GUIDED THERAPEUTICS INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION, BACKGROUND, AND BASIS OF PRESENTATION

Guided Therapeutics, Inc. (formerly SpectRx, Inc.), together with its wholly owned subsidiary, InterScan, Inc. (formerly Guided Therapeutics, Inc.), collectively referred to herein as the “Company”, is a medical technology company focused on developing innovative medical devices that have the potential to improve healthcare. The Company’s primary focus is the continued commercialization of its LuViva non-invasive cervical cancer detection device and extension of its cancer detection technology into other cancers, including esophageal. The Company’s technology, including products in research and development, primarily relates to biophotonics technology for the non-invasive detection of cancers.

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. All intercompany transactions and balances have been eliminated in consolidation.

The Company’s prospects must be considered in light of the substantial risks, expenses and difficulties encountered by entrants into the medical device industry. This industry is characterized by an increasing number of participants, intense competition and a high failure rate. The Company has experienced net losses since its inception and, as of December 31, 2025, it had an accumulated deficit of approximately $157.1 million. To date, the Company has engaged primarily in research and development efforts and the early stages of marketing its products. The Company may not be successful in growing sales for its products. Moreover, required regulatory clearances or approvals may not be obtained in a timely manner, or at all. The Company’s products may not ever gain market acceptance and the Company may not ever generate significant revenues or achieve profitability. The development and commercialization of the Company’s products requires substantial development, regulatory, sales and marketing, manufacturing and other expenditures. The Company expects operating losses to continue for the foreseeable future as it continues to expend substantial resources to complete development of its products, obtain regulatory clearances or approvals, build its marketing, sales, manufacturing and finance capabilities, and conduct further research and development.

Going Concern

The Company’s consolidated financial statements have been prepared and presented on a basis assuming it will continue as a going concern. The factors below raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might be necessary from the outcome of this uncertainty.

At December 31, 2025, the Company had a negative working capital of approximately $6.0 million, accumulated deficit of $157.1 million and incurred a net loss including preferred dividends of $3.3 million for the year then ended. Stockholders’ deficit totaled approximately $6.0 million at December 31, 2025, primarily due to recurring net losses from operations.

During the year ended December 31, 2025, the Company received $0.7 million of proceeds from issuances of notes payable and $0.6 million of proceeds from the same of common stock and warrants in private placement offerings. The Company will need to continue to raise capital in order to provide funding for its operations and to support the U.S. Food and Drug Administration (“FDA”) and China National Medical Products Administration (“NMPA”) approval process. If sufficient capital cannot be raised, the Company will continue its plans of curtailing operations by reducing discretionary spending and staffing levels and attempting to operate by only pursuing activities for which it has external financial support. However, there can be no assurance that such external financial support will be sufficient to maintain even limited operations or that the Company will be able to raise additional funds on acceptable terms, or at all. In such a case, the Company might be required to enter into unfavorable agreements or, if that is not possible, be unable to continue operations, and to the extent practicable, liquidate and/or file for bankruptcy protection.

2. SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant areas where estimates are used include the inventory valuation, valuation of share-based compensation and the valuation of the convertible note payable derivative liability. Management bases its estimates on historical experience and on various other assumptions believed to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Actual results could differ from those estimates, and such differences could be material to the Company’s financial statements.

Recently Adopted Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2023-09,Improvements to Income Tax Disclosures (Topic 740). The ASU requires disaggregated information about a reporting entity’s effective tax rate reconciliation as well as additional information on income taxes paid. The ASU is effective on a prospective basis for annual periods beginning after December 15, 2024. The Company adopted ASU 2023-09 effective January 1, 2025. The adoption did not impact the Company’s consolidated financial position, results of operations, or cash flows and resulted only in expanded income tax disclosures in the consolidated financial statements.

Recently Issued Accounting Standard Updates (“ASUs”) Not Yet Adopted

In November 2024, the FASB issued ASU No. 2024-03,Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. This ASU requires public business entities to disclose, for interim and annual reporting periods, additional information about certain income statement expense categories. All public business entities, including those with non-calendar year ends, are required to adopt the new disclosure requirements in their first annual reporting period beginning after December 15, 2026, and interim periods within annual periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the impact that adoption of ASU 2025-01 will have on its consolidated financial statements and related disclosures.

In November 2024, the FASB issued ASU No. 2024-04,Debt—Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions of Convertible Debt Instruments (“ASU 2024-04”). ASU 2024-04 clarifies the accounting guidance for determining whether a settlement of a convertible debt instrument should be accounted for as an induced conversion or as a debt extinguishment. Specifically, the amendments require that an inducement offer include, at a minimum, the form and amount of consideration that would have been issuable under the original conversion privileges and provide additional guidance for instruments with cash conversion features and volume-weighted average price (VWAP) formulas. The amendments also clarify that the induced conversion guidance can apply to convertible debt instruments that are not currently convertible, provided they contain a substantive conversion feature at issuance and at the date of the inducement offer.

ASU 2024-04 is effective for all entities for annual reporting periods beginning after December 15, 2025, and interim periods within those annual periods. Early adoption is permitted for entities that have adopted ASU 2020-06. The amendments may be applied either prospectively to settlements occurring after the effective date or retrospectively to the beginning of the earliest period presented, provided such settlements occurred after the adoption of ASU 2020-06. The Company is currently evaluating the impact that the adoption of ASU 2024-04 will have on its consolidated financial statements.

A variety of proposed or otherwise potential accounting standards are currently under consideration by standard-setting organizations and certain regulatory agencies. Because of the tentative and preliminary nature of such proposed standards, management has not yet determined the effect, if any, that the implementation of such proposed standards would have on the Company’s consolidated financial statements.

Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be a cash equivalent.

Concentrations of Credit Risk

The Company maintains a cash balance in a financial institution that is insured by the Federal Deposit Insurance Corporation up to certain federal limitations. At times, the Company’s cash balance exceeds these federal limitations. The amount in excess of insured limitations was nil and $137,770 as of December 31, 2025 and 2024, respectively.

Inventory Valuation

All inventories are stated at the lower of cost or net realizable value, with cost determined substantially on a “first-in, first-out” basis. Selling, general, and administrative expenses are not inventoried, but are charged to expense when incurred. Inventories consisted of the following at December 31, 2025 and 2024:

The company periodically reviews the value of items in inventory and provides write-downs or write-offs of inventory based on its assessment of market conditions. Write-downs and write-offs are charged to cost of goods sold.

Property and Equipment

Property and equipment are recorded at cost. Depreciation is computed using the straight-line method over estimated useful lives of three to seven years. Depreciation and amortization expense are included in general and administrative expense on the statements of operations. Expenditures for repairs and maintenance are expensed as incurred. Property and equipment consisted of the following at December 31, 2025 and 2024:

Depreciation expense related to property and equipment for the years ended December 31, 2025 and 2024 was not material.

Debt Issuance Costs

Debt issuance costs are capitalized and amortized over the term of the associated debt. Debt issuance costs are presented in the balance sheet as a direct deduction from the carrying amount of the debt liability consistent with the debt discount.

Patent Costs (Principally Legal Fees)

Costs incurred in filing, prosecuting, and maintaining patents are recurring, and expensed as incurred. Costs for maintaining patents are expensed as incurred as the Company has not yet received U.S. FDA approval and recovery of these costs is uncertain. Such costs were not material for the years ended December 31, 2025 and 2024.

Leases

A lease provides the lessee the right to control the use of an identified asset for a period of time in exchange for consideration. Right-of-use assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The Company determines if an arrangement is a lease at inception. Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

Where an operating lease contains extension options that the Company is reasonably certain to exercise, the extension period is included in the calculation of the right-of-use assets and lease liabilities.

The discount rate used to determine the commencement date present value of lease payments is the interest rate implicit in the lease, or when that is not readily determinable, the Company utilizes its secured borrowing rate. Right-of-use assets include any lease payments required to be made prior to commencement and exclude lease incentives. Both right-of-use assets and lease liabilities exclude variable payments not based on an index or rate, which are treated as period costs. The Company’s lease agreements do not contain significant residual value guarantees, restrictions or covenants. See Note 6 – “Commitments and Contingencies.”

Accrued Liabilities

Accrued liabilities as of December 31, 2025 and 2024 are summarized as follows:

Revenue Recognition

ASC 606, Revenue from Contracts with Customers, establishes a single and comprehensive framework which sets out how much revenue is to be recognized, and when. The core principle is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the vendor expects to be entitled in exchange for those goods or services. Revenue is recognized when control over the goods or services is transferred to the customer. For the Company, revenue is primarily generated from the sale of medical devices and related components, and in certain circumstances may also include service, licensing, or distribution arrangements. The application of the core principle in ASC 606 is carried out in five steps:

The Company’s revenues do not require significant estimates or judgments and are recognized when control of the promised goods or services is transferred to the Company’s customers, which occurs at a point in time, most frequently upon shipment of the product or receipt of the product, depending on shipment terms. Revenue is measured as the amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company does not offer returns, discounts, loyalty programs or other sales incentive programs that are material to revenue recognition. The Company is not party to contracts that include multiple performance obligations or material variable consideration.

The Company evaluated its arrangements under the principal versus agent guidance in ASC 606 and determined that it acts as the principal in its revenue arrangements because it controls the specified goods prior to transfer to the customer, is primarily responsible for fulfilling the promise to provide the goods and has discretion in establishing pricing. Accordingly, revenue is recognized on a gross basis. For the year ended December 31, 2025, all of the Company’s revenue was generated from sales customers located in China.

Contract Balances

The Company defers payments received as revenue until earned based on the related contracts and applying ASC 606 as required. Deferred revenue totaled $188,552, $848,917, and $424,225 as of December 31, 2025, December 31, 2024 and December 31, 2023, respectively.

The Company did not have material contract asset balances as of the periods presented.

Trade Receivables

Trade receivables are recorded net of allowances for chargebacks, cash discounts for prompt payment and credit losses. The Company estimates an allowance for expected credit losses by considering factors such as historical experience, credit quality, the age of the accounts receivable balances, and current economic conditions that may affect a customer’s ability to pay. The corresponding expense for the credit loss allowance is reflected in selling, general and administrative expenses. The credit loss allowance was immaterial as of December 31, 2025 and December 31, 2024.

Research and Development

Research and development expenses consist of expenditures for research conducted by the Company and payments made under contracts with consultants or other outside parties and costs associated with internal and contracted clinical trials. All research and development costs are expensed as incurred.

Income Taxes

The provision for income taxes is determined in accordance with ASC 740, “Income Taxes”. The Company provides for income taxes based on enacted tax law and statutory tax rates at which items of income and expense are expected to be settled in our income tax return. Certain items of revenue and expense are reported for Federal income tax purposes in different periods than for financial reporting purposes, thereby resulting in deferred income taxes. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

The Company has filed its 2024 federal and state corporate tax returns. Although the Company has been experiencing recurring losses, it is obligated to file tax returns for compliance with IRS regulations and that of applicable state jurisdictions. At December 31, 2025, the Company had approximately $66.3 million of net operating losses carryforward available, $3.0 million of which will expire in 2026. The remaining net operating loss will be eligible to be carried forward for tax purposes at federal and applicable states’ level. A full valuation allowance has been recorded related to the deferred tax assets.

The Company recognizes uncertain tax positions based on a benefit recognition model. Provided that the tax position is deemed more likely than not of being sustained, the Company recognizes the largest amount of tax benefit that is greater than 50.0% likely of being ultimately realized upon settlement. The tax position is derecognized when it is no longer more likely than not of being sustained. The Company classifies income tax related interest and penalties as interest expense and selling, general and administrative expense, respectively, on the consolidated statements of operations.

Warrants

The Company has issued warrants, which allow the warrant holder to purchase one share of stock at a specified price for a specified period of time. The Company records equity instruments including warrants based on the fair value at the date of issue. The fair value of warrants classified as equity instruments at the date of issuance is estimated using the Black-Scholes or binomial option pricing models.

The Company evaluates all warrants to determine whether they should be classified as equity or liabilities in accordance with ASC 815-40. Warrants that are not indexed to the Company’s own stock or that require net cash settlement are classified as liabilities and remeasured at fair value each reporting period. As of the periods presented, the Company had no liability-classified warrants outstanding.

Stock Based Compensation

The Company accounts for its stock-based awards in accordance with ASC Subtopic 718, “Compensation – Stock Compensation”, which requires fair value measurement on the grant date and recognition of compensation expense for all stock-based payment awards made to employees and directors. The Company determines the fair value of stock options using the Black-Scholes model. The fair value of restricted stock awards is based upon the quoted market price of the shares of common stock on the date of grant. The fair value of stock-based awards is expensed over the requisite service periods of the awards. The Company accounts for forfeitures of stock-based awards as they occur.

The Black-Scholes option pricing model requires the input of certain assumptions that require the Company’s judgment, including the expected term and the expected stock price volatility of the underlying stock. The assumptions used in calculating the fair value of stock-based compensation represent management’s best estimates, but these estimates involve inherent uncertainties and the application of judgment. As a result, if factors change resulting in the use of different assumptions, stock-based compensation expense could be materially different in the future.

During the year ended December 31, 2025, the Company recognized $106,574 of expense for stock options and expense of $270,389 related to warrants pursuant to an agreement approved by the Board of Directors on June 3, 2025 (see Note 6, “Commitments and Contingencies”, for details). During the year ended December 31, 2024, the Company recognized $80,155 of expense related to stock options and $41,242 of expense for common stock and warrants issued to consultants and directors. Additionally, during the year ended December 31, 2024, the Company accrued $17,889 of expense for common stock owed to a director, pursuant to his consulting agreement.

Derivatives

The Company reviews the terms of convertible debt issued to determine whether there are embedded derivative instruments, including embedded conversion options, which are required to be bifurcated and accounted for separately as derivative financial instruments. In circumstances where the host instrument contains more than one embedded derivative instrument, including the conversion option, that is required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.

Bifurcated embedded derivatives are initially recorded at fair value and are then revalued at each reporting date with changes in the fair value reported as non-operating income or expense. When the equity or convertible debt instruments contain embedded derivative instruments that are to be bifurcated and accounted for as liabilities, the total proceeds received are first allocated to the fair value of all the bifurcated derivative instruments. The remaining proceeds, if any, are then allocated to the host instruments themselves, usually resulting in those instruments being recorded at a discount from their face value. The discount from the face value of the convertible debt, together with the stated interest on the instrument, is amortized over the life of the instrument through periodic charges to interest expense.

Fair Value Measurements

ASC 820, “Fair Value Measurements and Disclosures,” clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. Fair value is a market-based measurement that should be determined based upon assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:

An asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Assets and liabilities measured at fair value are based on one or more of the following three valuation techniques noted in ASC 820:

The Company believes its valuation methods are appropriate and consistent with other market participants, however the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

3. STOCKHOLDERS’ DEFICIT

November 2025 Private Placement Offering

On November 21, 2025, the Company entered into a Securities Purchase Agreement (the “November Purchase Agreement”) with certain institutional investors in a private placement that generated gross proceeds of $307,000. The Company issued an aggregate of 1,615,791 units at a purchase price of $0.19 per unit. Each unit consisted of one share of common stock, one warrant to purchase one share of common stock at an exercise price of $0.26, and one warrant to purchase one share of common stock at an exercise price of $0.52. The $0.26 warrants are exercisable immediately and expire three years from the date of issuance. The $0.52 warrants are exercisable immediately and expire four years from the date of issuance.

In connection with the November Purchase Agreement, the Company entered into exchange agreements with two note holders pursuant to which $135,000 of principal and $6,267 of accrued interest were exchanged for 743,511 units. For the year ended December 31, 2025, the Company recognized a loss on extinguishment of debt of $394,720 related to these exchanges.

August 2025 Private Placement Offering

On August 29, 2025, the Company entered into a Securities Purchase Agreement (the “August Purchase Agreement”) with certain institutional investors, including Dr. John Imhoff and Michael James, members of the Company’s board of directors, for the purpose of raising $55,000 in gross proceeds for the Company. Pursuant to the terms of the August Purchase Agreement, the Company agreed to sell, in a private placement offering, an aggregate of 305,557 units, each unit consisting of one share of common stock and one warrant to purchase one share of common stock (the “August Warrants”). The purchase price per unit was $0.18. The August Warrants were immediately exercisable upon issuance, expire four years following the issuance date and have an exercise price of $0.25 per share.

In connection with the August Purchase Agreement, the Company entered into an exchange agreement with Alan Grujic, a member of the Company’s board of directors, whereby Mr. Grujic agreed to exchange a $25,000 note payable and accrued interest of $2,379 for 152,108 units as described above. Additionally, the Company entered into an exchange agreement with Dr. Mark Faupel, the Company’s President and Chief Executive Officer, whereby Dr. Faupel agreed to exchange a $25,000 note payable for 138,889 units as described above. During the year ended December 31, 2025, the Company recorded a loss on extinguishment of debt of $106,220 for the exchange agreements.

March 2025 Private Placement Offering

On March 18, 2025, the Company entered into a Securities Purchase Agreement (the “March Purchase Agreement”) with certain institutional investors, including Dr. Imhoff and Mr. James, for the purpose of raising $204,501 in gross proceeds for the Company. Pursuant to the terms of the March Purchase Agreement, the Company agreed to sell, in a private placement offering, an aggregate of 2,045,009 units, each unit consisting of one share of common stock and one warrant to purchase one share of common stock (the “March Warrants”). The purchase price per unit was $0.10. The March Warrants were immediately exercisable upon issuance, expire four years following the issuance date and have an exercise price of $0.13 per share.

In connection with the March Purchase Agreement, the Company entered into an exchange agreement with Dr. Imhoff, whereby Dr. Imhoff agreed to exchange a $25,000 note payable and accrued interest of $1,307 for 263,069 units as described above. Additionally, the Company entered into an exchange agreement with Mr. James, whereby Mr. James agreed to exchange a $25,000 note payable and accrued interest of $1,295 for 262,945 units as described above. During the year ended December 31, 2025, the Company recorded a loss on extinguishment of debt of $31,928 for the exchange agreements.

C-1 and C-2 Preferred Stock Exchanges

On March 3, 2025, the Company entered into exchange agreements with certain accredited investors, including Mark Faupel and John Imhoff, members of the Company’s board of directors, to exchange 675 shares of Series C-1 Preferred Stock and 2,700 shares of Series C-2 Preferred stock into 6,750,000 shares of common stock.

2024 Private Placement Offerings

On September 23, 2024, the Company entered into a Securities Purchase Agreement (the “September Purchase Agreement”) with certain institutional investors, including John Imhoff a member of the Company’s Board of Directors, for the purpose of raising $300,000 in gross proceeds for the Company. Pursuant to the terms of the September Purchase Agreement, the Company agreed to sell, in a private placement offering, an aggregate of 3,333,335 units, each unit consisting of one share of common stock and one warrant to purchase up to 3,333,335 shares of common stock (the “September Warrants”). The purchase price per unit was $0.09. The September Warrants were immediately exercisable upon issuance, expire four years following the issuance date and have an exercise price of $0.12 per share.

On December 18, 2024, the Company entered into a Securities Purchase Agreement (the “December Purchase Agreement”) with certain institutional investors, including John Imhoff, a member of the Company’s Board of Directors, for the purpose of raising $535,000 in gross proceeds for the Company. Pursuant to the terms of the December Purchase Agreement, the Company agreed to sell, in a private placement offering, an aggregate of 4,115,386 units, each unit consisting of one share of common stock and one warrant to purchase up to 4,115,386 shares of common stock (the “December Warrants”). The purchase price per unit was $0.13. The December Warrants were immediately exercisable upon issuance, expire four years following the issuance date and have an exercise price of $0.18 per share.

Common Stock

The Company has authorized 500,000,000 shares of common stock with $0.001 par value. As of December 31, 2025 and December 31, 2024,86,153,918 and 65,130,623 shares of common stock were issued and outstanding, respectively.

During the years ended December 31, 2025 and 2024, the Company issued 21,023,295 and 11,025,522 shares of common stock, respectively, as summarized in the following tables:

Preferred Stock

The Company has authorized 5,000,000 shares of preferred stock with a $0.001 par value. The board of directors has the authority to issue these shares and to set dividends, voting and conversion rights, redemption provisions, liquidation preferences, and other rights and restrictions.

Series C Convertible Preferred Stock

The board designated 9,000 shares of preferred stock as Series C Convertible Preferred Stock, (the “Series C Preferred Stock”). Pursuant to the Series C certificate of designations, shares of Series C Preferred Stock are convertible into common stock by their holder at any time and may be mandatorily convertible upon the achievement of specified average trading prices for the Company’s common stock. During the year ended December 31, 2025, the Company issued 2,258,690 common shares to Dr. John Imhoff for the conversion of his 286 Series C Convertible Preferred shares. At December 31, 2025 and December 31, 2024, there were nil and 286 shares outstanding, respectively.

Holders of the Series C Preferred Stock were entitled to quarterly cumulative dividends at an annual rate of 12.0% until 42 months after the original issuance date (the “Dividend End Date”), payable in cash or, subject to certain conditions, the Company’s common stock. Unpaid accrued dividends were $120,120 as of December 31, 2025 and December 31, 2024.

Series C1 Convertible Preferred Stock

The board designated 20,250 shares of preferred stock as Series C1 Preferred Stock, of which 374.25 and 1,049.25 shares were issued and outstanding at December 31, 2025 and December 31, 2024, respectively. The C1 Convertible Preferred Stock has a conversion price of $0.50 per share. During the year ended December 31, 2025, the Company issued 1,350,000 common shares for the conversion of 675 Series C1 Convertible Preferred shares.

The Series C1 Preferred Stock has terms that are substantially the same as the Series C Preferred Stock, except that the Series C1 Preferred Stock does not pay dividends (unless and to the extent declared on the common stock) or at-the-market “make-whole payments” and, while it has the same anti-dilution protections afforded the Series C Preferred Stock, it does not automatically reset in connection with a reverse stock split or conversion of our outstanding convertible debt.

Series C2 Convertible Preferred Stock

On August 31, 2018, the Company entered into agreements with certain holders of the Company’s Series C1 Convertible Preferred Stock, including the chairman of the Company’s board of directors, the former Chief Operating Officer (now the Chief Executive Officer) and a director of the Company pursuant to which those holders separately agreed to exchange each share of the Series C1 Preferred Stock held for one (1) share of the Company’s newly created Series C2 Convertible Preferred Stock. In total, for 3,262.25 shares of Series C1 Convertible Preferred Stock to be surrendered, the Company issued 3,262.25 shares of Series C2 Convertible Preferred Stock. During the year ended December 31, 2025, the Company issued 5,400,000 common shares for the conversion of 2,700 Series C2 Convertible Preferred shares. At December 31, 2025 and December 31, 2024, there were nil and 2,700 shares outstanding, respectively.

Series D Convertible Preferred Stock

The board designated 6,000 shares of preferred stock as Series D Preferred Stock,50 and 438 of which remained outstanding as of December 31, 2025 and 2024, respectively. On January 8, 2021, the Company entered into a Stock Purchase Agreement with certain accredited investors (“the Series D Investors”) pursuant to all obligations under the Series D Certificate of Designation. The Series D Investors included the Chief Executive Officer, Chief Operating Officer (now the Chief Executive Officer) and a director of the Company. In total, for $763,000 the Company issued 763 shares of Series D Preferred Stock,1,526,000 shares of common stock,1,526,000 common stock warrants exercisable at $0.25, and 1,526,000 common stock warrants, exercisable at $0.75. The Series D Preferred Stock have cumulative dividends at the rate per share of 10% per annum. Each share of Series D Preferred Stock has a par value of $0.001 per share and a stated value equal to $750.

Initially, each share of Series D Preferred Stock was convertible, at the option of the holder, at any time during the five-year period following issuance, into that number of shares of common stock determined by dividing the stated value by $0.25, subject to certain adjustments set forth in the Series D Certificate of Designation (the “Series D Conversion Price”). The conversion was subject to a 4.99% beneficial ownership limitation, which could be increased to 9.99% at the holder’s election. If the average of the VWAPs (as defined in the Series D Certificate of Designation) for any consecutive 5 trading day period (“Measurement Period”) exceeds 200% of the then Series D Conversion Price and the average daily trading volume of the Common Stock on the primary trading market exceeds 1,000 shares per trading day during the Measurement Period (subject to adjustments), the Company may redeem the then outstanding Series D Preferred, for cash in an amount equal to aggregate Stated Value then outstanding plus accrued but unpaid dividends.

During the year ended December 31, 2025, the Company issued 900,000 common shares to Dr. Imhoff for the conversion of 300 Series D Convertible Preferred shares and 114,000 common shares to Dr. Faupel for the conversion of 38 Series D Convertible Preferred shares, each of whom are related parties. In addition, the Company issued 150,000 common shares to an investor for the conversion of 50 Series D Convertible Preferred shares. During the year ended December 31, 2025, the Company issued 51,555 shares of common stock for payment of accrued Series D Preferred Stock dividends. As of December 31, 2025, and December 31, 2024, the Company had accrued dividends for the Series D Preferred Stock of $148 and $8,360, respectively.

Series E Convertible Preferred Stock

The Board designated 6,000 shares of preferred stock as Series E Preferred Stock,300 and 883 of which remained outstanding as of December 31, 2025 and 2024, respectively. During year ended December 31, 2020, the Company entered into a Security Agreement with the Series E Investors (the “Series E Security Agreement”) pursuant to which all obligations under the Series E Certificate of Designation are secured by all of the Company’s assets and personal properties, with certain accredited investors. In total, for $1,736,000 the Company issued 1,736 shares of Series E Preferred Stock. Each Series E Preferred Stock was convertible into 4,000 common stock shares. The stated value on the Series E Preferred Stock is $1,000.

Each share of Series E Preferred was convertible, at any time for a period of 5 years after issuance, into that number of shares of Common Stock, determined by dividing the Stated Value by $0.25, subject to certain adjustments set forth in the Series E Certificate of Designation (the “Series E Conversion Price”). The conversion of Series E Preferred is subject to a 4.99% beneficial ownership limitation, which may be increased to 9.99% at the election of the holder of the Series E Preferred. If the average of the VWAPs (as defined in the Series E Certificate of Designation) for any consecutive 5 trading day period (“Measurement Period”) exceeds 200% of the then Series E Conversion Price and the average daily trading volume of the Common Stock on the primary trading market exceeds 20,000 shares per trading day during the Measurement Period (subject to adjustments), the Company may redeem the then outstanding Series E Preferred, for cash in an amount equal to aggregate Stated Value then outstanding plus accrued but unpaid dividends. Each share of Series E Preferred Stock has a par value of $0.001 per share and a stated value equal to $1,000, subject to the increase set forth in its Certificate of Designation.

Each holder of Series E Preferred Stock is entitled to receive cumulative dividends of 8% per annum, payable annually in cash or, at the option of the Company, shares of common stock.

During the year ended December 31, 2025, the Company issued 1,200,000,932,000, and 200,000 shares of common stock to Dr. Imhoff, Mr. Richard Blumberg (a member of our board of directors), and Mr. Grujic, respectively, upon the conversion of 583 shares of Series E Convertible Preferred Stock in accordance with the applicable certificate of designation. During the year ended December 31, 2025, the Company also issued 321,279 shares of common stock for payment of accrued Series E Preferred Stock dividends. As of December 31, 2025 and December 31, 2024, the Company had accrued dividends of $8,000 and $30,272 for the Series E Preferred Stock, respectively.

Series F Convertible Preferred Stock

The Board designated 1,500 shares of preferred stock as Series F Preferred Stock,981 of which remained outstanding as of December 31, 2025 and 2024. During 2021, the Company entered into a Stock Purchase Agreement with certain accredited investors (“the Series F Investors”). In total, for $1,436,000 the Company issued 1,436 shares of Series F Preferred Stock. Each Series F Preferred Stock is convertible into 4,000 shares of common stock. The Series F Preferred Stock is entitled to cumulative dividends at the rate per share of 6% per annum. The stated value on the Series F Preferred Stock is $1,000.

Each share of Series F Preferred Stock is convertible, at any time for a period of 5 years after issuance, into that number of shares of Common Stock, determined by dividing the Stated Value by $0.25, subject to certain adjustments set forth in the Series F Certificate of Designation (the “Series F Conversion Price”). The conversion of Series F Preferred Stock is subject to a 4.99% beneficial ownership limitation, which may be increased to 9.99% at the election of the holder. If the average of the VWAPs (as defined in the Series F Certificate of Designation) for any consecutive 5 trading day period (“Measurement Period”) exceeds 200% of the then Series F Conversion Price and the average daily trading volume of the Common Stock on the primary trading market exceeds 20,000 shares per trading day during the Measurement Period (subject to adjustments), the Company may redeem the then outstanding Series F Preferred, for cash in an amount equal to aggregate stated value then outstanding plus accrued but unpaid dividends.

During the year ended December 31, 2025, the Company issued 624,373 shares of common stock for payment of accrued Series F Preferred Stock dividends. As of December 31, 2025 and 2024, the Company had accrued dividends for Series F preferred shares of $44,799.

Series F-2 Convertible Preferred Stock

The Company was oversubscribed for its Series F Preferred Stock, resulting in the requirement to file an additional Certificate of Designation for Series F-2 Preferred Stock with substantially the same terms as the Series F Preferred Stock. The Board designated 3,500 shares of preferred stock as Series F-2 Preferred Stock,480 and 520 of which were issued and outstanding as of December 31, 2025 and 2024, respectively. During 2021, the Company entered into a Stock Purchase Agreement with certain accredited investors. In total, for $678,000 the Company issued 678 shares of Series F-2 Preferred Stock. In addition, the Company exchanged outstanding debt of $2,559,000 for 2,559 shares of Series F-2 Preferred Stock. The Series F-2 Preferred Stock will have cumulative dividends at the rate per share of 6% per annum. The stated value on the Series F-2 Preferred Stock is $1,000.

Each share of Series F-2 Preferred Stock is convertible, at any time for a period of 5 years after issuance, into that number of shares of Common Stock, determined by dividing the Stated Value by $0.25, subject to certain adjustments set forth in the Series F-2 Certificate of Designation (the “Series F-2 Conversion Price”). The conversion of Series F-2 Preferred is subject to a 4.99% beneficial ownership limitation, which may be increased to 9.99% at the election of the holder. If the average of the VWAPs (as defined in the Series F-2 Certificate of Designation) for any consecutive 5 trading day period (“Measurement Period”) exceeds 200% of the then Series F-2 Conversion Price and the average daily trading volume of the Common Stock on the primary trading market exceeds 20,000 shares per trading day during the Measurement Period (subject to adjustments), the Company may redeem the then outstanding Series F-2 Preferred Stock, for cash in an amount equal to aggregate Stated Value then outstanding plus accrued but unpaid dividends.

During the year ended December 31, 2025, the Company issued 160,000 common shares for the conversion of 40 Series F-2 Convertible Preferred Shares. During the years ended December 31, 2025 and 2024, the Company issued 326,391 and 235,544 shares of common stock for the payment of annual Series F-2 Preferred Stock dividends, respectively. As of December 31, 2025 and 2024, the Company had accrued dividends for Series F-2 preferred shares of $21,804 and $23,518, respectively.

Series G Convertible Preferred Stock

During January 2021, the board designated 1,000,000 shares of preferred stock as Series G Convertible Preferred Stock, none of which remained outstanding as of December 31, 2025 and 2024. The Series G Convertible Preferred Stock had a mandatory redemption feature and was fully redeemed prior to January 1, 2022.

Warrants

The following table summarizes transactions involving the Company’s outstanding warrants to purchase common stock for the years ended December 31, 2025 and 2024:

Warrants Issued in 2025

Private Placement Offerings

On November 21, 2025, the Company issued 2,359,302 of $0.26 warrants to purchase up to 2,359,302 shares of common stock in connection with the November Purchase Agreement and related exchange agreements. Management estimated the fair value of the warrants utilizing the Black-Scholes Option Pricing model with the following assumptions:

On November 21, 2025, the Company issued 2,359,302 of $0.52 warrants to purchase up to 2,359,302 shares of common stock in connection with the November Purchase Agreement and related exchange agreements. Management estimated the fair value of the warrants utilizing the Black-Scholes Option Pricing model with the following assumptions:

On August 29, 2025, the Company issued 596,554 warrants to purchase up to 596,554 shares of common stock in connection with the August Purchase Agreement and related exchange agreements,318,775 of which were issued to members of our board of directors. Management estimated the fair value of the warrants utilizing the Black-Scholes Option Pricing model with the following assumptions:

On March 18, 2025, the Company issued 2,571,023 warrants in connection with the March Purchase Agreement and related exchange agreements,1,676,014 of which were issued to our board members. Management estimated the fair value of the warrants utilizing the Black-Scholes Option Pricing model with the following assumptions:

The proceeds from the 2025 private placement offerings were allocated between common stock and the warrants based on their relative fair values. The estimated fair value of warrants issued in connection with the exchange agreements was included in the calculation of the loss on extinguishment of debt.

Warrants Issued with Debt

During the year ended December 31, 2025, the Company issued 105,000 warrants in conjunction with the issuances of $154,000 of notes payable to unaffiliated third parties. See Note 7,*”Notes Payable”*for additional details. Management estimated the fair value of the warrants issued utilizing the Black-Scholes Option Pricing model with the following weighted-average assumptions:

Warrants Issued in 2024

During the year ended December 31, 2024, the Company issued 1,800,000 warrants to Richard Blumberg, a related party, pursuant to a consulting agreement. See Note 6,”Commitments and Contingencies” for additional information.

Warrants Issued with Debt

During the year ended December 31, 2024, the Company issued 727,667 warrants in conjunction with the issuance of notes payable totaling $350,000 to unaffiliated third parties and 75,000 warrants in conjunction with issuances of $75,000 of notes payable to board members. See Note 7,*”Notes Payable”*and Note 9, “Related Party Debt” for additional details on the warrants issued with debt that remained outstanding as of December 31, 2025 or 2024.

On July 1, 2024, the Company issued 100,000 warrants in connection with a $100,000 promissory note that was subsequently repaid. The warrants remain outstanding with an exercise price of $0.25 and an expiration date of July 1, 2028.

Management estimated the fair value of the warrants issued with debt utilizing the Black-Scholes Option Pricing model with the following weighted-average assumptions:

Private Placement Offerings

During the year ended December 31, 2024, the Company issued 3,333,335 warrants in connection with a private placement offering,1,666,677 of which were issued to one of our board members, a related party. Management estimated the fair value of the warrants utilizing the Black-Scholes Option Pricing model with the following assumptions before allocating the total proceeds from the offering to the common stock and warrants issued:

During the year ended December 31, 2024, the Company issued 4,115,386 warrants in connection with the private placement offering that closed on December 18, 2024,1,615,385 of which were issued to one of our board members, a related party. Management estimated the fair value of the warrants utilizing the Black-Scholes Option Pricing model with the following assumptions before allocating the total proceeds from the offering to the common stock and warrants issued:

The offering proceeds were allocated between common stock and the warrants based on their relative fair values.

4. STOCK OPTIONS

The Company’s Stock Plan (the “Plan”) allows for the issuance of incentive stock options, nonqualified stock options, and stock purchase rights. The exercise price of options was determined by the Company’s board of directors, but incentive stock options were granted at an exercise price equal to the fair market value of the Company’s common stock as of the grant date. Options historically granted have generally become exercisable over three years and expire ten years from the date of grant. The aggregate number of common shares that may be issued or reserved pursuant to stock option or other awards under the plan may not exceed 2,500,000 common shares. As of December 31, 2025, shares available for issuance under the Plan were 723,000.

In addition to awards granted under the Plan, the Company issued stock options outside of the Plan that were approved by the Board of Directors. During the years ended December 31, 2025 and 2024, the Company granted 550,000 and 500,000 stock options, respectively, outside of the Plan. These awards do not reduce the number of shares available for issuance under the Plan.

The following tables summarize the Company’s stock option activity and related information for the years ended December 31, 2025 and 2024. The activity presented includes options granted both under and outside of the Plan:

The aggregate intrinsic value is calculated as the difference between the Company’s closing stock price as of December 31, 2025 and the exercise price, multiplied by the number of options. As of December 31, 2025, there was $84,024 of unrecognized stock-based compensation expense. Such costs are expected to be recognized over a weighted average period of approximately 2.0 years. The weighted-average fair value of awards granted was $0.14 and $0.12 during the years ended December 31, 2025 and 2024, respectively.

The Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award. During the years ended December 31, 2025, the Company recognized expense for stock options of $106,574 and expense of $270,389 related to warrants pursuant to an agreement approved by the Board of Directors on June 3, 2025 (see Note 6, “Commitments and Contingencies”, for details). During the year ended December 31, 2024, the Company recognized $80,155 of expense for stock options and $41,242 of expense for warrants issued to a director. Additionally, during the year ended December 31, 2024, the Company accrued $17,889 of expense for common stock owed to a director, pursuant to his consulting agreement.

2025 Stock Option Activity

On June 3, 2025, the Company granted 75,000 stock options to employees under the Plan and 550,000 stock options to executives and directors of the Company outside of the Plan. The stock options, which have exercise prices of $0.14, will expire on June 2, 2035. One fourth of the stock options vested immediately, while the remaining options will vest over a period of 33 months, beginning on September 3, 2025.

The Black-Scholes option pricing model and the following weighted-average assumptions were used to estimate the fair value of awards granted during the year ended December 31, 2025:

2024 Stock Option Activity

On July 9, 2024, the Company granted 45,000 stock options to employees under the Plan and 500,000 stock options to executives and directors of the Company outside of the Plan. The stock options, which have exercise prices of $0.12, will expire on July 8, 2034. One fourth of the stock options vested immediately, while the remaining options will vest over a period of 33 months, beginning on October 9, 2024.

The Black-Scholes option pricing model and the following weighted-average assumptions were used to estimate the fair value of awards granted during the year ended December 31, 2024:

5. LITIGATION AND CLAIMS

From time to time, the Company may be involved in various legal proceedings and claims arising in the ordinary course of business. Management believes that the dispositions of these matters, individually or in aggregate, are not expected to have a material adverse effect on the Company’s financial condition. However, depending on the amount and timing of such disposition, an unfavorable resolution of some or all of these matters could materially affect the future results of operations or cash flows in a particular year.

As of December 31, 2025, and 2024, there was no accrual recorded for any potential losses related to pending litigation.

6. COMMITMENTS AND CONTINGENCIES

Operating Leases

Our corporate office, which includes our administrative, research and development, marketing and production facilities, are located in a 12,835 square-foot leased property. The lease originally terminated on May 31, 2026 and included a renewal option allowing the Company to extend the term for an additional five years. At lease commencement, the renewal option was not considered reasonably certain to be exercised and, accordingly, was not included in the measurement of the lease liability or right-of-use (“ROU”) asset.

On November 30, 2025, management determined that it was reasonably certain that the renewal option would be exercised. The lease amendment formalizing the extension was executed on December 23, 2025. Accordingly, during the year ended December 31, 2025, the Company accounted for the extension as a lease modification and remeasured the related operating lease liability and ROU asset based on the revised lease term. The remeasurement resulted in an increase of $641,709 to both the operating lease liability and the corresponding ROU asset. The amended lease term now expires on July 31, 2031.

Total operating lease cost recognized for this lease was $114,312 for each of the years ended December 31, 2025 and 2024. The table below presents total operating lease right-of-use assets and lease liabilities as of December 31, 2025 and December 31, 2024.

The table below presents the maturities of operating lease liabilities as of December 31, 2025:

The table below presents the weighted-average remaining lease term and discount rate used in the calculation of operating lease right-of-use assets and lease liabilities, as well as cash paid for operating lease liabilities, as of December 31, 2025 and December 31, 2024:

Related Party Contracts

Executive Compensation Agreement

On June 3, 2025, the Company’s Board of Directors approved a revised compensation agreement for the Company’s Chief Executive Officer (“CEO”), Dr. Mark Faupel. As of December 31, 2025, Dr. Faupel is entitled to:

Additionally, deferred salary of $373,783 accrued as of May 23, 2025, will continue accruing interest at an annual rate of 6%, and Mr. Faupel’s annual compensation was increased to $240,000 effective June 1, 2025. Up to $100,000 of this salary may be deferred at Mr. Faupel’s discretion, accruing interest at 6%.

As of December 31, 2025, Mr. Faupel’s deferred compensation balance totaled $472,502, which accrues interest at 6% and is convertible at his option into common stock at a conversion price of $0.25 per share. The fair value of the conversion feature was determined based on its intrinsic value, representing the difference between the Company’s closing stock price on December 31, 2025 and the conversion price. Accordingly, the Company recognized $548,102 of additional compensation expense during the year ended December 31, 2025 and recorded a corresponding liability for the conversion feature as of December 31, 2025. All amounts owed to Mr. Faupel will be due within ten business days if his position as CEO is terminated by the Board.

Related Party Debt

See Note 9, “Related Party Debt” for details regarding debt issued to related parties.

Director Consulting Agreements

On March 10, 2021, the Company entered into a consulting agreement with Richard Blumberg. As a result of the consulting agreement Mr. Blumberg provided a non-refundable payment of $350,000 to the Company in exchange for the following: (1)3,600,000 3-year warrants with exercise prices ranging from $0.30 - $0.60, and (2) 1,600,000 common stock shares. On September 30, 2021, the Company and Mr. Blumberg entered into an amended agreement, pursuant to which issuance of the warrants and common shares became predicated on Mr. Blumberg’s assistance in helping the Company obtaining financing or a series of financings resulting in minimum receipts of at least $1.0 million. Upon receipt of the funds, the Company agreed to issue the common shares and warrants owed to Mr. Blumberg in four equal tranches, to be issued every six months, beginning six months after the financing transaction. On November 11, 2022, the Company and Mr. Blumberg entered into an amended agreement, upon which the exercise prices of the warrants were changed to $0.30. The Company estimated the fair value of the modified warrants using the Black-Scholes option pricing model and the following assumptions:

During the years ended December 31, 2025 and 2024, the Company issued nil and 1,800,000 warrants to Mr. Blumberg pursuant to the agreement. Total unrecognized expense for the warrants was nil as of December 31, 2025.

On August 24, 2022, the Company entered into an agreement with Ironstone Capital Corp. and Alan Grujic (the “Advisory Group”) whereby the Advisory Group agreed to perform marketing and investor relations services over a term of twelve months, commencing on the closing of a financing of at least $2.5 million. In consideration for these services, the Company issued 800,000 warrants (“first tranche warrants”) with an exercise price of $0.50 to Mr. Grujic, which were due within 10 business days of closing the financing transaction (the “Transaction”) that took place in September 2022. In the event the Company’s 20 trading day variable weighted average price (“VWAP”) exceeds $1.00 within one year of the closing of the financing, the Company would have issued 600,000 warrants (“second tranche warrants”) with an exercise price of $0.75 to Mr. Grujic. In the event the Company’s 20 trading day VWAP exceeds $1.50 within two years of the closing of the financing, the Company will issue an additional 600,000 warrants (“third tranche warrants”) to Mr. Grujic. Once issued, the warrants vest immediately and will expire two years from the date of issuance. If the Company’s U.S. clinical study is not completed and filed with the U.S. FDA or if the Chinese NMPA approval is not granted by each due date for reaching each respective pricing milestone, then the due date for reaching each milestone shall be extended by six months. As of December 31, 2025, the deadlines to achieve the respective stock prices have passed and the second and third tranches of warrants will therefore not be issued.

The agreement also provided for monthly payments of $2,000 for 12 months following the Transaction, later amended to extend the term through September 2024. On November 1, 2024, the Company entered into a new consulting agreement with Ironstone, providing for monthly payments of $2,500 over a six-month term, which was subsequently extended through July 31, 2026.

Expense related to the first and second tranches of warrants was recognized in prior years. The Company estimated the fair value of the third tranche warrants using the Binomial Lattice model with the following assumptions:

The Company recognized expense for the third tranche of warrants of nil and $41,242 during the years ended December 31, 2025 and 2024, respectively. Unrecognized expense for the third tranche of warrants was nil as of December 31, 2025.

Other Commitments

On January 22, 2017, we entered into a license agreement with Shandong Yaohua Medical Instrument Corporation (“SMI”), as amended on March 28, 2017, pursuant to which we granted SMI an exclusive global license to manufacture the LuViva device and related disposables (subject to a carve-out for manufacturing in Turkey). On December 18, 2018, we entered into a co-development agreement with Newmars Technologies, Inc. (“NTI”), whereby NTI performs final assembly of the LuViva device for its contracted distribution countries in Eastern Europe and Russia at its ISO 13485 facility in Hungary. This additional carve-out was agreed to by SMI.

The Company then entered into several amendments to the SMI agreement, the most recent of which was executed on May 8, 2025. During 2025, SMI made a required payment of $130,000, and the Company recognized $183,525 of previously deferred revenue in other income related to reimbursement of prior-period costs. Management concluded that these amounts represented recoveries of costs previously incurred rather than consideration for the transfer of distinct goods or services to SMI in the current period and, accordingly, were presented in other income.

During the fourth quarter of 2025, SMI failed to fulfill certain obligations under the agreement and consequently lost its rights to manufacture and distribute LuViva in China. As a result of this breach, the Company concluded that no remaining performance obligations existed under the agreement and recognized an additional $488,766 of previously deferred revenue in revenue during the year ended December 31, 2025.

Following the May 2025 amendment, we entered into a purchase agreement with HDMT for 35 LuViva devices (without rolling carts) totaling $700,000. As of February 28, 2026, seven devices have been paid for and shipped, and four additional units have been manufactured and are undergoing testing. Additionally, on November 11, 2025, we entered into a purchase agreement with YMIC for $200,000 of LuViva parts and components used in our single-use cervical guides. As of March 20, 2026, this order remains in process.

Although SMI continues to work with partners in China to pursue NMPA approval, we are no longer obligated to work with SMI and have instead increased our engagement with HDMT and YMIC.

Contingencies

The conflict in Ukraine, which has already affected global financial markets, continues to create uncertainty that could impact the Company’s operating business. Although approval to market and sell the Company’s products in Russia was granted on August 11, 2025, ongoing geopolitical tensions could still disrupt supply chains, distribution activities, or future regulatory interactions within the region. The ultimate impact of the conflict remains highly uncertain, and the Company cannot provide assurance that it will not have a material adverse effect on its operations, financial condition, or future regulatory matters.

Recent conflicts and heightened geopolitical tensions in the Middle East have contributed to increased uncertainty in global financial markets and may result in volatility in commodity prices, including oil and natural gas, as well as disruptions to international trade routes. Any escalation or expansion of these conflicts could adversely affect global supply chains, increase transportation and energy costs, and create additional regulatory or economic uncertainty. While the Company does not currently have significant direct exposure to the region, the indirect effects of continued instability could adversely impact the Company’s operations, financial condition, and results of operations.

Tariffs imposed and/or publicly contemplated by the U.S. government in 2025, particularly those affecting imports from China, create significant uncertainty with respect to future tax and trade regulations and the potential competitive effects of such actions. Although the countries in which our products are manufactured or imported may from time to time impose additional quotas, duties, tariffs, or other restrictions, or adversely modify existing ones, we have established an auxiliary manufacturing site in Hungary. This strategic initiative helps mitigate our exposure to currently imposed tariffs, particularly those targeting Chinese imports, and limits the overall impact on our operations. Nevertheless, it remains unclear what the U.S. administration or foreign governments specifically will or will not do with respect to tariffs, tax policies, or other international trade agreements, regulations, and policies. A trade war, other governmental actions related to tariffs or international trade agreements, or changes in U.S. or foreign social, political, regulatory and economic conditions—especially as they relate to manufacturing and investment—could still materially adversely affect the Company’s business, financial condition, operating results, and cash flows.

7. NOTES PAYABLE

Short-term Promissory Notes

On July 23, 2024, the Company issued a promissory note totaling $50,000 to an unaffiliated third party. As of December 31, 2025 and 2024, the outstanding principal balance on the note was nil and $10,000, respectively. The promissory note accrued total interest of $5,000 and matured on February 1, 2025. Monthly payments of $10,000 were due on the note, beginning September 1, 2024 until January 1, 2025, while the interest payment was due on February 1, 2025. The holder of the promissory note also received 60,000 common stock purchase warrants, which have an exercise price of $0.25 and will expire on August 1, 2028. The warrants, which had an estimated fair value of $6,329, were recorded as a discount on the note payable. The Company estimated the fair value of the warrants using the Black-Scholes option pricing model with the following assumptions:

On July 4, 2025, the Company entered into a premium finance agreement to finance its insurance policies totaling $125,273. Monthly payments of $11,733 are due on the note, including interest incurred at a rate of 8.8%. The note, which matures on May 4, 2026, had an outstanding balance of $57,818 and nil as of December 31, 2025 and December 31, 2024, respectively. This balance is included in “Current portion of notes payable” in the consolidated balance sheet.

On July 4, 2024, the Company entered into a premium finance agreement to finance its insurance policies totaling $129,556. Monthly payments of $12,025 were due on the note, including interest incurred at a rate of 8.8%. The note, which matured on May 4, 2025, had an outstanding balance of nil and $59,255 as of December 31, 2025 and December 31, 2024, respectively. The outstanding balance under this agreement was included in “Current portion of notes payable” in the consolidated balance sheet.

Long-term Promissory Notes

On April 15, 2024, the Company entered into an exchange agreement with a former employee, whereby the former employee agreed to exchange outstanding amounts due to him for deferred compensation in the amount of $81,768 for an $87,162 promissory note dated April 15, 2024. Beginning on May 5, 2024, monthly payments of $2,000 are due on the note until its maturity date. The promissory note, which accrues interest at a rate of 6.0% per annum, matures on May 5, 2028. The total balance of the promissory note was $47,162 as of December 31, 2025, of which $24,000 is included in “Short-term notes payable” on the consolidated balance sheets and $23,162 is included in “Long-term notes payable.” The total principal balance of the promissory note was $71,162 as of December 31, 2024, of which $24,000 is included in “Short-term notes payable” on the condensed consolidated balance sheets and $47,162 is included in “Long-term notes payable.” Total accrued interest on the promissory note was $9,204 and $3,424 as of December 31, 2025 and 2024, respectively.

The following tables summarize notes payable (in thousands):

Future debt obligations at December 31, 2025 for notes payable are as follows:

8. CONVERTIBLE DEBT

10% Senior Unsecured Convertible Debentures

On May 17, 2021, the Company issued 10% senior unsecured convertible debentures with an aggregate principal amount of $1,130,000 to investors. The debentures were issued in $1,000 denominations and matured on May 17, 2024 (the “Maturity Date”) and remain outstanding as of December 31, 2025. The principal and accrued interest are convertible, at the holder’s option, into shares of common stock at a price of $0.50 per share (the “Conversion Price”), subject to adjustment in certain events, at any time prior to repayment. Interest accrues at a rate of 10% per annum, compounded quarterly, and is payable semi-annually on July 1 and January 1, in cash or shares of common stock at the Company’s option. Upon obtaining approval to list or quote the Company’s common stock on a national exchange or market, the Company may require the debentures to convert into shares of common stock immediately prior to such uplisting; however, if the Company conducts a financing in connection with the uplisting, the holder may elect to exchange the debentures for the securities issued in that financing.

If a Change of Control (as defined in the Convertible Debenture Certificate) occurs prior to repayment, the Company must repay all outstanding principal and accrued interest plus a premium equal to 3% of the outstanding principal, unless the holder elects to convert the debentures into shares of common stock at the Conversion Price immediately prior to the effective date of the Change of Control.

Beginning after May 2023, if the volume-weighted average trading price of the Company’s common stock equals or exceeds $1.50 per share for 30 consecutive trading days, the Company may redeem the debentures, in whole or in part, upon written notice, for cash equal to the outstanding principal and accrued interest.

At December 31, 2025 and December 31, 2024, the balance due on the 10% Senior Unsecured Convertible Debenture was $1,130,000 and total accrued interest was $103,960. Following the May 17, 2024 maturity date, the debentures became due and payable and continue to accrue interest. The default rate under the agreement is 18% per annum. As of December 31, 2025 and December 31, 2024, the balance of the Senior Unsecured Convertible Debentures is included in “Short-term convertible notes payable in default” within the consolidated balance sheets.

Convertible Promissory Notes

The following table summarizes convertible promissory notes outstanding as of December 31, 2025 and December 31, 2024:

1800 Diagonal Lending LLC Notes

On June 11, 2024, the Company entered into a securities purchase agreement and contingently convertible note with Diagonal Lending LLC (“Diagonal Lending”). The convertible note issued to Diagonal Lending had a total principal balance of $100,050 and an original issue discount of $13,050. The note, which accrued total interest of $14,007, matured on April 15, 2025. A payment of $57,029 was due on the note on December 15, 2024. The remaining balance due, including accrued interest, was paid in monthly payments of $14,257 from January 15, 2025 through April 15, 2025.

On July 22, 2024, the Company entered into a securities purchase agreement and contingently convertible note with Diagonal Lending. The convertible note had a total principal balance of $62,100 and an original issue discount of $8,100. The note, which accrued total interest of $8,694, matured on May 30, 2025. A payment of $35,397 was due on the note on January 30, 2025. The remaining balance due, including accrued interest, was paid in monthly payments of $8,849 from February 28, 2025 through May 30, 2025.

On April 1, 2025, the Company entered into a securities purchase agreement and contingently convertible note with Diagonal Lending. The convertible note issued to Diagonal Lending had a total principal balance of $149,500 and an original issue discount of $19,500. The note, which accrued total interest of $16,445, matured on January 30, 2026. A payment of $82,973 was due and paid on the note on September 30, 2025. The remaining balance due, including accrued interest, was paid in monthly payments of $20,743 from October 30, 2025 through January 30, 2026.

On May 1, 2025, the Company entered into a securities purchase agreement and contingently convertible note with Diagonal Lending. The convertible note issued to Diagonal Lending had a total principal balance of $120,750 and an original issue discount of $15,750. The note, which will accrue total interest of $13,282, will mature on February 28, 2026. A payment of $67,016 was due and paid on the note on October 30, 2025. The remaining balance due, including accrued interest, is payable in monthly payments of $16,754 from November 30, 2025, through February 28, 2026.

On October 3, 2025, the Company entered into a securities purchase agreement and contingent convertible note with Diagonal Lending (together with the previously issued notes, the “Notes”). The convertible note, which had a total principal balance of $123,050 and an original issue discount of $16,050, will accrue total interest of $14,766 and will mature on July 30, 2026. A payment of $68,908 is due on the note on March 30, 2026. The remaining balance due, including accrued interest, will be paid in monthly installments of $17,227 from April 30, 2026 through July 30, 2026.

Upon an event of default, the outstanding principal and accrued interest under the Notes are convertible into common stock at a variable conversion price equal to 65% of the lowest closing market price during the ten trading days preceding the conversion date.

The Company evaluated the embedded conversion features and determined that they are not clearly and closely related to the host debt and meet the definition of derivatives. Accordingly, the features were bifurcated and accounted for separately as derivative liabilities. The derivative liabilities were initially recorded at fair value on the issuance dates as debt discounts and are remeasured to fair value at each reporting date, with changes recognized in current earnings (see Note 11 for additional information on fair value measurements).

At December 31, 2025, the balance due on the Notes was $174,973 and is presented net of total unamortized debt discounts and debt issuance costs of $33,409 within “Short-term convertible debt, net of discounts” on the consolidated balance sheet. At December 31, 2024, the balance due on the Notes was $115,681 and is presented net of total unamortized debt discounts and debt issuance costs of $16,423 within “Short-term convertible debt, net of discounts” on the consolidated balance sheet. Total accrued interest as of December 31, 2025 and 2024 was $7,314 and $7,518, respectively.

GS Capital Partners, LLC Convertible Note

On December 30, 2025, the Company issued an unsecured promissory note to GS Capital Partners, LLC with a principal amount of $69,000 and an original issue discount of $6,000, resulting in gross proceeds of $63,000. The note bears a one-time guaranteed interest rate of 12% for a twelve-month period and matures on December 30, 2026. Principal is payable in six monthly installments of $12,880 beginning 181 days after issuance, with any remaining amounts due at maturity. Amounts past due bear default interest of up to 24% per annum.

Upon an event of default, the holder may convert all or a portion of the outstanding principal, accrued interest, and other amounts into shares of common stock at a conversion price equal to 65% of the lowest trading price of the Company’s common stock during the fifteen trading days preceding the conversion date, subject to a 4.99% beneficial ownership limitation.

The Company evaluated the embedded conversion feature and determined that it met the definition of a derivative liability. The feature was bifurcated and initially recorded at fair value as a debt discount and is remeasured at fair value each reporting period, with changes recognized in earnings (see Note 11 for additional information on fair value measurements).

Flynn D. Case Living Trust Convertible Note

On October 10, 2024, the Company issued a $200,000 promissory note to Flynn D. Case Living Trust, an unaffiliated third party (the “Holder”). The note originally matured on October 10, 2025 and accrued interest at 12.0% per annum. Principal payments of $20,000 were due monthly from November 30, 2024 until August 31, 2025, with interest payable on or before the maturity date. If not repaid by the maturity date, the unpaid balance accrues interest at 16.0% per annum. With the Holder’s consent, the note may be prepaid in whole or in part without penalty.

The Holder also received 667,667 common stock purchase warrants, which have an exercise price of $0.25 and will expire on October 9, 2028. The warrants, which had an estimated fair value of $109,356, were recorded based on relative fair value as a discount on the note payable. The Company estimated the fair value of the warrants using the Black-Scholes option pricing model with the following assumptions:

On December 5, 2024, the Company amended the note to extend the maturity date to June 4, 2026 and to provide the holder with the option to convert specified portions of principal and accrued interest at variable conversion prices based on fixed prices or discounts to market. The Company evaluated the embedded conversion features and determined that they were not clearly and closely related to the host debt and therefore met the definition of derivatives under ASC 815. Accordingly, the embedded features were bifurcated and accounted for as derivative liabilities.

The derivative liabilities were initially measured at fair value on the amendment date and recorded as debt discounts against the convertible note. The Company remeasures the derivative liabilities at fair value at each reporting date, with changes in fair value recognized in earnings (see Note 11 for additional information).

During the year ended December 31, 2025, the Holder converted $75,000 of outstanding principal and $13,800 of accrued interest into 498,752 shares of common stock at a conversion price of $0.18 per share. As a result of the conversion, the Company derecognized a derivative liability with an estimated fair value of $25,913.

In connection with the November Purchase Agreement, the Company entered into an exchange agreement with the Holder pursuant to which the remaining $125,000 of outstanding principal and $5,691 of accrued interest were exchanged for common stock and warrants prior to December 31, 2025. As a result of the exchange, all obligations under the convertible note were fully satisfied and no amounts remained outstanding as of December 31, 2025.

At December 31, 2024, the balance due on the convertible promissory note was $200,000 and is presented net of total unamortized debt discounts of $183,176, of which $2,583 is included in “Short-term convertible debt, net of discounts” and $14,241 is included in “Long-term convertible debt, net of discounts” on the consolidated balance sheets. Total accrued interest as of December 31, 2024 was $1,733.

Labrys Fund II Convertible Note

On August 27, 2025, the Company issued a promissory note totaling $107,800 to Labrys Fund II, L.P. (“Labrys”), an unaffiliated institutional investor. The note was issued at a purchase price of $98,000, reflecting an original issue discount of $9,800, and bears total interest of $10,780. The note matures on August 27, 2026. The note is unsecured and may not be prepaid except as provided in its terms. In the event of default, unpaid amounts bear interest at the lesser of 15.0% per annum or the maximum rate permitted by law.

Labrys may convert all or any portion of the outstanding principal and accrued interest upon the occurrence of an event of default or missed amortization payment at a conversion price equal to 75% of the average of the two lowest closing prices of the Company’s common stock during the ten trading days preceding the conversion date, subject to customary adjustments.

The Company assessed the embedded conversion features and determined that they are not considered clearly and closely related to the host note and meet the definition of derivatives. Therefore, these embedded conversion features are required to be bifurcated from the note and accounted for separately as a derivative liability. The Company estimated the fair value of the derivative liabilities on the date the amendment was executed and recorded them as discounts that net against the convertible note. The Company is required to remeasure the derivative liabilities to their then fair values at each subsequent balance sheet date, through an adjustment to current earnings (see Note 11 for further details on the Company’s fair value measurement).

A payment of $59,290 is due on the note on February 27, 2026. The remaining balance due, including accrued interest, will be paid in monthly payments of $9,882 from March 27, 2026 through August 27, 2026. As of December 31, 2025, the note remained outstanding in full and is presented net of total unamortized debt discounts and debt issuance costs of $16,234 within “Short-term convertible notes payable” on the consolidated balance sheets.

Auctus Convertible Note

On December 17, 2019, the Company issued a $2.4 million convertible promissory note to Auctus Fund, LLC (“Auctus”). The note provided for variable conversion prices based on a discount to market and bore default interest of up to 24% upon an event of default.

On September 1, 2022, the Company entered into an Exchange Agreement with Auctus pursuant to which certain outstanding debt and equity instruments were restructured. Immediately prior to the exchange, Auctus held $1,228,183 of debt, including prepayment penalties, default premiums, and accrued interest. Under the agreement, Auctus reduced the amount owed to $710,911, forgave $225,444 of default penalties, and exchanged certain warrants and a $350,000 prepayment penalty for 3,900,000 shares of common stock and warrants to purchase an aggregate of 7,800,000 shares of common stock at exercise prices of $0.50 and $0.65 per share. The remaining balance was payable in installments over an 18-month period. During 2024, Auctus agreed that payments would be applied first to principal.

The outstanding principal balance of the convertible note was $20,000 as of December 31, 2025 and is included in short-term convertible debt in default. The outstanding principal balance of the convertible note was $15,000 as of December 31, 2024 and is included in short-term convertible debt. Accrued interest totaled $143,638 and $116,412 as of December 31, 2025 and 2024, respectively.

Other Convertible Promissory Notes

On May 2, 2025, the Company issued a promissory note totaling $75,000 to an unaffiliated third party, which remained outstanding as of December 31, 2025. The promissory note, which matures on May 2, 2026, accrues interest at a rate of 12.0% per annum. In the event of default, the promissory note accrues interest at the default rate of 15.0% per annum. The principal balance and all accrued and unpaid interest are due at maturity. On the maturity date, the Company may give the holder of the promissory note the option of converting the balance to common shares at a conversion rate of $0.20 per share. The holder of the promissory note also received 75,000 common stock purchase warrants, which have an exercise price of $0.20 and will expire on May 1, 2028. The warrants, which are classified as equity under ASC 815-40 and had an estimated fair value of $7,072, were valued using the Black-Scholes option pricing model and allocated a portion of the proceeds from the note based on their relative fair value. The warrants were recorded as additional paid-in capital with a corresponding discount on the note payable. As of December 31, 2025, the unamortized discount and accrued interest on the promissory note was $2,364 and $5,992, respectively.

On May 22, 2025, the Company issued a $10,000 promissory note to an unaffiliated third party that bore interest at 12.0% per annum and matured on May 22, 2026. The note provided for default interest of 15.0% and included an option for the holder to convert the outstanding balance into common stock at $0.20 per share at maturity. In connection with the issuance, the holder received 10,000 warrants to purchase common stock at an exercise price of $0.20, which expire on May 21, 2028. The warrants were classified as equity under ASC 815-40, had a fair value of $1,134, and were recorded in additional paid-in capital with a corresponding discount to the note based on relative fair value. In connection with the November Purchase Agreement, the holder exchanged the remaining outstanding principal and accrued interest under the note for common stock and warrants prior to December 31, 2025. As a result of the exchange, the note was fully satisfied and no amounts remained outstanding as of December 31, 2025.

9. RELATED PARTY DEBT

Short-Term Notes Payable Due to Related Parties

During the year ended December 31, 2024, the Company issued promissory notes totaling $75,000 to members of the Board of Directors. The promissory notes accrued interest at a rate of 9.0%. The holders of the promissory notes also received 75,000 common stock purchase warrants, which have exercise prices of $0.25 and will expire four years after issuance. The warrants, which are classified as equity under ASC 815-40 and had an estimated fair value of $8,800, were recorded as a discount on the notes payable. The Company estimated the fair value of the warrants using the Black-Scholes option pricing model with the following weighted-average assumptions:

On August 21, 2025, the Company entered into an exchange agreement with Mr. Alan Grujic, a member of the Board of Directors, to exchange $25,000 of notes payable and $2,379 of accrued interest for 152,108 shares of common stock and 152,108 warrants to purchase up to 152,108 shares of common stock. The warrants, which were immediately exercisable upon issuance, expire four years following the issuance date and have an exercise price of $0.25 per share. During the year ended December 31, 2025, the Company recorded a loss on extinguishment of debt of $55,523 for the exchange agreement, equal to the excess of fair value of the common stock and warrants over the value of the debt and accrued interest. The fair value of the warrants was estimated using the Black-Scholes valuation model, with the following assumptions:

During the year ended December 31, 2025, the Company entered into exchange agreements with members of the Board of Directors to exchange $50,000 of notes payable and accrued interest of $2,602 for 526,014 shares of common stock and 526,014 warrants to purchase up to 526,014 shares of common stock. The warrants, which were immediately exercisable upon issuance, expire four years following the issuance date and have an exercise price of $0.13 per share. During the year ended December 31, 2025, the Company recorded a loss on extinguishment of debt of $31,928 for the exchange agreements, equal to the excess of fair value of the common stock and warrants over the value of the debt and accrued interest. The fair value of the warrants was estimated using the Black-Scholes valuation model, with the following assumptions:

The outstanding principal and associated debt discounts as of December 31, 2025 and December 31, 2024 are presented below (in thousands):

Long-Term Notes Payable Due to Related Parties

Executive Deferred Compensation Notes Payable

In 2018, the Company issued promissory notes to Dr. Mark Faupel and Dr. Gene Cartwright to settle previously deferred compensation and other amounts owed. The notes bear interest at 6.0% per annum and have been amended and extended multiple times.

On February 19, 2021, the Company replaced the original notes with new promissory notes totaling $420,263 and converted an additional $185,000 of amounts owed into 185 shares of Series F-2 Preferred Stock. The notes were subsequently amended on February 18, 2023 to extend the maturity to February 18, 2025. On March 7, 2025, the Company further amended the note held by Dr. Faupel to extend the maturity to February 18, 2026. The balance owed to Dr. Cartwright was past due as of December 31, 2025.

On August 27, 2025, the Company entered into an agreement with Dr. Faupel to exchange $25,000 of note principal for 138,889 shares of common stock and 138,889 warrants to purchase up to 138,889 shares of common stock. The warrants, which were immediately exercisable upon issuance, expire four years following the issuance date and have an exercise price of $0.25 per share. During the year ended December 31, 2025, the Company recorded a loss on extinguishment of debt of $50,697 for the exchange agreement, equal to the excess of fair value of the common stock and warrants over the value of the debt. The fair value of the warrants was estimated using the Black-Scholes valuation model, with the following assumptions:

The tables below summarize the outstanding balance of debt owed to Dr. Faupel and Dr. Cartwright (in thousands):

On March 22, 2021, the Company entered into an exchange agreement with Richard Fowler, a former executive. As of December 31, 2020, the Company owed Mr. Fowler $546,214, consisting of $412,624 of deferred salary and $133,590 of accrued interest. Under the agreement, the Company exchanged $50,000 of the outstanding balance for 50 shares of Series F-2 Preferred Stock, convertible into 200,000 shares of common stock, and issued a $150,000 unsecured promissory note for a portion of the remaining amount owed. The note bears interest at 6.0% per annum (18.0% upon default), has an effective interest rate of 6.18%, and is payable in monthly installments of $3,600 over four years, beginning March 15, 2022.

During the years ended December 31, 2025 and 2024, Mr. Fowler forgave $60,962 and $65,095 of the outstanding balance of deferred compensation, respectively. As of December 31, 2025, Mr. Fowler may forgive up to $3,278 of the remaining deferred compensation if the Company complies with the repayment plan described above. The reductions in the outstanding balance met the criteria for troubled debt. The basic criteria are that the borrower is troubled, i.e., they are having financial difficulties, and a concession is granted by the creditor. As of December 31, 2025, the outstanding principal amount owed on the note was $2,406, which is included in “Current portion of long-term debt, related parties” in the consolidated balance sheet. As of December 31, 2024, the outstanding principal amount owed on the note was $43,895, of which $41,489 is included in “Current portion of long-term debt, related parties” and $2,406 is included in “Long-term debt, related parties” in the consolidated balance sheet.

Other Notes Payable Issued to Related Parties

On September 25, 2025, the Company issued a $160,000 contingently convertible promissory note to Dr. John Imhoff. The note bears simple interest at 10% per annum and matures on February 28, 2027. Beginning November 30, 2025, the Company is required to make monthly payments of $10,000 plus accrued interest until maturity.

If the Company fails to make a required payment, the holder may elect to convert the unpaid balance, including accrued interest, into shares of common stock at a conversion price of $0.07 per share if the 10-day VWAP is below $0.50, or $0.14 per share if the 10-day VWAP is $0.50 or higher. The Company may prepay the note at any time without penalty with the holder’s written consent.

During the year ended December 31, 2025, the holder converted $10,000 of principal and $3,682 of accrued interest into 195,460 shares of common stock at a conversion price of $0.07 per share. As of December 31, 2025, the remaining principal balance was $150,000 and accrued interest totaled $534. Of the remaining principal, $130,000 is included in “Current portion of long-term debt, related parties” and $20,000 is included in “Long-term debt, related parties” in the consolidated balance sheet.

The following tables summarize long-term notes payable due to related parties:

Future debt obligations at December 31, 2024 for debt owed to related parties is as follows:

10. INCOME (LOSS) PER SHARE OF COMMON STOCK

Basic net income (loss) per share attributable to common stockholders, amounts are computed by dividing the net income (loss) plus preferred stock dividends and deemed dividends on preferred stock by the weighted average number of shares outstanding during the year.

Diluted net income (loss) per share attributable to common stockholders amounts are computed by dividing the net income (loss) plus preferred stock dividends, deemed dividends on preferred stock, after-tax interest on convertible debt and convertible dividends by the weighted average number of shares outstanding during the year, plus Series C, Series C-1, Series C-2, Series F and Series F-2 convertible preferred stock, convertible debt, convertible preferred dividends, warrants and stock options convertible into common stock shares.

During a period of net loss, basic and diluted earnings per share are the same as the assumed exercise of warrants and the conversion of convertible debt and preferred stock are anti-dilutive. For the years ended December 31, 2025 and 2024, all stock options, convertible preferred stock, convertible debt, convertible deferred compensation and warrants were anti-dilutive and were therefore excluded from the computation of diluted loss per share. At December 31, 2025 and 2024, these instruments were convertible into 58,609,742 and 57,954,585 common shares, respectively.

The following table sets forth pertinent data relating to the computation of basic and diluted net loss per share attributable to common shareholders (in thousands, except for per-share data):

11. FAIR VALUE MEASUREMENTS

The convertible notes payable derivative liabilities are considered Level 3 measurements, due to the significant unobservable inputs in the valuation, which are based on a forecast of the Company’s future stock performance and, as the note payable is contingently convertible upon an event of default, management’s estimate of the likelihood and timing of conversion.

Management utilized a pricing model simulation based on the terms of the bifurcated conversion features, which projects potential future stock prices using the Company’s historical volatility. The model estimates a variable conversion price as of an assumed future conversion date, based on management’s best estimate of the timing and probability of conversion.

The key inputs to the valuation model that was utilized to estimate the fair value of the bifurcated conversion option included:

The following table presents the fair value of the bifurcated conversion options as of December 31, 2025 and December 31, 2024:

Derivative financial instruments and changes thereto recorded in the years ended December 31, 2025 and 2024 are presented below:

12. INCOME TAXES

The Company has incurred net operating losses (“NOLs”) since inception. As of December 31, 2025, the Company had NOL carryforwards available to offset future taxable income through 2038 of approximately $48.6 million. The company has recorded deferred tax assets related to these NOLs; however, a full valuation allowance has been established due to uncertainty regarding their realizability. Utilization of existing NOL carryforwards may be limited in future years if the Company experiences an ownership change, as defined under Section 382 of the Internal Revenue Code. The Company is in the process of analyzing its NOL carryforwards and has not yet determined whether any ownership changes have occurred that could limit their utilization. NOL carryforwards that were generated after 2017, totaling $17.7 million, may only be used to offset 80% of taxable income and are carried forward indefinitely.

Components of deferred taxes are as follows at December 31, 2025 and 2024 (in thousands):

The following is a summary of the items that caused recorded income taxes to differ from taxes computed using the statutory federal income tax rate for the years ended December 31, 2025 and 2024:

The Company applies the applicable authoritative guidance which prescribes a comprehensive model for the manner in which a company should recognize, measure, present and disclose in its financial statements all material uncertain tax positions that the Company has taken or expects to take on a tax return. As of December 31, 2025 and 2024, the Company has no uncertain tax positions. There are no uncertain tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within twelve months from December 31, 2025.

The Company files federal income tax returns and income tax returns in the state of Georgia with varying statutes of limitations. The Company has filed its 2024 federal and state corporate tax returns.

The total provision for income taxes as of December 31, 2025 and 2024 was as follows:

In 2025 and 2024, our effective tax rate differed from the U.S. federal statutory rate due to the valuation allowance over our deferred tax assets.

13. SEGMENT REPORTING

The Company is not organized by multiple operating segments for the purpose of making operating decisions or assessing performance. Accordingly, the Company operates in one reportable operating segment. The Company’s principal decision maker is the Chief Executive Officer and acting Chief Financial Officer. Management believes that its business operates as one reportable segment because: a) the Company measures profit and loss as a whole; b) the principal decision maker does not review information based on any operating segment; c) the Company does not maintain discrete financial information on any specific segment; d) the Company has not chosen to organize its business around different products and services, and e) the Company has not chosen to organize its business around geographic areas. Since the Company operates as one operating segment, financial segment information, including profit or loss and asset information, can be found in the consolidated financial statements.

14. SUBSEQUENT EVENTS

Promissory Note

On January 8, 2026, the Company issued a promissory note to Diagonal Lending with a principal amount of $157,550 and an original issue discount of $20,550, resulting in cash proceeds of $137,000. The note accrues a one-time interest charge of 12% and matures on November 15, 2026. The outstanding balance is payable in five installments beginning July 15, 2026 and ending on the maturity date. Following an event of default, the holder has the right to convert the outstanding balance of the note into shares of the Company’s common stock at a conversion price equal to 65% of the lowest trading price of the Company’s common stock during the ten trading days prior to conversion, subject to certain limitations.

Warrant Exchange Transactions

On February 25, 2026, the Company entered into a series of warrant exchange agreements with certain holders of its outstanding common stock purchase warrants originally issued in 2022. Under these agreements, holders exchanged an aggregate of approximately 9,250,000 warrants with exercise prices of $0.50 or $0.65 per share for new warrants with exercise prices of $0.20 or $0.25 per share. Holders were permitted to either immediately exercise the newly issued warrants or extend the expiration date of such warrants by one year from their original expiration date.

As a result of these transactions, holders exercised approximately 4,825,000 of the newly issued warrants, resulting in the issuance of approximately 4,825,000 shares of the Company’s common stock and aggregate cash proceeds of approximately $980,000 to the Company. The remaining 4,425,000 newly issued warrants remain outstanding and will expire in 2027. The warrant exchange transactions were conducted pursuant to individually negotiated exchange agreements with each holder.

Conversion of Related Party Promissory Note

During February 2026, Dr. John Imhoff, a member of the Company’s Board of Directors, elected to convert portions of principal and accrued interest under his September 25, 2025 convertible promissory note into shares of the Company’s common stock. With the mutual agreement of the Company, these conversions were completed in lieu of scheduled principal payments, even though the Company was not in default under the note.

In connection with these elections, Dr. Imhoff converted an aggregate of $30,000 of principal and $2,816 of accrued interest into 468,806 shares of the Company’s common stock at a conversion price of $0.07 per share.

Debt Conversion and Warrant Issuance

Subsequent to December 31, 2025, the Company entered into an exchange agreement with the holder of a $75,000 convertible promissory note, pursuant to which the holder agreed to convert the outstanding principal and accrued interest of $7,816 into 414,082 shares of the Company’s common stock at a conversion price of $0.20 per share. In connection with the exchange, the Company also issued warrants to purchase 300,000 shares of common stock. The warrants have an exercise price of $0.30 per share and expire three years from the date of issuance.

Other Common Stock Issuances

Subsequent to December 31, 2025, the Company issued (1) 400,000 common shares to Dr. Imhoff upon conversion of 100 Series E preferred shares, (2) 200,000 common shares to Mr. Fowler upon conversion of 50 Series F-2 preferred shares, (3) 25,338 common shares to Dr. Imhoff for payment of dividends on Series E preferred stock, (4) 211,645 common shares for payment of dividends on Series F preferred stock, (5) 72,189 common shares for payment of dividends on Series F-2 preferred stock, (6) 2,840,000 common shares upon conversion of 710 shares of Series F preferred stock, and (7) 740,000 common shares upon conversion of 185 shares of Series F-2 preferred stock.

Stock Options Awarded

On March 10, 2026, the Company granted 75,000 stock options to employees under the Plan and 550,000 stock options to executives and directors of the Company outside of the Plan. The stock options, which have exercise prices of $0.29, will expire on March 9, 2036. One fourth of the stock options vested immediately, while the remaining options will vest over a period of 33 months, beginning on June 10, 2026.