Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

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

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q, and with the audited consolidated financial statements and notes thereto for the year ended December 31, 2025. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements.

Overview

Boumarang Inc. (the "Company," "we," "us," or "our") was incorporated on July 26, 2024, under the laws of the State of Delaware. We are headquartered in Irvine, California, with an additional location in Austin, Texas. We are a development-stage company designing and developing hydrogen-powered, AI-enabled uncrewed aerial and maritime systems, together with the fuel cell power systems and data analytics platforms that support them.

Our target sectors include natural resource monitoring, infrastructure analysis, agriculture, forestry, and defense and security applications. Our drones are designed to leverage artificial intelligence and machine learning to deliver real-time, actionable insights.

Since inception, we have focused on research and development, technology acquisition, prototype development, and capital formation. During the three months ended September 30, 2026, we recognized our first revenue from contracts with customers, $200,000, under our services agreement with Eva Defense Inc. and Eva Live Inc., which are related parties, as described in Notes 7 and 8 to the accompanying unaudited consolidated financial statements. We did not generate revenue during the three or nine months ended September 30, 2025.

WaveDrone Development Status

Overview. WaveDrone is our family of uncrewed surface vessels and our lead product line under development. Our product strategy is based on a common platform architecture intended to allow multiple applications to use shared structural, power, communications, control and payload-interface components. The initial WaveDrone platform is being developed to support Sensus, Skerry, Sentinel and certain customer-specific configurations. WaveDrone XL is planned as a higher-capacity platform for larger payloads and longer-duration missions while leveraging elements of the same control, communications and payload architecture.

We currently plan five WaveDrone configurations. Sensus is intended for environmental sensing, water-quality monitoring and eDNA sampling. Skerry is intended for coastal mapping, bathymetry and dredging support. Sentinel is intended for persistent maritime awareness and patrol support for ports, public-safety organizations, and government agencies. WaveDrone XL is planned as a higher-capacity platform for larger payloads and longer missions. Custom Platform is intended to allow customer-specific payloads, software, and operating workflows to be integrated into the WaveDrone architecture.

We plan to introduce Sensus first, initially targeting water-quality, aquaculture, utility, and research applications in North America using probes supplied by third-party sensor manufacturers. Skerry and Sentinel are planned to follow using the same core platform architecture. We expect WaveDrone XL and customer-specific configurations to be offered primarily on a request-for-quote basis.

Each WaveDrone is intended to connect to MoonTower Analytics, our fleet-management and mission-control software, which we currently plan to offer on a subscription basis. We are also developing the W150 and W150 VTOL uncrewed aerial vehicles. These aircraft are intended to operate as standalone products and, in the future, with WaveDrone as part of an integrated air-and-surface system.

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None of our WaveDrone or W150 products has been commercially released, and we have not generated revenue from sales of these products.

Development During the Quarter. During the three months ended September 30, 2026, we advanced development of the second version of our WaveDrone functional prototype, which is undergoing water trials. Development activities are performed by the Company and with Ascendant AI LLC, a related party, under a General Services Agreement dated June 22, 2026.

During the quarter, we paid Ascendant $150,000 for production tooling and test equipment associated with the redesigned WaveDrone platform. We recorded these expenditures as property and equipment - construction in progress because the related assets had not been completed and placed in service as of September 30, 2026. See Notes 2, 7 and 8 to the accompanying unaudited consolidated financial statements.

Engineering and product-development activities during the quarter included designing a common aluminum chassis for the initial WaveDrone platform; completing the third revision of the chassis computer-aided design and structural weldment drawings for the engineering-validation build; adopting a 24-volt electrical architecture; integrating water-quality sensors into the keel payload system; integrating satellite and radio-frequency communications, including Starlink connectivity; and developing and integrating command-and-control, telemetry and watchdog functionality.

We also continued commercial-validation activities, including product and integration work with a third-party sensor manufacturer and development of potential reseller relationships.

Development Subsequent to September 30, 2026. Subsequent to September 30, 2026, we continued development of the operator-control system, including design concepts for desktop, tablet, and mobile interfaces and the vessel's lost-link and failsafe functionality. We also further defined the planned WaveDrone product configurations, selected the initial commercial payload bundle, further defined the distinction between the initial WaveDrone platform and the larger WaveDrone XL configuration, and established an internal process for validating product specifications and performance claims before publication.

These activities remain part of an ongoing development and testing program. The specifications, features, and configuration of each product may change as testing continues and as we receive additional engineering, supplier, and customer feedback.

Commercial Development. We have exhibited WaveDrone at industry conferences and have engaged in discussions with prospective customers, resellers, sensor suppliers and other potential commercial partners. Certain prospective resellers have provided non-binding five-year sales or volume estimates for their respective markets. These estimates were prepared by third parties for planning purposes, are not Company forecasts, and do not constitute orders, backlog, minimum-purchase commitments or other contractual obligations. There can be no assurance that any portion of these estimates will result in product sales.

We are also in preliminary discussions with potential partners that provide digital-twin and related technology solutions to government and enterprise customers. We have not entered into definitive agreements with these parties, and these discussions may not result in commercial relationships or revenue.

Planned Development and Commercialization Milestones. Subject to successful development and testing and our ability to obtain sufficient financing, our current target is to complete during the fourth quarter of 2026 a functional WaveDrone prototype suitable for extended testing and performance benchmarking and to assemble demonstration equipment for prospective customers and channel partners.

During the first quarter of 2027, we currently intend to pursue initial commercial sales, reseller agreements and paid pilot programs. These targets depend on successful completion of testing, manufacturing readiness, supplier availability, customer acceptance, and adequate funding and, accordingly, may be delayed.

During the second half of 2027 through 2028, we currently plan to continue development of additional WaveDrone configurations and payloads and our other planned product lines. Based on our current development plan, management preliminarily estimates that this phase could require approximately $4 million to $6 million of development expenditures across our product lines. This estimate is preliminary and may change materially as product designs, testing requirements, supplier arrangements, manufacturing plans and customer requirements develop. We do not presently have sufficient capital to fund this program and will require additional financing.

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Longer-term expansion of manufacturing capacity and international commercialization would require additional capital and operational resources beyond our current development activities.

Liquidity and Funding Requirements. At September 30, 2026, we had cash of $6,119. The remaining contractual commitment under our agreement with Ascendant was $150,000 at September 30, 2026, with payments scheduled from October through December 2026. Accordingly, our cash at September 30, 2026, was not sufficient to satisfy this remaining commitment and fund our planned development and operating activities without additional capital.

Completion of our WaveDrone development program and achievement of the milestones described above therefore depend on our ability to obtain additional financing. If we are unable to obtain sufficient financing when needed and on acceptable terms, we may be required to delay development or testing, reduce the scope of planned product configurations, defer commercialization activities, renegotiate obligations or suspend portions of our development program. See "Liquidity and Capital Resources" and Note 3, "Management's Plans," to the accompanying unaudited consolidated financial statements.

Competition and Development Uncertainties. The market for uncrewed surface vessels includes established commercial suppliers with greater financial, engineering, manufacturing, sales and distribution resources than we have. Our ability to compete will depend on, among other factors, product performance and reliability, payload flexibility, price, ease of deployment, software functionality, customer support and our ability to establish manufacturing and distribution capabilities.

WaveDrone remains in the prototype and testing stage. Development may require additional design changes, testing or expenditures; development and commercialization may take longer than currently anticipated; and the final products may not achieve their planned specifications or market acceptance. We also depend on third-party suppliers for important components and on Ascendant, a related party, for portions of our development activities.

Our commercialization plans and development schedule are subject to these uncertainties and, most significantly, to our ability to obtain additional capital. See "Risk Factors" in our registration statement on Form S-1, File No. 333-292164, which was declared effective on June 29, 2026, and Part II, Item 1A, "Risk Factors," of this report.

Results of Operations

Comparison of the Three Months Ended September 30, 2026, and 2025

Revenue and Gross Profit. Revenue for the three months ended September 30, 2026, was $200,000, all from our related-party services agreement with Eva Defense Inc. and Eva Live Inc., under which performance commenced on August 5, 2026. We had no revenue in the three months ended September 30, 2025. Cost of revenue was $160,000, consisting of fees under our related-party subcontract with Ascendant AI LLC, which performs the services. Gross profit was $40,000, or 20% of revenue, reflecting the fixed $100,000 monthly fee under the Eva agreement and the fixed $80,000 monthly subcontract fee.

Operating Expenses. Operating expenses for the three months ended September 30, 2026, were $520,261, consisting entirely of general and administrative expenses, compared to $507,960 for the three months ended September 30, 2025, an increase of $12,301, or 2.4%. General and administrative expenses for the 2026 period comprised $416,667 of licensing-fee amortization relating to the prepaid T Stamp Inc. license, $102,225 of legal and professional fees, $723 of rent, and $646 of other expenses. The increase over the prior-year period was principally attributable to a $12,225 increase in legal and professional fees.

Net Loss. Net loss for the three months ended September 30, 2026, was $480,261, or $(0.01) per share (basic and diluted), based on 65,056,977 weighted average shares outstanding. This compares to a net loss of $507,960, or $(0.01) per share (basic and diluted), based on 66,056,977 weighted average shares outstanding, for the three months ended September 30, 2025. The $27,699 decrease in net loss reflects $40,000 of gross profit from our first revenue-generating contract, partially offset by the $12,301 increase in general and administrative expenses. No other income or expense was recognized in the three months ended September 30, 2026; the $1,000,000 unrealized gain on our investment in Nuvora Energy, Inc. was recognized in the three months ended June 30, 2026, as restated (see Note 2).

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Comparison of the Nine Months Ended September 30, 2026 and 2025

Revenue and Gross Profit. Revenue, cost of revenue, and gross profit for the nine months ended September 30, 2026, were $200,000, $160,000, and $40,000, respectively, all of which were recognized in the third quarter as described above. We had no revenue in the nine months ended September 30, 2025.

Operating Expenses. Operating expenses for the nine months ended September 30, 2026, were $1,584,483, consisting entirely of general and administrative expenses, compared to $1,565,410 for the nine months ended September 30, 2025, an increase of $19,073, or 1.2%. General and administrative expenses for the 2026 period comprised $1,250,001 of licensing-fee amortization, $331,200 of legal and professional fees, $1,917 of rent, and $1,365 of other expenses. The increase was principally attributable to a $19,462 increase in legal and professional fees. Licensing-fee amortization was unchanged period over period because the underlying $5,000,000 prepaid license is amortized on a straight-line basis at $138,889 per month over its 36-month term, which runs from the August 6, 2024, commencement date through August 2027 and therefore includes partial-month charges in the first and last periods, as described in Note 4.

Other Income. Other income for the nine months ended September 30, 2026, was $1,000,000, consisting of an unrealized gain on our investment in Nuvora Energy, Inc. We remeasured the investment under the ASC 321 measurement alternative to $3.00 per share, the price at which Nuvora issued common stock to investors in May and June 2026 (see Note 6). The gain was recognized in the three months ended June 30, 2026, through the restatement of our previously issued financial statements for that quarter (see Note 2); accordingly, no other income was recognized in the three months ended September 30, 2026. The gain is unrealized and non-cash: it does not provide cash to fund our operations and would be realized only on a sale of the shares, for which there is no public market. There was no other income in the three or nine months ended September 30, 2025.

Net Loss. Net loss for the nine months ended September 30, 2026, was $544,483, or $(0.01) per share (basic and diluted), based on 65,056,977 weighted average shares outstanding. This compares to a net loss of $1,565,410, or $(0.02) per share (basic and diluted), based on 66,056,977 weighted average shares outstanding, for the nine months ended September 30, 2025. The $1,020,927 decrease in net loss is attributable principally to the $1,000,000 non-cash unrealized gain on investment.

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Liquidity and Capital Resources

Since inception, we have funded our operations primarily through equity financing and short-term working-capital advances from a related party and, beginning in the third quarter of 2026, through collections under our services agreement with Eva Defense Inc. and Eva Live Inc. As of September 30, 2026, we had cash of $6,119, compared to $16,084 as of December 31, 2025. Our principal uses of cash are payments to related-party service providers, WaveDrone development costs, and legal and professional fees.

Total assets decreased from $20,781,853 at December 31, 2025, to $20,771,887 at September 30, 2026, a decrease of $9,966. The decrease was principally attributable to $1,250,001 of amortization of the prepaid T Stamp Inc. license during the nine-month period and a $9,965 decrease in cash, largely offset by the $1,000,000 remeasurement of the investment in private equity securities (from $2,000,000 to $3,000,000; see Note 6), $150,000 of property and equipment (construction in progress) and $100,000 of accounts receivable, related party. Acquired intangible assets of $16,000,000 were unchanged.

Total liabilities increased from $621,173 at December 31, 2025, to $1,155,590 at September 30, 2026, an increase of $534,417. The increase comprised a $260,000 increase in accounts payable, related parties (from $453,000 to $713,000), a $91,917 increase in accrued expenses, related parties (from $123,173 to $215,090), and a $182,500 increase in the related-party loan (from $45,000 to $227,500). All of the Company's liabilities at September 30, 2026, were owed to related parties.

Working capital decreased from a surplus of $1,061,579 at December 31, 2025, to a surplus of $366,297 at September 30, 2026, a decrease of $695,282, reflecting the $534,417 increase in current liabilities described above and a $160,865 decrease in current assets. Working capital at September 30, 2026, includes $1,415,768 of prepaid licensing assets that will be amortized to expense and are not available to satisfy current obligations; excluding those assets, we had a working capital deficit of $1,049,471.

Financing and Strategic Alternatives. We have had initial discussions with several investment banking firms regarding potential sources of additional capital, including private placements and public offerings of our securities, a potential listing of our common stock on a national securities exchange, and potential strategic transactions, including a reverse merger or other business combination that could be accompanied by a financing. We have not engaged any investment banking firm, and we have not entered into any letter of intent, term sheet, or definitive agreement with respect to any financing, listing, or strategic transaction. These discussions are preliminary, and there can be no assurance that they will result in any financing, listing or transaction on acceptable terms, or at all. Any equity financing could result in substantial dilution to our existing stockholders, and a reverse merger or similar business combination could result in a change in control of the Company.

Equity Activity. Other than the $100 correction described in Note 9, there was no equity activity during the three or nine months ended September 30, 2026. No shares of common stock or preferred stock were issued, canceled, exchanged, repurchased, or otherwise modified, and no subscription agreements were entered into during the period. 65,056,977 shares of common stock were issued and outstanding at both September 30, 2026, and December 31, 2025.

Cash Flows

Nine Months Ended September 30, 2026, Compared to Nine Months Ended September 30, 2025

Operating Activities. Net cash used in operating activities was $42,565 for the nine months ended September 30, 2026, compared to $43,678 for the nine months ended September 30, 2025. In each period, the net loss was substantially offset by non-cash amortization of prepaid licensing of $1,250,001 and by increases in related-party accounts payable and accrued expenses. In the 2026 period, the net loss also included the $1,000,000 non-cash unrealized gain on investment, which is deducted in arriving at net cash used in operating activities, and $100,000 of the $200,000 billed under the Eva Defense agreement remained uncollected at September 30, 2026.

Investing Activities. Net cash used in investing activities was $150,000 for the nine months ended September 30, 2026, consisting of payments to Ascendant AI LLC, a related party, for production tooling and test equipment for the redesigned WaveDrone, recorded as property and equipment (construction in progress). There were no investing activities during the nine months ended September 30, 2025.

Financing Activities. Net cash provided by financing activities was $182,600 for the nine months ended September 30, 2026, consisting of $203,510 of advances from Spark Capital Investments LLC, a related party controlled by Mr. Imran Firoz, less $21,010 of repayments to Spark Capital, and $100 received from Ms. Candida Beaumont, a director, as payment for founder shares (see Note 9). This compares to $45,000 of related-party advances for the nine months ended September 30, 2025. The advances are unsecured, bear no interest, and are payable on demand.

Net Change in Cash. Cash decreased by $9,965 during the nine months ended September 30, 2026, from $16,084 at the beginning of the period to $6,119 at the end of the period. Cash increased by $1,322 during the nine months ended September 30, 2025, from $50,242 to $51,564.

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Going Concern

Our unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the ordinary course of business. As of September 30, 2026, we had cash of $6,119 and an accumulated deficit of $3,538,703, and our revenue to date has been derived from a single related-party customer contract. Our results for the three and nine months ended September 30, 2026, include a $1,000,000 unrealized gain on investment that is non-cash and does not improve our liquidity. These conditions raise substantial doubt about our ability to continue as a going concern within one year after the date these unaudited consolidated financial statements are issued. See Note 3 to the accompanying unaudited consolidated financial statements.

Our ability to continue as a going concern depends on our ability to generate profitable operations in the future and to obtain the financing necessary to meet our obligations as they come due. Management's plans are described in Note 3 and include pursuit of proceeds under our registered offering, which was declared effective on June 29, 2026, pursuit of private placement proceeds, continued reliance on related-party working-capital advances, continued cost discipline, and performance under the firm, non-cancelable services agreement with Eva Defense Inc. and Eva Live Inc., under which $1,000,000 of fixed fees remained to be billed at September 30, 2026, against $800,000 of remaining related-party subcontract commitments. Management has not concluded that these plans are probable of being effectively implemented within the relevant assessment period, and there can be no assurance that we will obtain additional funding or achieve profitability.

Critical Accounting Policies and Estimates

Our unaudited consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on assumptions we believe to be reasonable under the circumstances; actual results may differ. Our critical accounting policies are described in Note 2 to the accompanying unaudited consolidated financial statements and include the following.

Intangible Assets. We hold $16,000,000 of acquired intangible assets consisting of intellectual property relating to our drone technology, comprising Airdrone Technology, Hydrogen Fuel Cell Technology, the WaveDrone Platform, and SUPA Consolidated Inc. intellectual property. These assets remain in development, have not been placed into service, and are not being amortized. We evaluate them for impairment at least annually and whenever events or changes in circumstances indicate the carrying amount may not be recoverable. No impairment indicators were identified as of September 30, 2026.

Prepaid Expenses. Prepaid expenses consist principally of $5,000,000 of consideration paid under our technology licensing agreement with T Stamp Inc., amortized on a straight-line basis at $138,889 per month over the 36-month license term, with partial-month charges in the first and last periods as described in Note 4. The unamortized balance at September 30, 2026, was $1,415,768, all of which is classified as current because the license term ends in August 2027.

Investment in Private Equity Securities. Our investment in private equity securities consists of 1,000,000 common shares of Nuvora Energy, Inc. carried at $3,000,000. We apply the measurement alternative under ASC 321-10-35-2 for equity securities without a readily determinable fair value, under which the investment is adjusted for observable price changes in orderly transactions for the identical or a similar investment of the same issuer, and we perform a qualitative impairment assessment at each reporting date. The significant judgment is whether a transaction by the issuer is orderly and involves an identical or similar security. We concluded that Nuvora's issuances of common stock to investors at $3.00 per share in May and June 2026 met these criteria and remeasured the investment from $2,000,000 to $3,000,000, recognizing the remeasurement in the three months ended June 30, 2026, as restated (see Note 2). Because Nuvora is a related party and its shares are not publicly traded, the carrying amount may change significantly on future observable transactions or impairment. No impairment indicators were identified as of September 30, 2026.

Revenue Recognition. Our revenue for the three and nine months ended September 30, 2026, was derived from our services agreement with Eva Defense Inc. and Eva Live Inc. We account for the agreement as a single performance obligation consisting of a series of distinct monthly service periods, satisfied over time, and recognize the fixed monthly fee ratably using a time-elapsed measure of progress. Two judgments are significant. First, we have concluded that we act as principal, because we are primarily responsible to the customer for fulfillment, we direct and control the services performed by our subcontractor, Ascendant AI LLC, before they are transferred to the customer, and we set the price charged to the customer; accordingly, we present revenue on a gross basis and the subcontract fees as cost of revenue. If we were instead considered an agent, revenue would be presented net of the subcontract cost, which would reduce reported revenue for the three and nine months ended September 30, 2026, from $200,000 to $40,000, with no effect on gross profit or net loss. Second, we have concluded that collection of the consideration is probable, considering the joint and several liability of Eva Defense Inc. and its parent, Eva Live Inc. See Note 2.

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Off-Balance Sheet Arrangements

We have not engaged in any off-balance sheet arrangements as defined in Item 303(b) of the SEC's Regulation S-K. We do not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements.

Recently Issued Accounting Pronouncements

We have reviewed all recently issued, but not yet effective, accounting pronouncements and do not believe the future adoption of any such pronouncements will have a material impact on our financial condition or results of operations. See Note 2 to the accompanying unaudited consolidated financial statements.

JOBS Act

We qualify as an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). Under the JOBS Act, emerging growth companies may delay adopting new or revised accounting standards until those standards apply to private companies. We have elected to use this extended transition period, and as a result our financial statements may not be comparable to those of companies that comply with public company effective dates.