Newton Golf Company, Inc.

NEWTON GOLF COMPANY, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Amounts rounded to nearest thousands, except share and per share amounts)

NOTE 1 –OPERATIONS AND LIQUIDITY

Newton Golf Company, Inc. (“we,” or the “Company”) was formed in 2018 as Sacks Parente Golf, Inc., a Delaware limited liability company. On March 18, 2025 the Company converted into a Delaware corporation named Newton Golf Company, Inc. Pursuant to our Plan of Conversion, on March 18, 2025, all of the outstanding ownership interests in Sacks Parente Golf, Inc., and rights to receive such interest were converted into and exchanged for shares of capital stock of Newton Golf Company, Inc. The Company retroactively reflected the conversion as of the earliest periods presented herein.

On March 11, 2025, the Company’s Board of Directors approved and, by written consent dated February 26, 2025, the holders of a majority of our common stock approved an amendment to our Certificate of Incorporation to change our name from Sacks Parente Golf, Inc. to Newton Golf Company, Inc. to better reflect its commitment to revolutionizing golf through advanced physics and precision engineering. The change to Newton Golf Company, Inc. became effective on March 17, 2025. All references throughout this filing to Sacks Parente Golf, Inc. have been changed to Newton Golf Company, Inc.

Newton Golf Company, Inc. is a technology-forward golf company, with a growing portfolio of golf products, including putting instruments, golf shafts, golf grips, and other golf-related products. In consideration of its growth opportunities in shaft technologies, in April of 2022, the Company expanded its manufacturing business to include advanced premium golf shafts by opening a new shaft manufacturing facility in St. Joseph, Missouri. It is the Company’s intent to manufacture and assemble substantially all products in the United States. The Company anticipates expansion into golf apparel and other golf-related product lines to enhance its growth. The Company’s future expansions may include broadening its offerings through mergers, acquisitions or internal developments of product lines that are complementary to its premium brand.

The Company currently sells its products through resellers, the Company’s websites, and distributors in the United States, Japan, and South Korea.

Basis of Presentation

The condensed financial statements as of September 30, 2025, and for the three and nine months ended September 30, 2025 and 2024, are unaudited. In the opinion of management of the Company, all adjustments, including normal recurring accruals, have been made that are necessary to present fairly the financial position of the Company as of September 30, 2025, and the results of its operations for the three and nine months ended September 30, 2025 and 2024, and its cash flows for the nine months ended September 30, 2025 and 2024. Operating results for the interim periods presented are not necessarily indicative of the results expected for a full fiscal year. The condensed balance sheet as of December 31, 2024 has been derived from the Company’s audited financial statements at such date.

The condensed financial statements and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. These condensed financial statements should be read in conjunction with the financial statements and other information included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as filed with the SEC.

Going Concern and Liquidity

The accompanying condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed financial statements, during the nine months ending September 30, 2025, the Company incurred a net loss of $3,625,000 and used cash in operations of $4,101,000. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the condensed financial statements being issued. These condensed financial statements do not include adjustments relating to the recoverability and classification of reported asset amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

In addition, the Company’s independent registered public accounting firm, in its report on the Company’s financial statements for the year ended December 31, 2024, expressed substantial doubt about the Company’s ability to continue as a going concern. These condensed financial statements do not include any adjustments that might result from this uncertainty.

As of September 30, 2025, the Company had cash and cash equivalents on hand in the amount of $2,549,000. The Company expects its cash on hand on September 30, 2025, to last for at least the next five months. On October 24, 2025, the Company entered into an At-The-Market Sales Offering Agreement (“ATM Offering Agreement”) with Kingswood Capital Partners, LLC (“Kingswood”), permitting the Company to sell up to $10.0 million of its common stock pursuant to its effective shelf registration statement on Form S-3 (the “ATM”). The ATM Offering Agreement provides a potential source of liquidity; however, the amount of capital the Company can raise under the program will depend on market conditions and investor demand.

The continuation of the Company as a going concern is dependent upon its ability to obtain necessary debt or equity financing to continue operations until it begins generating positive cash flow from operations.

No assurance can be given that any future financing will be available or, if available, that it will be on terms that are satisfactory to the Company. Even if the Company can obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing, or grant unfavorable terms in licensing agreements.

Reverse Stock Splits

On July 18, 2024, the Company filed a Certificate of Amendment to amend its Certificate of Incorporation with the Secretary of State of Delaware to affect a reverse stock split of the Company’s common stock at a ratio of 1-for-10 shares (the “First Reverse Stock Split”). The First Reverse Stock Split became effective as of 12:01 a.m. Eastern Time on July 30, 2024 and the Company’s common stock began trading on The Nasdaq Capital Market on a post-split basis under its existing trading symbol. As a result of the First Reverse Stock Split, every ten shares of common stock were automatically combined into one share of common stock. The authorized number of shares of common stock was not affected by the First Reverse Stock Split. No fractional shares were issued in connection with the First Reverse Stock Split, as all fractional shares were rounded up to the next whole share.

On March 4, 2025, the Company filed a Certificate of Amendment to amend its Certificate of Incorporation with the Secretary of State of Delaware to affect areverse stock split of the Company’s common stock at a ratio of 1-for-30 shares (the “Second Reverse Stock Split” and together with the First Reverse Stock Split, the “Reverse Stock Splits”). The Second Reverse Stock Split became effective as of 12:01 a.m. Eastern Time on March 17, 2025 and the Company’s common stock began trading on The Nasdaq Capital Market on a post-split basis under its existing trading symbol. As a result of the Second Reverse Stock Split, every 30 shares of common stock were automatically combined into one share of common stock. The authorized number of shares of common stock was not affected by the Second Reverse Stock Split. No fractional shares were issued in connection with the Second Reverse Stock Split, as all fractional shares were rounded up to the next whole share.

Accordingly, all share and per share amounts presented herein with respect to common stock have been retroactively adjusted to reflect the Reverse Stock Splits for all periods presented. Proportionate adjustments for the Reverse Stock Splits have been made to the per share exercise price and the number of shares issuable upon the exercise of warrants, the number of shares reserved for issuance under the Company’s equity plans, and all the then outstanding awards under the Company’s equity plans. The Reverse Stock Splits did not change the par value of the common stock or modify any voting rights or other terms of common stock.

NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures 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. Those estimates and assumptions include estimates for reserves of uncollectible accounts receivables, assumptions used in valuing inventories at net realizable value, impairment testing of recorded long-term and tangible and intangible assets, the valuation allowance for deferred tax assets, accruals for potential liabilities, assumptions made in valuing warrant liabilities, and assumptions made in valuing stock instruments issued for services.

Warrant Liabilities

The Company accounts for common stock warrants as either equity-classified or liability-classified instruments based on an assessment of the specific terms of the warrants and the guidance provided by the Financial Accounting Standards Board (“FASB”) in Accounting Standards Codification 480,Distinguishing Liabilities from Equity (“ASC 480”) and Accounting Standards Codification 815,Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own stock and whether the holders of the warrants could potentially require net cash settlement in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

Revenue Recognition

The Company recognizes revenue in accordance with Accounting Standards Codification 606,Revenue from Contracts with Customers(“ASC 606”). The underlying principle of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC 606 creates a five-step model that requires entities to exercise judgment when considering the terms of contract(s), which include (1) identifying the contract or agreement with a customer, (2) identifying our performance obligations in the contract or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and (5) recognizing revenue as each performance obligation is satisfied.

Revenue and costs of sales are recognized when control of the products is transferred to our customer, which generally occurs upon shipment from our facilities. The Company’s performance obligations are satisfied at that time. The Company does not have any significant contracts with customers requiring performance beyond delivery, and contracts with customers contain no incentives or discounts that could cause revenue to be allocated or adjusted over time. Shipping and handling activities are performed before the customer obtains control of the goods and therefore represent a fulfillment activity rather than a promised service to the customer.

All of the Company’s products are offered for sale as finished goods only, and there are no performance obligations required post-shipment for customers to derive the expected value from them.

The Company does not allow for returns, except for damaged products when the damage occurred pre-fulfillment. Damaged product returns have historically been insignificant. Because of this, the stand-alone nature of our products, and our assessment of performance obligations and transaction pricing for our sales contracts, we do not currently maintain a contract asset or liability balance for obligations. We assess our contracts and the reasonableness of our conclusions on a quarterly basis.

The following table presents our net sales by revenue source, and the period-over-period percentage change, for the period presented:

The following table presents our net sales by product lines for the period presented:

Loss per Common Share

Basic earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of shares of common stock outstanding during the year. Diluted earnings (loss) per share is computed by dividing the net income (loss) applicable to common stockholders by the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if all potential dilutive shares had been issued, using the treasury stock method. Potential common shares are excluded from the computation when their effect is anti-dilutive.

For the nine months ending September 30, 2025 and 2024, the calculations of basic and diluted net loss per share are the same because potential dilutive securities would have had an anti-dilutive effect. The potentially dilutive securities consisted of the following:

Advertising Costs

Third-party advertising costs are expensed as incurred and are included in selling, general and administrative expense. Advertising costs aggregated $2,039,000 and $1,103,000 for the nine months ending September 30, 2025 and 2024, respectively.

Research and Development

Research and development expenses consist primarily of personnel costs, prototype expenses, and consulting services associated with research and development equipment. Research and development costs are expensed as incurred. Research and development costs were $607,000 and $598,000 for the nine months ending September 30, 2025 and 2024, respectively,

Stock-Based Compensation

The Company periodically issues stock options to employees and non-employees in non-capital raising transactions for services and for financing costs. The Company accounts for such grants issued and vesting based on Accounting Standards Codification 718,Compensation-Stock Compensation (“ASC 718”), whereby the value of the award is measured on the date of grant and recognized for employees as compensation expense on a straight-line basis over the vesting period. The Company recognizes the fair value of stock-based compensation within its condensed statements of operations with classification depending on the nature of the services rendered.

The fair value of each option is estimated using the Black-Scholes option-pricing model. The Company was a private company through August 14, 2023, and lacked company-specific historical and implied volatility information. Therefore, through December 31, 2024 it estimated its expected stock volatility based on the greater of the historical volatility of a publicly traded set of peer companies within the consumer products industry with characteristics similar to the Company or the Company’s volatility since going public. Beginning on January 1, 2025, the company began to use its own historical volatility.

The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The expected term of stock options granted to non-employees is equal to the contractual term of the option award. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected dividend yield is zero because the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

Fair Value of Financial Instruments

The Company uses various inputs in determining the fair value of its financial assets and liabilities and measures these assets on a recurring basis. Financial assets recorded at fair value are categorized by the level of subjectivity associated with the inputs used to measure their fair value. Accounting Standards Codification Section 820 defines the following levels of subjectivity associated with the inputs:

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

Level 2—Inputs, other than quoted prices in active markets, that are observable either directly or indirectly.

Level 3—Unobservable inputs based on the Company’s assumptions.

The carrying amounts of financial assets and liabilities, such as cash, accounts receivable, inventory, accounts payable, and other payables, approximate their fair values because of the short maturity of these instruments. The carrying values of long-term financing obligations approximate their fair values because interest rates on these obligations are based on prevailing market interest rates.

The Company utilizes level 3 inputs in the fair value hierarchy to determine the fair market value of its warrant liability.

Concentrations of Risk

Cash Balances. The Company’s cash balances on deposits with banks are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. From time to time, however, the Company may be exposed to risk for the amounts of funds held in bank accounts in excess of the FDIC limit. To minimize the risk, the Company’s policy is to maintain cash balances with high quality financial institutions. All of the non-interest bearing cash balances were fully insured as of September 30, 2025 and December 31, 2024.

Accounts Receivable. As of September 30, 2025, two customers accounted for more than 13% and 11% of accounts receivable, respectively. As of December 31, 2024, two customers accounted for more than 44% and 20% of accounts receivable, respectively. As of September 30, 2025 and December 31, 2024, no other customers exceeded 10% of accounts receivable.

Net sales. During each of the three and nine months ending September 30, 2025 and 2024, no customer accounted for 10% or more of net sales.

Segments

Under Accounting Standards Codification 280,Segment Reporting(“ASC 280”), operating segments are defined as components of an enterprise where discrete financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), in deciding how to allocate resources and in assessing performance. The Company has one component. Therefore, the Company’s Chief Executive Officer, who is also the CODM, makes decisions and manages the Company’s operations as a single operating segment for the manufacture and distribution of its products.

Recent Accounting Pronouncements

Announced But Not Yet Adopted

In November 2024, the FASB issued ASU 2024-03,Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The guidance in ASU 2024-03 requires public business entities to disclose in the notes to the financial statements, among other things, specific information about certain costs and expenses including purchases of inventory; employee compensation; and depreciation and amortization expense for each caption on the income statement where such expenses are included. The update is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Early adoption is permitted, and the amendments may be applied prospectively to reporting periods after the effective date or retrospectively to all periods presented in the financial statements. We are currently evaluating the provisions of this guidance and assessing the potential impact on our financial statement disclosures.

Other recent accounting pronouncements issued by the FASB, its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the SEC did not or are not expected by management to have a material impact on the Company’s present or future financial statements.

NOTE 3 –INVENTORY

Inventory is initially measured at cost and subsequently measured at the lower of cost or net realizable value. Cost is determined on a first-in, first-out basis. The following table details our primary inventory categories for the periods presented:

NOTE 4 –PROPERTY AND EQUIPMENT

Property and equipment are comprised of the following:

Depreciation expenses are included in both cost of goods sold and selling, general and administrative expenses in the accompanying condensed statements of operations. Depreciation expense related to property and equipment was $84,000 and $58,000 for the three months ending September 30, 2025 and 2024, respectively. Depreciation expense related to property and equipment was $224,000 and $121,000 for the nine months ending September 30, 2025 and 2024, respectively.

NOTE 5 –SOFTWARE LICENSING OBLIGATION

In October 2023, the Company entered into a software licensing agreement with Oracle America, Inc (“Oracle”) for its NetSuite Enterprise Resource Planning (ERP) software (“NetSuite”). The Company agreed to license NetSuite for 36 months and utilize Oracle’s professional services to assist in the implementation of NetSuite. The cost of the license fee was $102,000 and professional services were fixed at $34,000, for an aggregate cost of $136,000. Per the payment terms, no payments were due during the first six months, and thirty monthly payments of $4,513 are due from April 1, 2024 through September 1, 2026.

The Company recorded the $42,000 cost as a deferred software licensing asset and liability on the accompanying condensed balance sheet. The deferred software licensing asset is being amortized over the license period. The deferred software licensing balance was $59,000 at December 31, 2024. During the nine months ending September 30, 2025, the Company recorded amortization expense of $25,000, resulting in a deferred software licensing balance of $34,000 as of September 30, 2025.

During the nine months ending September 30, 2025, the Company made payments of $32,000, leaving a software license obligation balance of $54,000 as of September 30, 2025, of which the current portion was $54,000.

Future payments under the software license obligation are as follows:

NOTE 6 –LEASE LIABILITIES

The Company determines whether a contract is, or contains, a lease at inception. Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset during the lease term, and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at lease commencement based upon the estimated present value of unpaid lease payments over the lease term. The Company leases its office and warehouse locations, and certain warehouse equipment. Leases with an initial term of 12 months or less are not included on the condensed balance sheets.

On April 1, 2022, the Company entered a facility lease for a 4,000 square foot facility in St. Joseph, Missouri, to expand its manufacturing business to include advanced premium golf shafts. The lease is for 24 months, and the monthly rent is approximately $1,500. During 2023, the Company amended its lease by adding an additional 5,000 square feet and extending the lease term to December 2025.

In July 2025, the Company entered into an additional lease agreement for a parking lot and a designated space for a dumpster. The lease runs from January 1, 2025 through December 31, 2027, with monthly rent increasing from $3,600 to $3,900.

The Company’s ROU asset balance was $34,000 as of December 31, 2024. During the nine months ending September 30, 2025, the Company recorded an increase of ROU assets of $106,000 related to its new lease, resulting in an ROU asset balance of $106,000 as of September 30, 2025.

The Company’s lease liability balance was $34,000 as of December 31, 2024. As of September 30, 2025 our lease liability was $106,000, of which the current portion of lease liability was $41,000, leaving a long-term lease liabilities balance of $65,000.

During the nine months ending September 30, 2025 and 2024, lease costs totaled approximately $106,000 and $72,000, respectively.

As of September 30, 2025, the weighted average remaining lease terms for operating lease is 1.50 years, and the weighted average discount rate for operating leases is 10.00%.

Future minimum lease payments under the leases are as follows

NOTE 7 –STOCK OPTIONS

Summary of Options

The Company maintains the 2022 Equity Incentive Plan (the “2022 Plan”), which provides for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock units and performance units and performance shares to employees, directors and consultants of the Company or any parent or subsidiary of the Company. The purpose of the 2022 Plan is to enable the Company to attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentives to employees, directors and consultants of the Company or any parent or subsidiary of the Company, and to promote the success of the Company’s business.

A summary of stock options for the nine months ending September 30, 2025 is as follows:

During the nine months ending September 30, 2025, the Company granted stock options to employees to purchase 5,000 shares of common stock for services rendered. The options have an average exercise price of $1.50 per share, expire infive years, vesting equally over four years from the employees’ start date. The total fair value of these options at the grant date was approximately $6,800 using the Black-Scholes option pricing model.

The total stock compensation expense recognized related to vesting stock options for the nine months ending September 30, 2025 and 2024 amounted to $137,000 and $245,000, respectively. As of September 30, 2025 the total unrecognized stock-based compensation was $268,000 which is expected to be recognized as part of operating expense through September 2028.

As of September 30, 2025, the intrinsic value of the outstanding options under the 2022 Plan was $0.

The fair value of share option award is estimated using the Black-Scholes option pricing model based on the following weighted-average assumptions:

NOTE 8 –WARRANTS CLASSIFIED AS LIABILITY

A summary of warrants for the nine months ending September 30, 2025 is as follows:

Information relating to outstanding warrants as of September 30, 2025, summarized by exercise price, is as follows:

Series A Warrants

Beginning on February 26, 2025 (the “Warrant Stockholder Approval”), the Series A Warrants contain a reset of the exercise price to a price equal to the lesser of (i) the then exercise price and (ii) the lowest volume weighted average price (“VWAP”) for the five trading days immediately following the date the Company effects a reverse split with a proportionate adjustment to the number of shares underlying the Series A Warrants (a “Reverse Split Reset”). Any such adjustment will be subject to a floor price (“the Floor Price”) calculated as follows: (a) prior to the date of the Warrant Stockholder Approval, 50% of the Nasdaq Minimum Price, and (b) after the date of the Warrant Stockholder Approval, 20% of the Nasdaq Minimum Price. “Nasdaq Minimum Price” means the lower of the Nasdaq closing price or the average closing price for the five immediately preceding trading days, as defined in Nasdaq Listing Rule 5635(d)(1)(A). Additionally, with certain exceptions, beginning on the date of the Warrant Stockholder Approval, the Series A Warrants provide for an adjustment to the exercise price and number of shares underlying the Series A Warrants (the “Dilutive Adjustment”) upon the Company’s issuance of its common stock or common stock equivalents at any time after the closing of the Offering, at a price per share that is less than the then-current exercise price of the Series A Warrants. Any Dilutive Adjustment will be subject to the Floor Price.

The Series A Warrants also require the Company to calculate the fair value in the event of certain fundamental transactions. The fair value calculation provides for a floor on the volatility amount utilized in the value calculation at 100% or greater. The Company has determined this provision introduces leverage to the holders of the Series A Warrants and Series B Warrants (collectively, the “Purchase Warrants”) that could result in a value that would be greater than the settlement amount of a fixed-for-fixed option on the Company’s own equity shares.

On September 30, 2025 the fair value of the Series A Warrants was valued with a binomial model using the exercise price of $1.88 per Series A Warrant, with the underlying asset price of $1.75, an expiration term of 1,534 days, volatility of 147%, a dividend rate of 0%, and a risk-free interest rate of 3.74%.

As of September 30, 2025, no Series A Warrants had been exercised. As of September 30, 2025, the fair value of the Series A Warrants has been determined to be $406,000. As of December 31, 2024, the fair value of the Series A Warrants had been determined to be $1,805,000. As a result of the change in fair value, the Company recognized a loss of $1,399,000 due to the change in the fair value of the warrant liability for the nine months ending September 30, 2025.

Series B Warrants

The Series B Warrants are exercisable at $72.00 per share, subject to adjustment, and expire 30 months from the date of the Warrant Stockholder Approval. The fair value of the Series B Warrants was valued by the Company based on the subsequent settlements of these warrants.

Beginning on the date of the Warrant Stockholder Approval, in lieu of a cash exercise, the holder of the Series B Warrants has the right to elect to receive an aggregate number of shares of common stock equal to the product of (x) the aggregate number of shares of common stock that would be issuable upon a cash exercise of the Series B Warrants and (y) 2.0. Also, the Series B Warrants will provide for a Reverse Split Reset subject to the Floor Price. Additionally, effective on the 11th trading day following the date of the Warrant Stockholder Approval, the exercise price and the number of shares underlying the Common Warrants will be reset to the then-current lowest VWAP in the period commencing on the first trading day following the date of the Warrant Stockholder Approval and ending the close of trading on the 10th trading day thereafter. Such reset will be subject to the Floor Price. With respect to all of the Common Warrants, with the consent of the holder, the Company may adjust the exercise price to such amount and for such time as may be agreed upon. None of the Common Warrants may be exercisable until the Warrant Stockholder Approval. The Series B Warrants allow an alternative cashless conversion The alternative cashless conversion is determined by multiplying the number of exercised Series B Warrants by the exercise price and dividing the result by the lesser of the VWAP price or the $8.40 floor. This amount is then doubled to arrive at the final share total.

Therefore, pursuant to ASC 815, the Company has classified the Purchase Warrants as liabilities in its condensed balance sheet. The classification of the Purchase Warrants, including whether the Purchase Warrants should be recorded as liabilities or as equity, is evaluated at the end of each reporting period with changes in the fair value reported in other income (expense) in the condensed statements of operations. Upon the closing of the registered direct offering, the fair value of the Series B Warrant liability was $12,456,000. For the nine months ending September 30, 2025, warrant holders exercised 251,484 Series B Warrants on an alternative cashless basis to acquire 4,233,226 shares of common stock. The fair value of the Series B Warrant liabilities as of September 30, 2025 was determined to be $505,000, and the Company recognized a gain of $136,000 due to the change in the fair value of the warrant liability for the nine months ending September 30, 2025.

Based on the alternative cashless exercise the Company estimates issuing 288,834 shares of common stock when the remaining 16,849 Series B Warrants are exercised.

A recap of the warrant liabilities is as follows:

NOTE 9 –RESTRICTED STOCK UNITS

A summary of restricted stock unit activity for the nine months ended September 30, 2025 is presented below.

During the nine months ended September 30, 2025, the Company issued 120,000 shares of restricted stock units to vendors for services rendered and to be rendered with a fair value of $192,000. The shares were valued based on the market value of the Company’s common stock price on the grant date and will be amortized over their vesting term.

The total fair value of restricted stock units that vested or were deemed vested during the nine months ended September 30, 2025 was $192,000, of which $114,000 was recognized as an expense and included in selling, general and administrative expenses and $48,000 was recorded as pre-paid expense in the accompanying condensed statements of operations and balance sheets. The pre-paid expense related to issuances of restricted stock units will be amortized over the remaining service period and charged to selling, general and administrative expense.

NOTE 10 –TREASURY STOCK

On January 31, 2025, the Board of Directors of authorized the Chief Executive Officer to repurchase, from time to time, on the open market or otherwise, shares of common stock in such quantities, at such prices, in such manner and on such terms and conditions as he determines are in the best interests of the Company; provided, however, that the aggregate value of shares of common stock repurchased shall not exceed $1,000,000 and no shares of common stock shall be repurchased after 12 months. Pursuant to this approval, the Company repurchased a total of 200,400 shares of its common stock in 13 separate open market transactions during the month of April 2025, for an aggregate purchase price of approximately $500,000. The repurchases were funded using available cash on hand.

These transactions were not conducted under a formal share repurchase program and were solely authorized as a one-time action by the Board. The repurchased shares are recorded as treasury stock at cost and are presented as a reduction to stockholders’ equity in the accompanying condensed balance sheets as of September 30, 2025.

NOTE 11 -REPORTABLE SEGMENT INFORMATION

The Company is organized and operates asone operating and reportable segment. The Company’s revenue comes from customers in the following geographic regions.

The following table presents our net sales by region for the period presented:

This determination is based on the management approach which designates internal information regularly available to the Chief Operating Decision Maker (“CODM”) for making decisions and assessing performance as the source of determination of the Company’s reportable segments. The Company’s CODM, the Chief Executive Officer, reviews financial information presented on a consolidated basis for the purpose of making operating decisions and assessing financial performance.

The accounting policies of the one reportable segment are the same as those described in Note 2, “Summary of Significant Accounting Policies”. The CODM uses net (loss) income, as reported in our statements of operations, to measure segment profit or loss, assess performance, and make strategic capital resources allocations. The measure of segment assets is reported on our balance sheets as total assets. The significant expense categories regularly provided to the CODM are the expenses as noted on the face of the statements of operations.

NOTE 12 –SUBSEQUENT EVENTS

ATM Offering Agreement

On October 24, 2025, the Company entered into an ATM Offering Agreement with Kingswood, as sales agent, permitting the Company to sell up to $10.0 million of its common stock pursuant to its effective shelf registration statement on Form S-3, which was declared effective by the SEC on September 23, 2024.

Shares Issued for Services

Subsequent to September 30, 2025, the Company issued 102,041 restricted stock units to vendors for services rendered and to be rendered with a fair value of $150,000. The restricted stock units were valued based on the market value of the Company’s common stock price on the grant date and will be amortized over their vesting term.

Breach of Right of First Refusal

As a result of entering into the ATM Offering Agreement, the Company breached the right of first refusal provision in that certain underwriting agreement between Aegis Capital Corp. (“Aegis”) and the Company, dated December 12, 2024. The Company is in negotiations with Aegis to resolve this matter; however, the ultimate outcome cannot be presently determined. The Company has no liability as of this filing, but may become liable for some fees due to Aegis for any shares sold under the ATM.