Ascent Solar Technologies, Inc.

NOTES TO FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION

Ascent Solar Technologies, Inc. (“Ascent” or the "Company") was incorporated on October 18, 2005 from the separation by ITN Energy Systems, Inc. (“ITN”) of its Advanced Photovoltaic Division and all of that division’s key personnel, core technologies, and certain trade secrets and royalty free licenses to use in connection with the manufacturing, developing marketing, and commercializing Copper-Indium-Gallium-diSelenide (“CIGS”) photovoltaic (“PV”) products. ITN, a private company incorporated in 1994, is an incubator dedicated to the development of thin film, PV, battery, fuel cell and nano technologies. Through its work on research and development contracts for private and governmental entities, ITN developed proprietary processing and manufacturing know how applicable to PV products generally, and CIGS PV products in particular. ITN formed Ascent to commercialize its investment in CIGS PV technologies.

The Company focus is on integrating its PV products into scalable and high value markets such as space power beaming, aerospace, satellites, near earth orbiting vehicles, fixed wing unmanned aerial vehicles (“UAV”), and agrivoltaics. The value proposition of Ascent’s proprietary solar technology not only aligns with the needs of customers in these industries, but also overcomes many of the obstacles other solar technologies face in these unique markets. Ascent has the capability to design and develop finished products for end users in these areas as well as collaborate with strategic partners to design and develop custom integrated solutions for products like satellites, spacecraft, airships and fixed-wing UAVs. Ascent sees significant overlap of the needs of end users across some of these industries and can achieve economies of scale in sourcing, development, and production in commercializing products for these customers.

On August 14, 2024, the Company effected a reverse stock split of the Company’s common stock at a ratio of one-for-one hundred (the “Reverse Stock Split”). The Company’s common stock began trading on a split-adjusted basis on August 15, 2024. Stockholders also received one whole share of common stock in lieu of a fractional share and no fractional shares were issued. All shares and per share amounts in the financial statements and accompanying notes have been retroactively adjusted to give effect to the Reverse Stock Split.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates: The preparation of financial statements in conformity with US GAAP requires management to make estimates and 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 revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash Equivalents: The Company classifies all short-term investments in interest bearing bank accounts and highly liquid debt securities purchased with an original maturity of three months or less to be cash equivalents. The Company maintains cash balances which may exceed federally insured limits. The Company does not believe this results in significant credit risk.

Inventories: All inventories are stated at the lower of cost or net realizable value, with cost determined using the weighted average method. Inventory balances are frequently evaluated to ensure they do not exceed net realizable value. The computation for net realizable value takes into account many factors, including expected demand, product life cycle and development plans, module efficiency, quality issues, obsolescence and others. Management's judgment is required to determine reserves for obsolete or excess inventory. As of December 31, 2024, and 2023, the Company had inventory reserve balances of $70,524 and $105,915, respectively. If actual demand and market conditions are less favorable than those estimated by management, additional inventory write downs may be required.

Property, Plant and Equipment: Property, plant and equipment are recorded at the original cost to the Company. Assets are being depreciated over estimated useful lives ofthree to 10 years using the straight-line method, as presented in the table below, commencing when the asset is placed in service. Leasehold improvements are depreciated over the shorter of the remainder of the lease term or the life of the improvements. Upon retirement or disposal, the cost of the asset disposed of and the related accumulated depreciation are removed from the accounts and any gain or loss is reflected in income. Expenditures for repairs and maintenance are expensed as incurred.

Patents: At such time as the Company is awarded patents, patent costs are amortized on a straight-line basis over the legal life on the patents, or over their estimated useful lives, whichever is shorter. As of December 31, 2024, and 2023, the Company had net patent costs of$28,494 and$53,978, respectively. Of these amounts$185 and$6,678 represent costs net of amortization incurred for awarded patents, and the remaining$28,309 and$47,300 represents costs incurred for patent in process applications as of December 31, 2024 and 2023, respectively. During the years ended December 31, 2024 and 2023, the Company capitalized$0 and$19,583 in patent costs, respectively, as it worked to secure design rights and trademarks for newly developed products. Amortization expense was$6,493 and$19,168 for the years ended December 31, 2024 and 2023, respectively.

As of December 31, 2024, future amortization of patents is expected as follows:

Impairment of Long-lived Assets: The Company analyzes its long-lived assets (property, plant and equipment) and definitive-lived intangible assets (patents) for impairment, both individually and as a group, whenever events or changes in circumstances indicate the carrying amount of the assets may not be recoverable. Events that might cause impairment would include significant current period operating or cash flow losses associated with the use of a long-lived asset or group of assets combined with a history of such losses, significant changes in the manner of use of assets and significant negative industry or economic trends. An undiscounted cash flow analysis is calculated to determine if impairment exists. If impairment is determined to exist, any related loss is calculated using the difference between the fair value and the carrying value of the assets. During the years ended December 31, 2024 and 2023, the Company recognized an impairment charge of$524,481 and$3,283,715, respectively. See Note 5 for further discussion on the impairment charge.

Equity Method Investment: The Company accounts for its investments in stock of other entities over which the Company has significant influence, but not control, using the equity method of accounting. Under the equity method of accounting, the Company increases its investment for contributions made and records its proportionate share of net earnings, declared dividends and investment distributions based on the most recently available financial statements of the investee. The Company re-evaluates the classification at each balance sheet date and when events or changes in circumstances indicate that there is a change in the Company’s ability to exercise significant influence. The Company evaluates its equity method investments for potential impairment whenever events or changes in circumstances indicate that there is an other-than-temporary decline in the value of the investment. Declines in fair value that are deemed to be other-than-temporary are charged to Other income (expense), net.

Other Assets: Other assets is comprised of the following:

Related Party Payables: The Company accounts for fees due to board members in the related party payables account on the Balance Sheets.

Convertible Notes: The Company issues, from time to time, convertible notes. Refer to Note 11 for further information.

Convertible Preferred Stock: The Company evaluates its preferred stock instruments under FASB ASC 480,"Distinguishing Liabilities from Equity" to determine the classification, and thereby the accounting treatment, of the instruments. Refer to Notes 12, 13, and 14 for further discussion on the classification of each instrument.

Product Warranties: The Company provides a limited warranty to the original purchaser of products against defective materials and workmanship. Warranty accruals are recorded at the time of sale and are estimated based upon product warranty terms and historical experience. The Company assesses the adequacy of its liabilities and makes adjustments as necessary based on known or anticipated warranty claims, or as new information becomes available.

Leases: The Company determines if an arrangement is a lease or contains a lease at the inception of the contract. The Company accounts for non-lease components, such as certain taxes, insurance and common area maintenance, separate from the lease arrangement. Operating lease liabilities, which represent the Company’s obligation to make lease payments arising from the lease, and corresponding Operating lease right-of-use assets, which represent the Company’s right to use an underlying asset for the lease term, are recognized at the commencement date of the lease based on the present value of fixed future payments over the lease term. The Company utilizes the lease term for which it is reasonably certain to use the underlying asset, including consideration of options to extend or terminate the lease. Incentives received from landlords are recorded as a reduction to the lease right-of-use assets. The Company does not recognize lease right-of-use assets and corresponding lease liabilities for leases with initial terms of 12 months or less.

The Company calculates the present value of future payments using the discount rate implicit in the lease, if available, or its incremental borrowing rate. The incremental borrowing rate is the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term at an amount equal to the lease payments in a similar economic environment. In determining the Company's operating lease right of use assets and operating lease liabilities, the Company applied these incremental borrowing rates to the minimum lease payments within the lease agreement.

Revenue Recognition:

Product revenue. The Company recognizes revenue for the sale of PV product sales at a point in time following the transfer of control of such products to the customer, which typically occurs upon shipment or delivery depending on the terms of the underlying contracts. For product sales contracts that contain multiple performance obligations, the Company allocates the transaction price to each performance obligation identified in the contract based on relative standalone selling prices, or estimates of such prices, and recognize the related revenue as control of each individual product is transferred to the customer.

During the years ended December 31, 2024 and 2023, the Company recognized product revenue of$41,893 and$397,886, respectively. For the year ended December 31, 2024, one customer represented 53% of total product revenue. For the year ended December 31, 2023, one customer from Switzerland represented 74% of total product revenue and one domestic customer presented 23% of the Company’s total product revenue.

Milestone and engineering revenue. Each milestone and engineering arrangement is a separate performance obligation. The transaction price is estimated using the most likely amount method and revenue is recognized as the performance obligation is satisfied through achieving manufacturing, costs or engineering targets. During the years ended December 31, 2024 and 2023, the Company recognized total milestone revenue of$0 and$60,374.

Government contracts revenue. Revenue from government research and development contracts is generated under terms that include cost plus fee, cost share, or firm fixed price. The Company generally recognizes this revenue over time using cost-based input methods, which recognize revenue and gross profit as work is performed based on the relationship between actual costs incurred compared to the total estimated costs of the contract. In applying cost-based input methods of revenue recognition, we use the actual costs incurred relative to the total estimated costs to determine our progress towards contract completion and to calculate the corresponding amount of revenue to recognize.

Cost based input methods of revenue recognition are considered a faithful depiction of our efforts to satisfy long-term government research and development contracts and therefore reflect the performance obligations under such contracts. Costs incurred that do not contribute to satisfying the Company's performance obligations are excluded from our input methods of revenue recognition as the amounts are not reflective of transferring control under the contract. Costs incurred towards contract completion may include direct costs plus allowable indirect costs and an allocable portion of the fixed fee. If actual and estimated costs to complete a contract indicate a loss, provision is made for the anticipated loss on the contract.

No government contract revenue was recognized for the years ended December 31, 2024 and 2023.

Receivables and Allowance for Doubtful Accounts: Trade accounts receivable are recorded at the invoiced amount as the result of transactions with customers. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. The Company estimates the collectability of accounts receivable using analysis of historical bad debts, customer creditworthiness and current economic trends. Reserves are established on an account-by-account basis and are written off against the allowance in the period in which the Company determines that is it probable that the receivable will not be recovered.

The Company bills the government under cost-based research and development contracts at provisional billing rates which permit the recovery of indirect costs. These rates are subject to audit on an annual basis by the government agencies’ cognizant audit agency. The cost audit may result in the negotiation and determination of the final indirect cost rates. In the opinion of management, re-determination of any cost-based contracts will not have a material effect on the Company’s financial position or results of operations.

As of December 31, 2024 and 2023, the Company hadno accounts receivable, net balance andno allowance for doubtful accounts.

The payment terms and conditions in customer contracts vary. Customers required to prepay are represented by deferred revenues, included in Accrued Liabilities on the Balance Sheets, until the Company’s performance obligations are satisfied. Invoiced customers are typically required to pay within 30 days of invoicing. Deferred revenue was as follows:

Shipping and Handling Costs: The Company classifies shipping and handling costs for products shipped to customers as a component of “Cost of revenues” on the Company’s Statements of Operations. Customer payments of shipping and handling costs are recorded as a component of Revenues.

Share-Based Compensation: The Company measures and recognizes compensation expense for all share-based payment awards made to employees, officers, directors, and consultants based on estimated fair values at grant date. The value of the portion of the award that is ultimately expected to vest, net of estimated forfeitures, is recognized as expense on a straight-line basis, over the requisite service period in the Company’s Statements of Operations. Forfeitures are estimated at the time of grant and revised, as necessary, in subsequent periods if actual forfeitures differ from those estimates.

Research, Development and Manufacturing Operations Costs: Research, development and manufacturing operations expenses were$2,300,948 and$3,222,283 for the years ended December 31, 2024 and 2023, respectively. Research, development and manufacturing operations expenses include: 1) technology development costs, which include expenses incurred in researching new technology, improving existing technology and performing federal government research and development contracts, 2) product development costs, which include expenses incurred in developing new products and lowering product design costs, and 3) pre-production and production costs, which include engineering efforts to improve production processes, material yields and equipment utilization, and manufacturing efforts to produce saleable product. Research, development and manufacturing operations costs are expensed as incurred, with the exception of costs related to inventoried raw materials, work-in-process and finished goods, which are expensed as cost of revenue as products are sold.

Marketing and Advertising Costs: Marketing and advertising costs are expensed as incurred. Marketing and advertising expenses were$0 and$93,474 for the years ended December 31, 2024 and 2023, respectively.

Other Income (Expense): Other income/(expense), net is comprised as follows:

Income Taxes: Deferred income taxes are provided using the liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of the changes in tax laws and rates as of the date of enactment. Interest and penalties, if applicable, would be recorded in income tax (benefit) / expense.

The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years (2021-2024) in these jurisdictions. The Company believes its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s financial condition, results of operations, or cash flows. Therefore, no reserves for uncertain income tax positions have been recorded.

Earnings per Share: Earnings per share (“EPS”) are the amount of earnings attributable to each share of common stock. Basic EPS has been computed by dividing income available to common stockholders by the weighted-average number of common shares outstanding during the period. Income available to common stockholders includes dividends on cumulative preferred stock (whether or not earned). Diluted earnings per share have been computed by dividing net income adjusted on an if-converted basis for the period by the weighted average number of common shares and dilutive common shares outstanding (which consist primarily of warrants and convertible securities using the treasury stock method or the if-converted method, as applicable, to the extent they are dilutive).

Approximately 49,000 dilutive shares and 115,000 dilutive warrants for the year ended December 31, 2024 and approximately 11,000 dilutive shares and 20,000 dilutive warrants for the year ended December 31, 2023 were omitted because they were anti-dilutive.

Fair Value Estimates: Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company uses fair value hierarchy based on three levels of inputs, of which, the first two are considered observable and the last unobservable, to measure fair value:

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Level 1 – Quoted prices in active markets for identical assets or liabilities.

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Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

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Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

Certain long-lived assets and current liabilities have been measured at fair value on a recurring and non-recurring basis. The carrying amount of our debt outstanding approximates fair value because the Company's current borrowing rate does not materially differ from market rates for similar bank borrowings and are considered to be Level 2. The carrying value for cash and cash equivalents, accrued expenses and other assets and liabilities approximate their fair values due to their short maturities.

In addition to the items measured at fair value on a recurring basis, in conjunction with the significant impairment loss taken during the years ended December 31, 2024 and 2023, the Company also measured certain property, plant and equipment at fair value on a nonrecurring basis. These fair value measurements rely primarily on our specific inputs and assumptions about the use of the assets, as observable inputs are not available. Accordingly, we determined that these fair value measurements reside primarily within Level 3 of the fair value hierarchy.

Segment Reporting: The Company has one reportable segment, PV. The PV segment sells PV products and engineering services and currently, is primarily selling it in North America. The Company’s chief operating decision maker (“CODM”), who is the Company’s Chief Executive Officer, makes significant operating decisions and assesses the performance of the Company as a single business segment.

The CODM regularly reviews the Company’s company wide Balance Sheet and Statement of Operations to determine how to allocate resources within the Company. The CODM assesses performance and decides how to allocate resources based on Net Income that also is reported on the Statement of Operations and reviews significant expenses as outlined in the Statement of Operations. The CODM uses Net Income to evaluate how to reinvest profits into the PV segment assets, research and development, employees, and other resources. The measure of segment assets is reported on the Balance Sheet as total assets.

Recently Adopted Accounting Standards

In November 2023, the FASB issued ASU 2023-07, Segment Reporting: Improvement to Reportable Segment Disclosures ("ASU 2023-07"). ASU 2023-07 improves segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. In addition, the amendments enhance interim disclosure requirements, clarify circumstances in which an entity can disclose multiple segment measures of profit or loss, provide new segment disclosure requirements for entities with a single reportable segment, and contain other disclosure requirements. The amendments in ASU 2023-07 are effective for all public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The adoption of ASU 2023-07 did not have a material impact on the Company's financial statements.

Recently Issued Accounting Standards

In December 2023, the FASB issued ASU 2023-09, Income Taxes: Improvements to Income Tax Disclosures ("ASU 2023-09"). ASU 2023-09 improves income tax disclosures by requiring public entities annually to (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 is effective for public entities for annual periods beginning after December 15, 2024. Entities are permitted to early adopt the standard for annual financial statements that have not yet been issued or made available for issuance. Management is evaluating the impact of this ASU on the Company's financial statements.

NOTE 3. LIQUIDITY, CONTINUED OPERATIONS, AND GOING CONCERN

The Company continued to enter into financing arrangements during the year ended December 31, 2024 to fund operations.

The Company has limited industrial scale production capabilities in its Thornton facility and continues to focus on its research and development activities to improve its PV products. The Company does not expect that sales revenue and cash flows will be sufficient to support operations and cash requirements until it has fully implemented our strategy of focusing on selling high value PV products and manufacturing at full industrial scale. During the year ended December 31, 2024 the Company used$8,423,569 in cash for operations. As of December 31, 2024, the Company had $2,280,406 in current liabilities.

Additionally, projected product revenues are not anticipated to result in a positive cash flow position for the year 2025 overall and, although as of December 31, 2024, the Company has a working capital of$1,432,912, Management believes that additional financing will be required for the Company to reach a level of sufficient sales to achieve profitability.

The Company continues to accelerate sales and marketing efforts related to its specialty PV application strategies through expansion of its sales and distribution channels. The Company also continues activities to secure additional funding through strategic or financial investors, but there is no assurance the Company will be able to raise additional capital on acceptable terms or at all. If the Company's revenues do not increase rapidly, and/or additional financing is not obtained, the Company will be required to significantly curtail operations to reduce costs and/or sell assets. Such actions would likely have an adverse impact on the Company's future operations.

As a result of the Company’s recurring losses from operations, and the need for additional financing to fund its operating and capital requirements, there is uncertainty regarding the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to the Company’s ability to continue as a going concern.

Management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. These financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern.

NOTE 4. RELATED PARTY TRANSACTIONS

On September 15, 2021, the Company entered into a Long-Term Supply and Joint Development Agreement (“JDA”) with TubeSolar, a former significant stakeholder in the Company. Under the terms of the JDA, the Company would produce, and TubeSolar will purchase, thin-film PV foils (“PV Foils”) for use in TubeSolar’s solar modules for agricultural photovoltaic (“APV”) applications that require solar foils for its production. Additionally, the Company will receive (i) up to $4 million of non-recurring engineering (“NRE”) fees, (ii) up to $13.5 million of payments upon achievement of certain agreed upon production and cost structure milestones and (iii) product revenues from sales of PV Foils to TubeSolar. The JDA has no fixed term, and may only be terminated by either party for breach.

The Company and TubeSolar also established Ascent Solar Technologies Germany GmbH (“Ascent Germany”), in which TubeSolar holds of 30% of the entity. Ascent Germany was established to jointly establish and operate a PV manufacturing facility in Germany that would produce and deliver PV Foils exclusively to TubeSolar. Until Ascent Germany’s facility is fully operational, PV Foils will be manufactured in the Company’s existing facility in Thornton, Colorado. The Company accounts for this investment as an equity method investment as it does not have control of this entity, but does have significant influence over the activities that most significantly impact the entity’s operations and financial performance. The Company currently cannot quantify its maximum exposure in this entity.

In June, 2023, TubeSolar filed an application for insolvency proceedings with the insolvency court. Since then, there has been no activity under the JDA (no revenuewas recognized under the JDA during the years ended December 31, 2024 and

2023)and minimal activity in Ascent Germany. Management continues to monitor this situation but does not anticipate significant activity under these agreements in the future.

NOTE 5. ASSET ACQUISITION

On April 17, 2023, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Flisom (the “Seller”), pursuant to which, among other things, the Company purchased certain assets relating to thin-film photovoltaic manufacturing and production from the Seller (collectively, the “Assets”), including (i) certain manufacturing equipment located at Seller’s Niederhasli, Switzerland facility (the “Manufacturing Facility”) and (ii) related inventory and raw materials at the Manufacturing Facility (collectively, the “Transaction”). In connection with the Transaction, the Company also acquired, by operation of Swiss law, the employment contracts of certain employees of Seller in Switzerland who are functionally predominantly working with the Assets, subject to such employees being offered the right to remain employed by Seller after the closing of the Transaction. The total consideration paid by the Company to Seller in connection with the Transaction was an aggregate amount in cash equal to $2,800,000.

At the Closing, the Company and Seller also entered into (i) a Transition Services Agreement requiring the Seller to provide transition support for the Company’s operation of the Assets, with fees to be paid by the Company for performing defined support services, (ii) a Sublease Agreement allowing the Company’s to use the Manufacturing Facility where the Assets are located, and (iii) a Technology License Agreement, pursuant to which Seller granted the Company a revocable, non-exclusive license to certain intellectual property rights of the Seller used in the operation of the Assets (the “Licensed IP”), subject to certain encumbrances on the Licensed IP in favor of Seller’s lender. The Company will also receive proceeds from fulfilling a supply agreement obligation for one of the Seller’s customers.

The total purchase price, including transaction costs of $1,283,926, was allocated as follows:

In addition to the Asset Purchase Agreement, on April 20, 2023, the Company entered into a letter agreement (the “Letter Agreement”) with FL1 Holding GmbH, a German company (“FL1”) that is affiliated with BD 1 Investment Holding, LLC (“BD1”), a former affiliate of the Company, BD1 and BD Vermögensverwaltung GmbH (“BD”), the parent entity of FL1 (collectively, the “Affiliates”), in connection with the prospective acquisition by FL1 of substantially all shares in Seller following the Closing, subject to the satisfaction of certain terms and conditions. The Letter Agreement, among other things, granted the Company the option, but not the obligation, (i) to purchase certain intellectual property rights of Seller relating to thin-film photovoltaic manufacture and production for $2,000,000 following the release of certain liens on such intellectual property rights in favor of Seller’s lender, and (ii) for a period of 12 months following the Closing, to resell the Assets to the Affiliates for an aggregate amount equal to $5,000,000, with such transaction to close within 90 days following the exercise of the Company’s resale right. On June 16, 2023, the Company exercised its option to resell the Assets to the Affiliates. The Company has not received payment on this option.

As the purchased Assets were no longer being utilized for its intended purpose and because the put option was in default, Management concluded that there was a change in circumstance that could indicate that the carrying value of of the Assets may not be recoverable. Based on Management's analysis, Management concluded the undiscounted cash flows were not sufficient to recover the Asset's carrying value and recorded an impairment loss of$3,283,715 during the year ended December 31, 2023. The impairment loss represented the difference between the estimated fair value and the carrying value of the Assets. Management estimated the fair value of these Assets using Company specific inputs (including historical and forecasted information) and the Company's assumptions about the use of the Assets as observable inputs were not available. Inputs includes projected selling prices net of projected transaction costs. This analysis incorporated many different assumptions and estimates which involve a high degree of judgment. These assumptions and estimates, which may change significantly in the future, have a substantial impact on the actual impairment loss recorded.

As of December 31, 2023, the Company's remaining book value of the Assets was approximately $0.8 million and the Company had a payable to Flisom of approximately $0.8 million.

At March 31, 2024, the Company designated the Assets as assets held for sale as all of the following criteria have been met: (i) a formal commitment to a plan to sell a property has been made and exercised; (ii) the property is available for sale in its present condition; (iii) actions required to complete the sale of the property have been initiated; (iv) sale of the property is probable and we expect the sale will occur within one year; and (v) the property is being actively marketed for sale at a price that is reasonable given its current market value. Assets held for sale were recorded in Property, Plant and Equipment, net in the Balance Sheets.

Upon designation as an asset held for sale, the Company recorded the carrying value of the property at the lower of its carrying value or its estimated fair value, less estimated costs to sell, and depreciation of the property ceases. As the estimated fair value of $221,519 and the price the Company sold the Assets for is less than their carrying value, the Company recorded an impairment loss of$524,481. On April 1, 2024, the Company sold the Assets to the Landlord in exchange for forgiveness of its $221,519 payables to the Landlord.

In September, 2023, Flisom filed for bankruptcy in Switzerland. In February, 2024, the Swiss bankruptcy administrator closed the bankruptcy proceedings due to a lack of assets unless a creditor demands that the bankruptcy proceedings be carried out within the specified period and makes an advance to cover the costs. The deadline for creditors to make their demand lapsed and the bankruptcy proceedings remained closed. As the bankruptcy proceedings are closed, the Company reversed the Swiss liabilities and recognized a gain on extinguishment of liabilities of $541,021 in Other income/(expense) on the Statements of Operations during the year ended December 31, 2024.

NOTE 6. PROPERTY, PLANT AND EQUIPMENT

The following table summarizes property, plant and equipment as of December 31, 2024 and 2023:

Fixed assets for the year ended December 31, 2023 includes approximately $786,000 of manufacturing machinery and equipment that were located in Switzerland (see Note 5). Depreciation expense for the years ended December 31, 2024 and 2023 was$67,649 and$76,069, respectively. Depreciation expense is recorded under “Depreciation and amortization expense” in the Statements of Operations.

NOTE 7. OPERATING LEASES

In September 2020, the Company commenced a operating lease for approximately 100,000 rentable square feet for its manufacturing and operations. The building lease term is for 88 months commencing on September 21, 2020 at a rent of $50,000 per month including taxes, insurance and common area maintenance until December 31, 2020. Beginning January 1, 2021, the rent adjusted to $80,000 per month on a triple net basis and shall increase at an annual rate of 3% per annum until December 31, 2027.

Effective September 1, 2023, the lease was amended to reduce the rentable square feet from 100,000 to approximately 75,000 square feet and the rent and tenant share of expenses decreased in proportion to the reduction in rentable square feet. The Company recorded this as a lease modification in accordance with ASC 842, Leases, and recorded a reduction to the right of use asset and lease liability of $1,292,316 and $1,376,994, respectively. The Company recognized a gain on the lease modification of $84,678, which was recorded as other income in the Statement of Operations.

As of December 31, 2024 and 2023, assets and liabilities related to the Company's lease were as follows:

During the years ended December 31, 2024 and 2023 the Company recorded operating lease costs included in Selling, general, and administrative expenses on the Statement of Operations of$761,989 and$961,333, respectively.

Future maturities of the operating lease liability are as follows:

The remaining weighted average lease term and discount rate of the operating lease is 36 months and 12%, respectively.

During the years ended December 31, 2024 and 2023, the Company recorded short term lease expense of approximately $0 and $326,400, respectively.

NOTE 8. INVENTORIES

Inventories consisted of the following at December 31, 2024 and 2023:

NOTE 9. OTHER PAYABLE

On June 30, 2017, the Company entered into an agreement with a vendor (“Vendor”) to convert the balance of their account into a note payable in the amount of $250,000. The note bears interest of 5% per annum and matured on February 28, 2018. On September 25, 2024, the Company entered into a Note Termination and Release Agreement with the Vendor where the Company agreed to a one time payment of $175,000 in exchange for the termination of the note payable. Upon payment, the note and interest payable were forgiven and the Company recognized a gain on extinguishment of liabilities of $165,548 in Other income/(expense), net on the Statements of Operations during the year ended December 31, 2024.

NOTE 10. BRIDGE LOANS

On February 27, 2024, the Company entered into a loan agreement ("Loan 1") with a lender ("Lender") for an aggregate principal amount of $375,000. The Company paid origination fees of $25,000 for net proceeds of $350,000. The discount is recorded as interest expense ratably over the term of the loan. Under Loan 1, the Company will make weekly payments of $19,420 for 28 weeks for a total repayment of $543,750. The Company also had an early repayment option where the Company would repay an aggregate of $478,125 if repaid by April 15, 2024.

On April 17, 2024, the Company entered into a new loan agreement ("Loan 2") with the Lender. Under Loan 2, the Company borrowed an aggregate principal amount of $685,000, incurred origination fees of $34,250, and repaid the outstanding balance of Loan 1 of $428,310 for net proceeds of $222,440. Under Loan 2, the Company will make weekly payments of $31,000 for 32 weeks for a total repayment of $993,250. This loan is secured by a lien on the Company's assets.

As of December 31, 2024, Loan 2 principal and interest was fully repaid. The Company also recognized$536,250 in interest expense during the year ended December 31, 2024.

On April 1 and 2, 2024, the Company closed two loan agreements with a second lender ("Lender 2") for an aggregate principal amount of $180,800. These loans have an original issuance discount of $20,800 for net proceeds of $160,000. The Company will repay a total of $202,496 under these loans. The loans mature on January 30, 2025 and are payable in monthly installments as defined in the loan agreements. Upon a default event, outstanding principal and interest payable is convertible into Company stock at a 25% discount; however, the conversion price cannot be below $25.

At December 31, 2024, principal and interest payable on these loans was$22,335 and $0, respectively. The Company also recognized$46,270 in interest expense during the year ended December 31, 2024.

NOTE 11. CONVERTIBLE NOTES

The following tables provide a summary of the activity of the Company's convertible notes:

Sabby / L1 Convertible Note

On December 19, 2022, the Company entered into a Securities Purchase Contract (the “Purchase Contract”) with two institutional investors (each, an “Investor” and collectively, the “Investors”) for the issuance of $12,500,000 in aggregate principal amount of Senior Secured Original Issue 10% Discount Convertible Advance Notes, for a purchase price of $11,250,000 in cash, net of an original issuance discount of $1,250,000 (the “Registered Advance Notes”), which matures in 18 months, bears 4.5% interest per annum, payable, at the option of the Company, in kind or in cash, subject to certain conditions, and is convertible, at the option of the holders from time to time, into shares of the Company’s Common Stock, or repayable in cash at maturity.

Under the Purchase Contract, in a concurrent private placement (the “Private Placement”), the Company issued to the Investors an additional $2,500,000 in aggregate principal amount of Senior Secured Original Issue 10% Discount Convertible Advance Notes, for a purchase price of $2,250,000 in cash, net of an original issuance discount of $250,000 (the “Private Placement Advance Notes” and, together with the Registered Advance Notes, the “Advance Notes”), which matures in 18 months, bears 4.5% interest per annum, payable, at the option of the Company, in kind or in cash, subject to certain conditions, and is convertible, at the option of the holders from time to time, into shares of the Company’s Common Stock, or repayable in cash at maturity.

The Advanced Notes are secured by a pledge of all assets of the Company pursuant to a Security Agreement. The Investors can converted the Advanced Notes into shares of the Company’s Common Stock at a conversion price, which is equal to the lower of (1) a 30% premium to the average of the five most recent daily volume weighted average price (“VWAPs”) of the Common Stock as measured on the day prior to the issuance of the Registered Advance Notes (the “Fixed Conversion Price”) and (2)92.5% of the three lowest VWAPs of the Common Stock on the 10 trading days preceding delivery of a Conversion

Noticeby an Investor. The conversion price cannot be less than $11,400 if required in accordance with the rules and regulations of Nasdaq. An Investor (together with its affiliates) may not convert any portion of such Investor’s Advance Notes to the extent that the Investor would beneficially own more than 4.99% of the Company’s outstanding shares of Common Stock after conversion, except that upon at least 61 days prior notice from the Investor to the Company, the Investor may increase the maximum amount of its beneficial ownership of the Company’s outstanding shares of Common Stock after converting the holder’s Advance Notes to up to 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the conversion.

Additionally, the Investors have the option to require early prepayment of the principal amount of the Registered Advance Notes in cash from up to 30% of the gross proceeds of any subsequent issuance by the Company, for cash, of shares of the Company’s Common Stock or convertible securities, or any combination of units thereof. The Company, pursuant to the terms in the Purchase Contract,210 days after the date of the Purchase Contract, may request that one of the Investors (the “Additional Advance Notes Investor”) acquire from the Company for a purchase price equal to 90% of the principal amounts thereof, additional Advance Notes (the “Additional Advance Notes”) to be issued in a registered direct offering in an aggregate principal amount not to exceed $1,000,000 (or, with the consent of the Additional Advance Notes Investor, $2,000,000) in any given month, up to an aggregate principal amount of $35,000,000 of Additional Advance Notes, provided, however, thatno more than one Additional Advance Note may be issued during any 30-day period.

The Company also issued to the Investors warrants to purchase up to 126 shares of Common Stock (the “Warrants”), which have afive-year term and an initial exercise price of $78,600 per share, subject to certain adjustments in certain events, including the future issuance by the Company of securities with a purchase or conversion, exercise or exchange price that is less than the exercise price of the Warrants then in effect at any time. The Warrants are exercisable for cash. If, at the time the holder exercises any Warrants, a registration statement registering the issuance of the shares of Common Stock underlying the Warrants is not then effective or available for the issuance of such shares, then the Warrants may be net exercised on a cashless basis according to a formula set forth in the Warrants.

On December 19, 2022, the Company received $13,500,000 of gross proceeds from the Investors. The $13,500,000 was allocated between the Advanced Notes and Warrants purchased based on the relative fair value of these instruments. The fair value of the Advanced Notes was estimated as the proceeds received and the fair value of the Warrants was determined using the Black Scholes model using the following inputs and are both considered to be Level 2 inputs on the fair value hierarchy:

The Company then allocated transaction costs based on these allocations resulting in the following allocation of proceeds:

On March 29, 2023 and on April 12, 2023, the Company and each of the Investors amended the agreements (the “Amendment”), to waive the event of default, provide a prepayment schedule for the Advance Notes held by each of the Investors, and reduce the floor price to $4,000. After giving effect to the Amendment, the Advance Notes will be prepaid by the Company in cash on the following dates and in the following aggregate amounts, at a price equal to 100% of the principal amount of the Advance Notes to be prepaid plus accrued and unpaid interest thereon (if any). The Company’s failure to comply with the terms of the Amendment would constitute an “Event of Default” under the Advance Notes.

On May 22, 2023, the Investors and the Company agreed to defer for 90 days each of the two prepayments of $666,667 that were scheduled for May 18, 2023 and June 19, 2023. Accordingly,(i) the May 18, 2023 payment was deferred until August 16, 2023, and (ii) the June 19, 2023 payment was delayed until September 17, 2023.

On May 25, 2023, the Company and each of the Investors entered into a Waiver and Amendment Agreement (the “Second Amendment”) relating to the Securities Purchase Contract and the Advance Notes. Pursuant to the Second Amendment, the Company and each of the Investors agreed to amend the Advance Notes to provide that if the Company receives a Notice of Conversion at a time that the Conversion Price (or, as applicable, the Alternative Conversion Price) then in effect Price, without regard to the Floor Price (the “Applicable Conversion Price”), is less than the Floor Price then in effect, the Company shall issue a number of shares equal to the Conversion Amount divided by such Floor Price and, at its election (x) pay the economic difference between the Applicable Conversion Price and such Floor Price (the “Outstanding Conversion Amount”) in cash at such time or (y) pay the Outstanding Conversion Amount following the consummation of a reverse stock split by the Company (1) in cash or (2) by issuing to the Holder a number of shares of Common Stock with an aggregate value equal to the Outstanding Conversion Amount, with the value per share of Common Stock for purposes of such calculation equal to (i) if such shares are issued on or prior to August 23, 2023, the daily VWAP of the Common Stock on the Trading Day following the date of the consummation of such reverse stock split or (ii) if such shares are issued after August 23, 2023,90% of the daily VWAP of the Common Stock on the Trading Day following the date of the consummation of such reverse stock split. The Company records the Outstanding Conversion Amounts as Conversions Payable on the Balance Sheets. If the VWAP on the conversion day is less than the floor price, then the economic different between the conversion day VWAP and the floor price becomes payable in cash and is recorded as Cash payable on the Balance Sheet.

During the year ended December 31, 2023, the Company settled $14.5 million of principal as follows:

On December 1, 2023, the Company and each of the Investors agreed that future stock payments of existing conversion payable liabilities will be at an issue price of 100% of the VWAP of the Common Stock on the conversion date, but the conversion price may not be less than the revised Floor Price of $65. The Conversion payable activity for the year ended December 31, 2023 was as follows:

During the years ended December 31, 2024 and 2023, the Company issued 24,118 and 4,659 shares of common stock, respectively, under the Securities Purchase Contract. During the year ended December 31, 2024 and 2023, the Company recognized $32,471 and$4,077,510 in accelerated discounts in Additional Paid-in Capital on the Statements of Changes in Stockholders' Equity (Deficit).

On April 14, 2023 the Company entered a securities purchase agreement (“SPA”) with Lucro Investments VCC-ESG Opportunities Fund (“Lucro”) for an approximate $9 million private placement (the “Private Placement”) of an aggregate of 375 shares of the Company’s Common Stock. The per share purchase price for the Shares was $24,000 per share. The terms of the SPA with Lucro triggered certain adjustments to the Advance Notes and the Warrants in accordance with the existing terms of the outstanding Advance Notes and the outstanding Warrants. Following these adjustments:

The fixed conversion price of the remaining principal outstanding on the Advance Notes was lowered to $7,322 per share of Common Stock;

The exercise price of the outstanding Warrants was lowered to $5,118 per share of Common Stock; and

The number of shares that the Warrants are exercisable for increased from 182 to 1,956 shares of Common Stock.

On June 29, 2023 the Company entered a securities purchase agreement (“Series 1B SPA”) with accredited investors (the "Accredited Investors") for the private placement of $900,000 for 900 shares of the Company’s newly designated Series 1B Convertible Preferred Stock (“Series 1B Preferred Stock”) (Note 13). Shares of the Series 1B Preferred Stock are convertible at the option of the holder into common stock at an initial conversion price of equal to $2,800 per share.

The terms of the Series 1B SPA triggered certain further adjustments to the Advance Notes and the Warrants in accordance with the existing terms of the outstanding Advance Notes and the outstanding Warrants. Following these further adjustments in June 2023:

The fixed conversion price of the remaining principal outstanding on the Advance Notes was lowered to $2,536 per share of Common Stock;

The exercise price of the outstanding Warrants was lowered to $1,772 per share of Common Stock; and

The number of shares that the Warrants are exercisable for increased from 1,956 to 5,648 shares of Common Stock.

On September 28, 2023, the Company entered into a placement agency agreement (the “Placement Agent Agreement”) with Dawson James Securities Inc. (“Dawson James”) pursuant to which the Company engaged Dawson James as the placement agent for a registered public offering by the Company (the “Offering”), of an aggregate of 35,726 units (“Units”) at a price of $288 per Unit, for gross proceeds of approximately $10.3 million, before deducting offering expenses.

The terms of the Offering triggered certain further adjustments to the Advance Notes and the Warrants in accordance with the existing terms of the outstanding Advance Notes and the outstanding Warrants. Following these further adjustments in October 2023:

The fixed conversion price of the approximately then outstanding $400,000 principal amount currently outstanding Advance Notes has been lowered to $176 per share of Common Stock;

The exercise price of the outstanding Warrants was lowered to $123 per share of Common Stock; and

The number of shares that the Warrants are exercisable for was increased from 5,648 to 81,160 shares of Common Stock.

Pursuant to ASC 260, Earnings per Share, the Company recorded a deemed dividend for the down round adjustments of $17,980,678 which reduced income available to common shareholders in the Company's earnings per share calculations.

On March 6, 2024 and March 7, 2024, the Company entered into Warrant Repurchase Agreements (the “Repurchase Agreements”), with each of the Investors. Pursuant to the Repurchase Agreements, if the Company closes a new capital raising transaction with gross proceeds in excess of $5 million (“Qualified Financing”), the Company will repurchase the Warrants from the Investors for an aggregate purchase price of $3.6 million. Following the delivery of the purchase price to the Investors, the Investors will relinquish all rights, title and interest in the Warrants and assign the same to the Company, and the Warrants will be cancelled. On April 12, 2024, the Company entered into Amended and Restated Warrant Repurchase Agreements (the “Amendments”) with each of the Investors. Pursuant to the Amendments, on April 12, 2024, the Company and the Investors agreed to the following:

•

First Repurchase. On April 12, 2024, the Investors agree to convey, assign and transfer 50% of the Warrants to the Company in exchange for the payment by the Company for an aggregate purchase price of $1.8 million.

•

Second Repurchase. On or before April 18, 2024, the Investors agree to convey, assign and transfer all remaining Warrants to the Company for an aggregate purchase price of $1.8 million.

To extend the repurchase deadline, on April 12, 2024 the Company agreed to issue the Investors approximately 85,500 warrants in aggregate at an exercise price of $11.68 per warrant. These warrants will be exercisable at any time, and from time to time, in whole or in part, commencing six months from the closing of the offering and expiring five and a half (5.5)years from the date of issue, and will be exercisable for cash only unless an effective registration statement is not available at the time of exercise, in which case the warrants could be exercised on a cashless basis. The Company recorded an expense of

$743,462 as Warrant settlement expense on the Statement of Operations. The expense represents the estimated fair value of the warrants at the issuance date andwas determined using the Black Scholes model using the following inputs:

On April 18, 2024, the Company, closed offerings of common stock for gross proceeds totaling $5.09 million (see Note 16 for additional information). The $3.6 million of the net proceeds from the closings of the offering were utilized to repurchase and cancel the Warrants. The repurchase of these Warrants eliminated a substantial potential future issuance of common stock at a substantially reduced price. These warrants would have been adjusted in accordance with their terms to provide for the purchase of approximately 850,000 shares of the Company’s common stock at an exercise price of $11.68 if they had not been repurchased by the Company.

The discount on the note is recorded as interest expense ratably over the term of the note. Interest payable on the Advance Notes, as of December 31, 2023 was approximately $29,900. The Company recognized $3,200 and $301,700 in interest expense for the years ended December 31, 2024 and 2023, respectively and recognized $19,300 and $1,809,000 as interest expense for the amortization of the discount for the years ended December 31, 2024 and 2023.

During the year ended December 31, 2024, $400,000 of principal was converted for 6,184 shares of common stock. The note matured on June 19, 2024 and the Company paid the remaining principal and interest payable.

During the year ended December 31, 2024, $1,279,782 of conversions payable was converted into 17,934 shares of common stock and $199,997 of Cash payable. The Cash payable was paid in April 2024 with the close of the Company's public offering (see Note 16).

NOTE 12. SERIES A PREFERRED STOCK

Holders of Series A Preferred Stock are entitled to cumulative dividends at a rate of 8% per annum when and if declared by the Board of Directors at its sole discretion. The dividends may be paid in cash or in the form of common stock (valued at 10% below market price, but not to exceed the lowest closing price during the applicable measurement period), at the discretion of the Board of Directors. The dividend rate on the Series A Preferred Stock is indexed to the Company's stock price and subject to adjustment.

The Series A Preferred Stock may be converted into shares of common stock at the option of the Company if the closing price of the common stock exceeds $23.2 billion, as adjusted, fortwenty consecutive trading days, or by the holder at any time. The Company has the right to redeem the Series A Preferred Stock at a price of $8.00 per share, plus any accrued and unpaid dividends. At December 31, 2024, the preferred shares were not eligible for conversion to common shares at the option of the Company. The holder of the preferred shares may convert to common shares at any time. After making adjustment for the Company’s prior reverse stock splits, all 48,100 outstanding Series A preferred shares are convertible into less thanone common share. Upon any conversion (whether at the option of the Company or the holder), the holder is entitled to receive any accrued but unpaid dividends.

Except as otherwise required by law (or with respect to approval of certain actions), the Series A Preferred Stock shall have no voting rights. Upon any liquidation, dissolution or winding up of the Company, after payment or provision for payment of debts and other liabilities of the Company, the holders of Series A Preferred Stock shall be entitled to receive, pari passu with any distribution to the holders of common stock of the Company, an amount equal to $8.00 per share of Series A Preferred Stock plus any accrued and unpaid dividends.

As of December 31, 2024, there were 48,100 shares of Series A Preferred Stock outstanding and accrued and unpaid dividends, included as Accrued Interest on the Balance Sheet, of $563,171. As of December 31, 2023, there $514,269 of accrued and unpaid dividends included as Accrued Interest on the Balance Sheet.

NOTE 13. SERIES 1B PREFERRED STOCK

On June 29, 2023, the Company entered into the Series 1B SPA with Accredited Investors for the private placement of 900 shares of Series 1B Preferred Stock for $900,000 gross proceeds.

The Series 1B Preferred Stock ranks senior to the common stock with respect to dividends and rights upon liquidation. Holders of the Series 1B Preferred Stock do not have voting rights and are not entitled to any fixed rate of dividends; however, if the Company pays a dividend or otherwise makes a distribution or distributions payable on shares of common stock, then the Company will make a dividend or distribution to the holders of the Series 1B Preferred Stock in such amounts as each share of Series 1B Preferred Stock would have been entitled to receive if such share of Series 1B Preferred Stock was converted into shares of common stock at the time of payment of the stock dividend or distribution.

There is no scheduled or mandatory redemption for the Series 1B Preferred Stock and there is no redemption for the Series 1B Preferred Stock exercisable (i) at the option of the Investor, or (ii) at the option of the Company.

Upon our liquidation, dissolution or winding up, holders of Series 1B Preferred Stock will be entitled to be paid out of the Company assets, prior to the holders of our common stock, an amount equal to $1,000 per share plus any accrued but unpaid dividends (if any) thereon.

Shares of the Series 1 B Preferred Stock are convertible at the option of the holder into common stock at an initial conversion price of equal to $2,800 per share. The conversion price for the Series 1B Preferred Stock is subject to adjustment on the earliest of the date that (a) a resale registration statement relating to the shares of common stock underlying the Series 1B Preferred Stock has been declared effective by the SEC, (b) all of such underlying shares of common stock have been sold pursuant to SEC Rule 144 or may be sold pursuant to SEC Rule 144 without volume or manner-of-sale restrictions, (c) the one year anniversary of the closing provided that a holder of such underlying shares is not an affiliate of the Company or (d) all of such underlying shares may be sold pursuant to an exemption from registration under Section 4(a)(1) of the Securities Act without volume or manner-of-sale restrictions (such earliest date, the “Reset Date”).

On the Reset Date, the conversion price shall be equal to the lower of (i) $2,800 and (ii)90% of the lowest VWAP for the Company’s common stock out of the 10 trading days commencing 5 trading days immediately prior to the Reset Date, provided that the conversion price may not be adjusted to less than $1,000 per share.

Holders of the Series 1B Preferred Stock (together with its affiliates) may not convert any portion of such Investor’s Series 1B Preferred Stock to the extent that the holder would beneficially own more than 4.99% of the Company’s outstanding shares of common stock after conversion, except that upon at least 61 days’ prior notice from the holders to the Company, the holder may increase the maximum amount of its beneficial ownership of outstanding shares of the Company’s Common Stock after converting the holder’s Series 1B Preferred Stock up to 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the conversion, as such percentage ownership is determined in accordance with the terms of the Series 1B Preferred Stock.

On October 2, 2023, with the closing of the Public Offering (Note 16), the Company retired the $900,000 of Series 1B Preferred Stock.

NOTE 14. SERIES 1C PREFERRED STOCK

On October 17, 2024, the Company entered into a securities purchase agreement with accredited investorsfor a convertible preferred stock financing for approximately $1.9 million of gross proceeds and will issue approximately 1,900 shares of Series 1C convertible preferred stock (“Series 1C Preferred Stock”) at a purchase price of $1,000 per share. Approximately 75% of these securities were purchased by officers, directors and advisory board members of the Company. Through December 31, 2024, the Company received approximately $815,000 of gross proceeds and the Company expects to receive the remaining balance by June 30, 2025. The Series 1C Preferred Stock is convertible into common stock at any time after April 17, 2025 at the option of the holder at an initial fixed conversion price of $2.50 per share of common stock; however, the holder may not convert any portion to the extent that the holder would beneficially own more than 4.99% of the Company's outstanding shares of Common Stock outstanding immediately after giving effect to the conversion.

Holders of the Series 1C Preferred Stock will be entitled to dividends on the per share stated value of $1,000 in the amount of 10% per annum, payable quarterly. The dividend rate will increase to 15%if any of the Series 1C Preferred Stock remains outstanding on or after October 17, 2027. Unless the Company elects to pay dividends on the Series 1C Preferred Stock in cash, the Company will cumulate the dividends, in which case the accrued dividend amount shall be added to the stated value of each share of Series 1C Preferred Stock. The Company recorded accrued dividends of $33,301 for the year ended December 31, 2024.

If at any time the closing sale price of the Company’s common stock equals at least 300% of the conversion price for the most recent 20 consecutive trading days, the Company shall have the right to redeem all, but not less than all, of the Series 1C Preferred Stock then outstanding in cash at a price equal to 110% of the stated value of the shares being redeemed.

Upon our liquidation, dissolution or winding up, holders of Series 1C Preferred Stock shall be entitled to receive in cash out of the assets of the Company, before any amount shall be paid to the holders of any of shares of common stock, an amount per share of Series 1C Preferred Stock equal to the greater of (A)110% of the stated value of such preferred share and (B) the amount per share such holder would receive if such holder converted such preferred share into common stock immediately prior to the date of such payment. The stated value was approximately $848,300 as of December 31, 2024.

On any matter presented to the stockholders of the Company for their action or consideration at any meeting of stockholders of the Company (or by written consent of stockholders in lieu of meeting), each holder of outstanding shares of Series 1C Preferred Stock shall be entitled to cast the number of votes equal to the number of whole shares of common stock into which the outstanding shares of Series 1C Preferred Stock held by such holder are convertible as of the record date (but only after giving effect to the maximum percentage conversion limitations referred to above). Except as provided by law or by the other provisions of the Series 1C Preferred Stock, holders of Series 1C Preferred Stock shall vote together with the holders of common stock as a single class and on an as-converted to common stock basis.

NOTE 15. SERIES Z PREFERRED STOCK

On June 20, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with Paul Warley, the Company’s Chief Executive Officer (the “Purchaser”) pursuant to which it issued and soldone (1) share (the “Share”) of the Company’s newly designated Series Z Preferred Stock, par value $0.0001 per share (the “Series Z Preferred Stock”), to such Purchaser for an aggregate purchase price of $1,000.

The Share of Series Z Preferred Stock is not convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the Company. The Share of Series Z Preferred Stock has no rights with respect to any distribution of assets of the Company, including upon a liquidation, bankruptcy, reorganization, merger, acquisition, sale, dissolution or winding up of the Company, whether voluntarily or involuntarily. The holder of the Share of Series Z Preferred Stock will not be entitled to receive dividends of any kind.

The outstanding share of Series Z Preferred Stock shall be redeemed in whole, but not in part, at any time (i) if such redemption is ordered by the Board of Directors in its sole discretion or (ii) automatically upon the effectiveness of the amendment to the Certificate of Incorporation implementing a reverse stock split. Upon such redemption, the holder of the Series Z Preferred Stock will receive consideration of $1,000 in cash.

The Share of Series Z Preferred Stock will have 1,800,000 votes and will vote together with the outstanding shares of the Company’s common stock as a single class exclusively with respect to any proposal to amend the Company’s Certificate of Incorporation to effect a reverse stock split of the Company’s common stock. The Share of Series Z Preferred Stock will be voted, without action by the holder, on any such reverse stock split proposal in the same proportion as shares of common stock are voted on such proposal (excluding any common shares that are not voted). The Series Z Preferred Stock otherwise has no voting rights, except as may otherwise be required by the General Corporation Law of the State of Delaware.

On August 22, 2024, the Company redeemed the Series Z Preferred Stock and repaid the consideration received.

NOTE 16. STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock

As of December 31, 2024, the Company had 500 million shares of common stock, $0.0001 par value, authorized for issuance. Each share of common stock has the right toone vote. As of December 31, 2024, the Company had 1,454,896 shares of common stock outstanding. The Company has not declared or paid any dividends related to the common stock through December 31, 2024.

During the year ended December 31, 2024, $400,000 of convertible debt principal was converted into 6,184 shares of common stock and $1,279,782 of conversions payable was converted into 17,934 shares of common stock.3,500 shares of common stock was also issued to settle liabilities.

At The Market Offering

On May 16, 2024, the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC, as sales agent (“Wainwright”), to sell shares of its common stock, having an aggregate sales price of up to $4,219,000, from time to time, through an “at the market offering” program. The sales, if any, of the common stock made under the ATM Agreement will be made by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on or through the Nasdaq Capital Market or on any other existing trading market for the Company’s common stock. The Company will pay Wainwright a commission rate equal to 3.0% of the aggregate gross proceeds from each sale of common stock and will also reimburse Wainwright for certain specified expenses inconnection with entering into the ATM Agreement, including certain fees and out-of-pocket expenses of its legal counsel.

On May 23, 2024, the Company increased the amount available for sale under the ATM Agreement, up to an additional aggregate offering price of $4,344,000 and on May 30, 2024, the Company again increased the amount available for sale under the ATM Agreement by an additional aggregate offering price of $3,981,000.

As of December 31, 2024, the Company sold 816,848 shares of common stock at an average price of $12.31 per share, resulting in aggregate gross proceeds of approximately $10 million. The Company anticipates that the at-the-market offering will continue throughout the next reporting period.

2024 Public Offering

On April 9, 2024 the Company entered into a placement agency agreement with Dawson James Securities Inc. (“Dawson James”) pursuant to which the Company engaged Dawson James as the placement agent for a registered public offering by the Company (the “Offering”), of up to $6 million of shares of common stock or, in lieu of common stock, one prefunded warrant to purchase a share of common stock on a best efforts basis.

The Company agreed to pay Dawson James a placement agent fee in cash equal to 8.00% of the gross proceeds from the sale of the shares of common stock; provided, however, that the placement agent fee shall equal 4% for investors that the Company directs to the Offering. The Company also agreed to reimburse Dawson James for all reasonable travel and other out-of-pocket expenses, including the reasonable fees of legal counsel, not to exceed $155,000.

On April 18, 2024, the Company, completed closings under the Offering of common stock. Aggregate gross proceeds from all closings under the offering total $5.09 million before deducting offering expenses. In the completed closings, the Company issued an aggregate of (i)151,795 common shares and (ii)211,623 Pre-Funded Warrants. The Pre-Funded Warrants are immediately exercisable at a price of $0.0001 per share of common stock and only expire when such Pre-Funded warrants are fully exercised.

As of December 31, 2024, all 211,623 of the Pre-Funded Warrants were exercised into common stock.

The net proceeds from the closings of the Offering were utilized to retire approximately $200,000 of cash payable and $3.6 million to repurchase and cancel the Warrants that were both issued with our secured notes issued in December 2022 (see Note 11).

2023 Public Offering

On September 28, 2023, the Company entered into a placement agency agreement with Dawson James pursuant to which the Company engaged Dawson James as the placement agent for a registered public offering by the Company (the “2023 Offering”), of an aggregate of 35,726 units (“Units”) at a price of $288 per Unit, for gross proceeds of approximately $10.3 million, before deducting offering expenses.

Each Unit is comprised of (i) one share of common stock or, in lieu of common stock, one Prefunded warrant to purchase a share of common stock, and (ii) one common warrant to purchase a share of common stock. The Prefunded warrants are immediately exercisable at a price of $0.0001 pershare of common stock and only expire when such Prefunded warrants are fully exercised. The common warrants are immediately exercisable at a price of $240.30 per share of common stock and will expire five years from the date of issuance.

The Company agreed to pay Dawson James a placement agent fee in cash equal to 8.00% of the gross proceeds from the sale of the Units. The Company also agreed to reimburse Dawson James for all reasonable travel and other out-of-pocket expenses, including the reasonable fees of legal counsel, not to exceed $155,000.

The 2023 Offering closed on October 2, 2023 and, in the 2023 Offering, the Company issued (i)3,890 common shares, (ii)31,836 Prefunded warrants, and (iii)43,044 common warrants.

The $10.3 million was allocated between the Common Stock or Prefunded Warrants and Common Stock Warrants purchased based on the relative fair value of these instruments. The fair value of the Common Stocks or Prefunded Warrants was determined using the closing price of the stock at close of the SPA (Level 1 on the fair value hierarchy) and the fair value of the Warrants was determined using the Black Scholes model using the following inputs (Level 2 on the fair value hierarchy):

The Company used a portion of the proceeds from the 2023 Offering to retire approximately $5.2 million of the outstanding conversion amount payable related to the Company’s secured convertible notes and all $900,000 of the Company’s outstanding Series 1B Preferred Stock.

During the years ended December 31, 2024 and 2023, 7,152 and 24,685 of the pre-funded warrants were exercised into common stock.

Warrants

As of December 31, 2024, there were approximately 143,000 outstanding warrants with exercise prices between $11.68 and $74,086 per share.

As of December 31, 2023, there were 99,982 (of which 7,151 are Prefunded warrants) outstanding warrants with exercise prices between $176 and $106,000 per share (per share amounts exclude the Prefunded warrants).

Preferred Stock

As of December 31, 2024, the Company had 25,000,000 shares of preferred stock, $0.0001 par value, authorized for issuance. Preferred stock may be issued in classes or series. Designations, powers, preferences, rights, qualifications, limitations and restrictions are determined by the Company’s Board of Directors. The following table summarizes the designations, shares authorized, and shares outstanding for the Company’s Preferred Stock:

Series A Preferred Stock

Refer to Note 12 for Series A Preferred Stock activity.

Series 1B Preferred Stock

Refer to Note 13 for Series 1B Preferred Stock activity.

Series 1C Preferred Stock

Refer to Note 14 for Series 1C Preferred Stock activity.

Series Z Preferred Stock

Refer to Note 15 for Series Z Preferred Stock activity.

Series B-1, B-2, C, D, D-1, E, F, G, H, I, J, J-1, and K Preferred Stock

There were no transactions involving the Series B-1, B-2, C, D, D-1, E, G, H, I, J, J-1, or K during the years ended December 31, 2024 and 2023.

NOTE 17. SHARE-BASED COMPENSATION

On September 21, 2022, the Company’s Board of Directors appointed Jeffrey Max as the Company’s new Chief Executive Officer and granted an inducement grant of restricted stock units (“RSUs”) for an aggregate of 177 shares of Ascent’s common stock.20% of the RSUs are fully vested upon grant. The remaining 80% of the RSUs vests in equal monthly increments over the next 36 months. Any outstanding and unvested RSUs will accelerate and fully vest upon the earlier of (i) a change of control and (ii) the termination of Mr. Max’s employment for any reason other than (x) by the Company for cause or (y) by Mr. Max without good reason. The estimated fair value of the restricted stock unit is $107,400, the closing price at grant date. The RSUs will settle in eight equal increments on the last business day of each calendar quarter beginning with the initial settlement date of September 30, 2024. On April 26, 2023, the Company terminated its employment contract with Mr. Max resulting in the forfeiture of 114 restricted stock units.

On December 12, 2022, the Company’s Board of Directors appointed Paul Warley as the Company’s new Chief Financial Officer and granted him an inducement grant of RSUs for an aggregate of 35 shares of Ascent’s common stock.20% of the RSUs are fully vested upon grant. The remaining 80% of the RSUs vests in equal monthly increments over the next 36 months. Any outstanding and unvested RSUs will accelerate and fully vest upon the earlier of (i) a change of control and (ii) the termination of Mr. Warley’s employment for any reason other than (x) by the Company for cause or (y) by Mr. Warley without good reason. The estimated fair value of the restricted stock unit is $59,600, the closing price at grant date. The RSUs will settlein eight equal increments on the last business day of each calendar quarter beginning with the initial settlement date of December 31, 2024.

In January 2024, the Company granted 4,590 shares of restricted stock units to employees and directors. One third of these shares vested on March 31, 2024. The remaining unvested shares will vest pro rata on January 1, 2025 and January 1, 2026. The Company also granted members of our advisory board an aggregate of 200 shares of restricted stock units. The advisory shares originally vested pro rata on January 1, 2025 and January 1, 2026; however, were amended to vest pro rata on June 30, 2024 and January 1, 2025.

The Company had a total of 3,188 units as of December 31, 2024 are expected to vest in the future. Total unrecognized share-based compensation expense from the remaining unvested restricted stock as of December 31, 2024 was $673,447 and is expected to be recognized over 12 months. The Company recognized share-based compensation expense related to restricted stock grants of$809,022 and $2,243,445 for the years ended December 31, 2024 and 2023, respectively. The following table summarizes non-vested restricted stock and the related activity as of and for the years ended December 31, 2024, and 2023:

The fair values of the respective vesting dates of RSUs was $7,149 and $264,800 for the years ended December 31, 2024 and 2023, respectively.

In August 2024, the Company granted 124,850 stock options terminating 10 years from the date of grant to employees, directors, and advisory board members. One third of these options vested on September 15, 2024. The remaining unvested options will vest pro rata annually on over the nexttwo years.

The Company had a total of 83,220 unvested options as of December 31, 2024 that are expected to vest in the future. Total unrecognized share based compensation expense from the remaining unvested options as of December 31, 2024 was approximately $302,000 and is expected to be recognized over approximately 1.75 years. The Company had approximately 41,630 exercisable options as of December 31, 2024. The following table summarizes options activity as of December 31, 2024:

The weighted average remaining contractual term for these options at December 31, 2024, was approximately 9.7 years. Based on the Black-Scholes option pricing model, the options estimated weighted average fair values at the date of grant of $4.15 per share. The fair values were estimated using the following weighted average assumptions:

The Company utilized the simplified method for estimating the stock options granted as the Company has experienced significant changes in its business and the historical data may not provide a reasonable basis upon which to estimate expected term.

NOTE 18. INCOME TAXES

At December 31, 2024, the Company had $233.6 million of cumulative net operating loss carryforwards for federal income tax purposes that were available to offset future taxable income through the year 2037. At December 31, 2024, the Company had $91.5 million of cumulative net operating loss carryforwards for federal income tax purposes that were available to offset future taxable income indefinitely. Under the Internal Revenue Code, the future utilization of net operating losses may be limited in certain circumstances where there is a significant ownership change. The Company prepared an analysis for the year ended December 31, 2012 and determined that a significant change in ownership had occurred as a result of the cumulative effect of the sales of common stock through its offerings. Such change resulted in a limitation of the Company’s utilizable net operating loss carryforwards and ultimately a write-off of the associated limited NOLs in the amount of $87 million. Available net operating loss carryforwards may be further limited in the event of another significant ownership change.

Deferred income taxes reflect an estimate of the cumulative temporary differences recognized for financial reporting purposes from that recognized for income tax reporting purposes. At December 31, 2024 and 2023, the components of these temporary differences and the deferred tax asset were as follows:

In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical losses and projections of future taxable income over the periods in which the deferred tax assets are deductible, management believes it is not more-likely-than-not that the Company will realize the benefits of these deductible differences at December 31, 2024. The Company’s deferred tax valuation allowance was $81.1 million and $81.1 million for the year ended December 31, 2024 and 2023, respectively.

As of December 31, 2024, the Company hasnot recorded a liability for uncertain tax positions. No interest and penalties related to uncertain tax positions were accrued at December 31, 2024.

The Company’s effective tax rate for the years ended December 31, 2024 and 2023 differs from the statutory rate due to the following (expressed as a percentage of pre-tax income):

NOTE 19. COMMITMENTS AND CONTINGENCIES

On September 21, 2022, the Company and Victor Lee, our former CEO, entered into a Separation Agreement and Release of Claims September 21, 2022 (the “Separation Agreement”). Under the Separation Agreement Mr. Lee is entitled, subject to his non-revocation of a general release of claims in favor of the Company, to the following separation benefits: (i) payment of twelve (12) months salary equal to $360,000, which amount shall be payable in accordance with the Company’s customary payroll practices and regular payroll time periods as in effect from time to time; (ii) the Company will pay Mr. Lee’s $200,000 declared but unpaid cash bonus in two installments; and (iii) the Company shall pay COBRA premiums at the Company’s current contribution level for the next 12 months. The Company settled all Severance Payable as of December 31, 2023.

On April 26, 2023, the board of directors of the Company terminated Mr. Max as the Company’s President and Chief Executive Officer. Mr. Max claims that his termination was not for cause as defined in his employment agreement which could enable him to certain benefits, including severance and vesting of restricted stock units. Management believes Mr. Max was terminated for cause and any such claims, if asserted, would be without substantial merit. Although the outcome of any legal proceedings is uncertain, the Company will vigorously defend any future claims made by Mr. Max.

On August 15, 2023, H.C. Wainwright & Co., LLC (“Wainwright”) filed an action against the Company in the New York State Supreme Court in New York County. The complaint alleges a breach by the Company of an investment banking engagement letter entered into in October 2021. The Wainwright engagement letter expired in April 2022 without any financing transaction having been completed. The complaint claims that Wainright is entitled, under a “tail provision”, to an 8% fee and 7% warrant coverage on the Company’s $15 million secured convertible note financing. The complaint seeks damages of $1.2 million,27 common stock warrants with a per share exercise price of $60,500 and attorney fees. On May 15, 2024, the Company and Wainwright reached a settlement agreement. The settlement did not have a material impact on our financial statements.

The Company is subject to various legal proceedings, both asserted and unasserted, that arise in the ordinary course of business. The Company cannot predict the ultimate outcome of such legal proceedings or in certain instances provide reasonable ranges of potential losses. However, as of the date of this report, the Company believes that none of these claims will have a material adverse effect on its financial position or results of operations. In the event of unexpected subsequent developments and given the inherent unpredictability of these legal proceedings, there can be no assurance that the Company’s assessment of any claim will reflect the ultimate outcome, and an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company’s financial position or results of operations in particular quarterly or annual periods.

NOTE 20. RETIREMENT PLAN

The Company has a qualified 401(k) plan which provides retirement benefits for all of its eligible employees. Under the plan, employees become eligible to participate at the first entry date, provided they are at least 21 years of age. The Company will match 100% of the first four percent of employee contributions. In addition, the Company may make discretionary contributions to the Plan as determined by the Board of Directors. Employees are immediately vested in all salary reduction contributions. Employer contributions vest over athree-year period, one-third per year. Employer 401(k) match expense was$74,062 and $107,526 for the year ended December 31, 2024 and 2023, respectively. 401(k) match expenses are recorded under “Research, development and manufacturing operations" expense and “Selling, general and administrative" expense in the Statements of Operations.

NOTE 21. SUBSEQUENT EVENTS

Subsequent to December 31, 2024, the Company sold 249,262 shares of common stock under the ATM Agreement at an average price of $2.73 per share, resulting in aggregate gross proceeds of approximately $680,863.