Newton Golf Company, Inc.

NOTES TO FINANCIAL STATEMENTS

**For the Years Ended December 31, 2024 and 2023

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

NOTE 1 –OPERATIONS AND LIQUIDITY

Newton Golf Company, Inc. (“we,” 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. 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 Newton Golf Company, Inc. have been changed to Newton Golf Company.

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, MO. 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.

Going Concern and Liquidity

The accompanying 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 financial statements, during the year ended December 31, 2024, the Company incurred a net loss of $11,752,000 and used cash in operations of $4,929,000 and had a stockholders’ deficit of $5,187,000 as of that date. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the financial statements being issued. These 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.

At December 31, 2024, the Company had cash and cash equivalents on hand in the amount of $7,650,000. The Company expects its cash on hand on December 31, 2024, will last at least the next 12 months.

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. 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 is able to 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 case or equity financing.

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 is able to 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 case of equity financing, or grant unfavorable terms in licensing future licensing agreements.

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 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”). 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. All shares and per share amounts and information presented herein have been retroactively adjusted to reflect the reverse stock splits for all periods presented.

The authorized number of shares of common stock was not affected by the First or Second Reverse Stock Splits. No fractional shares were issued in connection with the First or 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 First and Second Reverse Stock Split for all periods presented. Proportionate adjustments for the First and Second 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 First and Second Reverse Stock Splits will 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.

Cash and Cash Equivalents

The Company’s cash consists of cash on deposit with banks. Cash equivalents represent money market funds or short-term investments with original maturities of three months or less from the date of purchase.

Accounts Receivable

Accounts receivable are generally recorded at the invoiced amounts net of an allowance for expected losses. The Company evaluates the collectability of its trade accounts receivable based on a number of factors. In circumstances where the Company becomes aware of a specific customer’s inability to meet its financial obligations to the Company, a specific reserve for bad debts is estimated and recorded, which reduces the recognized receivable to the estimated amount the Company believes will ultimately be collected. In addition to specific customer identification of potential bad debts, bad debt charges are recorded based on the Company’s historical losses and an overall assessment of past due trade accounts receivable outstanding. The allowance for accounts receivable is established through a provision reducing the carrying value of receivables. At December 31, 2024, management recorded an allowance for doubtful accounts of $19,000. At December 31, 2023, management determined thatno allowance was necessary.

Inventory

Inventory is stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out (“FIFO”) basis. We regularly review our inventory quantities on hand and record a provision for excess and obsolete inventory based primarily on our estimated forecast of product demand and our ability to sell the product(s) concerned. Demand for our products can fluctuate significantly. Factors that could affect demand for our products include unanticipated changes in consumer preferences, general market conditions or other factors, which may result in cancellations of advance orders or a reduction in the rate of reorders placed by customers. Additionally, our management’s estimates of future product demand may be inaccurate, which could result in an understated or overstated provision required for excess and obsolete inventory. At December 31, 2024 and 2023, management recorded a reserve for slow moving and potentially obsolete inventory of $49,000 and $98,000, respectively.

Property and Equipment

Property and equipment are stated at cost. Expenditures for major renewals and improvements that extend the useful lives of property and equipment are capitalized, and expenditures for repairs and maintenance are charged to expense as incurred. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets as follows:

Management assesses the carrying value of property and equipment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If there is an indication of impairment, management prepares an estimate of future cash flows expected to result from the use of the asset and its eventual disposition. If these cash flows are less than the carrying amount of the asset, an impairment loss is recognized to write down the asset to its estimated fair value. For the years ended December 31, 2024 and 2023, the Company determined there wereno indicators of impairment of its property and equipment.

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 ASC 480, Distinguishing Liabilities from Equity (ASC 480) and ASC 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 (ASC) 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 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 dilutive potential common shares had been issued, using the treasury stock method. Potential common shares are excluded from the computation when their effect is antidilutive.

For the years ended December 31, 2024 and 2023, the calculations of basic and diluted 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

Advertising costs are expensed as incurred and are included in selling, general and administrative expense. Advertising costs aggregated $1,614,000 and $827,000 for the years ended December 31, 2024 and 2023, 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 $743,000 and $258,000 for the years ended December 31, 2024 and 2023, 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 ASC 718,Compensation-Stock Compensation whereby the value of the award is measured on the date of grant and recognized for employees as compensation expense on the straight-line basis over the vesting period. The Company recognizes the fair value of stock-based compensation within its Statements of Operations with classification depending on the nature of the services rendered.

The fair value of each option or warrant grant is estimated using the Black-Scholes option-pricing model. The Company was a private company through August 14, 2023, and lacks company-specific historical and implied volatility information. Therefore, it estimated its expected stock volatility based on the historical volatility of a publicly traded set of peer companies within the consumer products industry with characteristics similar to the Company. 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, based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

Prior to August 14, 2023, the common shares of the Company were not publicly traded. As such, during the period, the Company estimated the fair value of common stock using an appropriate valuation methodology, in accordance with the framework of the American Institute of Certified Public Accountants’ Technical Practice Aid, Valuation of Privately-Held Company Equity Securities Issued as Compensation. Each valuation methodology includes estimates and assumptions that require the Company’s judgment. These estimates and assumptions include a number of objective and subjective factors, including external market conditions, guideline public company information, the prices at which the Company sold its common stock to third parties in arms’ length transactions, the rights and preferences of securities senior to the Company’s common stock at the time, and the likelihood of achieving a liquidity event such as an initial public offering or sale. Significant changes to the assumptions used in the valuations could result in different fair values of stock options at each valuation date, as applicable.

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 the 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 warrant liabilities are determined with level 3 inputs.

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 at December 31, 2024 and 2023.

Accounts Receivable. At December 31, 2024, two customers accounted for more than 44% and 20% of accounts receivable, respectively. At December 31, 2023, one customer accounted for 100% of accounts receivable. No other customers exceeded 10% of accounts receivable.

Net sales. During the year ended December 31, 2024, no customer exceeded 10% of net sales. During the year ended December 31, 2024, approximately 6% of the Company’s net sales were international, and 94% of the Company’s net sales were in the United States. During the year ended December 31, 2023, one customer classified as a distributor accounted for 26% of net sales. No other customers exceeded 10% of net sales. During the year ended December 31, 2023, approximately 74% of the Company’s net sales were in the United States, and 26% of the Company’s net sales were in South Korea.

Income Taxes

The Company uses an asset and liability approach for accounting and reporting for income taxes that allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

Segments

Under ASC 280, Segment Reporting, 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

In November 2023, the FASB issued ASU 2023-07,Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure, which is intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss. The update also requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided in interim periods and for entities with a single reportable segment to provide all the disclosures required by ASC 280,Segment Reporting, including the significant segment expense disclosures. This standard became effective for the Company on January 1, 2024. The adoption of 2023-7 did not have a material impact on the Company’s results of operations, financial position or cash flows.

In November 2024, 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 Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company’s present or future financial statements.

NOTE 3 –INVENTORY

Inventory is valued at the lower of cost (first-in, first-out) or net realizable value, and net of reserves is comprised of the following:

At December 31, 2024 and 2023, inventory presented above is net of a reserve for slow moving and potentially obsolete inventory of $49,000 and $98,000, respectively.

NOTE 4 –PROPERTY AND EQUIPMENT

Property and equipment are comprised of the following:

Depreciation expense is included in selling, general and administrative expenses in the accompanying Statements of Operations. For the years ended December 31, 2024 and 2023, depreciation expenses were $165,000 and $32,000, 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 thirty-six (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 nine months, and thirty monthly payments of $4,513 are due from April 1, 2024 through September 1, 2026.

The Company initially recorded the $136,000 cost as a deferred software licensing asset and liability on the accompanying Balance Sheet. The deferred software licensing asset is being amortized over the license period. The deferred software licensing balance was $110,000 at December 31, 2023. During the year ended December 31, 2024, the Company recorded amortization expense of $51,000, resulting in a deferred software licensing balance of $59,000 at December 31, 2024.

During the year ended December 31, 2023, the Company made no payments, leaving a software license obligation balance was $136,000 at December 31, 2023. During the year ended December 31, 2024, the Company made payments of $50,000, leaving a software license obligation balance was $86,000, of which the current portion was $54,000, leaving a long-term software license obligation of $32,000 at December 31, 2024.

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 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. On January 1, 2023, the Company amended its lease by adding an additional 5,000 square feet and extending the lease term to December 2024. The amended lease is for 24-months from January 1, 2023, and the monthly rent is approximately $3,000. On December 14, 2023, the Company again amended itslease by extending the lease term to December 2025 with the monthly rent remaining unchanged.

The Company’s ROU asset balance was $65,000 as of December 31, 2023. During the year ended December 31, 2024, the Company recorded a reduction of ROU assets of $31,000 related to its leases, resulting in an ROU asset balance of $34,000 as of December 31, 2024.

The Company’s lease liability balance was $65,000 as of December 31, 2023. During the year ended December 31, 2024, the Company made payments of $31,000 against its operating lease liability, resulting in a lease liability of $34,000.

During the year ended December 31, 2024 and 2023, lease costs totaled approximately $98,000 and $84,000, respectively.

As of December 31, 2024, the weighted average remaining lease terms for operating lease is 1.00 years, and the weighted average discount rate for operating lease is 10.00%.

Future minimum lease payments under the leases are as follows:

NOTE 7 –STOCKHOLDERS’ EQUITY

Common Stock Issued for Services

On March 6, 2023, the Company entered into a Management Services Agreement (“MSA”) with Steve Handy to serve in the role as the Company’s Chief Financial Officer. As part of the MSA, the Company issued Mr. Handy 167 shares of restricted common stock with immediate vesting, which the Company determined had a fair value of $225,000, or $1,350 per share. The fair value of $225,000 was recorded as a component of selling, general, and administrative expenses on the Statements of Operations during the year ended December 31, 2023.

Common Stock Issued for Public Offerings

On August 14, 2023, the Company entered into a underwriting agreement with The Benchmark Company for the purchase of shares of the Company’s common stock, in an offering of securities registered under an effective registration statement filed with the Securities and Exchange Commission. In the offering, the Company sold 10,667 shares of common stock, at a price of $1,200 per share. The offering closed on August 17, 2023, and total proceeds received, net of fees, were $11,594,000 including an underwriting discount of 7% and a non-accountable expenses allowance of 1% based on the aggregate proceeds of the offering. The Company incurred expenses of $565,000 associated with our initial public offering, resulting in net proceeds for the Company of $11,029,000.

On October 8, 2024, the Company entered into an underwriting agreement with Aegis Capital Corp. as the sole underwriter relating to the offering, issuance and sale of up to 12,200 shares of the Company’s common stock at a public offering price of $60.00 per share. The offering closed on October 10, 2024. The net proceeds to the Company for the offering were $467,000, after deducting the underwriting discounts and commissions and estimated offering expenses.

On December 12, 2024, we entered into an underwriting agreement with Aegis Capital Corp. as the sole underwriter relating to the sale of up to 233,333 Common Units, each consisting of one (1) share of Common Stock, one (1) Series A Common Warrant to purchase one (1) share of Common Stock per warrant, and one (1) Series B Common Warrant to purchase one (1) share of Common Stock per warrant. The public offering price per Common Unit is $36.00. The initial exercise price of each Series A Common Warrant is $72.00 per share of Common Stock. The Series A Common Warrants are exercisable following stockholder approval and expire 60 months thereafter. The initial exercise price of each Series B Common Warrant is $72.00 per share of Common Stock or pursuant to an alternative cashless exercise option. The Series B Common Warrants are exercisable following stockholder approval and expire 30 months thereafter. The offering closed on December 13, 2024. The net proceeds to us for the offering were approximately $7,326,000, after deducting underwriting discounts and commissions and estimated offering expenses.

As discussed below, the Series A and B warrants have been accounted for as a liability. The fair value of the warrant at the date of issuance was determined to be $12,456,000 (Series B) and $1,783,000 (Series A). Upon closing of the offering, the fair value of the warrant liability, up to the amount of funds received of $7,326,000 was recorded as a cost of capital and the excess of $6,913,000 was recorded as a finance cost.

Equity Incentive Plans

Summary of Options

A summary of stock options for the year ended December 31, 2024 is as follows:

Information relating to outstanding options at December 31, 2024, summarized by exercise price, is as follows:

On January 1, 2024, the Company’s Board of Directors appointed Jane Casanta to the Company’s Board of Directors. The Board granted Ms. Casanta options to purchase 133 shares of common stock under the Company’s 2024 Equity Incentive Plan, at an exercise price of $201.60 per common share, vesting for a thirty-six (36) month period, and an expiration period ofseven years. The grant of options was for board service to be rendered for the year ended December 31, 2024. The total fair value of these options at grant date was approximately $22,145, which was determined using a Black-Scholes-Merton option pricing model with the following weighted average assumptions: fair value of our stock price of $201.60 per share, the expected term offive years, volatility of 111%, dividend rate of 0%, and risk-free interest rate of 3.87%.

On July 18, 2024 (the “Meeting Date”), the Compensation Committee of the Board of Directors of the Company discussed the appointment of Gregor Campbell as the Company’s permanent Executive Chairman retroactive to July 1, 2024 (the “Appointment Date”). The appointment was not effective until the Company received from all directors a counterpart copy of the resolutions regarding the details of his compensation agreement, the last of which was received on July 26, 2024. On the Meeting Date, he was also granted an option (the “Option”) to purchase 1,333 shares of the Company’s Common Stock at an exercise price of $160.20 per share which was the closing price on the Nasdaq Stock Market on the Meeting Date. The Option terminates on the earlier ofseven years from the Meeting Date or nine months from Mr. Campbell’s separation date from the Company and vests monthly over 36 months commencing on the Meeting Date. The total fair value of these options at grant date was $171,000, which was determined using a Black-Scholes-Merton option pricing model with the following weighted average assumptions: fair value of our stock price of $160.20 per share, the expected term ofseven years, volatility of 150%, dividend rate of 0%, and risk-free interest rate of 3.49%.

On December 20, 2024, the Company’s Board of Directors granted themselves aggregate options to purchase 5,020 shares of common stock under the Company’s 2022 Equity Incentive Plan, at an exercise price of $9.60 per common share, vesting for a thirty-six (36) month period, and an expiration period ofseven years. The grant of options was for board service for the years ended 2024 and 2025. The total fair value of these options at grant date was approximately $44,223, which was determined using a Black-Scholes-Merton option pricing model with the following weighted average assumptions: fair value of our stock price of $9.60 per share, the expected term ofseven years, volatility of 150%, dividend rate of 0%, and risk-free interest rate of 4.45%.

On December 20, 2024, the Company’s Board of Directors also granted Angelo Papadourakis and Megan Kelly aggregate options to purchase 733 shares of common stock at an exercise price of $9.60 per common share, vesting for a thirty-six (36) month period. The total fair value of these options at grant date was approximately $6,460, which was determined using a Black-Scholes-Merton option pricing model with the following weighted average assumptions: fair value of our stock price of $9.60 per share, the expected term ofseven years, volatility of 150%, dividend rate of 0%, and risk-free interest rate of 4.45%.

On December 20, 2024, the Company’s Board of Directors also granted Shigeyuki Okabe and Dourg Barron aggregate options to purchase 667 shares of common stock at an exercise price of $9.60 per common share, vesting for a twenty-four (24) month period. The total fair value of these options at grant date was approximately $5,459, which was determined using a Black-Scholes-Merton option pricing model with the following weighted average assumptions: fair value of our stock price of $9.60 per share, the expected term offive years, volatility of 150%, dividend rate of 0%, and risk-free interest rate of 4.37%.

On December 20, 2024, the Company’s Board of Directors also granted Jeff Opheim options to purchase 167 shares of common stock at an exercise price of $9.60 per common share, vesting inone-year. The total fair value of these options at grant date was approximately $1,311, which was determined using a Black-Scholes-Merton option pricing model with the following weighted average assumptions: fair value of our stock price of $9.60 per share, the expected term offive years, volatility of 150%, dividend rate of 0%, and risk-free interest rate of 4.37%.

On March 6, 2023, the Company entered into a Management Services Agreement (“MSA”) with Steve Handy to serve in the role as the Company’s Chief Financial Officer through September 6, 2023. The Company granted Mr. Handy options to purchase 233 shares of common stock under the Company’s 2022 Equity Incentive Plan, at an exercise price of $321.00 per common share, vesting for a six-month period, and an expiration period offive years. The total fair value of these options at grant date was approximately $274,000, which was determined using a Black-Scholes-Merton option pricing model with the following weighted average assumptions: fair value of our stock price of $1,350 per share, based on the Company’s current public offering price, the expected term ofthree years, volatility of 111%, dividend rate of 0%, and risk-free interest rate of 4.61%.

On September 7, 2023, the Company entered into an employment agreement with Steve Handy to serve in the role as the Company’s Chief Financial Officer. The Company granted Mr. Handy options to purchase 1,200 shares of common stock under the Company’s 2022 Equity Incentive Plan, at an exercise price of $321 per common share, vesting for a thirty-six (36) month period, and an expiration period offive years. The total fair value of these options at grant date was approximately $478,000, which was determined using a Black-Scholes-Merton option pricing model with the following weighted average assumptions: fair value of our stock price of $492 per share, the expected term offour years, volatility of 112%, dividend rate of 0%, and risk-free interest rate of 4.52%.

On November 27, 2023, the Company entered into an employment agreement with Scott White to serve in the role as the Company’s Chief Operating Officer. The Company granted Mr. White options to purchase 1,000 shares of common stock under the Company’s 2022 Equity Incentive Plan, at an exercise price of $206.70 per common share, with 25 percent vesting after the first twelve months, with the remaining seventy-five (75) percent vesting monthly over the next twenty-four (24) month period, and an expiration period offive years. The total fair value of these options at grant date was approximately $147,000, which was determined using a Black-Scholes-Merton option pricing model with the following weighted average assumptions: fair value of our stock price of $206.70 per share, the expected term offour years, volatility of 100%, dividend rate of 0%, and risk-free interest rate of 4.49%.

From October 2023 to December 2023, Mr. Campbell assumed additional responsibilities as Chairman of the Board due to the Company’s CEO leave of absence related to a family health matter. For the assumption of additional responsibilities, the Board agreed to compensate Mr. Campbell $10,000 per month. In addition, on November 27, 2023, the Company’s Board of Directors granted Mr. Campbell options to purchase 767 shares of common stock under the Company’s 2022 Equity Incentive Plan, at an exercise price of $206.70 per common share, vesting for a thirty-six (36) month period, and an expiration period offive years. The total fair value of these options at grant date was approximately $113,000, which was determined using a Black-Scholes-Merton option pricing model with the following weighted average assumptions: fair value of our stock price of $206.70 per share, the expected term offour years, volatility of 100%, dividend rate of 0%, and risk-free interest rate of 4.49%.

On December 22, 2023, the Company’s Board of Directors granted themselves aggregate options to purchase 693 shares of common stock under the Company’s 2022 Equity Incentive Plan, at an exercise price of $207 per common share, vesting for a thirty-six (36) month period, and an expiration period ofseven years. The grant of options was for board service for the years ended 2023 and 2024. The total fair value of these options at grant date was approximately $115,000, which was determined using a Black-Scholes-Merton option pricing model with the following weighted average assumptions: fair value of our stock price of $207 per share, the expected term offive years, volatility of 111%, dividend rate of 0%, and risk-free interest rate of 3.87%.

During the year ended December 31, 2024 and 2023, the Company recognized approximately $308,000 and $443,000 of compensation expense, respectively, relating to vested stock options. As of December 31, 2024, the aggregate amount of unvested compensation related to stock options was approximately $435,000 which will be recognized as an expense as theoptions vest in future periods through December 2031.

As of December 31, 2024, the outstanding and exercisable options had an intrinsic value of $20,000. The aggregate intrinsic value was calculated as the difference between the estimated market value of $12.60 per share as of December 31, 2024, and the exercise price of the outstanding options.

NOTE 8 –WARRANTS CLASSIFIED AS LIABILITY

The securities purchase agreements governing the Series A and Series B Warrants discussed in Note 7 (collectively, the “Purchase Warrants”) provide for a value calculation that result in liability treatment.

Series A Warrants

The outstanding and exercisable Series A Warrants are exercisable at a price of $72.00 per share and expire 60 months from the date of shareholder approval. The fair value of the Series A Warrants were valued with a binomial model. The Company was a private company through August 14, 2023, and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies within the consumer products industry with characteristics similar to the Company. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of warrants. The expected dividend yield is zero, based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

Beginning on the date of 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, all as at the pricing of this Offering. Additionally, with certain exceptions, beginning on the date of the Warrant Stockholder Approval, the Series A Warrants will 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 require 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 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.

The fair value of the Series A warrants was valued with a binomial model using the exercise price of $72.00 per warrant, with the underlying asset price of $12.60, expiration term of 1,806 days, volatility of 115%, dividend rate of 0%, and a risk-free interest rate of 4.18%.

As of March 31, 2025, there has beenno A warrants exercised. As of December 12, 2024, the fair value of the A warrants has been determined to be $1,783,000. As of December 31, 2024, the fair value of the A warrants has been determined to be $1,805,000. As a result of the change in fair value, the Company recognized an expense of $22,000 in other expenses for the increase in the fair value of the warrant liability for the year ended December 31, 2024.

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 shareholder approval. The fair value of the Series A Warrants were 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 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 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 consolidated statements of operations and comprehensive loss. Upon the closing of the registered direct offering, the fair value of the Warrant liability was $12,456,000, for which up to the net amounts of the funds received of approximately $7,326,000 was recorded as a financing cost, and the excess of $6,913,000 was recorded as a financing cost in the statement of operations. The fair value of the B warrant liabilities at December 31, 2024 was determined to be $12,456,000.

The fair value of the Series B warrants were valued by the Company based on the subsequent settlement and exercise of these warrants.

As of March 31, 2025, there has been a total of 247,222 B warrants exercised for a total of 4,090,584 shares with a fair value of $11,750,000 based on the actual underlying share price on the date of each warrant exercised. The remaining 21,111 warrants have been valued based on the current share price of $1.95 per share, thus equating to an additional fair value of $706,000.

NOTE 9 -SECURITIES PURCHASE AGREEMENT SUBJECT TO REDEMPTION

On January 30, 2022, the Company entered into a Securities Purchase Agreement (“SPA”) with Speicher Limited (“Investor”) to which the Investor agreed to purchase 1,871 shares of the Company’s common stock in a private placement. The purchase price per share of common stock was $321.00, and the net proceeds to the Company was $600,000. The net proceeds are to pay for expenses associated with the Company’s planned Initial Public Offering the (“Listing”). The receipt of SPA proceeds of $600,000 was scheduled as follows:(i) $250,000 on completion of tasks defined in the SPA, (ii) $250,000 on or before submission of a Form S-1 in relation to the Company’s Listing; and (iii) $100,000 before Listing or as and when requested by the Company to pay for professional fees and expenses in connection with the listing after the submission of Form S-1. During the year ended December 31, 2022, the Company issued 1,871 shares of the Company’s common stock and received partial proceeds of $420,000, of which $24,000 remained in an escrow account as of December 31, 2022. The remaining balance to be disbursed to the Company was $180,000 as of December 31, 2022. During the year December 31, 2023, the Company received the remaining proceeds of $180,000.

In accordance with the SPA, the Company granted the Investor the right to require the Company to repurchase the Investor’s shares of the Company’s common stock at a price of $321.00 per share only on the event of default making the Listing unsuccessful and within five business days on receipt of written notice. If the Listing does not occur on or before August 31, 2023, as amended, and such failure to occur is not due to the Company’s Default, as defined in the SPA, then neither party shall owe the other any further payment under the SPA. The provision herein would require a potential cash settlement of the company which prohibits the presentation of this instrument as part of permanent equity. As such the amounts were reflected as a mezzanine financing at December 31, 2022.

The right of the Investor to require the repurchase of its shares was extinguished as a result of the listing of the Company’s shares on the Nasdaq Stock Market on August 15, 2023. As such,1,871 shares of common stock were reclassified as outstanding, and the $600,000 cash received was reclassified to additional paid in capital in the accompanying Balance Sheets at December 31, 2023.

NOTE 10 –COMMITMENTS AND CONTINGENCIES

On August 12, 2023, the Company entered a non-binding letter of intent with Greater Asia Golf Promotions Limited as its non-exclusive distributor of the Company’s products in the territory of Asia excluding Japan and Korea for a one-year term. The Company plans to spend up to $2,500,000 to fund joint marketing expenses. On August 31, 2023, the Company transferred $500,000 to an escrow account as its first payment pending the negotiation and execution of a distribution agreement, which was recorded as a marketing cost in 2023.

On May 9, 2024, the Company entered into a Distributor Agreement with Greater Asia Golf Promotions Limited and released the $500,000 in an escrow account. The initial term of the Distributor Agreement is twelve months. Within 18 months from the date of the Distributor Agreement, if Greater Asia Golf Promotions Limited purchases from the Company exceed $500,000, the Company will issue 1,667 shares of common stock to Greater Asia Golf Promotions Limited. If purchases exceed $1.0 million, an additional 1,667 shares of common stock will be issued, and if purchases exceed $1.5 million, an additional 1,667 shares of common will be issued. As of December 31, 2024, purchases by Greater Asia Golf Promotions Limited were $98,000.

NOTE 11 –INCOME TAXES

The Company uses an asset and liability approach for accounting and reporting for income taxes that allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

At December 31, 2024, the Company had available Federal and state net operating loss carryforwards to reduce future taxable income. The amounts available were approximately $2,686,000 for Federal and state purposes. The carryforwards expire in various amounts through 2044. Given the Company’s history of net operating losses, management has determined that it is more likely than not that the Company will not be able to realize the tax benefit of the carryforwards. Accordingly, the Company has not recognized a deferred tax asset for this benefit. Section 382 generally limits the use of NOLs and credits following an ownership change, which occurs when one or more 5 percent shareholders increase their ownership, in aggregate, by more than 50 percentage points over the lowest percentage of stock owned by such shareholders at any time during the “testing period” (generally three years).

The Company has adopted FASB guidelines that address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. This guidance also provides guidance on de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of December 31, 2024 and 2023, the Company did not have a liability for unrecognized tax benefits, and no adjustment was required at adoption.

The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of December 31, 2024, and 2023, the Company has not accrued interest or penalties related to uncertain tax positions. Additionally, tax years 2021 through 2024 remain open to examination by the major taxing jurisdictions to which the Company is subject.

Upon the attainment of taxable income by the Company, management will assess the likelihood of realizing the tax benefit associated with the use of the carryforwards and will recognize the appropriate deferred tax asset at that time.

The Company’s effective income tax rate differs from the amount computed by applying the federal statutory income tax rate to loss before income taxes as follows:

The components of deferred taxes consist of the following at December 31, 2024 and 2023:

NOTE 12. 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 the summary of significant accounting policies. The CODM uses net income, as reported in our consolidated 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 consolidated balance sheets as total assets. The significant expense categories regularly provided to the CODM are the expenses as noted on the face of the consolidated statements of operations.

NOTE 13 –SUBSEQUENT EVENTS

On January 29, 2025, the Company received a written notice (the “Notice”) from The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that it is not in compliance with the minimum bid price requirement set forth in Nasdaq Listing Rule 5550(a)(2) due to the Company’s common stock not maintaining a closing bid price of at least $1.00 per share for a period of 30 consecutive business days. The Notice has no immediate effect on the listing of the Company’s common stock on The Nasdaq Capital Market.

Normally, a company would be afforded a 180-day calendar period to demonstrate compliance with the minimum bid price requirement. However, pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(iv), the Company is not eligible for any compliance period due to the fact that the Company has affected a reverse split within the prior one-year period.

The Company requested a hearing before a Panel as provided in the Nasdaq Rules. The hearing request automatically stayed any suspension or delisting action pending the hearing. On March 11, 2025 the hearing was held and the Company requested an extension based on the reverse split occurring on march 17, 2025. The Panel has granted an extension to the Company to regain compliance.

Exercise of Warrants

Subsequent to December 31, 2024, the Company issued 4,090,584 shares on the exercise of 247,222 warrants, leaving only 21,111 warrants unexercised as of March 31, 2025. Accordingly, the Company expects thatthe Series B Warrant liability for the 247,222 warrants with a December 31, 2024 fair value of $11,750,000 will be accounted for as additional paid in capital as of March 31, 2025 based on the actual exercised warrants that occurred in the first quarter of 2025.

The Pro-forma effect of the exercised warrants and the corresponding adjustment to warrant liability and additional paid in capital on a pro-forma basis as of December 31, 2024 is as follows: