Newton Golf Company, Inc.

Previous wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of the financial statements with a narrative report on our financial condition, results of operations, and liquidity. This discussion and analysis should be read in conjunction with the attached unaudited Condensed Financial Statements and notes thereto and our Annual Report for the year ended December 31, 2024, including the audited Financial Statements and notes thereto. The following discussion contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Our actual results could differ materially from those discussed in the forward-looking statements. Please also see the cautionary language at the beginning of this Quarterly Report regarding forward-looking statements.

Current wording

Management’s Discussion and Analysis of Financial Condition and Results of Operations is designed to provide a reader of the financial statements with a narrative report on our financial condition, results of operations, and liquidity. This discussion and analysis should be read in conjunction with the attached unaudited condensed financial statements and notes thereto and our Annual Report on Form 10-K for the year ended December 31, 2024, including the audited Financial Statements and notes thereto. The following discussion contains forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations, and intentions. Our actual results could differ materially from those discussed in the forward-looking statements. Please also see the cautionary language at the beginning of this Quarterly Report regarding forward-looking statements.

Previous wording

On December 5, 2023, the Company received a deficiency letter from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that, for the preceding 30 consecutive business days, the closing bid price of the Company’s common stock remained below the minimum $1.00 per share requirement for continued listing on The Nasdaq Capital Market as set forth in Nasdaq Listing Rule 5550(a)(2) (the “Bid Price Requirement”). The Company was provided a compliance period of 180 calendar days from the date of the letter, or until June 3, 2024, to regain compliance with the Bid Price Requirement.

Current wording

On January 29, 2025, the Company received a written notice (the “Notice”) from the Listing Qualifications Department of The Nasdaq Stock Market LLC (“Nasdaq”) notifying the Company that it was not in compliance with 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 “Bid Price Requirement”). Pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(iv), the Company was not eligible for the typical 180-calendar-day period to regain compliance due to the fact that the Company had effected a reverse stock split within the prior one-year period.

Previous wording

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 stock split occurring on March 17, 2025. The Panel has granted an extension to the Company to regain compliance.

Current wording

The Company requested a hearing before a Hearings Panel (the “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 its intent to effect a reverse stock split. The Panel granted an extension to the Company to regain compliance, and the Company effected a 1-for-30 reverse split on March 17, 2025. By letter dated April 4, 2025, Nasdaq informed the Company that it had regained compliance with the Bid Price Requirement.

Previous wording

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.

Current wording

On April 14, 2025, the Company received a deficiency letter from Nasdaq notifying the Company that it was not in compliance with Nasdaq Listing Rule 5550(b)(1), which requires the Company to maintain a minimum of $2.5 million in stockholders’ equity for continued listing on Nasdaq (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. However, because most of the Series B Warrants were exercised on or before March 31, 2025, the Company’s stockholders’ equity as of such date was $6.2 million, which was in excess of the Stockholders’ Equity Requirement. As a result, on May 27, 2025, the Company received formal notice from Nasdaq stating that, based on the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2025, the Company had regained compliance with the Stockholders’ Equity Requirement.

Previous wording

Our sales, cost of goods sold, operating expenses, and loss from operations for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024 were as follows (amounts are rounded to nearest thousands):

Current wording

Three Months Ended June 30, 2025 as Compared to the Three Months Ended June 30, 2024

Previous wording

Our net sales increased $0.9 million, or 246%, to $1.2 million during the three months ended March 31, 2025, compared to $0.4 million during the three months ended March 31, 2024. The increase in net sales was primarily from the introduction of our Newton Motion driver shaft product line in November 2023, and our Newton Motion fairway shaft product line in April 2024. For the three months ended March 31, 2025, we generated $1.0 million of net sales through our websites, compared to $0.3 million for the three months ended March 31, 2024.

Current wording

Our net sales increased $1,255,000, or 154%, to $2,068,000 during the three months ending June 30, 2025, compared to $813,000 during the three months ending June 30, 2024. The increase in net sales was from the introduction of our Newton Motion driver shaft product line in November 2023, our Newton Motion fairway shaft product line in April 2024, and our Newton Fast Motion driver product line in April 2025. For the three months ending June 30, 2025, we generated $2,026,000 of net sales from Newton Motion shafts, and we generated approximately 92% of our net sales through our websites.

Previous wording

Cost of goods sold represents primarily our material, labor, components, and changes in inventory reserves for slow-moving or potentially obsolete products. Our cost of goods sold increased by $0.2 million to $0.4 million for the three months ended March 31, 2025, compared to $0.1 million for the three months ended March 31, 2024, primarily due to our increase in net sales. Our gross margin was 70% and 59% for the three months ended March 31, 2025 and 2024, respectively. The increase in gross margin was primarily due to the change in product mix sold and changes to our inventory reserves as compared to the prior year period.

Current wording

Cost of goods sold represents primarily our material, labor, components, and changes in inventory reserves for slow-moving or potentially obsolete products. Our cost of goods sold increased by $345,000, 106%, to $669,000 for the three months ending June 30, 2025, compared to $324,000 for the three months ending June 30, 2024 due to our increase in net sales. Our gross margin was 68% and 60% for the three months ending June 30, 2025 and 2024, respectively. The increase in gross margin was due to the change in product mix sold, lower discounts and additional volume lowering our per unit cost as compared to the prior year period.

Previous wording

Interest income was $45,000 for the three months ended March 31, 2025, compared to $62,000 for the three months ended March 31, 2024. The decrease was attributable to lower interest earned on our bank balances, as compared to the prior year period.

Current wording

Interest income was $29,000 for the three months ending June 30, 2025, compared to interest income of $47,000 for the three months ending June 30, 2024. The decrease in interest income was due to lower interest earned on our bank balances, as compared to the prior year period.

Previous wording

Selling, general and administrative expenses include employee costs, legal and professional fees, sales and marketing expenses, stock-based compensation, public company expenses, rent, depreciation and other general expenses. Our selling, general and administrative expenses increased $1.3 million to $2.5 million during the three months ended March 31, 2025, compared to $1.3 million during the three months ended March 31, 2024. The increase in selling, general and administrative expenses was primarily from additional legal expense associated with special shareholder meetings and Series B Warrant exercises, higher accounting and audit expense associated with warrant valuation and warrant accounts, transfer agent costs associated with the exercise of Series B Warrants, and proxy solicitor costs associated with special shareholder meeting.

Current wording

Selling, general and administrative expenses include employee costs, legal and professional fees, sales and marketing expenses, stock-based compensation, public company expenses, rent, depreciation and other general expenses. Our selling, general and administrative expenses increased $2,549,000, or 93%, to $5,304,000 for the six months ending June 30, 2024, compared to $2,755,000 for the six months ending June 30, 2024. The increase is primarily attributed to increased sales, marketing and employee related costs to support growth, plus additional legal expense associated with the special stockholder meeting, Series B Warrant exercises, higher accounting and audit expense associated with warrant valuation and warrant accounts, transfer agent costs associated with the exercise of Series B Warrants, and proxy solicitor costs associated with special a stockholder meeting.

Previous wording

Research and development costs include employee costs, consultants, licensing fees, and product design and development costs. Research and development expenses increased $0.1 million to $0.3 million during the three months ended March 31, 2025, compared to $0.2 million during the three months ended March 31, 2024. The increase in research and development costs was due to costs incurred to test and refine prior to the commercialization of our Newton Fast Motion product, which was launched in May 2025.

Current wording

Research and development costs include employee costs, consultants, licensing fees, and product design and development costs. Research and development expenses increased $28,000 to $425,000, or 7% during the six months ending June 30, 2025, compared to $397,000 during the six months ending June 30, 2024. The additional cost was to support increased research and development activities that included the release of our Fast Motion shaft in April 2025.

Previous wording

The change in fair value of warrant liability was due to a reduction of the Series A Warrants of $1.6 million, partially offset by an increase in the fair value of the remaining Series B Warrants of $226,000, for a total expense reduction of $1.4 million.

Current wording

The change in fair value of warrant liability was due to a reduction in the fair value of the Series A Warrants of $1,417,000, partially offset by an increase in the fair value of the remaining Series B Warrants of $58,000, for a total decrease in fair value of $1,359,000.

Previous wording

Net cash used in operating activities for the three months ended March 31, 2025 totaled $1.6 million, compared to net cash used in operating activities for the three months ended March 31, 2024 of $1.2 million. The increase in net cash used in operations for the three months ended March 31, 2025, was primarily from additional legal expense associated with special shareholder meetings and Series B Warrant exercises, higher accounting and audit expense associated with warrant valuation and warrant accounts, transfer agent costs associated with the exercise of Series B Warrants, and proxy solicitor costs associated with special shareholder meeting.

Current wording

Net cash used in operating activities for the six months ending June 30, 2025 totaled $2,777,000, compared to net cash used in operating activities for the six months ending June 30, 2024 of $2,341,000. The increase in net cash used in operations for the six months ending June 30, 2025, was primarily from additional legal expense associated with a special stockholder meeting, and Series B Warrant exercises, higher accounting and audit expense associated with warrant valuation and warrant accounts, transfer agent costs associated with the exercise of Series B Warrants, and proxy solicitor costs associated with a special stockholder meeting, partially offset by higher gross margin.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2025 totaled $131,000, and was for the purchase of software licensing and property and equipment. Net cash used in investing activities for the three months ended March 31, 2024 totaled $83,000, and was for the purchase of software licensing and property and equipment.

Current wording

Net cash used in investing activities for the six months ending June 30, 2025 totaled $291,000 for the purchase of property and equipment. Net cash used in investing activities for the six months ending June 30, 2024 totaled $188,000, and was for the purchase of software licensing and property and equipment.

Previous wording

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 financial statements, during the three months ended March 31, 2025, we incurred a net loss of $0.5 million and used cash in operations of $1.6 million. 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 accompanying 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 we be unable to continue as a going concern.

Current wording

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 financial statements, for the six months ending June 30, 2025, we incurred a net loss of $2,045,000 and used cash in operations of $2,777,000. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date of the condensed financial statements being issued. These accompanying 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 we be unable to continue as a going concern.

Previous wording

At March 31, 2025, we had cash and cash equivalents on hand in the amount of $5.9 million. We expect our cash on hand on March 31, 2025, to last for at least the next 12 months.

Current wording

As of June 30, 2025, we had cash and cash equivalents on hand in the amount of $4,005,000. We expect our cash on hand on June 30, 2025, to last for at least the next nine months.

Previous wording

We account for revenue recognition in accordance with Accounting Standards Codification Topic 606,Revenue from Contracts with Customers.

Current wording

We account for revenue recognition in accordance with Accounting Standards Codification (“ASC”) Topic 606,Revenue from Contracts with Customers.

Previous wording

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 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.

Current wording

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.

Previous wording

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 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.

Current wording

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.

Previous wording

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 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.

Current wording

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 FASB in ASC 480 and 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.