremental shares of Common Stock issuable upon exercise of Common Stock equivalents such as stock options, warrants and convertible debt instruments. Potentially dilutive securities are excluded from the computation if their effect is anti-dilutive. As a result, the basic and diluted per share amounts for all periods presented are identical.
For the three months ended
March 31, 2026 and 2025, the Company incurred net losses which cannot be diluted; therefore, basic and diluted loss per share of Common
Stock is the same. Each share of Series A Preferred Stock is convertible into
| March 31, | ||||||||
| 2026 | 2025 | |||||||
| Series A Preferred Stock | ||||||||
| Warrants | ||||||||
| Stock Options | ||||||||
| Shares excluded from the calculation of diluted loss per share | ||||||||
Recently Issued Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses (“DISE”), which will require additional disclosure of the nature of expenses included in the income statement in response to longstanding requests from investors for more information about an entity’s expenses. The new standard requires disclosures about specific types of expenses included in the expense captions presented on the face of the income statement as well as disclosures about selling expenses. The new standard will be effective for public companies for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The requirements will be applied prospectively with the option for retrospective application. Early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on its financial statements.
6
The Company does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying consolidated financial statements.
NOTE 3 – RECEIVABLES AND PREPAID EXPENSES:
Receivables and prepaid expenses as of March 31,
2026 consists primarily of the prepayment of $
NOTE 4 – REGISTRATION RIGHTS AGREEMENT LIABILITY:
In connection with the private placement that occurred simultaneously
with the Share Exchange on August 14, 2023 (the “Private Placement”), the Company entered into a securities purchase agreement
with certain purchasers (the “Private Placement Investors” and such agreement, the “Securities Purchase Agreement”).
On the same date, the Company entered into a registration rights agreement with the Private Placement Investors (together with all attachments
and exhibits thereto, as each may be amended or modified from time to time, the “Registration Rights Agreement”), pursuant
to which the Company agreed to register, among other registrable securities (as further described in the Registration Rights Agreement),
on Form S-1 (or, if the Company is then eligible, on Form S-3) with the Securities and Exchange Commission (the “SEC”): (i)
the shares of Common Stock issued in the Private Placement Shares,(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 warrants issued to the Private Placement Investors in the Private Placement (the “Private Placement Warrants” and the
shares underlying such warrants, the “Warrant Shares”), and (iv) the shares of the Company’s Common Stock underlying
the securities issued to the investors who, on or about December 6, 2021, participated in the $
Under the Registration Rights
Agreement, among other things, if a registration statement registering the resale of the Registrable Securities is not filed by the 45th
calendar date following the date of the Registration Rights Agreement and if such registration statement is not declared effective by
the SEC by the 135th calendar day (or, in the event of a “full review” by the SEC, the 165th calendar day) following the date
of the Registration Rights Agreement, then the Company was required to pay as partial liquidated damages in amount equal to the product
of
Pursuant to Section 6(e) of
the Registration Rights Agreement, the provisions of the Registration Rights Agreement may be amended by obtaining the written consent
of the Company and the Private Placement Investors holding
7
NOTE 5 – ACCRUED SEVERANCE
Israeli law generally requires payment of severance pay upon dismissal of an employee or upon termination of employment in certain other circumstances. The Israel pension and severance pay liability to employees are partially covered by regular deposits with recognized pension and severance pay funds under the employees’ names and through the purchase of insurance policies The amounts funded as above are not reflected in the balance sheet since they are not under the control and management of the Company. Although certain employees have waived their rights to receive severance pay on a portion of their salaries, the Company has recorded a provision for the full amount that would have been required under Israeli labor law.
NOTE 6 – CONVERTIBLE PROMISSORY NOTES, NET
During the year ended December
31, 2025, the Company entered into Securities Purchase Agreements (the “Purchase Agreements”) with certain existing investors
for the sale of debentures (“Debentures”). Pursuant to the Purchase Agreements, the Company agreed to sell to the purchasers
in several private placements, Debentures in aggregate principal amounts of $
In the event that prior to the maturity dates the Company consummates a public offering of its securities (“Public Offering”), the then-outstanding principal amount 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 a 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.
In addition, pursuant to the
Purchase Agreements the Company agreed to issue (A) subject to the consummation of a Public Offering, five-year warrants to purchase up
to a number of shares of Common Stock (the “Purchase Warrants”), equal to: (i) in the event the Debentures are outstanding
as of the date of the consummation of the Public Offering,
8
The Company reviewed the terms
of the Bridge Financing Loans and determined that due to the variable number of instruments to be issued, they would constitute a derivative
liability. At the initial date, the Company estimated the fair value of both sets of Bridge Financing. The fair value of the embedded
derivative financial instruments was bifurcated from the host instrument and remeasured on recurring basis at each reporting period under
marked to market approach. The fair value of the derivative liabilities at inception are recorded as debt discounts to the Debentures
which are amortized over the life of the loan using the effective interest method. Amortization of debt discount for the three months
ended March 31, 2026 and 2025 amounted to $
Derivative Liability
The Company valued the derivative liability relating to the embedded conversion features using the Black Scholes Model using the following assumptions on the respective dates of the Debentures:
| December 31, 2025 | February 26, 2026 | March 31, 2026 | ||||||||||
| Stock price | $ | |||||||||||
| Estimated exercise price | ||||||||||||
| Term (years) | ||||||||||||
| Annual volatility | % | % | % | |||||||||
| Risk free rate | % | % | % | |||||||||
| Dividend yield | % | % | % | |||||||||
| Estimated warrant amount* | ||||||||||||
| Fair value of warrants | $ | $ | $ | |||||||||
| * |
The Company has assumed that the debentures will
be outstanding at the potential Public Offering. The Company discounted the Purchase Warrants value due to an estimated probability of
The Company’s activity in its convertible promissory notes, net related derivative liability was as follows for the period ended March 31, 2026:
| Balance of derivative liability at January 1, 2025 | $ | - | ||
| Grant of warrants | ||||
| Change in fair value of warrant derivative liability | ( | ) | ||
| Balance of derivative liability at December 31, 2025 | $ | |||
| Grant of warrants | ||||
| Change in fair value of warrant derivative liability | ( | ) | ||
| Balance of derivative liability at March 31, 2026 | $ |
9
NOTE 7 – COMMITMENTS AND CONTINGENCIES
Israel Innovation Authority
The Company partially financed their research and development expenditures
under grant programs sponsored by the Israel Innovation Authority (“IIA”) (formerly the Office of Chief Scientist) for the
support of research and development activities conducted in Israel. At the time the grants were received from the IIA, successful development
of the related projects was not assured. In exchange for participation in the programs by the IIA, in accordance with the terms of the
grant, the Company is required to pay
Legal proceedings
From time to time in the normal course of business, the Company may be subject to routine litigation incidental to its business. Although there can be no assurances as to the ultimate disposition of any such matters, it is the opinion of management, based upon the information available at this time, that there are no matters, individually or in the aggregate, that would have a material adverse effect on the results of operations and financial condition of the Company.
War in Israel
Since October 7, 2023, Israel has been engaged in armed conflicts on multiple fronts, including with Hamas in Gaza, Hezbollah in Lebanon, the Houthis in Yemen, and various militia groups in Syria and Iraq, as well as direct hostilities with Iran, including the June 2025 twelve-day war and the renewed Israel-U.S.–Iran conflict that commenced in February 2026. The duration and ultimate impact of these conflicts cannot be predicted.
The Company’s research and development activities are located in Israel. Currently, such activities in Israel remain largely unaffected. During the three months ended March 31, 2026 and 2025, the impact of the regional conflicts on the Company’s results of operations and financial condition was immaterial. Management will continue to monitor events in the region and their effect on the Company’s financial position and results of operations.
NOTE 8 – STOCKHOLDERS’ EQUITY
Common Stock
On January 4, 2024, the Company
filed its Amended and Restated Certificate of Incorporation, which provided for the number of authorized shares of the Company’s
Common Stock, par value $
On January 5, 2026 the Company
entered into a service contract with the American Academy of Facial Esthetics LLC (“AAFE”) for the provision of marketing
and promotional services. As payment for those services, the Company provided AAFE with $
Holders of the Company’s Common Stock have no preemptive, redemption, conversion or subscription rights. No sinking fund provisions are applicable to the Company’s Common Stock. Upon liquidation, dissolution or winding-up, holders of the Company’s Common Stock are entitled to share in all assets remaining after payment of all liabilities and the liquidation preferences of any of the Company’s outstanding shares of preferred stock. Subject to preferences that may be applicable to any outstanding shares of preferred stock, holders of Common Stock are entitled to receive dividends, if any, as may be declared from time to time by our board of directors out of the Company’s assets which are legally available. Such dividends, if any, are payable in cash, in property or in shares of capital stock.
10
Equity Incentive Plan
Prior to the Share Exchange,
there were
Stock-based compensation expense
for the three months ended March 31, 2026 and 2025 amounted to $
NOTE 9 – RELATED PARTY TRANSACTIONS
Accrued Salaries
Accrued expenses balance as
of March 31, 2026 and December 31, 2025 contained accrued executive salaries of $
Director Consulting Services
On June 1, 2022, the Company
entered into a consulting agreement with Yehuda Englander, a director of the Company (the “Consulting Agreement”), pursuant
to which, in consideration for certain financial and strategic consulting services, Mr. Englander is entitled to a cash fee of NIS
NOTE 10 – SEGMENT REPORTING:
ASC 280, “Segment Reporting”
establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization
structure as well as information about services categories, business segments and major customers in financial statements. The Company
has only
The Company adheres to the
provisions of ASC 280, Segment Reporting, which establishes standards for the way public business enterprises report information about
operating segments in annual financial statements and requires that those enterprises report selected information about operating segments
in financial statements issued to shareholders. As the Company is currently involved in the development of one product, the Platform,
the Company has determined that it operates in a single reportable segment.
NOTE 11 – SUBSEQUENT EVENTS
On
April 28, 2026, the Company entered into a securities purchase agreement, by and among the Company and certain investors, for the sale
of debentures in an aggregate principal amount of $
11
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the results of operations and financial condition of Dror Ortho-Design, Inc. (the “Company”) as of March 31, 2026 and for the three months ended March 31, 2026 and 2025 should be read in conjunction with our financial statements and the notes 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 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.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains “forward-looking statements,” which include information relating to future events, future financial performance, financial projections, strategies, expectations, competitive environment and regulation. Words such as “may,” “should,” “could,” “would,” “predicts,” “potential,” “continue,” “expects,” “anticipates,” “future,” “intends,” “plans,” “believes,” “estimates,” and similar expressions, as well as statements in future tense, identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and may not be accurate indications of when such performance or results will be achieved. Forward-looking statements are based on information we have when those statements are made or management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:
| ● | our operations and financial performance depend on global and regional economic conditions. Inflation, fluctuations in currency exchange rates, changes in consumer confidence and demand, and weakness in general economic conditions and threats, or actual recessions, could materially affect our business, results of operations, and financial condition.; |
| ● | the Company is in the development stage, is not generating revenues and has no operating history in the manufacturing and distribution of orthodontic medical devices or platforms for consumer use; |
| ● | our products and technologies may not be accepted by the intended commercial consumers of our products, which could harm our future financial performance; |
| ● | we expect continued operating losses and cannot be certain of our future profitability; |
| ● | our net revenues will depend primarily on our Platform and any decline in sales or average selling price of our Platform may adversely affect net revenues, gross margin and net income; |
| ● | the Company will face competition from large internationally established aligner companies whose products have been widely accepted; |
| ● | our growth and future success may depend on our ability to enhance our Platform or to develop, obtain regulatory clearance for, successfully introduce, and achieve market acceptance of new products and services; |
| ● | we are subject to operating risks, including excess or constrained capacity and operational inefficiencies, which could adversely affect our results of operations; |
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| ● | our products and information technology systems are critical to our business. Issues with product development or enhancements, IT system integration, implementation, updates and upgrades could disrupt our operations and have a material impact on our business and operating results; |
| ● | complying with regulations enforced by FDA and other regulatory authorities is expensive and time consuming, and failure to comply could result in substantial penalties; |
| ● | 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. |
| ● | certain modifications to our products may require new 510(k) clearance or other marketing authorizations; |
| ● | ongoing changes in healthcare regulation could negatively affect our revenues, business and financial condition; |
| ● | we are subject to certain federal, state, and foreign fraud and abuse laws, health information privacy and security laws, and transparency laws, which, if violated, could subject us to substantial penalties. Additionally, any challenge to or investigation into our practices under these laws could cause adverse publicity and be costly to respond to, and thus could harm our business; |
| ● | our success depends in part on our proprietary technology, and if we are unable to successfully enforce our intellectual property rights, our competitive position may be harmed; |
| ● | the relative lack of U.S. public company experience of our management team may put us at a competitive disadvantage; |
| ● | our Common Stock is not listed on any stock exchange and there is a limited market for shares of our Common Stock. Even if a market for our Common Stock develops, our Common Stock could be subject to wide fluctuations; and |
| ● | other risks and uncertainties outlined in section entitled “Risk Factors” and other risks detailed from time to time in our filings with the SEC or otherwise. |
The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking statements. For a discussion of these and other risks that relate to our business and financial performance, you should carefully review the risks and uncertainties described under the heading “Item 1A. Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K filed on February 27, 2026, and those described from time to time in our future reports filed with the Securities and Exchange Commission. Moreover, new risks regularly emerge, and it is not possible for us to predict or articulate all risks we face, nor can we assess the impact of all risks on our business or the extent to which any risk, or combination of risks, may cause actual results to differ from those contained in any forward-looking statements. All forward-looking statements included in this Form 10-Q are based on information available to us on the date of this Quarterly Report on Form 10-Q. Except to the extent required by applicable laws or rules, we undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.
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Overview
We were incorporated as Novint Technologies, Inc. in the State of New Mexico in April 1999. On February 26, 2002, we changed our state of incorporation to Delaware by merging with Novint Technologies, Inc., a Delaware corporation. On July 5, 2023, we entered into a share exchange agreement with the shareholders of Dror Ortho-Design, Ltd. (“Private Dror”), pursuant to which the shareholders of Private Dror agreed to exchange all of their outstanding ordinary shares Private Dror for shares of our Common Stock, par value $0.0001 per share (the “Common Stock”) and the Series A Convertible Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”, and such transaction, the “Share Exchange”). On August 14, 2023 the Share Exchange was consummated and we changed our name to “Dror Ortho-Design, Inc.”
Following the Share Exchange, we succeeded to the business of Private Dror as our sole line of business. The Share Exchange is being accounted for as a recapitalization, with Private Dror deemed to be the accounting acquirer and the Company the acquired company. Accordingly, Private Dror’s historical financial statements for periods prior to the consummation of the Share Exchange have become those of the Company. Operations reported for periods prior to the Share Exchange are those of Private Dror.
Our Company
We have reimagined the way people can correct their smile.
We plan to disrupt the aligner market by offering millions of people a revolutionary alternative. We believe that people do not need to change their lifestyle to correct their smile as they are required to do with existing aligner solutions. Rather, we believe they can get a perfect smile discreetly and hassle-free even while they sleep with our FDA-cleared proprietary solution.
Existing aligner solutions generally share the same treatment principles, which are different from our solution. In most cases, patients seeking to improve their smile need to undergo a 12-to-15 month process of wearing plastic aligners, which need to be worn the entire day and should only be removed while eating or drinking. Patients are prescribed a series of 20 to 30 aligners that are intended to forcefully move teeth progressively closer to their intended final position. This process causes pain every time a new aligner is used and restricts blood circulation, which counterproductively slows down tooth movement. All-day aligner solutions are also intrusive, as patients need to conduct their lives at work or school wearing the plastic aligners. In addition, most existing aligner therapies require multiple visits to an orthodontist to monitor the progress of treatment plans through intraoral scanning, physical examination and patient testimony.
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 (the “Platform”). The Platform uses only one smart aligner to gently move teeth into their optimum position with pulsating air while the patient is sleeping or at home.
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.
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The Company currently does not generate revenues to fund operations and anticipates that it will continue to incur significant losses as it continues to develop the Platform. Please refer to “Risk Factors - We are in the development stage, are not generating revenues and have no operating history in the manufacturing and distribution of orthodontic medical devices or platforms for consumer use” included in our Annual Report on Form 10-K for the year ended December 31, 2025, for additional information. The Company intends to spend approximately $1.5 million over the next 18 months on software and hardware development as well as the accompanying regulatory approvals and IP protection associated with such software and hardware projects.
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:
| ● | we assumed all of Private Dror’s obligations under Private Dror’s outstanding share options; |
| ● | all outstanding Series A-4 Warrants to purchase Private Dror’s ordinary shares were assumed by the Company and converted into Share Exchange Warrants (as defined below); and |
| ● | simultaneously with the Share Exchange, the board of directors and certain officers of the Company resigned, and a new board of directors, comprised of Private Dror’s legacy board of directors, and new officers were appointed at the Company. The Company’s new board of directors consists of Eliyahu (Lee) Haddad, Chaim Hurvitz, Moshe Shvets, Chaim Ravad and Yehuda Englander. In addition, immediately following the Share Exchange, Mr. Haddad was appointed as the Company’s chief executive officer, Mr. Shvets was appointed Chief Technology Officer, and Mr. Hurvitz was appointed chairman of the board of directors. |
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.
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Going Concern
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 three months ended March 31, 2026, the Company’s cash used in operations was $404,268 leaving a cash balance of $23,802 as of March 31, 2026. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance of these unaudited condensed consolidated financial statements. In order to have sufficient cash to fund the Company’s operations in the future, the Company will need to raise additional equity or debt capital and cannot provide any 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, 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.
As a result of these factors and because the Company does not have sufficient resources to fund its operations for the next twelve months from the date of this Quarterly Report on Form 10-Q, management has substantial doubt about the Company’s ability to continue as a going concern. The Company’s unaudited condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Results of Operations
Comparison of the Three Months Ended March 31, 2026, and the Three Months Ended March 31, 2025
The following table sets forth the results of operations of the Company for the three months ended March 31, 2026 and March 31, 2025:
| Three Months Ended March 31, | ||||||||||||||||
| 2026 | 2025 | Change $ | Change % | |||||||||||||
| Research and development | $ | 118,410 | $ | 239,604 | $ | (121,194 | ) | (51 | )% | |||||||
| General and administrative | $ | 378,784 | $ | 313,629 | $ | 65,155 | 21 | % | ||||||||
| Share-based compensation | $ | - | $ | 23,193 | $ | (23,193 | ) | (100 | )% | |||||||
| Financial income (expenses), net | $ | 2,253 | $ | 303 | $ | 1,950 | 644 | % | ||||||||
| Change in fair value of derivative | $ | 17,700 | - | $ | 17,700 | 100 | % | |||||||||
| Debt discount amortization | $ | (161,425 | ) | - | $ | (161,425 | ) | (100 | )% | |||||||
Research and development expenses
Research and development expenses were $118,410 for the three months ended March 31, 2026, compared to $239,604 for the three months ended March 31, 2025. The decrease in research and development expenses of $121,194 or 51%, was primarily due to decreased activities relating to software development.
General and administrative expenses
General and administrative expenses were $378,784 for the three months ended March 31, 2026, compared to $313,629 for the three months ended March 31, 2025. The increase in general and administrative expenses of $65,155 or 21%, was primarily due to a decrease in professional fees during the three months ended March 31, 2025.
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Share-based Compensation Expenses
Share-based compensation expenses were $0 for the three months ended March 31, 2026, compared to $23,193 for the three months ended March 31, 2025. The decrease in share-based compensation expenses of $23,193 or 100%, was due to no share-based compensation activity during the three months ended March 31, 2026.
Financial income, net
Financial income, net was $2,253 for the three months ended March 31, 2026, compared to $303 of income for the three months ended March 31, 2025. The increase in financial income, net, of $1,950 or 644%, 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 $17,700 for the three months ended March 31, 2026, compared to $0 for the three months ended March 31, 2025. The increase in the change in fair value of the derivative of $17,700 or 100%, was due to the derivative liability not being recognized as of March 31, 2025.
Debt discount amortization
Debt discount amortization was $161,425 for the three months ended March 31, 2026, compared to $0 for the three months ended March 31, 2025. The increase in debt discount amortization of $161,425 or 100% was due to the debt instrument not being recognized as of March 31, 2025.
Liquidity and Capital Resources
Sources of Liquidity
We do not have revenues to fund operations. We anticipate that we will continue to incur significant losses as we continue to develop our 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 of shares to new investors concurrent with the Share Exchange. We intend to spend approximately $1.5 million over the next 18 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 three months ended March 31, 2026 and 2025, the Company received $200,000 and $300,000, respectively, in the form of bridge loans from existing investors as further described below.
We will need to raise additional capital to fund operating losses and grow our operations. There can be no assurance however that we will be able to raise additional capital when needed, or at terms deemed acceptable, if at all. Such factors raise substantial doubt about our ability to sustain operations for at least one year from the issuance of the interim condensed consolidated financial statements included in this Quarterly Report on Form 10-Q. 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. For additional information, see the section above titled “MD&A—Going Concern.”
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Bridge Loan 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, then to March 31, 2026, and subsequently to June 30, 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 issued during the year ended December 31, 2025, were extended to March 31, 2026, and subsequently to June 30, 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 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.
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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.
Cash Flows
| Three months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Cash provided by (used in) | ||||||||
| Operating activities | $ | (404,268 | ) | $ | (499,593 | ) | ||
| Investing activities | - | - | ||||||
| Financing activities | 200,000 | 300,000 | ||||||
| Effect of exchange rate changes on cash and cash equivalents | (470 | ) | - | |||||
| Net decrease in cash and cash equivalents | $ | (204,738 | ) | $ | (199,593 | ) | ||
Three months ended March 31, 2026 Compared to Three Months Ended March, 31, 2025
Operating activities
Net cash used in operating activities was $404,268 for the three months ended March 31, 2026 as compared to $499,593 for the three months ended March 31, 2025. The amount for the three months ended March 31, 2026 primarily consisted of a net loss of $638,666 partially offset by non-cash charges of $139,557 (including: depreciation of $1,314, debt discount amortization of $161,425, change in fair value of derivative of $(17,700), and foreign exchange differences of $5,482), 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.
Investing Activities
During the three months ended March 31, 2026, net cash provided by investing activities was $0. During the three months ended March 31, 2025, net cash provided by investing activities was $0.
Financing Activities
During the three months ended March 31, 2026, net cash provided by financing activities was $200,000. During the three months ended March 31, 2025, net cash provided by financing activities was $300,000.
Effects of Inflation
Management does not believe that inflation has had a material impact on the Company’s business, sales, or operating results during the periods presented.
Off-Balance Sheet Arrangements
The Company has not entered into any off-balance sheet financial guarantees or other off-balance sheet commitments to guarantee the payment obligations of any third parties. The Company has not entered into any derivative contracts that are indexed to the Company’s shares and classified as stockholder’s equity or that are not reflected in the Company’s financial statements included in this Quarterly Report on Form 10-Q. Furthermore, the Company does not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. The Company does not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or product development services with us.
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Critical Accounting Policies and Use of Estimates
The SEC defined a company’s critical accounting policies as the ones that are most important to the portrayal of our financial condition and results of operations and which require us to make our most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.
Based on this definition, we have identified the critical accounting policies and judgments addressed below. We also have other key accounting policies that are significant to understanding our results.
Research and Development
We expense all research and development costs as they are incurred. Research and development includes expenditures in connection with in-house research and development salaries and staff costs, consulting fees, as well as proprietary products and technology.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates or assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could vary from those estimates. Management utilizes various other estimates, including but not limited to accrued royalties, estimated lives of long-lived assets, the valuation of stock-based compensation, the valuation allowance for deferred tax assets and other contingencies. The results of any changes in accounting estimates are reflected in the financial statements in the period in which the changes become evident. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period that they are determined to be necessary.
Recent Accounting Pronouncements
The Company has reviewed the recent accounting pronouncements issued by the Financial Accounting Standards Board (“FASB”), including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC and determined that these pronouncements do not have a material impact on the Company’s current or anticipated consolidated financial statement presentation or disclosures.
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 2024-03is 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 is not expected to have a material impact on the Company's consolidated financial statements.
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In November 2023, the FASB issued ASU 2023-07 “Segment Reporting: Improvements to Reportable Segment Disclosures”. This guidance expands public entities’ segment disclosures primarily by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments are required to be applied retrospectively to all prior periods presented in an entity’s financial statements. The adoption of the ASU did not have a material impact on its consolidated financial statements related disclosures.
In October 2023, the FASB issued ASU 2023-06 “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative,” which incorporates certain SEC disclosure requirements into the FASB Accounting Standards Codification (“Codification”). The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification topics, allow investors to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The amendments in this ASU should be applied prospectively. The Company does not expect ASU 2023-06 will have a material impact to its consolidated financial statements or related disclosures.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our principal executive officer and principal financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Rule 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q, have concluded that, based on such evaluation, our disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure.
Change in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be involved in litigation that arises through the normal course of business. As of the date of this filing, we are not a party to any material litigation nor are we aware of any such threatened or pending litigation.
There are no proceedings in which any of our directors, officers, affiliates or any registered or beneficial stockholders is an adverse party or has a material interest adverse to our interest.
Item 1A. Risk Factors
The following description of risk factors includes any material changes to, and supersedes the description of, the risk factors addressed below associated with our business, financial condition and results of operations previously disclosed in “Item 1A. Risk Factors” of our Annual Report for the year ended December 31, 2025 on Form 10-K, as filed with the SEC on February 27, 2026. Our business, financial condition and operating results can be affected by a number of factors, whether currently known or unknown, including but not limited to those described below, any one or more of which could, directly or indirectly, cause our actual financial condition and operating results to vary materially from past, or from anticipated future, financial condition and operating results. Any of these factors, in whole or in part, could materially and adversely affect our business, financial condition, operating results and stock price.
The following discussion of risk factors contains forward-looking statements. This risk factor may be important to understanding other statements in this Form 10-Q. The following information should be read in conjunction with the condensed consolidated financial statements and related notes in Part I, Item 1, “Financial Statements” and Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Form 10-Q.
The Company’s financial statements have been prepared on a going concern basis and do not include adjustments that might be necessary if the Company is unable to continue as a going concern. Management has substantial doubt about the Company’s ability to continue as a going concern.
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 March 31, 2026, the Company’s cash used in operations was $404,268 leaving a cash balance of $23,802 as of March 31, 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.
The Company will need to raise additional capital to finance its losses and negative cash flows from operations and may continue to be dependent on additional capital raising as long as its products do not reach commercial profitability. There are no assurances that the Company would be able to raise additional capital on terms favorable to it. If the Company is unsuccessful in commercializing its products and raising capital, it will need to reduce activities, curtail, or cease operations.
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Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities.
There were no unregistered sales of the Company’s equity securities during the three months ended March 31, 2026, other than those previously reported in a Current Report on Form 8-K, other than as set forth below:
On January 5, 2026, the Company entered into a service contract with the American Academy of Facial Esthetics LLC (“AAFE”) for the provision of marketing and promotional services. As consideration for such services, the Company issued 20,000,000 shares of Common Stock to AAFE, valued at $200,000 (based on a price of $0.01 per share). The shares were issued in reliance upon the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), as a transaction not involving a public offering. AAFE represented to the Company that it is an “accredited investor” as defined in Rule 501(a) of Regulation D promulgated under the Securities Act and that the shares were being acquired for investment purposes only and not with a view to or for sale in connection with any distribution thereof.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Mine Safety Disclosures
Not Applicable.
Item 5.
On April 14, 2026, the board of directors of the Company appointed Ran Israeli to the position of Chief Financial Officer, principal accounting officer and principal financial officer, effective May 1, 2026. Mr. Israeli, age 55, has over 25 years of senior financial leadership experience, having served as Deputy Chief Executive Officer and Chief Financial Officer of public and private companies operating across Israel, Europe, China, and the United States. Most recently, from 2022 until present, Mr. Israeli has served as Deputy Chief Executive Officer and Chief Financial Officer of Kardan NV, a Netherlands-registered public company traded on the Tel Aviv Stock Exchange ("TASE"), where he directed a global asset portfolio valued at approximately NIS 1 billion and successfully completed two debt restructuring cycles totaling NIS 1.5 billion with Israeli institutional entities. Previously, from 2018 until 2021, he served as Deputy Chief Executive Officer and Chief Financial Officer, and subsequently as Chief Executive Officer, of Arena Group, a TASE-listed real estate company with Swiss-German ownership, where he managed a NIS 1 billion asset base and led the company through multiple operational and financial crises. Mr. Israeli holds an MBA with a Finance specialty from the Hebrew University of Jerusalem, holds an Investment Management License from the Israel Securities Authority, and has completed advanced directors training at the Hebrew University.
Mr. Israeli will be provided a monthly fee equal to $5,000, plus Value Added Tax (VAT) as applicable under Israeli law, for his service as Chief Financial Officer, principal accounting officer and principal financial officer.
There is no arrangement or understanding between Mr. Israeli and any other person pursuant to which he was appointed as Chief Financial Officer, principal accounting officer and principal financial officer. There are no family relationships between Mr. Israeli and any of the Company’s directors, executive officers or persons nominated or chosen by the Company to become a director or executive officer of the Company. There are no transactions between Mr. Israeli and the Company that would be required to be reported under Item 404(a) of Regulation S-K of the Exchange Act.
Item 6. Exhibits
| Exhibit No. | Description | |
| 31.1* | Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2* | Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1** | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 32.2** | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101 INS* | Inline XBRL Instance Document | |
| 101 SCH* | Inline XBRL Taxonomy Extension Schema Document | |
| 101 CAL* | Inline XBRL Taxonomy Calculation Linkbase Document | |
| 101 DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101 LAB* | Inline XBRL Taxonomy Labels Linkbase Document | |
| 101 PRE* | Inline XBRL Taxonomy Presentation Linkbase Document | |
| 104* | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| * | Filed herewith. |
| ** | Furnished herewith. |
| + | Management contract or compensatory plan or arrangement. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| DROR ORTHO-DESIGN, INC. | ||
| Date: May 13, 2026 | By: | /s/ Eliyahu (Lee) Haddad |
| Name: | Eliyahu (Lee) Haddad | |
| Title: | Chief Executive Officer | |
| Date: May 13, 2026 | By: | /s/ Ran Israeli |
| Name: | Ran Israeli | |
| Title: | Chief Financial Officer (Principal Accounting Officer and Principal financial Officer) |
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