Interactive Strength, Inc.

1. Description of Business and Basis of Presentation

Description and Organization

Interactive Strength Inc. (the "Company") is the parent company of two leading brands serving the commercial and at-home markets with specialty fitness equipment and virtual training: CLMBR and FORME. CLMBR manufactures vertical climbing equipment and provides a unique digital and on-demand training platform. FORME is a hardware manufacturer and digital fitness service provider that combines award-winning smart gyms with live 1:1 personal training (from real humans) to deliver an immersive experience ("Connected Fitness Products"). The combination of technology with expert training leads to better outcomes for both consumers and trainers alike. CLMBR and FORME offer unique fitness solutions for both the commercial and at-home markets. Our Members are defined as any individual who has a FORME or CLMBR account through a paid connected fitness membership.

Binding LOI - Sportstech

On February 10, 2025, the Company, Sportstech and Mr. Ali Ahmad, the sole shareholder of Sportstech, entered into a Binding Transaction Agreement (the “Agreement”), pursuant to which the Company will acquire Sportstech in a transaction (the “Transaction”) comprised of an initial investment (the “Initial Investment”) and three optional investment tranches, which are callable, subject to performance metrics, by Mr. Ahmad or an entity connected to him.

Pursuant to the Agreement, in the Initial Investment, the Company will acquire an approximately 99.8% stake in Sportstech with a $15,000,000 capital increase through contribution in kind of the Company’s Series D Non-voting Convertible Preferred Stock to be newly created, all of which will be issued to Sportstech at the closing of the Transaction. The conversion price of the Initial Investment into the Company’s Common Stock will be determined on June 15, 2026, using the volume-weighted average price (the “VWAP”) of the previous 20 trading days, subject to compliance with Nasdaq Listing Rule 5635(d) (the “Nasdaq Minimum Price Rule”).

Optional Investment A (“Optional Investment A”) provides an option to call a capital increase of up to $10.0 million through contribution in kind of the Company’s Common Stock, which shall vest based on a formula that calculates (x) the EU-sourced EBITDA earned above $3.5 million for the twelve (12) months ended March 2026, (y) multiplied by two (2). The price used to calculate the number of the Company’s Common Stock issued for Optional Investment A will be determined on June 15, 2026 by using the VWAP of the previous 20 trading days, subject to compliance with the Nasdaq Minimum Price Rule.

Optional Investment B (“Optional Investment B”) provides an option to call a capital increase of up to $10.0 million through contribution in kind of the Company’s Common Stock, which shall vest based on a formula that calculates (x) the EU-sourced EBITDA earned above $5.5 million for the twelve (12) months ended March 2027, (y) multiplied by two (2). The price used to calculate the number of the Company’s Common Stock issued for Optional Investment B will be determined on June 15, 2027 by using the VWAP of the previous 20 trading days, subject to compliance with the Nasdaq Minimum Price Rule.

Optional Investment C (“Optional Investment C”) provides an option to call a capital increase of up to $20.0 million through contribution in kind of the Company’s Common Stock, which shall vest based on a formula that calculates (x) the US-sourced EBITDA earned for the twenty-four (24) months ended March 2027, (y) multiplied by three (3). The price used to calculate the number of the Company’s Common Stock issued for Optional Investment C will be determined on June 15, 2027 by using the VWAP of the previous 20 trading days, subject to compliance with the Nasdaq Minimum Price Rule.

In addition, pursuant to the Agreement, Mr. Ahmad will join the Board of Directors of the Company upon closing of the Initial Investment.

Acquisition of CLMBR, Inc.

On October 6, 2023, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) with CLMBR and CLMBR1, LLC (collectively, the “Sellers”) to purchase and acquire substantially all of the assets and assume certain liabilities of the Sellers. On January 22, 2024, the Company and the Sellers entered into an amended and restated Asset Purchase Agreement (the “Amended Agreement”). On February 2, 2024, pursuant to the Amended Agreement, the Company completed the acquisition for a total purchase price of approximately $16.1 million, consisting of (i) cash of $30,000, (ii)357 shares of the Company’s common stock with a fair value in the aggregate of $1.0 million, (iii)1,500,000 shares of the Company’s non-voting Series B preferred stock with a fair value in the aggregate of $3.0 million, (iv) contingent consideration with a fair value of $1.3 million, and (v) the retirement of $9.4 million of senior debt and $1.4 million in related fees, such retirement to be in the form of a $1.4 million cash payment to the lender of thesenior debt and the issuance of an $8.0 million promissory note to such lender (the “Acquisition”).

The Acquisition was accounted for under the acquisition method of accounting under ASC 805, Business Combinations. Assets acquired and liabilities assumed were recorded in the condensed consolidated balance sheet at their estimated fair values as of February 2, 2024, with the remaining unallocated purchase price recorded as goodwill. See Note 22. that outlines the Company’s consideration transferred and the identifiable net assets acquired at their estimated fair value as of February 2, 2024.

Basis of Presentation and Consolidation

The accompanying condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The condensed consolidated financial statements include the accounts of Interactive Strength Inc. and its subsidiaries in which the Company has a controlling financial interest. All intercompany balances and transactions have been eliminated.

In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, cash flows, and the changes in equity for the interim period.

Liquidity and Capital Resources

In accordance with Accounting Standards Update ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), or ASU 205-40, management evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the accompanying condensed consolidated financial statements were issued.

As an emerging growth company, the Company is subject to certain inherent risks and uncertainties associated with the development of an enterprise. In this regard, since the Company’s inception, substantially all of management’s efforts have been devoted towards the development of its brands and services, their penetration in the marketplace, and the development of a commercial organization, all at the expense of short-term profitability.

As of the date the accompanying condensed consolidated financial statements were issued (the “issuance date”), management evaluated the following adverse conditions and events present at the Company in accordance with ASU 205-40:

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The Company has incurred significant operating losses and used net cash flows in its operations since its inception. In this regard, the Company incurred a net operating loss of$6.3 million and used net cash in its operations of$3.5 million during the three months ended March 31, 2025, and had an accumulated deficit of$209.4 million as of March 31, 2025.

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In order to execute its emerging growth strategy, the Company has been heavily dependent on financing from lenders and capital from private and public investors (collectively “outside capital”) since its inception and expects to remain heavily dependent on outside capital for the foreseeable future until such time that the Company’s operations reach a scale of profitability that allows it to fund its obligations primarily with cash inflows from operations. However, management can provide no assurance the Company will ever be able to generate sufficient cash inflows to reduce or eliminate its reliance on outside capital.

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The Company’s available liquidity to fund its operations over the next twelve months beyond the issuance date was limited to approximately $0.5 million of unrestricted cash and cash equivalents. However, based on the Company’s anticipated liquidity needs, the foregoing available liquidity will not be sufficient to fund the Company’s obligations as they become over the next year beyond the issuance date due absent management’s ability to secure additional outside capital.

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While the Company is actively seeking to secure additional outside capital (and has historically been able to successfully secure such capital), no additional outside capital has been secured or was deemed probable of being secured as of the issuance date. In addition, management can provide no assurance the Company will be able to secure additional outside capital or on acceptable terms.

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Included in the Company’s anticipated liquidity needs is a substantial amount of outstanding debt that is scheduled to mature over the next twelve months beyond the issuance date. As of disclosed in Notes 11 and 21, the Company had total outstanding debt, including convertible notes, of approximately$10.9 million as of the issuance date, of which approximately $9.0 millionis scheduled to mature over the next twelve months beyond the issuance date, for which the Company does not have sufficient liquidity to repay if a cash settlement is required. In the event the Company is unable to refinance its outstanding debt, settle some or all of the debt with shares of the Company’s common or preferred stock, secure additional outside capital, and/or secure amendments or waivers from its lenders to defer or modify the repayment terms, management will be required to seek other strategic alternatives to settle this indebtedness, which may include, among others, a significant curtailment of the Company’s operations, a sale of certain of the Company’s assets, a sale of the entire Company to strategic or financial investors, and/or allowing the Company to become insolvent by filing for bankruptcy protection under the provisions of the U.S. Bankruptcy Code.

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In the past, the Company has been unable to remain in compliance with certain qualifications required by the Nasdaq Capital Markets in order for the Company’s common stock to remain listed on the Nasdaq. These requirements include a minimum stockholders’ equity balance of $2.5 million, a minimum of 500,000 publicly held shares, and a minimum trading price of $1.00 per share for a sustained period of time (collectively the “Rules”). The Company received two notices from the Listing Qualifications staff of the Nasdaq (the “Staff”) with respect to the Company’s noncompliance with these requirements, as follows:

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The first notice dated August 22, 2023, notified the Company that it did not comply with the minimum $2.5 million stockholders’ equity requirement for continued listing set forth in Nasdaq Listing Rule 5550(b)(1) (the “Rule 1”) but was granted a period of time to regain compliance. On November 25, 2024, the Company received a letter from the Staff stating that the Company has demonstrated compliance with Rule 1. The letter also stated that the Company will be subject to a Mandatory Panel Monitor for a period of one year from the date of the letter in accordance with the requirements of Nasdaq Listing Rule 5815(d)(4)(B). If, within that one-year monitoring period, the Staff finds that the Company failed to remain in compliance with Rule 1, the Company will not be permitted to provide the Staff with a plan of compliance with respect to that deficiency, the Staff will not be permitted to grant additional time for the Company to regain compliance with respect to that deficiency, and the Company will not be afforded an applicable cure or compliance period. Instead, the Staff will issue a Delist Determination Letter and the Company will have an opportunity to request a new hearing with the Panel. While the Company will have the opportunity to present to the Panel, no assurance can be provided that the Staff will grant the Company a compliance plan and allow the Company’s securities to remain listed on the Nasdaq.

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The second notice dated November 13, 2024 notified the Company that it did not comply with the minimum 500,000 publicly held shares requirement for continued listing set forth in Nasdaq Listing Rule 5550(a)(4) (“Rule 2”) but was granted a period of time to regain compliance. On December 23, 2024, the Company received a letter from the Staff confirming that the Company has demonstrated compliance with Rule 2. The letter also stated that the Company will be subject to a Mandatory Panel Monitor for a period of one year from the date of the letter in accordance with the requirements of Nasdaq Listing Rule 5815(d)(4)(B). If, within that one-year monitoring period, the Staff finds that the Company failed to remain in compliance with Rule 2, the Company will not be permitted to provide the Staff with a plan of compliance with respect to that deficiency, the Staff will not be permitted to grant additional time for the Company to regain compliance with respect to that deficiency, and the Company will not be afforded an applicable cure or compliance period. Instead, the Staff will issue a Delist Determination Letter and the Company will have an opportunity to request a new hearing with the Panel. While the Company will have the opportunity to present to the Panel, no assurance can be provided that the Staff will grant the Company a compliance plan and allow the Company’s securities to remain listed on the Nasdaq.

As of March 31, 2025 and through the issuance date, the Company was in compliance with the Rules. However, management can provide no assurance that the Company will be able to remain in compliance with the Rules over the next twelve months beyond the issuance date and, if compliance is not maintained, the Staff will not require the Company’s securities to be delisted from the Nasdaq. If a delisting occurs, the Company will be faced with a number of material adverse consequences, including limited availability of market quotations for its common stock; limited news and analyst coverage; decreased ability to obtain additional financing; limited liquidity for the Company’s stockholders due to thin trading; and a potential loss of confidence by investors, employees and other third parties who do business with the Company.

These uncertainties raise substantial doubt about our ability to continue as a going concern. The accompanying condensed consolidated financial statements have been prepared on the basis that the Company will continue to operate as a going concern, which contemplates that the Company will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future. Accordingly, the accompanying condensed consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

2. Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The accompanying unaudited interim condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP, for interim financial reporting and as required by Regulation S-X, Rule 10-01. Accordingly, these unaudited condensed consolidated financial statements do not include all of the information and disclosures required by U.S. GAAP for complete financial statements as certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on March 31, 2025.

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited consolidated annual financial statements for the years ended December 31, 2024 and 2023 and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the Company’s condensed consolidated balance sheet as of March 31, 2025 the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2025 and 2024, the condensed consolidated statement of stockholders' equity as of March 31, 2025 and condensed consolidated statements of cash flows for the three months ended March 31, 2025 and 2024. The financial data and other information disclosed in these notes related to the three months ended March 31, 2025 and 2024 are unaudited. The results for the three months ended March 31, 2025, are not necessarily indicative of results to be expected for the year ending December 31, 2025, any other interim periods, or any future year or period.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosures. On an ongoing basis, the Company evaluates its estimates, including, among others, those related to revenue related reserves, the realizability of inventory, fair value measurements, useful lives of long lived assets, including property and equipment and finite lived intangible assets, product warranty, stock-based compensation expense, warrant liabilities, accrual of acquisition earn-outs, estimated legal accruals, valuation of deferred taxes, valuation of derivatives, fair value of goodwill and other intangible assets, and commitments and contingencies. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable. Actual results may differ from these estimates.

Segment Information

Operating segments are defined as components of an enterprise for which separate and discrete information is available for evaluation by the chief operating decision-maker (“CODM”) in deciding how to allocate resources and assess performance. The Company has one operating segment, the development and sale of its at-home fitness technology platform. The Company’s chief operating decision maker, its chief executive officer, manages the Company’s operations on a consolidated basis for the purpose of allocating resources. As the Company has one reportable segment, all required segment financial information is presented in the condensed consolidated financial statements. The Company currently operates in the United States, the United Kingdom, and Taiwan. As of March 31, 2025 and 2024, substantially all of the Company’s long-lived assets are held in the United States.

Significant Accounting Policies

During the three months ended March 31, 2025, there were no significant changes to the Company’s significant accounting policies as described in the Company’s audited consolidated financial statements as of and for the year ended December 31, 2024, except as described below.

Loan Receivable

Loan receivable consists of a loan agreement entered into with Sportstech as a form of bridge financing until the acquisition is closed. The loan agreement provides for a $2.3 million loan facility (the “Loan”) that terminates on April 30, 2025 (the “Termination Date”). The Loan accrues interest at a rate of 10% per annum, subject to adjustment from time to time as set forth in the loan agreement, and has a discount at an amount equal to 10% of the principal amount. Pursuant to the Loan Agreement, Sportstech has the option, upon delivery of a written request, to extend the term of the Loan for an additional eight-month period, such that the Termination Date will be extended to December 30, 2025. Net loan origination fees and certain direct origination expenses of $0.2 million were deferred and amortized to interest income over the contractual life of the loan using the effective interest method. The Company is currently negotiating with Sportstech to extend the Termination Date.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”), or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective will not have a material impact on the Company’s condensed consolidated financial statements upon adoption. The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”) and has elected not to “opt out” of the extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, the Company will adopt the new or revised standard at the time public companies adopt the new or revised standard and will do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company. As noted below, certain new or revised accounting standards were early adopted.

Accounting Pronouncements Recently Adopted

ASU 2023-07

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures.” The amendments in the ASU improve reportable 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 and loss, and provide new segment disclosure requirements for entities with a single reportable segment, among other disclosure requirements. We adopted this standard on a retrospective basis for the 2024 annual period, and for interim periods beginning January 1, 2025. The impact is limited to financial statement disclosures. See Note 3 - Segment Reporting.

Accounting Pronouncements Not Yet Adopted

ASU 2020-04 and ASU 2022-06

In March 2020, the FASB issued ASU 2020-04, “Reference rate reform (Topic 848): Facilitation of the effects of reference rate reform on financial reporting.” The ASU provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. The amendments apply only to contracts and hedging relationships that reference London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. The amendments are elective and are effective upon issuance. In December 2022, the FASB issued ASU 2022-06, “Reference rate reform (Topic 848): Deferral of the sunset date of Topic 848” which defers the expiration date for Topic 848 from December 31, 2022 until December 31, 2024. The Company is currently evaluating the potential impact of adopting this new accounting guidance, but does not expect the adoption of the standard to have a material impact on its condensed consolidated financial statements.

ASU 2023-09

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The ASU modifies income tax disclosures by requiring (i) consistent categories and greater disaggregation of information in the rate reconciliations and (ii) the disclosure of income taxes paid disaggregated by jurisdiction, among other requirements. This ASU is effective for fiscal years beginning after December 31, 2024 and should be applied on a prospective basis, with the option to apply the standard retrospectively. Early adoption is permitted. We are currently evaluating the impact of the new standard, which is limited to financial statement disclosures.

ASU 2024-03

In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses". The amendments in ASU 2024-03 address investor requests for more detailed expense information and require additional disaggregated disclosures in the notes to financial statements for certain categories of expenses that are included on the face of the income statement. This guidance is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating this guidance to determine the impact it may have on its condensed consolidated financial statements.

3. Segment Reporting

We are organized intoone operating andone reportable segment that engages in the development and sales of specialty fitness equipment and virtual training and are managed on a consolidated basis. Our chief operating decision maker (“CODM”) is ourchief executive officer. Our CODM regularly reviews financial information at the operating segment level to allocate resources and to assess performance. Our CODM evaluates segment profit (loss) based on net loss, which is reported on the condensed consolidated statement of operations and comprehensive loss as net loss. The measure of segment assets is reported on the condensed consolidated balance sheets as total assets. Our CODM uses net loss to allocate resources, including property and equipment and financial or capital resources, to the segments and to assess their performance by monitoring budget-to-actual and year-over-year variances.

The following tables present revenue and significant segment expenses that are included within net loss:

(1)Transaction costs related to acquisition of CLMBR, Inc.

(2)Costs related to vendor settlements.

(3)Other segment items included in consolidated net loss includes sales and marketing (excluding stock based compensation, depreciation and amortization), other expense, and change in fair value of convertible notes.

See Note 4. Revenues for details of revenue from external customers by geography and by product.

4. Revenue Recognition

The Company’s primary source of revenue is substantially derived from the United States from sales of its Connected Fitness Products and related accessories and associated recurring Membership revenue, as well as from sales of personal training services recorded within Training revenue.

The Company determines revenue recognition through the following steps:

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Identification of the contract, or contracts, with a customer;

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Identification of the performance obligations in the contract;

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Determination of the transaction price;

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Allocation of the transaction price to the performance obligations in the contract; and

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Recognition of revenue when, or as, the Company satisfies a performance obligation.

Revenue is recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company’s revenue is reported net of sales returns, discounts and incentives as a reduction of the transaction price.

The Company applies the practical expedient as per ASC 606-10-50-14 and does not disclose information related to remaining performance obligations due to their original expected terms being one year or less.

Connected Fitness Products

Connected Fitness Products include the Company’s portfolio of Connected Fitness Products and related accessories, delivery and installation services, and extended warranty agreements. The Company recognizes Connected Fitness Product revenue net of sales returns and discounts on the date the product has been delivered to the customer or at shipping point if the customer is responsible for shipping, except for extended warranty revenue which is recognized over the warranty period. The Company allows customers to return products within thirty days of purchase, as stated in its return policy.

Amounts paid for payment processing fees for credit card sales for Connected Fitness Products are included as a reduction to fitness product revenue in the Company’s condensed consolidated statements of operations and comprehensive loss.

The Company’s memberships provide unlimited access to content in its library of on-demand fitness classes. The Company’s memberships are offered on a month-to-month basis.

Amounts paid for membership fees are included within deferred revenue on the Company’s condensed consolidated balance sheets and recognized ratably over the membership term. The Company records payment processing fees for its monthly membership charges within cost of membership in the Company’s condensed consolidated statements of operations and comprehensive loss.

The Company’s training services are personal training services delivered through the Connected Fitness Products, third-party mobile devices and in-studio classes. Training revenue is recognized at the time the services are delivered.

Standard Product Warranty

The Company offers a standard product warranty that its Connected Fitness Products and related accessories will operate under normal, non-commercial use for a period of one year which covers the touchscreen, frame and all incorporated elements, and related accessories from the date of original delivery. The Company has the obligation, at its option, to either repair or replace the defective product. At the time revenue is recognized, an estimate of future warranty costs are recorded as a component of cost of revenue. Factors that affect the warranty obligation include historical as well as current product failure rates, service delivery costs incurred in correcting product failures, and warranty policies and business practices.

The Company also offers the option for customers in some markets to purchase a third-party extended warranty and service contract that extends or enhances the technical support, parts, and labor coverage offered as part of the base warranty included with the Connected Fitness Product for an additional period of 24 to 48 months.

For third-party extended warranty service sold along with the Company’s Connected Fitness Products, the Company does not obtain control of the warranty before transferring it to the customers. Therefore, the Company accounts for revenue related to the fees paid to the third-party extended warranty provider on a net basis, by recognizing only the net commission it retains. The Company considers multiple factors when determining whether it obtains control of third-party products including, but not limited to, evaluating if it can establish the price of the product, retains inventory risk for tangible products or has the responsibility for ensuring acceptability of the product.

The Company sells connected fitness equipment and digital fitness services across Business to Business ("B2B") and Business to Customer ("B2C") channels in the United States. The Company also sells fitness equipment across B2B channel in Europe and Asia.

The following table presents a summary of total revenues by geographic location:

The following table presents a summary of total revenues by product:

5. Inventories, net

Inventories consist of the following:

Finished products - Long Term represents inventory not expected to be sold in the next twelve months. Raw materials - Long Term represents the components and parts currently being stored in our Taiwan facility that will be shipped to our manufacturing partners and will not be used within one year.

6. Property and Equipment, net

Property and equipment consisted of the following:

Depreciation expense amounted to$0.04 million and$0.2 million for each of the three months ended March 31, 2025 and 2024, respectively.

7. Goodwill and Intangible Assets, net

Goodwill

There wereno changes in the carrying amount of goodwill for thethree months ended March 31, 2025. As of March 31, 2025, there wasno goodwill impairment. Refer to Note 22. Acquisitions for more information.

Intangible Assets, Net

Identifiable intangible assets, net consist of the following:

Amortization expense amounted to$0.5 million and$0.7 million for each of the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025 and 2024, there wasno intangible asset impairment.

As of March 31, 2025, estimated annual amortization expense for each of the next five fiscal years is as follows:

8. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

9. Other Assets, net

Other assets, net consisted of the following:

Amortization expense amounted to$0.4 million and$1.0 million for the three months ended March 31, 2025 and 2024, respectively.

10. Accrued Expenses and Other Current Liabilities

Accrued expenses consisted of the following:

Accrued legal settlement of $2.0 million represents the payments due following settlement of a lawsuit which was an assumed liability as part of the Acquisition and is further discussed in Note 15. Commitments and Contingencies.

11. Debt

Debt consisted of the following:

Principal Stockholder Promissory Notes

During 2019, 2020, and 2021, the Company entered into promissory notes with a then-principal stockholder (the "former principal stockholder”) of the Company. As the 2019, 2020 and 2021 notes were not paid upon maturity, these loans were in default and on August 4, 2023, the Company received a notice of default from the principal stockholder. The Company accrued for the default fee on the date of default and the additional default interest following that date. See Note 20. Related Party Transactions. On January 29, 2025, the Former Principal Stockholder assigned the Former Principal Stockholder Notes to an accredited investor. On February 4, 2025, the Company and the accredited investor entered into an exchange agreement pursuant to which the Company issued (the “Exchange”) five new secured convertible promissory notes (the “ January 2025 Exchange Notes”). At the time of the Exchange, (1) the Company has negative cash flows from operations, history of losses, and significant accumulated deficit that raise substantial doubt about our ability tocontinue as a going concern and (2) the accredited investor accepted an interest rate of 5.0% on the January 2025 Exchange Notes, which is significantly lower than the default rates on the promissory notes at the time of the Exchange and therefore indicative of a concession. As a result, the Company will account for the Exchange as a troubled debt restructuring in accordance with ASC 470-60 Troubled Debt Restructurings by Debtors. The fair value of the January 2025 Exchange Notes on February 4, 2025 was $5.1 million and the carrying value of the Former Principal Stockholder Notes was $5.4 million resulting in a gain on extinguishment of $0.3 million which was recorded in the condensed consolidated statement of stockholders equity. See description of the January 2025 Exchange Notes in Note 11. Debt under heading "January 2025 Exchange Notes".

Promissory Notes

On March 5, 2025, the Company entered into an agreement to settle outstanding liabilities with prior Law Firm by issuing to the Law Firm an unsecured promissory note in the principal amount of $3.9 million which has a maturity date of October 15, 2025 and accrues interest at a rate of 12% per annum. Total interest expense of $0.03 million was recorded in the condensed consolidated statement of operations for the three months ended March 31, 2025.

Term Loan

On February 1, 2024, the Company entered into a Credit Agreement (the "Term Loan") with Vertical Investors LLC, (the “Lender”) pursuant to which the Company agreed to borrow from the Lender a term loan in the aggregate principal amount of approximately $8.0 million. The term loan bears interest at Daily Simple Secured Overnight Financing Rate ("SOFR-Based Rate"), and the Company shall pay a guarantee fee of $2.3 million due on the maturity date. The guarantee fee was treated as a debt discount and accreted through interest expense through maturity date. The maturity date of the Term Loan was originally June 28, 2024. On March 29, 2024, the Company issued 1,500,000 shares of the Company’s Series A Convertible Preferred Stock to the Lender in exchange for reduction of outstanding debt of $3.0 million which was effective upon entering into the Loan Modification Agreement (the “Modification Agreement”) on April 24, 2024.

On April 24, 2024, (the “Effective Date”) the Company entered into the Modification Agreement with the Lender reducing the outstanding debt by $3.0 million and extending the maturity date to December 31, 2024. The Loan Modification Agreement was evaluated and determined to be a modification as the effective borrowing rate was not reduced therefore no concession were made at the time of the modification.

Pursuant to the Modification Agreement, the Company agreed to make monthly payments of interest in the amount of $60,000 to the Lender. In addition, the Company agreed to make mandatory principal payments simultaneously with the closing of all future capital raises by the Company or any affiliate of the Company. The first principal payment will be the greater of (i) $3.0 million (the “Minimum Payment”) or (ii)20% of the net amount raised from any source of debt, equity, synthetic equity instruments or otherwise less any reasonable expenses paid to third parties (the “Net Capital Raise”). At each capital raise thereafter, the Company shall make a mandatory principal payment to the Lender of 20% of the Net Capital Raise. As of the Effective Date, the outstanding principal amount of the Loan was approximately $5.0 million.

On April 24, 2024, the Company entered into a Loan Restoration Agreement with the Lender (the “Restoration Agreement”) which was amended on September 30, 2024. The Amendment revised the definition of Preferred Stock to “2,861,128 shares of Series C Preferred Stock”. Prior to the Amendment, the definition of Preferred Stock read “1,500,000 shares of Series A Preferred Stock”. The definition of Net Trade Value was amended and restated in its entirety to include the disposition of the shares of Common Stock issued pursuant to the exchange agreements entered into by and between the Borrower and the Lender and the Net Trade Value shall be determined by Lender. Furthermore, the Amendment revised the date on which the Net Trade Value received will be calculated from December 31, 2024 to December 31, 2025. The Restoration Agreement was accounted for as a derivative in the Company’s condensed consolidated balance sheet in accordance with FASB ASC 815, Derivatives and Hedging. The derivative liability or asset will be remeasured at each reporting period using a Monte Carlo simulation with changes in fair value recorded in the condensed consolidated statements of operations in change in fair value of derivatives. See Note 13. for further details.

On September 30, 2024, the Lender was issued 59,668 shares of Series A Preferred Stock as a dividend in kind on the shares of Series A Preferred Stock owned by the Lender (the 59,668 shares of Series A Preferred Stock combined with the 1,500,000 shares of Series A Preferred Stock already owned by the Lender is referred to herein as the “Series A Preferred Shares”). As of September 30, 2024, the outstanding principal amount of the Loan was $4.3 million (the “Loan Amount”). On September 30, 2024, the Company and the Lender entered into an Exchange and Settlement Agreement (the “Exchange Agreement”). Pursuant to the Exchange Agreement, the Company and Lender agreed to exchange (a) the Series A Preferred Shares and (b) the Loan Amount (minus $2 million) for a total of 2,861,128 shares of the Company’s Series C Preferred Stock (“Series C Preferred Shares”). In connection with the Exchange Agreement, on September 30, 2024, the Company and the Lender reduced the principal amount of the Note Purchase Agreement previously entered into by the Company and the Lender to $2.0 million. The Company evaluated and determined the Exchange Agreement should be accountedfor as an extinguishment. The Series C Preferred stock shares was consideration paid to settle a portion of the Loan Amount and was recognized at fair value as of the date of issuance per ASC 470. The difference between the portion of the Loan Amount settled and the fair value of Series C Preferred stock on settlement date was recognized in earnings in loss upon extinguishment of debt in the condensed consolidated statements of operations.

On January 23, 2025, the Company and the Lender entered into a Settlement Agreement, pursuant to which the Company issued 496,246 shares of the Company’s Series C Preferred Stock, par value $0.0001 per share, to the Lender as payment of the $992,492 Net Trade Value as of the settlement date pursuant to the Loss Restoration Agreement.

On March 31, 2025, the Company and the Lender entered into a Settlement Agreement, pursuant to which the Company issued 1,188,571 shares of the Company’s Series C Preferred Stock, par value $0.0001 per share, to the Lender as payment of the $2,377,142 Net Trade Value as of the settlement date pursuant to the Loss Restoration Agreement.

The carrying value of the Term Loan is as follows:

Interest expense recognized on the Term Loan is as follows:

Convertible Notes

Other Related Party Convertible Notes

On February 18, 2020, the Company entered into a $0.1 million note with interest at the rate of 12.0% per annum and a maturity date of February 18, 2021. The note was amended in January 2024 to include a conversion provision whereby at any time while outstanding the lender has the right to convert any outstanding and unpaid principal and accrued interest of the note into shares of the Company's Series A Preferred Stock at a conversion price of $2.00 per share. The total outstanding balance at March 31, 2025 and December 31, 2024, including accrued interest, was $0.2 million and $0.2 million, respectively, and is included in convertible note payable on the condensed consolidated balance sheet.

February 2024 Convertible Notes

On February 1, 2024, the Company entered into a Senior Secured Convertible Promissory Note (the "February 2024 Convertible Note") with Treadway Holdings LLC, a lender, in the aggregate principal amount of $6.0 million, which is convertible into shares of Common Stock. The Note accrues interest at a rate of 2.0% per month.

The original maturity date of the February 2024 Convertible Note was December 15, 2024. Interest payments are guaranteed through the Maturity date regardless of whether the February 2024 Convertible Note is earlier converted or redeemed. The February 2024 Convertible Note is convertible (in whole or in part) at any time prior to the Maturity Date into the number of shares of Common Stock equal to the quotient resulting by dividing the outstanding principal balance of the February 2024 Convertible Note to be converted by a conversion price of $8,000.00 per share. The February 2024 Convertible Note sets forth certain standard events of default upon the occurrence of which the Company is required to deliver written notice to the Treadway Holdings LLC within two (2) business days. At any time after the earlier of (a) Treadway Holdings LLC’s receipt of a notice of default and (b) Treadway Holdings LLC becoming aware of the event of default, the Treadway Holdings LLC may require the Company to redeem all or any portion of the February 2024 Convertible Note. Upon an event of default, the February 2024 Convertible Note shall bear interest at a rate of 4.0% per month.

In November 2024, the Company and Treadway Holdings LLC entered into an Amended and Restated Senior Secured Convertible Promissory Note (the “Amended and Restated Note”) that amended and restated the February 2024 Convertible Note in its entirety. The Amended and Restated Note has a principal amount of $4,000,000 (the “Principal Amount”). Pursuant to the Amended and Restated Note, the conversion price of the February 2024 Convertible Note was changed to $4.79 per share (the Common Stock’s Nasdaq Official Closing Price (as reflected on Nasdaq.com) on November 11, 2024. The amendment to the Note represents the addition of a substantive conversion feature and as a result the Company recorded a loss on extinguishment upon issuance and the remaining unamortized discount was written off upon extinguishment. The Company elected the fair value option for the February 2024 Convertible Notes under ASC 825, Financial Instruments, with changes in fair value recorded in earnings each reporting period. The fair value of the February 2024 Convertible Notes and change to were determined using a discounted cash flow analysis at a discount rate of 16.3%. The fair value of the February 2024 Convertible Notes of $4.0 million was recorded as a current liability upon fair value election.

On December 13, 2024, the Company and Treadway Holdings LLC entered into a Letter Agreement (the “Letter Agreement”) that amends the Note Purchase Agreement. Pursuant to the Letter Agreement, Section 3.2(a) of the Note Purchase Agreement was amended to allow the Company to extend the maturity date of the Amended and Restated Note (the “Maturity Date”) upon written notice to Treadway Holdings LLC and payment of the Extension Fee (as defined below) to extend the Maturity Date for an additional thirty-day period (each an “Extension”). The Company shall be entitled to up to three Extensions.

Pursuant to the Letter Agreement, each “Extension Fee” shall be an amount in cash, calculated as of the Maturity Date prior to giving effect to such Extension, equal to five percent (5%) of the sum of (A) the outstanding principal balance of the Amended and Restated Note plus (B) the principal amount of converted Amended and Restated Note for which Treadway Holdings LLC is still holding the resulting conversion shares. For each Extension period, if the principal amount of the Amended and Restated Note converted by Treadway Holdings LLC during such Extension period is less than the purchase price received by Treadway Holdings LLC upon the sale of the resulting conversion shares (such difference, the “Conversion Profit”), then the Extension Fee for the following Extension shall be reduced by an amount equal to such Conversion Profit (but not less than zero).

In connection with the Letter Agreement, the Company exercised its option for the first Extension on December 13, 2024, and paid the applicable Extension Fee of $0.2 million and reimbursed the Purchaser’s accrued but unpaid legal fees of $0.02 million. As of December 13, 2024, the Maturity Date was extended to January 14, 2025.

On January 14, 2025, Treadway Holdings LLC sold the Amended and Restated Note to Woodway USA, Inc. (the “Purchaser”). The Purchaser was the guarantor of the Note Purchase Agreement and is currently the largest customer of the Company, pursuant to the previously disclosed Exclusive Distribution Agreement, by and between the Company and the Purchaser, dated as of February 20, 2024. On March 3, 2025, the Purchaser sold the Amended and Restated Note to TR Opportunities II LLC (the “Current Holder”). The transfer of the Amended and Restated Note on January 14, 2025 and March 3, 2025 were both exchanges between creditors without any involvement of the Company, therefore on either exchange date there was no accounting impact to the Company.

For the three months ended March 31, 2025, the Current Holder converted a total of $1.2 million owed pursuant to the Amended and Restated Note into a total of 471,750 shares of Common Stock and the Company recorded a gain on extinguishment of debt of $0.09 million.

January 2025 Exchange Notes

As previously disclosed, from 2019 to 2021, the Company entered into five promissory notes (collectively, the “Former Principal Stockholder Notes”) with a then-principal stockholder (the "Former Principal Stockholder”) of the Company.

On January 29, 2025, the Former Principal Stockholder assigned the Former Principal Stockholder Notes to an accredited investor that is managed by an ATW Partners related entity (the “Exchange Agreement Investor”). The Selling Stockholder is also managed by an ATW Partners related entity.

On February 4, 2025, the Company and the Exchange Agreement Investor entered into an Exchange Agreement (the “Exchange Agreement”), pursuant to which the Company and the Exchange Agreement Investor exchanged the Former Principal Stockholder Notes for five new secured promissory notes of the Company secured by the Company’s assets (the “January 2025 Exchange Notes”). Note 1 was exchanged for “Exchange Note 1”, Note 2 was exchanged for “Exchange Note 2”, Note 3 was exchanged for “Exchange Note 3”, Note 4 was exchanged for “Exchange Note 4”, and Note 5 was exchanged for “Exchange Note 5”. The January 2025 Exchange Notes were offered, sold, and issued by the Company to the Exchange Agreement Investor pursuant to the exemption provided in Section 3(a)(9) under the Securities Act.

The principal amounts of the January 2025 Exchange Notes are as follows: Exchange Note 1 principal amount: $2.8 million, Exchange Note 2 principal amount: $1.6 million, Exchange Note 3 principal amount: $0.3 million, Exchange Note 4 principal amount: $0.4 million, and Exchange Note 5 principal amount: $0.4 million.

The January 2025 Exchange Notes accrue interest at a rate of 5% per annum, subject to adjustment from time to time as set forth in the Exchange Notes. The maturity date of Exchange Note 1 and Exchange Note 3 is May 5, 2025. The maturity date of Exchange Note 2, Exchange Note 4 and Exchange Note 5 is April 4, 2025.

The January 2025 Exchange Notes are convertible (in whole or in part) at any time prior to the maturity date into the number of shares of Common Stock equal to (x) the sum of (A) the portion of the principal of the January 2025 Exchange Notes to be converted, redeemed or otherwise with respect to which this determination is being made, (B) accrued and unpaid interest with respect to the principal of the Exchange Note, (C) accrued and unpaid late charges with respect to the principal of the Exchange Note and interest, and (D) any other unpaid amounts pursuant to the Exchange Agreement, if any, divided by (y) a conversion price of $2.04 per share, subject to adjustment as provided in the Exchange Notes (such shares, the “Exchange Agreement Note Conversion Shares”).

The January 2025 Exchange Notes, in the aggregate principal amount of $5.4 million were fully converted into 2,642,878 shares of Common Stock in February 2025 and the Company recorded a gain on extinguishment of debt of $2.1 million.

The Company has elected the fair value option to account for its January 2025 Exchange Notes upon issuance in February 2025 as the exchange was accounted for as an extinguishment.

January 2025 Convertible Notes

On January 28, 2025, the Company sold a senior secured convertible note (the “January 2025 Convertible Notes”) in the aggregate principal amount of $3.3 million, which is convertible into shares of the Company’s common stock, par value $0.0001 per share. The January 2025 Convertible Notes carries an original issue discount of 10.0% and accrues interest at a rate of 12% per annum, subject to adjustment from time to time as set forth in the agreement with a maturity date of January 24, 2028.

The January 2025 Convertible Notes is convertible (in whole or in part) at any time prior to the Maturity Date into the number of shares of Common Stock equal to (x)110% of the sum of (i) the portion of the principal amount of the January 2025 Convertible Notes to be converted or redeemed, (ii) accrued and unpaid Interest with respect to such principal amount of the January 2025 Convertible Notes, (iii) the Make-Whole Amount, (iv) accrued and unpaid Late Charges with respect to such principal amount of the Note, Make-Whole Amount and Interest, and (v) any other unpaid amounts pursuant to the Transaction Documents, if any, divided by (y) a conversion price of $3.133 per share, subject to adjustment as provided in the January 2025 Convertible Notes agreement.

The January 2025 Convertible Notes sets forth certain standard events of default (each such event, an “Event of Default”), upon the occurrence of which the Company is required to deliver written notice to the Investor within one business day (an “Event of Default Notice”). At any time after the earlier of (a) the Investor’s receipt of an Event of Default Notice, and (b) the Investor becoming aware of an Event of Default, the Investor may require the Company to redeem all or any portion of the Note. Upon an Event of Default, the Note shall bear interest at a rate of the sum of (x) the applicable Interest Rate in effect for such determination and (y)8.0% per annum.

For the three months ended March 31, 2025, the Investor converted a total of $2.0 million owed pursuant to the January 2025 Convertible Notes into a total of 826,950 shares of Common Stock and the Company recorded a gain on extinguishment of debt of $0.7 million.

The $3.3 million of aggregate principal received from the issuance of the January 2025 Convertible Notes was initially allocated to the aggregate issuance date fair value of the embedded derivatives and the warrants issued in connection with the issuance of the January 2025 Convertible Notes (see Note 13. Fair Value Measurements for more information), original issue discount and the remainder of the proceeds from the issuance of the January 2025 Convertible Notes was allocated to the convertible notes, resulting in a debt discount of $2.0 million. In addition, the Company incurred $0.3 million of debt issuance costs. The Company has recorded the debt discount and debt issuance costs as a direct reduction to the face value of the January 2025 Convertible Notes and will amortize these amounts over the life of January 2025 Convertible Notes as a component of interest expense on the condensed consolidated statement of operations. The January 2025 Convertible Notes will remain on the consolidated balance sheet at amortized cost.

The carrying value of the January 2025 Convertible Notes is as follows:

Interest expense recognized on the January 2025 Convertible Notes is as follows:

March 2025 Convertible Notes

On March 11, 2025, the Investor elected to exercise 829,876 Class A Incremental Warrants to purchase the Class A Incremental Notes (the "March 2025 Convertible Notes") for an aggregate principal amount of $4.0 million. The March 2025 Convertible Notes carry an original issue discount of 10.0% and accrues interest at a rate of 12% per annum, subject to adjustment from time to time as set forth in the March 2025 Convertible Notes agreement. The maturity date of the March 2025 Convertible Notes is January 24, 2028.

The March 2025 Convertible Notes are convertible (in whole or in part) at any time prior to the Maturity Date into the number of shares of Common Stock equal to (x)110% of the sum of (i) the portion of the principal amount of the March 2025 Convertible Notes to be converted or redeemed, (ii) accrued and unpaid Interest with respect to such principal amount of the March 2025 Convertible Notes, (iii) the Make-Whole Amount, (iv) accrued and unpaid Late Charges with respect to such principal amount of the Note, Make-Whole Amount and Interest, and (v) any other unpaid amounts pursuant to the transaction documents, if any, divided by (y) a conversion price of $1.989 per share, subject to adjustment as provided in the March 2025 Convertible Notes agreement.

The March 2025 Convertible Notes sets forth certain standard events of default (each such event, an “Event of Default”), upon the occurrence of which the Company is required to deliver written notice to the Investor within one business day (an “Event of Default Notice”). At any time after the earlier of (a) the Investor’s receipt of an Event of Default Notice, and (b) the Investor becoming aware of an Event of Default, the Investor may require the Company to redeem all or any portion of the Note. Upon an Event of Default, the Note shall bear interest at a rate of the sum of (x) the applicable Interest Rate in effect for such determination and (y)8.0% per annum.

The $4.0 million of aggregate principal received from the issuance of the March 2025 Convertible Notes was initially allocated to the aggregate issuance date fair value of the embedded derivatives and the warrants issued in connection with the issuance of the March 2025 Convertible Notes (see Note 13. Fair Value Measurements for more information), original issue discount and the remainder of the proceeds from the issuance of the March 2025 Convertible Notes was allocated to the convertible notes, resulting in a debt discount of $2.1 million. In addition, the Company incurred $0.1 million of debt issuance costs. The Company has recorded the debt discount and debt issuance costs as a direct reduction to the face value of the March 2025 Convertible Notes and will amortize these amounts over the life of March 2025 Convertible Notes as a component of interest expense on the condensed consolidated statement of operations. The March 2025 Convertible Notes will remain on the consolidated balance sheet at amortized cost.

The carrying value of the March 2025 Convertible Notes is as follows:

Interest expense recognized on the March 2025 Convertible Notes is as follows:

12. Warrants

The following is a schedule of changes in warrants issued and outstanding from December 31, 2024 to March 31, 2025:

The warrants are classified as other long-term liabilities within the condensed consolidated balance sheets and are carried at fair value, with changes in fair value recorded in earnings.

November 2023 Bridge Warrants

In connection with the November Bridge Notes issued in November 2023, the Company entered into a warrant agreement whereby the holders are eligible to receive warrants based on the occurrence of future events as defined in the agreement. No warrants have been issued as of March 31, 2025.

February 2024 Warrants

On February 1, 2024, the Company issued an aggregate 750 warrants to purchase shares of common stock to an accredited investor in conjunction with the issuance of its $6.0 million February 2024 Note. The Warrants are exercisable for 375 shares of Common Stock, at a price of $5,000.00 per share (“Warrant 1”) and $7,000.00 per share (“Warrant 2” and, together with Warrant 1, the “Warrants”) (the “Exercise Prices”). The Warrants may be exercised during the period commencing February 1, 2024 and ending on February 1, 2034. The Exercise Prices are subject to voluntary adjustments and adjustments upon subdivision or combinations of shares of Common Stock.

Woodway Warrants

On February 20, 2024, the Company issued 200 warrants in connection with an Exclusive Distribution Agreement with WOODWAY USA, INC ("Woodway"). Each warrant has a strike price of $5,000.00 per share. The warrants may be exercised during the period commencing February 20, 2024 and ending February 20, 2034.

Registered Direct Placement Agent Warrants

On May 8, 2024, the Company entered into an engagement agreement with H.C. Wainwright & Co., LLC (the "Placement Agent"), pursuant to which the Placement Agent agreed to act as the exclusive placement agent in connection with the Registered Offering. The Company has agreed to issue the Placement Agent or its designees as compensation in connection with the Offering, warrants to purchase up to an aggregate of 107 shares of Common Stock (equal to 7.5%of the aggregate number of Shares sold in the Registered Offering)

andwill have a term of five years from the commencement of sales in the Registered Offering and an exercise price of $880.00 per share.

Registered Direct Offering Warrants

Pursuant to the securities purchase agreement, in a concurrent private placement (together with the Registered Offering, the “Offering”), the Company has also agreed to issue to the Investors unregistered warrants to purchase up to an aggregate of 1,420 shares of Common Stock, which represent 100% of the shares of Common Stock to be issued and sold in the Registered Offering. The Warrants have an exercise price of $704.00 per share, and will expire on the five and one-half (5.5) year anniversary from the Stockholder Approval Date on May 31, 2024.

Best Efforts Offering A-1 and A-2 Warrants

On July 1, 2024, the Company issued Series A-1 warrants to purchase up to an aggregate of 28,369 shares of common stock and Series A-2 warrants to purchase up to an aggregate of 28,369 shares of common stock. The public offering price for each Share and accompanying Warrants was $141.00 (which is the last reported sale price of the Common Stock on The Nasdaq Capital Market on June 28, 2024). Each Warrant has an exercise price of $141.00 per share and is exercisable beginning on the effective date of stockholder approval on August 30, 2024. The Series A-1 Warrant will expire on the five-year anniversary of the initial issuance date. The Series A-2 Warrant will expire on the eighteen-month anniversary of the initial issuance date.

Best Efforts Placement Agent Warrants

The Company entered into an engagement agreement with H.C. Wainwright & Co., LLC (the "Placement Agent"), pursuant to which the Placement Agent agreed to act as the exclusive placement agent in connection with the Best Efforts Offering. The Company has agreed to issue the Placement Agent or its designees as compensation in connection with the Offering, warrants to purchase up to an aggregate of 2,128 shares of Common Stock (equal to 7.5% of the aggregate number of Shares sold in the Best Efforts Offering) and will have a term of five years from the commencement of sales in the Best Efforts Offering and an exercise price of $176.30 per share.

January 2025 Warrants

On January 28, 2025, the Company issued warrants to purchase 674,274 shares of common stock. The warrants are exercisable for shares of common stock at a price of $4.82 per share. The warrants may be exercised during the period commencing January 28, 2025 and ending January 28, 2032. The warrant exercise price is subject to customary adjustments for stock dividends, stock splits, issuances of additional shares of common stock.

January 2025 Class A Incremental Warrants

On January 28, 2025, the Company issued 2,697,097 Class A incremental warrants to purchase senior secured convertible notes in the aggregate principal amount of $13.0 million. On March 11, 2025 the Investor elected to exercise 829,876 Class A Incremental Warrants to purchase Class A Incremental Notes of $4.0 million. The Incremental Warrants are exercisable during the period commencing January 28, 2025 and ending on the two year anniversary of the effectiveness of the Registration Statement at an exercise price of equal to 90% of the principal amount of the Incremental Notes issued to such purchaser, subject to customary adjustments for stock dividends, stock splits, issuances of additional shares of Common Stock and the like. The Incremental Warrants contain call options that allow the Company to repurchase the incremental warrants if certain conditions are present.

January 2025 Class B Incremental Warrants

On January 28, 2025, the Company issued 4,149,380 Class B incremental warrants to purchase senior secured convertible notes in the aggregate principal amount of $20.0 million. The Incremental Warrants are exercisable during the period commencing January 28, 2025 and ending on the two year anniversary of the effectiveness of the Registration Statement at an exercise price of equal to 90% of the principal amount of the Incremental Notes issued to such purchaser, subject to customary adjustments for stock dividends, stock splits, issuances of additional shares of Common Stock and the like. The Incremental Warrants contain call options that allow the Company to repurchase the incremental warrants if certain conditions are present.

March 2025 Warrants

On March 11, 2025, the Company issued warrants to purchase 829,876 shares of common stock. The warrants are exercisable for shares of common stock at a price of $3.06 per share. The warrants may be exercised during the period commencing January 28, 2025 and ending January 28, 2032. The warrant exercise price is subject to customary adjustments for stock dividends, stock splits, issuances of additional shares of common stock.

13. Fair Value Measurements

The Company’s financial instruments consist of derivatives, convertible notes held at fair value, and warrants.

Assets and liabilities measured at fair value on a recurring basis as of March 31, 2025 and December 31, 2024 were as follows:

During the three months ended March 31, 2025, there wereno transfers between Level 1 and Level 2, nor into and out of Level 3. The carrying values of the Company’s prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

The following summarizes the activity for the Company Level 3 assets and liabilities measured at fair value on a recurring basis for thethree months ended March 31, 2025.

Derivative Assets

Derivative Liabilities

Loss Restoration Derivative Asset / Liability

In connection with the Company entering into the Loss Restoration Agreement the Company recorded the Loss Restoration Derivative as a derivative asset or a derivative liability in the Company’s condensed consolidated balance sheet depending on the fair value in accordance with FASB ASC 815, Derivatives and Hedging. Monte Carlo Simulation valuation models incorporate assumptions as to stock price volatility, discount rate, dividend rate and risk-free interest rate. The Company recognized a gain equal to $2.6 million and $0.0 million forthree months ended March 31, 2025 and 2024, respectively, related to change in fair value of the Loss Restoration Derivative recorded in the condensed consolidated statements of operations in change in fair value of derivatives. The assumptions used to estimate the fair value of the Loss Restoration Derivative are as follows:

January 2025 Convertible Note Derivative

In connection with the Company issuing the January 2025 Convertible Notes, the Company recorded the January 2025 Convertible Note Derivatives (the "January 2025 Derivative") as a liability in the Company’s condensed consolidated balance sheet in accordance with FASB ASC 815, Derivatives and Hedging. The fair value of the January 2025 Derivative as of January 28, 2025 was $1.0 million and was determined using a Monte Carlo simulation. The Monte Carlo Simulation valuation model incorporates assumptions as to stock price volatility, discount rate, dividend rate and risk-free interest rate. The Company recognized a gain equal to $0.7 million for three months ended March 31, 2025, respectively, related to change in fair value of the January 2025 Derivative recorded in the condensed consolidated statements of operations in change in fair value of derivatives. The assumptions used to estimate the fair value are as follows:

March 2025 Convertible Note Derivative

In connection with the Company issuing the March 2025 Convertible Notes, the Company recorded the March 2025 Convertible Note Derivatives (the "March 2025 Derivative") as a liability in the Company’s condensed consolidated balance sheet in accordance with FASB ASC 815, Derivatives and Hedging. The fair value of the March 2025 Derivative as of March 11, 2025 was $1.1 million and was determined using a Monte Carlo simulation. The Monte Carlo Simulation valuation model incorporates assumptions as to stock price volatility, discount rate, dividend rate and risk-free interest rate. The Company recognized a gain equal to $0.4 million for three months ended March 31, 2025, respectively, related to change in fair value of the March 2025 Derivative recorded in the condensed consolidated statements of operations in change in fair value of derivatives. The assumptions used to estimate the fair value are as follows:

Convertible Notes

February 2024 Convertible Notes

The Company entered into a convertible note arrangement in February 2024. The amendment to the Note represents the addition of a substantive conversion feature and as a result the Company recorded a loss on extinguishment upon issuance and the remaining unamortized discount was written off upon extinguishment. The Company elected the fair value option for the February 2024 Convertible Notes under ASC 825, Financial Instruments, with changes in fair value recorded in earnings each reporting period. The fair value of the February 2024 Convertible Notes were determined using a discounted cash flow analysis at a discount rate of 16.3%. The fair value of the February 2024 Convertible Notes of $4.0 million was recorded as a current liability upon issuance. The Company recorded a change in fair value adjustment of $0.3 million and $0.0 million forthree months ended March 31, 2025 and 2024, respectively.

January 2025 Exchange Notes

On February 4, 2025, the Company and the Exchange Agreement Investor entered into an Exchange Agreement (the “Exchange Agreement”), pursuant to which the Company and the Exchange Agreement Investor exchanged the Former Principal Stockholder Notes for five new secured promissory notes of the Company secured by the Company’s assets (the “January 2025 Exchange Notes”). The amendment to the Note represents the addition of a substantive conversion feature and as a result the Company recorded a gain on extinguishment included in condensed consolidated statement of stockholders equity. The Company elected the fair value option for the January 2025 Exchange Notes under ASC 825, Financial Instruments, with changes in fair value recorded in earnings each reporting period. The fair value of the January 2025 Exchange Notes were determined using a discounted cash flow analysis at a discount rate of 16.3%. The fair value of the January 2025 Exchange Notes of $5.1 million was recorded as a current liability upon issuance. The January 2025 Exchange Notes, in the aggregate principal amount of $5.4 million were fully converted into 2,642,878 shares of Common Stock in February 2025. The Company recorded a change in fair value adjustment of $0.3 million and $0.0 million forthree months ended March 31, 2025 and 2024, respectively.

Warrants

The following table summarizes the activity for the Company Level 3 warrant liabilities measured at fair value on a recurring basis for thethree months ended March 31, 2025:

November 2023 Warrants

On November 10, 2023, the Company issued warrants to two accredited investors to purchase shares of Common Stock. The fair value of the warrants was determined using the Monte Carlo Simulation, given the variable number of shares issuable upon exercise of the warrant. For the outstanding warrants as of March 31, 2025 and December 31, 2024, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) and risk free rate. The Company recorded a change in fair value of warrants of $0.0 million and $0.1 million forthree months ended March 31, 2025 and 2024, respectively. The assumptions used to estimate the fair value of the November 2023 Warrants are as follows:

February 2024 Warrants

On February 1, 2024, the Company issued an aggregate 75,000 warrants to purchase shares of common stock to an accredited investor in conjunction with the issuance of its $6.0 million February 2024 Note. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as of March 31, 2025 and December 31, 2024, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.0 million and $1.2 million forthree months ended March 31, 2025 and 2024, respectively. The assumptions used to estimate the fair value of the February 2024 Warrants are as follows:

Woodway Warrants

On February 20, 2024, the Company issued warrants in connection with an Exclusive Distribution Agreement with WOODWAY USA, INC. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as March 31, 2025 and December 31, 2024, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.0 million and $0.3 million forthree months ended March 31, 2025 and 2024, respectively. The assumptions used to estimate the fair value of the Woodway Warrants are as follows:

Registered Direct Placement Agent Warrants

On May 8, 2024, the Company issued warrants in connection with an agreement with the Placement Agent, pursuant to which the Placement Agent agreed to act as the exclusive placement agent in connection with the Registered Offering. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as March 31, 2025 and December 31, 2024, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, and (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.0 million and $0.0 million forthree months ended March 31, 2025 and 2024, respectively. The assumptions used to estimate the fair value of the Placement Agent Warrants are as follows:

Registered Direct Offering Warrants

On May 20, 2024, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as March 31, 2025 and December 31, 2024, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.0 million and $0.0 million forthree months ended March 31, 2025 and 2024, respectively. The assumptions used to estimate the fair value of the Registered Offering Warrants are as follows:

Best Efforts Offering Pre-Funded Warrants

On July 1, 2024, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as March 31, 2025 and December 31, 2024, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.0 million and $0.0 million forthree months ended March 31, 2025 and 2024, respectively. The warrants were exercised in full in July 2024.

Best Efforts A-1 Warrants

On July 1, 2024, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as March 31, 2025 and December 31, 2024, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.004 million and $0.0 million forthree months ended March 31, 2025 and 2024, respectively. The assumptions used to estimate the fair value of the Best Efforts A-1 Warrants are as follows:

Best Efforts A-2 Warrants

On July 1, 2024, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as March 31, 2025 and December 31, 2024, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.0 million and $0.0 millionfor three months ended March 31, 2025 and 2024, respectively. The assumptions used to estimate the fair value of the Best Efforts A-2 Warrants are as follows:

Best Efforts Placement Agent Warrants

On July 1, 2024, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. For the outstanding warrants as March 31, 2025 and December 31, 2024, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.0 million and $0.0 million forthree months ended March 31, 2025 and 2024, respectively. The assumptions used to estimate the fair value of the Best Efforts Placement Agent Warrants are as follows:

January 2025 Warrants

On January 28, 2025, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. The fair value of the January 2025 Warrants of $0.7 million was recorded as along-term liability upon issuance. For the outstanding warrants as March 31, 2025, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.3 million for thethree months ended March 31, 2025. The assumptions used to estimate the fair value of the January 2025 Warrants are as follows:

January 2025 Class A Incremental Warrants

On January 28, 2025, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Monte Carlo simulation and the determined value as of issuance date was $0.0 million. For the outstanding warrants as March 31, 2025, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.0 million for thethree months ended March 31, 2025. The assumptions used to estimate the fair value of the January 2025 Class A Incremental Warrants are as follows:

January 2025 Class B Incremental Warrants

On January 28, 2025, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Monte Carlo simulation and the determined value as of issuance date was $0.0 million. For the outstanding warrants as March 31, 2025, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.0 million for thethree months ended March 31, 2025. The assumptions used to estimate the fair value of the January 2025 Class B Incremental Warrants are as follows:

March 2025 Warrants

On March 11, 2025, the Company issued warrants in connection with a securities purchase agreement with certain institutional investors. The fair value of the warrants was determined using a Black-Scholes-Merton model, in which the probability and timing of potential future events is considered in order to estimate the fair value of the warrants as of each valuation date. The fair value of the March 2025 Warrants of $0.5 million was recorded as along-term liability upon issuance. For the outstanding warrants as March 31, 2025, management determined the fair value of the warrants using the following significant unobservable inputs: (1) probability and timing of events, (2) expected future equity value of the underlying shares at the time of conversion, (3) dividend yield and (4) a risk free rate. The Company recorded a change in fair value of warrants of $0.1 million for thethree months ended March 31, 2025. The assumptions used to estimate the fair value of the March 2025 Warrants are as follows:

The following summarizes the activity for the Company Level 3 liabilities measured at fair value on a recurring basis for the three months ended March 31, 2024:

Derivatives

In connection with the Company’s issuance of its December 2023 Note, the Company bifurcated the embedded conversion option and redemption rights and recorded embedded conversion option and redemption rights as a short term derivative liability in the Company’s balance sheet in accordance with FASB ASC 815, Derivatives and Hedging. The fair value of the embedded derivative was determined using a lattice model. The Company recognized gains equal to $0.05 million for the three months ended March 31, 2024 related to changes in fair value of the embedded derivative for the December 2023 Note recorded in the condensed consolidated statements of operations in other expense (income).

November 2023 Bridge Notes

On November 10, 2023, the Company issued the November Bridge Notes. The fair value of the bridge notes were determined using a discounted cash flow analysis at a discount rate of 21.0%. The Company amended the Bridge notes into convertible notes in January 2024 and subsequently converted the notes into Preferred Stock Series A in February 2024 and March 2024. The Company recognized a loss equal to $0.3 million on the extinguishment of debt and loss on change in fair value of $0.3 million upon conversion to Series A Preferred Stock for thethree months ended March 31, 2024.

Warrants

The change in fair value of warrants for thethree months ended March 31, 2024 was as follows:

14. Leases

Lease Obligations

The Company adopted ASC 842 on January 1, 2022, using the effective date transition method, which requires a cumulative-effect adjustment to the opening balance of retained earnings on the effective date.

The Company has made certain assumptions and judgements when applying ASC 842 including the adoption of the package of practical expedients available for transition. The practical expedients allowed the Company to not reassess (i) whether expired or existing contracts contained leases, (ii) lease classification for expired or existing leases and (iii) previously capitalized initial direct costs. The Company also elected not to recognize right-of-use assets and lease liabilities for short-term leases (leases with a term of twelve months or less).

Operating lease arrangements primarily consist of office and warehouse leases expiring at various years through 2028. The facility leases have original lease terms of two to seven years and contain options to extend the lease up to 5 years or terminate the lease. Options to extend are included in leased right-of-use assets and lease liabilities in the condensed consolidated balance sheet when the Company is reasonably certain it will renew the underlying leases. Since the implicit rate of such leases is unknown and the Company is not reasonably certain to renew its leases, the Company has elected to apply a collateralized incremental borrowing rate to facility leases on the original lease term in calculating the present value of future lease payments.

As of March 31, 2025, the weighted average discount rate for operating leases was 7.38% and the weighted average remaining lease term for operating leases was 2.2 years, respectively. As of December 31, 2024, the weighted average discount rate for operating leases was 6.89% and the weighted average remaining lease term for operating leases was 2.3 years, respectively.

The Company has entered into various short-term operating leases for office and warehouse space, with an initial term of twelve months or less. These short-term leases are not recorded on the Company’s condensed consolidated balance sheets. The components of lease expense and other information forthree months ended March 31, 2025 and 2024 were as follows.

The following represents the Company’s minimum annual rental payments under operating leases for each of the next five years and thereafter:

15. Commitments and Contingencies

Royalty Agreement

In 2017, the Company entered into a royalty agreement with Fuseproject and agreed to pay 3% of cumulative FORME net sales up to $5.0 million and 1% of cumulative FORME net sales above $5.0 million, up to a maximum total royalty of $1.0 million. Regardless of the level of cumulative net sales, a guaranteed minimum payment of $0.2 million shall be paid in the first 12 months after the product's initial retail release as an advance towards the royalty payments which was accrued as of March 31, 2025. The Company recorded royalty expense of $0.005 million and $0.004 million forthree months ended March 31, 2025 and 2024, respectively.

Legal Proceedings

On March 7, 2024, a petition was filed by Tung Keng Enterprise Co., Ltd. d/b/a DK City Co., Ltd. (“DK City”) against CLMBR, Inc. and the Company in the United States District Court for the District of Colorado to enforce a monetary arbitration award of approximately $2.25 million against CLMBR, Inc. (the “Petition”). The Company was not involved in that prior arbitration, which involved alleged breaches of an equipment manufacturing agreement between CLMBR, Inc. and DK City. On June 25, 2024, CLMBR, Inc. and the Company collectively resolved the dispute via a Confidential Settlement Agreement and Mutual Release with DK City. Pursuant to that agreement, the Company is required to make certain payments to DK City, CLMBR Inc. and the Company will be released from liability, and the Petition will be voluntarily dismissed without prejudice. Total remaining payments as of March 31, 2025 of $2.0 million are all due within one year from March 31, 2025 and are included in Accrued Expenses and other current liabilities in the condensed consolidated balance sheet. The Company is in default per the agreement as a result of not following the payment plan.

The Company has been sued for breach of contract and related claims by one of its former financial services consultants (“the Plaintiff”). On or about February 20, 2025, an action was filed and is presently pending in the Superior Court of Massachusetts, Suffolk County. The Plaintiff is seeking damages in the amount of $2.2 million (plus interest and attorneys’ fees, costs, and expenses) related to the Company’s alleged breach of an agreement between the parties for financial services Plaintiff allegedly provided to the Company. The parties are currently engaged in good faith settlement discussions to fully resolve all allegations and/or claims. In the event of an unfavorable final judgment against the Company, management believes it will not have a material impact on the Company’s financial position but it could have a material impact on the Company’s cash flows. The Company believes it is adequately accrued as of March 31, 2025.

The Company is involved in legal proceedings in the normal course of business. The Company currently believes that any ultimate liability arising out of such proceedings will not have a material adverse effect on the Company’s financial position, results of operations or cash flows.

16. Stockholders’ Equity (Deficit)

Common Stock

The Company’s authorized common stock consisted of 900,000,000 shares at $0.0001 par value, as of March 31, 2025 and December 31, 2024. The issued and outstanding common stock was 7,953,570 shares and 1,402,102 shares as of March 31, 2025 and December 31, 2024, respectively.

On February 2, 2024, the Company issued 357 shares of common stock in connection with acquisition of CLMBR, Inc. as part of the purchase price.

From January 2024 through June 2024, the Company issued 2,882 shares of common stock upon conversions of $1.9 million from the December 2023 Convertible Note.

On February 1, 2024, the Company issued 188 shares of common stock to the February 2024 Convertible Note holder, pursuant to a securities purchase agreement.

On February 1, 2024, the Company issued 63 shares of common stock to the December 2023 Convertible Note holder and the Equity Line Investor for granting a waiver to the Company to allow the Company to issue the February 2024 Convertible Note and to enter into the Term Loan.

In January 2024 through May 2024, the Company issued 407 shares of common stock, par value $0.0001, from equity line of credit.

In May 2024, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company agreed to issue and sell, in a registered direct offering priced at-the-market under the rules of The Nasdaq Stock Market an aggregate of 1,420 shares of common stock, par value $0.0001, of the Company, at an offering price of $704.00 per share.

In June 2024, the Company issued 231 shares of common stock upon exercising of warrants associated with the December 2023 Convertible Note.

In July 2024, the Company commenced a best efforts public offering of an aggregate of 2,100 shares of common stock, par value $0.0001 per share, of the Company, at an offering price of $141.00 and issued 26,269 shares of common stock from exercise of pre-funded warrants of common stock, par value $0.0001, of the Company, at an offering price of $140.90 per share.

In June 2024 through December 2024, the Company issued 648,700 shares of common stock, par value $0.0001, from At the Market offering.

The Reverse Stock Split on June 14, 2024 decreased the number of shares of Common Stock issued and outstanding but such reduction was subject to adjustment for the rounding up of fractional shares. On June 25, 2024 due to the rounding up of fractional shares, a total of 1,003 shares of Common Stock were issued to certain shareholders who owed shares of Common Stock on June 14, 2024.

The Reverse Stock Split on November 11, 2024 decreased the number of shares of Common Stock issued and outstanding but such reduction was subject to adjustment for the rounding up of fractional shares. On November 21, 2024 due to the rounding up of fractional shares, a total of 217,717 shares of Common Stock were issued to certain shareholders who owed shares of Common Stock on November 11, 2024.

From September 2024 through November 2024, the Company issued 235,161 shares of common stock upon conversion of $2.4 million of debt.

From November 2024 through December 2024, the Company issued 262,051 shares of common stock upon conversion of 919,794 shares of Series A Preferred Stock.

In February 2025, the Company issued 821,500 shares of common stock, par value $0.0001, from At the Market offering.

From January 2025 through March 2025, the Company issued 3,941,578 shares of common stock upon conversion of $8.6 million of convertible notes.

From January 2025 through March 2025, the Company issued 1,788,390 shares of common stock upon conversion of 100,000 shares of Series A Preferred Stock,1,060,118 shares of Series B Preferred Stock and 2,801,250 shares of Series C Preferred Stock.

Preferred Stock

In January 2024, our board authorized the proposed issuance of shares of non-voting Series A and Series B convertible preferred stock. The Company's authorized preferred stock consists of 200,000,000 shares at $0.0001 par value as of December 31, 2024. The Series A Certificate designated 5,000,000 shares of the Company’s preferred stock as Series A Preferred Stock. The Series B Certificate designated 1,500,000 shares of the Company’s preferred stock as Series B Preferred Stock. In September 2024, our board authorized the proposed issuance of shares of non-voting Series C convertible preferred stock. The Series C Certificate designated 5,000,000 shares of the Company’s preferred stock as Series C Preferred Stock. The remaining unissued shares of our authorized preferred stock are undesignated. On April 18, 2024, the Series A Certificate was amended increasing designated shares from 5,000,000 to 7,000,000. On June 28, 2024 the Series A Certificate was amended increasing designated shares from 7,000,000 to 10,000,000.

The Series A convertible preferred stock is subject to certain rights, preferences, privileges, and obligations, including voluntary and mandatory conversion provisions, as well as beneficial ownership restrictions and share issuance caps, as described below and as set forth in the Series A Certificate. The Series A convertible preferred stock can be issued at any time and any subsequent mandatory or voluntary conversion into common stock shall be at a conversion price at least equal to or above the closing price per share of the Common Stock as reported on Nasdaq on the last trading day immediately preceding the date that the Series A Certificate was approved by our board of directors, subject to customary adjustments for stock splits and combinations.

The Series A convertible preferred stock includes the following:

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Subject to certain restrictions specified in the Series A Certificate, and applicable legal and regulatory requirements, including without limitation, the listing requirements of the Nasdaq Stock Market, (i) each share of Series A convertible preferred stock is convertible, at the option of the holder, at any time, provided that such conversion occurs at least 12 months following the Original Issuance Date (as defined in the Series A Certificate), into such whole number of fully paid and non-assessable shares of common stock as is determined by dividing the Original Issue Price (as defined in the Series A Certificate) by the Conversion Price (as defined in the Series A Certificate) in effect at the time of conversion, and (ii) upon the earliest Mandatory Conversion Time (as defined in the Series A Certificate) all outstanding shares of Series A convertible preferred stock shall automatically be converted into shares of common stock;

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In no event shall any share of Series A convertible preferred stock convert into shares of common stock if the total number of shares of common stock issued would exceed 19.99% of the total number of our shares of common stock outstanding as of immediately prior to the adoption of the Series A Certificate;

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Dividends accrue on each share of Series A convertible preferred stock at the rate per annum of 8% of the Original Issue Price of such share, plus the amount of previously accrued dividends, compounded annually, subject to certain restrictions and provisions as set forth in the Series A Certificate; and

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The Series A convertible preferred stock does not have any voting rights, other than any vote required by law or our certificate of incorporation (which does not currently provide for any such voting rights).

On January 23, 2025 the Board of Directors of the Company declared a dividend on the shares of Series A Preferred Stock issued and outstanding as of the record date for such dividend, as a dividend in kind, in the form of 112,334 shares of Series A Preferred Stock. The Company issued 112,334 Dividend Shares on January 23, 2025.

There are no circumstances outside the Company's control other than final liquidation that would require the Company to settle the Series A Preferred Stock in cash therefore the Company classified the Series A Preferred Stock as permanent equity as of March 31, 2025.

The Series B convertible preferred stock includes the following:

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Subject to certain restrictions specified in the Series B Certificate, and applicable legal and regulatory requirements, including without limitation, the listing requirements of the Nasdaq Stock Market, (i) each share of Series B convertible preferred stock is convertible, at the option of the holder, at any time, into such whole number of fully paid and non-assessable shares of common stock as is determined by dividing the Original Issue Price (as defined in the Series B Certificate) by the Conversion Price (as defined in the Series B Certificate) in effect at the time of conversion.

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In the event that stockholder approval is not obtained, the holders of the Series B Preferred Stock may voluntarily convert the Series B Preferred Stock into Common Stock, provided that in no event shall the number of shares of Common Stock issued upon such voluntary conversion exceed 19.99% of the total number of shares of Common Stock outstanding as of immediately prior to the execution of the Asset Purchase Agreement.

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The Series B Preferred Stock does not have any voting rights, other than any vote required by law or the Company’s certificate of incorporation (which does not currently provide for any such voting rights) and is not entitled to any dividends.

The Company classifies Series B Preferred Stock in accordance with ASC 480, Distinguishing Liabilities from Equity, as there are conversion features that are subject to shareholder approval which is outside of the Company and therefore the securities should be classified outside of permanent stockholders’ deficit. Upon shareholder approval on May 31, 2024, the Company classified the Series B Preferred Stock as permanent equity.

The Series C convertible preferred stock includes the following:

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Subject to certain restrictions specified in the Series C Certificate, and applicable legal and regulatory requirements, including without limitation, the listing requirements of the Nasdaq Stock Market, (i) each share of Series C convertible preferred stock is convertible, at the option of the holder, at any time, provided that such conversion occurs at least 18 months following the Original Issuance Date (as defined in the Series C Certificate), into such whole number of fully paid and non-assessable shares of common stock as is determined by dividing the Original Issue Price (as defined in the Series C Certificate) by the Conversion Price (as defined in the Series C Certificate) in effect at the time of conversion, and (ii) upon the earliest Mandatory Conversion Time (as defined in the Series C Certificate) all outstanding shares of Series C convertible preferred stock shall automatically be converted into shares of common stock;

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In the event that stockholder approval is not obtained, the holders of the Series C convertible preferred stock may voluntarily convert the Series C convertible preferred stock, provided that in no event shall the number of shares of Common Stock issued upon such voluntary conversion exceed 19.99% of the total number of shares of Common Stock outstanding as of immediately prior to the Effective Date (as defined in the Series C Certificate);

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Dividends accrue on each share of Series C convertible preferred stock at the rate per annum of 15% of the Original Issue Price of such share, plus the amount of previously accrued dividends, compounded annually, subject to certain restrictions and provisions as set forth in the Series C Certificate; and

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The Series C convertible preferred stock does not have any voting rights, other than any vote required by law or our certificate of incorporation (which does not currently provide for any such voting rights).

There are no circumstances outside the Company's control other than final liquidation that would require the Company to settle the Series C Preferred Stock in cash therefore the Company classified the Series C Preferred Stock as permanent equity as of March 31, 2025.

On January 23, 2025, the Board of Directors of the Company declared a dividend on the shares of Series C Preferred Stock issued and outstanding as of the record date for such dividend, as a dividend in kind, in the form of 126,515 shares of Series C Preferred Stock. The Company issued 126,515 Dividend Shares on January 23, 2025.

17. Equity-Based Compensation

2023 and 2020 Equity Incentive Plan

Presented below is a summary of the compensation cost recognized in the condensed consolidated statements of operations and comprehensive loss for thethree months ended March 31, 2025 and 2024.

For the three months ended March 31, 2025 and 2024, $0.3 million and$0.2 million of stock-based compensation was capitalized as software costs, respectively.

During the three months ended March 31, 2025, the Company didnot grant any shares under the 2023 and 2020 Plan. The Company hasnot granted any restricted stock or stock appreciation rights.

The following summary sets forth the stock option activity under the 2023 and 2020 Plan:

The aggregate intrinsic value of options outstanding, exercisable and unvested were calculated as the difference between the exercise price of the options and the estimated fair market value of the Company’s common stock, as of March 31, 2025.

With respect to the 2023 and 2020 Plan, the Company recognized stock compensation expense of$2.1 million and $3.4 million for thethree months ended March 31, 2025 and 2024, respectively, of which $0.3 million and$0.2 million of stock-based compensation was capitalized as software costs, respectively. As of March 31, 2025 and December 31, 2024, the Company had $1.9 million and $4.4 million of unrecognized stock-based compensation expense that is expected to be recognized over a weighted-average period of 0.5 years and 0.7 years, respectively.

18. Concentration of Credit Risk and Major Customers and Vendors

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. The Company’s cash and cash equivalents are maintained with high-quality financial institutions, the compositions and maturities of which are regularly monitored by management.

For three months ended March 31, 2025, Woodway our exclusive distributor represents 71% of the Company’s total revenue. Forthree months ended March 31, 2024, there wereno customers representing greater than 10% of the Company’s total revenue.

At March 31, 2025, one customer had an accounts receivable balance greater than 10% of accounts receivable, representing 97% of accounts receivable in the aggregate. At December 31, 2024, one customer had an accounts receivable balance greater than 10% of accounts receivable, representing 96% of accounts receivable in the aggregate.

The Company hadone vendor representing greater than 10% of total finished goods for the three months ended March 31, 2025. The Company hadno vendors representing greater than 10% of total finished goods for the three months ended March 31, 2024.

19. Benefit Plans

The Company established a defined contribution savings plan under Section 401(k) of the Internal Revenue Code. This plan covers all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Matching contributions to the plan may be made at the discretion of the Company’s board of directors. During the three months ended March 31, 2025 and 2024, the Company didnot make any contributions to the plan.

20. Loss Per Share

The computation of loss per share is as follows:

The following potentially dilutive shares were not included in the calculation of diluted shares outstanding as the effect would have been anti-dilutive:

21. Related Party Transactions

In the ordinary course of business, we may enter into transactions with directors, principal officers, their immediate families, and affiliated companies in which they are principal stockholders (commonly referred to as “related parties”).

Principal Stockholder Promissory Notes

On January 29, 2025, the Former Principal Stockholder assigned the Former Principal Stockholder Notes of $5.4 million to an accredited investor that is managed by an ATW Partners related entity (the “Exchange Agreement Investor”) and the outstanding principal balance is $0 million as of March 31, 2025. See Note 11 for further information.

During 2019, 2020, and 2021 the Company entered into the following promissory notes with a then-principal stockholder (the "former principal stockholder”) of the Company.

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On May 17, 2019, a $2.0 million note with interest at the rate of 2.5% per annum and maturity date of May 17, 2021. The note includes additional interest and fees associated with it upon the occurrence of default for late payment. Upon default, the Company shall pay a fee of 5% of the outstanding principal balance and accrued interest and from that point further interest shall accrue at an additional rate of 7.5%. This note was secured by a lien on and security interest in all right, title and interest of the Company’s assets. The security interest continued until all obligations under the note were satisfied. The total outstanding principal balance including accrued interest as of March 31, 2025 and December 31, 2024 was $0.0 million and $2.8 million, respectively.

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On August 28, 2019, a $1.0 million note with interest at the rate of 5.0% per annum and a maturity date of August 28, 2021. The note includes additional interest and fees associated with it upon the occurrence of default for late payment. Upon default, the Company shall pay a fee of 5.0% of the outstanding principal balance and accrued interest and from that point further interest shall accrue at an additional rate of 10.0%. This note was secured by a lien on and security interest in all right, title and interest of the Company’s assets. The security interest continued until all obligations under the note were satisfied. The total outstanding principal balance including accrued interest as of March 31, 2025 and December 31, 2024 was $0.0 million and $1.5 million, respectively.

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On November 28, 2019, a $0.3 million note with interest at the rate of 5.0% per annum and a maturity date of August 28, 2021. The note includes additional interest and fees associated with it upon the occurrence of default for late payment. Upon default, the Company shall pay a fee of 5% of the outstanding principal balance and accrued interest and from that point further interest shall accrue at an additional rate of 10.0%. This note was secured by a lien on and security interest in all right, title and interest of the Company’s assets. The security interest continued until all obligations under the note were satisfied. The total outstanding principal balance including accrued interest as of March 31, 2025 and December 31, 2024 was $0.0 million and $0.3 million, respectively.

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On March 20, 2020, a $0.3 million note with interest at the rate of 5.0% per annum and a maturity date of March 20, 2022. The note includes additional interest and fees associated with it upon the occurrence of default for late payment. Upon default, the Company shall pay a fee of 5% of the outstanding principal balance and accrued interest and from that point further interest shall accrue at an additional rate of 10.0%. This note was secured by a lien on and security interest in all right, title and interest of the Company’s assets. The security interest continued until all obligations under the note were satisfied. The total outstanding principal balance including accrued interest as of March 31, 2025 and December 31, 2024 was $0.0 million and $0.4 million, respectively.

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On February 12, 2021, a $0.6 million note with interest at the rate of 5.0% per annum and a maturity date of June 12, 2022. The note includes additional interest and fees associated with it upon the occurrence of default for late payment. Upon default, the Company shall pay a fee of 5% of the outstanding principal balance and accrued interest and from that point further interest shall accrue at an additional rate of 10.0%. This note is secured by a lien on and security interest in all right, title and interest of the Company’s assets. The security interest continued until all obligations under the note were satisfied. The total outstanding principal balance including accrued interest as of March 31, 2025 and December 31, 2024 was $0.0 million and $0.4 million, respectively.

As of December 31, 2024, all outstanding promissory notes with respect to the former principal stockholder are included within the loan payable on the condensed consolidated balance sheet for a total of $5.3 million, including accrued interest and default interest of $1.8 million. Interest expense, including default interest, recorded in the condensed consolidated statement of operations was $0.03 million and $0.3 million for thethree months ended March 31, 2025 and 2024, respectively.

Loan payable included the following as of March 31, 2025 and December 31, 2024:

Other Related Party Transactions

In 2017, the Company entered into a royalty agreement with Fuseproject and agreed to pay 3% of cumulative net FORME fitness product sales up to $5.0 million and 1% of cumulative net FORME fitness product sales above $5.0 million, up to a maximum total royalty of $1.0 million. Regardless of the level of cumulative net sales, a guaranteed minimum payment of $0.2 million shall be paid in the first 12 months after the products initial retail release as an advance towards the royalty payments which was accrued as of March 31, 2025. As of March 31, 2025 the Company has accrued $0.2 million in royalty payments. The Company recorded royalty expense of $0.005 million and $0.004 million forthree months ended March 31, 2025 and 2024, respectively.

22. Acquisition

On October 6, 2023, the Company entered into an asset purchase agreement (the “Asset Purchase Agreement”) with CLMBR and CLMBR1, LLC (collectively, the “Sellers”) to purchase and acquire substantially all of the assets and assume certain liabilities of the Sellers. On January 22, 2024, the Company and the Sellers entered into an amended and restated Asset Purchase Agreement (the “Amended Agreement”). On February 2, 2024, pursuant to the Amended Agreement, the Company completed the acquisition for a total purchase price of approximately $16.1 million, consisting of (i) cash of $30,000, (ii)357 shares of the Company’s common stock with an aggregate fair value of $1.0 million, (iii)1,500,000 shares of the Company’s non-voting Series B preferred stock with an aggregate fair value of $3.0 million, (iv) contingent consideration with a fair value of $1.3 million (as further described below), and (v) the retirement of $9.4 million of senior debt and $1.4 million in related fees, such retirement to be in the form of a $1.4 million cash payment to the lender of the senior debt and the issuance of an $8.0 million promissory note to such lender (the “Acquisition”).

The CLMBR, acquisition was a strategic acquisition that helped accelerate the Company’s commercialization path and help achieve immediate scale, resulting in a high growth, profitable platform that sells connected fitness equipment and digital fitness services across B2B and B2C channels.

The CLMBR acquisition was accounted for as a purchase business combination in accordance with ASC 805 “Business Combinations.” Assets acquired and liabilities assumed were recorded in the condensed consolidated balance sheet at their estimated fair values as of February 2, 2024, with the remaining unallocated purchase price recorded as goodwill.

(a) As previously reported in the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2024.

(b) The adjustments to goodwill resulted from finalization of assets acquired and liabilities assumed as the Company obtained additional information during the measurement period. The purchase price allocation period closed as of December 31, 2024.

The Company recorded a step-up in the fair value of inventory of approximately $0.6 million and is being amortized through Cost of Fitness product as the underlying product is sold.

The identified intangible assets of $6.2 million are comprised of hardware developed technology of $1.1 million that have an estimated useful life of 7 years, software developed technology of $0.3 million that have an estimated useful life of 4 years, hardware distribution of $3.7 million that have an estimated useful life of 13 years, direct-to-customer subscription of $0.3 million that have an estimated useful live of 9 years, and trademarks and trade name of $0.8 million that have an estimated useful life of 9 years. Significant assumptions utilized in the valuation of identified intangible assets were based on company specific information and projections which are not observable in the market and are thus considered Level 3 measurements as defined by U.S. GAAP. Estimated annual amortization expense for each of the next five fiscal years is included in Note 7.

Accrued Earn Out

As part of the Acquisition of CLMBR, Inc., the Sellers shall be entitled to receive a contingent payment in the form of shares of Common Stock (collectively, the “Earn-Out Shares”) calculated in the manner set forth in the Asset Purchase Agreement based on the 2024 Unit Sales (as defined in the Asset Purchase Agreement) and the volume-weighted average price (“VWAP”) for the Company’s common stock based on the 10 consecutive trading days ending on (and including) December 31, 2024, subject to the VWAP Collar. In addition, there were 2 contingent payments (1) based on total CLMBR sales in 2024 (5,000 units sold in 2024) and (2) based on CLMBR sales through B2B channel in 2024 (2,400 in B2B channel in 2024). Contingent payment (1) was determined at inception to be remote and therefore, $0 was recognized for the earn out as of the acquisition date. Contingent payment (2) was probable and a contingent liability of $1.3 million was recorded based on in the event the 2024 Unit Sales include at least 2,400 Units sold in the business-to-business channel, the Sellers shall be entitled to an additional number of Earn-Out Shares calculated in the manner set forth in the Asset Purchase Agreement subject to total maximum number of 5,666 Earn-Out Shares. The Company assessed the fair value as of December 31, 2024 and it was determined based on current sales that achieving the projection and likelihood of contingent payment (2) was deemed remote and as a result the Company marked the contingent liability to $0 in 2024.

The following unaudited pro forma summary presents condensed consolidated information of the Company, including CLMBR as if the. acquisition had occurred as of January 1, 2024, the earliest year presented herein:

The unaudited pro forma consolidated results for the three month periods were prepared using the acquisition method of accounting and are based on the historical financial information of CLMBR, Inc. and the Company. The unaudited pro forma consolidated results incorporate historical financial information for all significant acquisitions pursuant to SEC regulations since January 1, 2024. The historical financial information has been adjusted to give effect to pro forma adjustments that are: (i) directly attributable to the acquisition, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results. The unaudited pro forma consolidated results are not necessarily indicative of what the Company’s consolidated results of operations actually would have been had it completed these acquisitions on January 1, 2024. The following unaudited condensed consolidated results of operations included in the condensed consolidated statements of loss for the three months ended March 31, 2024.

23. Subsequent Events

The Company has evaluated subsequent events through the financial statement issuance date, pursuant to ASC 855-10 Subsequent Events.

Binding LOI

On April 8, 2025, the Company entered into an Agreement for the Sale and Purchase of the Entire Issued Share Capital and Loan Notes of Wattbike (Holdings) Limited (“Wattbike”) (the “Purchase Agreement”) with the shareholders of Wattbike and holders of certain promissory notes (the “Notes’) issued by Wattbike (the “Noteholders,” and together with the Shareholders, the “Sellers”) to acquire the entire issued share capital and Notes of Wattbike (the “Transaction”).

Pursuant to the Purchase Agreement, the Company would acquire all of the issued and outstanding shares of Wattbike held by the Shareholders in exchange for £1.00, payable at the closing of the Transaction (the “Closing”). In addition, the Company would acquire the Notes in exchange for paying the Noteholders (a) shares of the Company’s Series E Preferred Stock, par value $0.0001 per share (“Series E Preferred Stock”) to be newly created, which upon the mandatory conversion date of June 15, 2026, will be convertible into the Company’s common stock, par value $0.0001 per share (“Common Stock”), payable at Closing (the “Initial Consideration”), and (b) subject to the satisfaction of applicable milestones, additional consideration consisting of Common Stock:

(i)

If the revenues of Wattbike for the period from October 1, 2025 to September 30, 2026 (“FY26”) (“FY26 Revenues”) exceed £17,500,000, the additional consideration for FY26 shall be an amount equal to 50% of the amount by which FY26 revenues exceeded £17,500,000, subject to a cap of £1,500,000. If FY26 Revenues did not exceed £17,500,000, there shall be no additional consideration paid for FY26.

(ii)

If the revenues of Wattbike for the period from October 1, 2026 to September 30, 2027 (“FY27”) (“FY27 Revenues”) exceed £20,000,000, the additional consideration for FY27 shall be an amount equal to 50% of the amount by which FY26 revenues exceeded £20,000,000, subject to a cap of £1,500,000. If FY27 Revenues did not exceed £20,000,000, there shall be no additional consideration paid for FY27.

The Closing is subject to: (a) the receipt of Wattbike of the written consent (the “FCA Consent”) from the Financial Conduct Authority in the United Kingdom (“FCA”) regarding the change of control of Wattbike on Closing pursuant to the terms of its authorization from the FCA to carry out consumer credit activities, or (b) if the FCA Consent is not provided to Wattbike prior to July 31, 2025, Wattbike shall have received written confirmation from the FCA that Wattbike’s authorization from the FCA to carry out consumer credit activities has been cancelled. If this condition is not satisfied on or before September 30, 2026, or an Insolvency Event (as defined in the Purchase Agreement) occurs, the Purchase Agreement shall be terminated automatically on September 30, 2026, or on the date that the Insolvency Event occurs.

Pursuant to the Purchase Agreement, the Warrantors (as defined in the Purchase Agreement) undertake to the Company that, during the period beginning on the date of the Purchase Agreement and ending at the earliest of (i) the Closing, (ii)September 30, 2026, and (iii) the termination of the Purchase Agreement, they shall use reasonable endeavors to procure that Wattbike and its subsidiaries operate within a 10% margin of the Total Budgeted Costs (as defined in the Purchase Agreement). If the Company is not satisfied that Wattbike and its subsidiaries have operated within such 10% margin, then the Company shall have the right to terminate the Purchase Agreement by paying to the Noteholders the Initial Consideration as a break fee.

In the Purchase Agreement, each of the Company and the Sellers have made customary representations, warranties and covenants. The Transaction is expected to close as early as the second quarter of 2025, subject to the satisfaction or waiver (if permitted) of customary conditions, including, among others, the receipt of any required stockholder approval and contemplation of applicable regulatory filings.

The board of directors of the Company and the Shareholders have approved the Purchase Agreement and the transactions contemplated therein.

Preferred Stock Dividends

Pursuant to the Certificate of Designations of Series C Preferred Stock, on April 17, 2025, the Board of Directors of the Company declared a dividend on the shares of Series C Preferred Stock issued and outstanding as of the record date for such dividend, as a dividend in kind, in the form of 46,727 shares of Series C Preferred Stock in the aggregate.

Pursuant to the Certificate of Designations of Series A Preferred Stock, on January 23, 2025, the Board of Directors of the Company declared a dividend on the shares of Series A Preferred Stock issued and outstanding as of the record date for such dividend, as a dividend in kind, in the form of 81,464 shares of Series A Preferred Stock in the aggregate.

The Company issued the Series A Preferred Stock and Series C Preferred Stock dividend shares on April 17, 2025.

Vendor Settlement

Prior to May 1, 2025, the Company received advisory services from Berenberg Capital Markets LLC (the “Recipient”). As of May 1, 2025, the Company owed the Recipient $0.5 million (the “Liability”). On May 1, 2025, the Company and the Recipient entered into a Settlement Agreement, pursuant to which the Company and the Recipient agreed to settle the Liability by issuing to the Recipient an unsecured promissory note in the principal amount of $0.5 million (the “Settlement Note”). The Settlement Note has a maturity date of May 1, 2026 and accrues interest at a rate of 5% per annum.