Newton Golf Company, Inc.

NOTES TO CONDENSED FINANCIAL STATEMENTS

**For the Three Months Ended March 31, 2025 and 2024

(Unaudited)

(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 at March 31, 2025, and for the three months ended March 31, 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 March 31, 2025, and the results of its operations for the three months ended March 31, 2025 and 2024, and its cash flows for the three months ended March 31, 2025 and 2024. Operating results for the interim periods presented are not necessarily indicative of the results to be expected for a full fiscal year. The condensed consolidated balance sheet at December 31, 2024 has been derived from the Company’s audited consolidated 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 consolidated 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 three months ended March 31, 2025, the Company incurred a net loss of $525,000 and used cash in operations of $1,564,000. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the 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 consolidated 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 consolidated financial statements do not include any adjustments that might result from this uncertainty.

At March 31, 2025, the Company had cash and cash equivalents on hand in the amount of $5,871,000. The Company expects its cash on hand on March 31, 2025, to last for 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 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 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.

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 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 three months ended March 31, 2025 and 2024, 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 $518,000 and $381,000 for the three months ended March 31, 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 $282,000 and $190,000 for the three months ended March 31, 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 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 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.

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 long-term financing obligations approximate their fair values because interest rates on these obligations are based on prevailing market interest rates.

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 March 31, 2025 and December 31, 2024.

Accounts Receivable. At March 31, 2025, two customers accounted for more than 60% and 15% of accounts receivable, respectively. At December 31, 2024, two customers accounted for more than 44% and 20% of accounts receivable, respectively. No other customers exceeded 10% of accounts receivable.

Net sales. During the three months ended March 31, 2025, no customers exceeded 10% of net sales. During the three months ended March 31, 2025,98% of the Company’s net sales were in the United States.

During the three months ended March 31, 2024, no customers exceeded 10% of net sales. During the three months ended March 31, 2024, greater than 90% of the Company’s net sales were in the United States.

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 and Adopted

In November 2023, the FASB issued Accounting Standards Update (“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 CODM 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, including the significant segment expense disclosures. This standard became effective for the Company on January 1, 2024. The adoption of ASU 2023-7 did not have a material impact on the Company’s results of operations, financial position or cash flows.

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

At March 31, 2025 and December 31, 2024, inventory presented above is net of a reserve for slow moving and potentially obsolete inventory of $52,000 and $49,000, respectively.

NOTE 4 –PROPERTY AND EQUIPMENT

Property and equipment are comprised of the following:

Depreciation expenses are included in selling, general and administrative expenses in the accompanying condensed statements of operations. For the three months ended March 31, 2025 and 2024, depreciation expenses were $57,000 and $21,000, 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 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 30 monthly payments of $4,513 are due from April 1, 2025 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 $59,000 at December 31, 2024. During the three months ended March 31, 2025, the Company recorded amortization expense of $8,000, resulting in a deferred software licensing balance of $51,000 at March 31, 2025.

During the year ended December 31, 2024, the Company made payments of $50,000, leaving a software obligation balance of $86,000. During the three months ended March 31, 2025, the Company made payments of $14,000, leaving a software obligation balance of $72,000, of which the current portion was $54,000, leaving a long-term software license obligation of $18,000 at March 31, 2025.

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.

The Company’s ROU asset balance was $34,000 as of December 31, 2024. During the three months ended March 31, 2025, the Company recorded a reduction of ROU assets of $8,000 related to its lease, resulting in an ROU asset balance of $26,000 as of March 31, 2025.

The Company’s lease liability balance was $34,000 as of December 31, 2024. During the three months ended March 31, 2025, the Company made payments of $8,000 against its operating lease liability, resulting in a lease liability of $26,000, of which the current portion of lease liability was $26,000, leaving a long-term lease liabilities balance of $0.

During the three months ended March 31, 2025 and 2024, lease costs totaled approximately $23,000 and $25,000, respectively.

As of March 31, 2025, the weighted average remaining lease terms for operating lease is 0 years, and the weighted average discount rate for operating lease is 10.00%.

NOTE 7 –STOCKHOLDERS’ EQUITY (DEFICIT)

Equity Incentive Plans

Summary of Options

A summary of stock options for the three months ended March 31, 2025 is as follows:

Information relating to outstanding options at March 31, 2025, 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 over 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 a 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 the Option 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 a 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 over 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 a 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 over 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 a risk-free interest rate of 4.45%.

On December 20, 2024, the Company’s Board of Directors also granted Shigeyuki Okabe and Doug Barron aggregate options to purchase 667 shares of common stock at an exercise price of $9.60 per common share, vesting over 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 a 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 a risk-free interest rate of 4.37%.

During the three months ended March 31, 2025 and 2024, the Company recognized approximately $52,000 and $99,000 of compensation expense, respectively, relating to vested stock options. As of March 31, 2025, the aggregate amount of unvested compensation related to stock options was approximately $350,000 which will be recognized as an expense as theoptions vest in future periods through December 2031.

As of March 31, 2025, the outstanding and exercisable options hadno intrinsic value. The aggregate intrinsic value was calculated as the difference between the estimated market value of $2.09 per share as of March 31, 2025, and the exercise price of the outstanding options.

NOTE 8 –WARRANTS CLASSIFIED AS LIABILITY

Summary of Warrants

A summary of warrants for the three months ended March 31, 2025 is as follows:

Information relating to outstanding warrants at March 31, 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 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 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.

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

As of March 31, 2025, there has beenno Series A Warrants exercised. As of March 31, 2025, the fair value of the Series A Warrants has been determined to be $177,000. 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 gain of $1,628,000 due to the change in the fair value of the warrant liability for the quarter ended March 31, 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 Warrant Stockholder Approval. The fair value of the Series B 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 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 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. During the period ended March 31, 2025, warrant holders exercised 247,214 Series B Warrants on a cash less basis to acquire 4,090,584 shares of common stock. The fair value of the Series B Warrant liabilities at March 31, 2025 was determined to be $755,000, and the Company recognized an expense of $227,000 related to the change in the fair value of the warrant liability that is included in other expense.

NOTE 9 -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 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 10 –SUBSEQUENT EVENTS

Exercise of Warrants

Subsequent to March 31, 2025, the Company issued 128,367 of its common shares on the exercise of 4,270 Series B Warrants, leaving 16,849 Series B Warrants unexercised as of May 1, 2025. All 268,333 Series A Warrants remain unexercised.

Nasdaq Compliance

On April 14, 2025, the Company received a deficiency letter from Nasdaq notifying the Company that it is not in compliance with Nasdaq Listing Rule 5550(b)(1), which requires the Company to maintain a minimum of $2,500,000 in stockholders’ equity for continued listing on The Nasdaq Capital Market (the “Stockholders’ Equity Requirement”). As disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, the deficiency in the Stockholders’ Equity Requirement was a result of the derivative liability from the issuance of the Company’s Series A Warrants and Series B Warrants in December 2024 as part of the Company’s public offering. However, because most of the Series B Warrants were exercised on or before March 31, 2025, our stockholders’ equity as of such date was $6.2 million, which is in excess of the Stockholders’ Equity Requirement.

Lease Extension

The Company has extended its Missouri facility lease described in Note 6 to December 2026 under similar terms.