QS Energy, Inc.

THREE AND SIX MONTHS ENDED JUNE 30, 2025 AND 2024

QS Energy, Inc. (“QS Energy”, “Company”) was incorporated on February 18, 1998, as a Nevada Corporation under the name Mandalay Capital Corporation. The Company changed its name to Save the World Air, Inc. on February 11, 1999 and to QS Energy, Inc. on August 11, 2015. The Company’s common stock is quoted under the symbol “QSEP” on the Over-the-Counter Bulletin Board (Pink Sheets). More information including the Company’s fact sheet, logos, media articles, and update information are available at our corporate website, www.qsenergy.com.

QS Energy develops and is seeking to commercialize energy efficiency technologies that assist in meeting increasing global energy demands, improving the economics of oil extraction and transport, and reducing greenhouse gas emissions. The Company's intellectual properties include a portfolio of domestic and international patents and patents pending, a substantial portion of which have been developed in conjunction with and exclusively licensed from Temple University of Philadelphia, PA (“Temple”). QS Energy's primary technology is called Applied Oil Technology (AOT), a commercial-grade crude oil pipeline transportation flow-assurance product. AOT is engineered specifically to reduce pipeline pressure loss, increase pipeline flow rate and capacity, and reduce shippers’ reliance on diluents and drag reducing agents to meet pipeline maximum viscosity requirements. AOT is a 100% solid-state system that has shown to reduce crude oil viscosity by applying a high intensity electrical field to crude oil feedstock while in transit. The AOT product is seeking to transition from the testing, research and development stage to initial production for continued testing in advance of our goal of seeking acceptance and adoption by the midstream pipeline marketplace. As of the date of this report, the Company has not achieved revenue through the sale and/or lease of its AOT product, nor has it achieved its goal of acceptance and adoption of its AOT product by the midstream pipeline marketplace. We can provide no assurance that our AOT product will ever be accepted and adopted by the midstream pipeline marketplace. See Risk Factors, below.

Going Concern

The accompanying consolidated 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 consolidated financial statements, during the six-months ended June 30, 2025, the Company incurred a net loss of $11,813,000, used cash in operations of $2,360,000 and had a stockholders’ deficit of $4,082,000 as of that date. In addition, as of June 30, 2025, 33 convertible notes payable with an aggregate principal balance and accrued interest of $1,167,000 and certain obligations to a former officer are past due. These factors raise substantial doubt about the Company’s ability to continue as a going concern. In addition, the Company's independent registered public accounting firm, in its report on the Company's December 31, 2024 financial statements, has raised substantial doubt about the Company's ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

At June 30, 2025, the Company had cash on hand in the amount of $778,000. Management estimates that the current funds on hand will be sufficient to continue operations through October 2025. Management is currently seeking additional funds, primarily through the issuance of debt and equity securities for cash to operate our business, including without limitation the expenses it will incur in connection with the license agreements with Temple; costs associated with product development and commercialization of the AOT technologies; costs to manufacture and ship the products; costs to design and implement an effective system of internal controls and disclosure controls and procedures; costs of maintaining our status as a public company, including, without limitation, legal and accounting fees and costs associated therewith, by filing periodic reports with the SEC and fees and costs required to protect our intellectual property. In addition, as discussed below, the Company has substantial contractual commitments, including without limitation salaries to our executive officers pursuant to employment agreements, certain payments to a former officer and consulting fees, during the remainder of 2025 and beyond.

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.

Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited. These unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these interim condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 28, 2025. The condensed consolidated balance sheet as of December 31, 2024, included herein was derived from the audited consolidated financial statements as of that date, but does not include all disclosures, including notes, required by GAAP.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments necessary to fairly present the Company’s financial position and results of operations for the interim periods reflected. Except as noted, all adjustments contained herein are of a normal recurring nature. Results of operations for the fiscal periods presented herein are not necessarily indicative of the full fiscal year-end results.

The accompanying consolidated financial statements of QS Energy Inc. include the accounts of QS Energy Inc. (the Parent) and its wholly owned subsidiaries, QS Energy Pool, Inc. and STWA Asia Pte. Limited. Intercompany transactions and balances have been eliminated in consolidation.

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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include those related to accruals for potential liabilities, assumptions used in valuing equity instruments issued for financing and services and realization of deferred tax assets, among others. Actual results could differ from those estimates.

Basic and Diluted Income (Loss) Per Share

Our computation of earnings per share (“EPS”) includes basic and diluted EPS. Basic EPS is measured as the income (loss) available to common stockholders divided by the weighted average common shares outstanding for the period. Diluted income (loss) per share reflects the potential dilution, using the treasury stock method, that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the income (loss) of the Company as if they had been converted at the beginning of the periods presented, or issuance date, if later.

At June 30, 2025 and 2024, we excluded the following dilutive shares as their effect would have been anti-dilutive.

Stock-Based Compensation

The Company periodically issues stock options and restricted stock awards to employees and non-employees in non-capital raising transactions for services and for financing costs. Stock option grants, which are generally time or performance vested, are measured at the grant date fair value and depending on the conditions associated with the vesting of the award, compensation cost is recognized on a straight-line or graded basis over the vesting period. Recognition of compensation expense for non-employees is in the same period and manner as if the Company had paid cash for the services. The fair value of stock options granted is estimated using the Black-Scholes option-pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life, and future dividends. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods.

Research and Development Costs

Research and development costs are expensed as incurred and consist primarily of fees paid to consultants and outside service providers, and other expenses relating to the acquisition, design, development and testing of the Company’s products. Certain research and development activities are incurred under contract. In those instances, research and development costs are charged to operations ratably over the life of the underlying contracts, unless the achievement of milestones, the completion of contracted work, or other information indicates that a different expensing schedule is more appropriate. Payments made pursuant to research and development contracts are initially recorded as advances on research and development contract services in the Company’s consolidated balance sheet and then charged to research and development costs in the Company’s consolidated statement of operations as those contract services are performed.

Patent Costs

Patent costs consist of patent-related legal and filing fees. Due to the uncertainty associated with the successful development of our AOT and Joule Heat products, all patent costs are expensed as incurred. During the six-month periods ended June 30, 2025 and 2024, patent costs were $4,000 and $31,000, respectively, which is included as part of operating expenses in the accompanying consolidated statements of operations.

Recent Accounting Pronouncements

In November 2024, the FASB issued ASU No. 2024-03 “Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” This ASU requires public business entities to disclose, for interim and annual reporting periods, additional information about certain income statement expense categories. The requirements are effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027. Entities are permitted to apply either the prospective or retrospective transition methods. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated financial statements.

The Company’s management has evaluated all other the recently issued, but not yet effective, accounting standards and guidance that have been issued or proposed by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission through the filing date of these financial statements and does not believe the future adoption of any such pronouncements will have a material effect on the Company’s financial position and results of operations.

As of June 30, 2025 and December 31, 2024, the Company owed $197,000 and $197,000, respectively, pursuant to a separation agreement with a former executive officer effective April 1, 2017 as amended by letter agreements dated effective August 16, 2018 and March 31, 2019, which have been included as part of accounts payable and accrued expenses on the accompanying condensed consolidated balance sheet. The payments are to be made at $10,000 per month. During the six months ended June 30, 2025, the Company madeno payments.

Convertible notes payable

At December 31, 2024, total outstanding notes payable totaled $1,651,000. During the six-month period ended June 30, 2025, the Company issued convertible promissory notes in the aggregate of $2,515,000 for cash proceeds of $2,285,000, net of original issue discount (“OID”) of $229,000. The notes are unsecured, mature in twelve months from issuance, and are convertible into shares of the Company’s common stock at $0.08 per share.

In addition, the Company granted the note holders warrants to purchase 31,423,615 shares of the Company’s common stock with a relative value of $1,430,000. The warrants are fully vested, and expire one year from the date of issuance. The Company determined the fair value of the warrants by using a Black-Scholes option pricing model, with the following assumptions: expected term of 1.0 year, stock price of $0.16 to $0.20, exercise price of $0.10, volatility of 136% to 160%, risk-free rate of 3.96% to 4.03%, and no forfeiture rate.

Also, during the period ended June 30, 2025, convertible notes of $3,267,000, net of unamortized discount of $1,572,000, were converted into 53,218,542 shares of common stock (see also accrued interest below). At June 30, 2025, total outstanding convertible notes payable totaled $899,000. As of June 30, 2025, convertible notes payable and accrued interest are convertible into approximately 18,397,839 shares of common stock at conversion rates ranging from $0.03 to $0.48 per share. As of June 30, 2025, a total of 33 convertible notes and accrued interest in the aggregate of $1,167,000 have reached maturity and are past due.

Accrued interest

At December 31, 2024, accrued interest on convertible notes payable totaled $1,006,000. During the period ended June 30, 2025, accrued interest of $537,000 was converted into 9,586,290 shares of common stock. During the six-month period ended June 30, 2025, accrued interest of $91,000 was recorded. At June 30, 2025, accrued interest on convertible notes payable totaled $560,000.

Debt discount

At December 31, 2024, the unamortized debt discount was $133,000. During the six-month period ended June 30, 2025, debt discount of $1,659,000 was recorded for the relative fair value of warrants of $1,430,000 and OID of $229,000, debt discount amortization of $141,000 was recorded, and $1,572,000 of debt discount was removed and included in the carrying amount of related convertible notes payable that were converted into shares of common stock. At June 30, 2025, the unamortized debt discount was $79,000.

In June 2020, the Company was granted a loan (the “PPP loan”) from Cadence Bank in the aggregate amount of $151,000, pursuant to the Paycheck Protection Program (the “PPP”) under the CARES Act.

At December 31, 2024, the balance of the PPP loan was $24,000. During the six-month period ended June 30, 2025, the Company paid $24,000 of principal on the PPP loan, and at June 30, 2025, the PPP loan was paid in full.

The Company constructs, develops and tests the AOT technologies with internal resources and through the assistance of various third-party entities. Costs incurred and expensed include fees such as license fees, purchase of test equipment, pipeline pumping equipment, crude oil tank batteries, viscometers, SCADA systems, computer equipment, payroll and other related equipment and various logistical expenses for the purposes of evaluating and testing the Company’s AOT prototypes.

Costs incurred for research and development are expensed as incurred. Purchased materials that do not have an alternative future use are also expensed. Furthermore, costs incurred in the construction of prototypes with no certainty of any alternative future use and established commercial uses are also expensed.

For the six-month periods ended June 30, 2025 and 2024 research and development costs were $151,000 and $95,000, respectively. For the three-month periods ended June 30, 2025 and 2024 research and development costs were $104,000 and $48,000, respectively.

AOT Prototypes

During the periods ended June 30, 2025 and 2024, the Company incurred total expenses of $57,000 and $1,000, respectively, in the manufacture and testing of the AOT prototype equipment. These expenses are included in Research and Development expenses on the accompanying condensed consolidated statements of operations.

Temple University Licensing Agreements

On August 1, 2011, the Company and Temple University (“Temple”) entered into two (2) Exclusive License Agreements (collectively, the “License Agreements”) relating to Temple’s patent applications, patents and technical information pertaining to technology associated with an electric and/or magnetic field assisted fuel injector system (the “First Temple License”), and to technology to reduce crude oil viscosity (the “Second Temple License”). The License Agreements are exclusive, and the territory licensed to the Company is worldwide and replace previously issued License Agreements.

Pursuant to the two licensing agreements, the Company paid Temple a non-refundable license maintenance fee of $300,000 and agreed to pay (i) annual maintenance fees of $187,500; (ii) royalty fee ranging from 4% up to 7% from revenues generated from the licensing agreements; and (iii) 25% of all revenues generated from sub-licensees to secure or maintain the sub-license or option thereon. The term of the licenses commenced in August 2011 and will expire upon expiration of the patents. The agreements can also be terminated by either party upon notification under terms of the licensing agreements or if the Company ceases the development of the patent or fails to commercialize the patent rights.

Total expenses recognized during each six-month period ended June 30, 2025 and 2024 pursuant to these two License Agreements amounted to $94,000 and has been reflected in Research and Development expenses on the accompanying condensed consolidated statements of operations. In the six-month periods ended June 30, 2025 and 2024, the Company also recognized penalty interest on past-due balances of $24,000 and $24,000, respectively, which is included as part of interest and financing expense in the accompanying condensed consolidated statements of operations.

As of June 30, 2025 and December 31, 2024, total unpaid fees due to Temple pursuant to these agreements are $2,551,000 and $2,433,000, respectively, which are included as part of Accounts Payable – license agreements in the accompanying condensed consolidated balance sheets. With regards to the unpaid fees to Temple, a total of $135,000 are deferred until such time the Company achieves a revenue milestone of $835,000 or upon termination of the licensing agreements and the remaining $2,416,000 are deemed past due. The Company is in ongoing discussions with Temple to settle or cure the past due balance.

No revenues were earned from the two License Agreements during the six-month periods ended June 30, 2024 and 2023.

During the six months ended June 30, 2025, the Company issued 90,790,297 shares of its common stock as follows:

The Company periodically issues stock options and warrants to employees and non-employees in capital raising transactions, for services, and for financing costs.

Options

Options vest according to the terms of the specific grant and expire from 2 to 10 years from date of grant. The weighted-average, remaining contractual life of employee and non-employee options outstanding at June 30, 2025 was 7.1 years. Stock option activity for the period January 1, 2025 up to June 30, 2025, was as follows:

The weighted average exercise prices, remaining contractual lives for options granted, exercisable, and expected to vest as of June 30, 2025 were as follows:

In the six-month period ending June 30, 2025, the Company issued options to purchase 17,482,638 shares of common stock to members of the Board of Directors, including 7,218,750 options issued to the Company’s CEO/CFO (see Note 9, below), upon reinstatement of the Director Compensation Policy.7,656,250 options are exercisable at $0.02 per share,4,375,000 options are exercisable at $0.04 per share,2,430,555 options are exercisable at $0.06 per share,2,187,500 options are exercisable at $0.08 per share, and 833,333 options are exercisable at $0.15 per share.16,649,305 of the options were fully vested at the date of grant and 833,333 of the options vest over one year. Total fair value of these options at grant date was $2,571,000 using the Black-Scholes Option Pricing model with the following assumptions: expected life of 5 to 6 years; risk free interest rate of 3.95% to 4.47%; volatility of 179% and dividend yield of 0%. During the six-month period ended June 30, 2025, the Company recognized compensation costs based on the fair value of options that vested of $2,511,000.

In the six-month period ending June 30, 2025, the Company issued options to purchase 24,317,500 shares of common stock upon execution of an employment agreement with Cecil Bond Kyte, the Company’s CEO and CFO (see Note 9, below). The options are exercisable at a price of $0.03, fully vested at the date of grant, and expire 10 years from the date of grant. Total fair value of these options at grant date was $3,574,000 using the Black-Scholes Option Pricing model with the following assumptions: expected life of 5 years; risk free interest rate of 4.57%; volatility of 179% and dividend yield of 0%. During the six-month period ended June 30, 2025, the Company recognized compensation costs based on the fair value of options that vested of $3,574,000.

In the six-month period ending June 30, 2025, the Company issued options to purchase 1,500,000 shares of common stock to its corporate secretary as compensation. The options are exercisable at a price of $0.03, one third vested at the date of grant, and the balance will vest two years from the date of grant, and expire 10 years from the date of grant. Total fair value of these options at grant date was $238,000 using the Black-Scholes Option Pricing model with the following assumptions: expected life of 6 years; risk free interest rate of 4.32%; volatility of 179% and dividend yield of 0%. During the six-month period ended June 30, 2025, the Company recognized compensation costs based on the fair value of options that vested of $79,000.

In the six-month period ending June 30, 2025, the Company issued options to purchase 9,800,000 shares of common stock in exchange for services. The options are exercisable at a price of $0.03, vest up to two years from the date of grant, and expire 5 to 10 years from the date of grant. Total fair value of these options at grant date was $1,558,000 using the Black-Scholes Option Pricing model with the following assumptions: life of 2.5 to 6 years; risk free interest rate of 3.92% to 4.32%; volatility of 161% to 179% and dividend yield of 0%. During the six-month period ended June 30, 2025, the Company recognized compensation costs based on the fair value of options that vested of $549,000.

As of June 30, 2025, based on the market price of the Company’s stock of $0.21 per share, the aggregate intrinsic value of the options outstanding at June 30, 2025 was $9,898,000.

Warrants

The following table summarizes certain information about the Company’s stock purchase warrants activity for the period starting January 1, 2025 up to June 30, 2025.

The weighted average exercise prices, remaining contractual lives for warrants granted, exercisable, and expected to vest as of June 30, 2025 were as follows:

In the six-month period ending June 30, 2025, the Company issued warrants to purchase 199,998 shares of common stock in exchange for services. The warrants are exercisable at a price range of $0.14 to $0.30, vesting one month from the date of grant, and expiring two years from the date of grant. Total fair value of these warrants at grant date was $30,000 using the Black-Scholes Option Pricing model with the following assumptions: life of 2 years; risk free interest rate of 3.75% to 4.29%; volatility of 154% to 158% and dividend yield of 0%. During the six-month period ended June 30, 2025, the Company recognized compensation costs based on the fair value of warrants that vested of $27,000.

In the six-month period ending June 30, 2025, the Company extended the expiration date of warrants to purchase 13,796,200 shares of common stock. The warrants had been issued to certain consultants and certain investors, and the modifications were executed to compensate the warrant holders for services provided. The Company measured the fair value of the modified warrants as of the modification date and compared it to the fair value of the warrants immediately before modification. The incremental fair value resulting from the modification was determined to be $511,000 using a Black-Scholes Option Pricing model with the following assumptions: life of 1 to 2 years; risk free interest rate of 3.94% to 4.31%; volatility of 133% to 154% and dividend yield of 0%. The warrants were fully vested on the modification date, and the full incremental fair value of $511,000 was recognized as stock-based compensation - warrant modification.

In the six-month period ending June 30, 2024, the Company issued warrants to purchase 199,998 shares of common stock in exchange for services. The warrants are exercisable at a price range of $0.03 to $0.07, vesting one month from the date of grant, and expiring two years from the date of grant. Total fair value of these warrants at grant date was $9,000 using the Black-Scholes Option Pricing model with the following assumptions: life of 2 years; risk free interest rate of 4.39% to 4.97%; volatility of 181% to 188% and dividend yield of 0%. During the six-month period ended June 30, 2024, the Company recognized compensation costs based on the fair value of warrants that vested of $9,000.

At June 30, 2025, the Company’s common stock was $0.21 per share. At June 30, 2025, the aggregate intrinsic value of warrants outstanding was $9,429,000.

Employment Agreement with CEO/CFO

Effective April 15, 2021, Cecil Bond Kyte was appointed to serve as the Company’s Chief Executive Officer and Chief Financial Officer upon mutually acceptable terms and conditions to be determined at a later date subject to the Company’s financial condition. From April 15, 2021 through July 7, 2024, Mr. Kyte served as the Company’s CEO and CFO without compensation. For the period July 7, 2024, through December 31, 2024, the Company paid Mr. Kyte $210,000 for his services as CEO and CFO of the Company.

On February 19, 2025, effective January 1, 2025, the Company entered into an employment agreement (“Agreement”) with Mr. Kyte to serve as the Company’s CEO and CFO, with an annual base salary of $420,000. In addition, the Agreement provides for the payment of a retention bonus (“Bonus”) in the amount of $1,557,500 to Mr. Kyte, $519,167 of which was paid in January 2025 to Mr. Kyte on execution of the Agreement; $519,167 of the Bonus was paid in part in May 2025 in anticipation of the execution of a customer contract with VIPS Petroleum, and the balance of the Bonus was paid in June and July 2025 to Mr. Kyte on the actual execution and delivery of a customer contract with VIPS Petroleum; and, $519,166 of the Bonus will be paid to Mr. Kyte upon the execution, closing, and effective date of debt or equity financing in favor of the Company in the amount of no less than $5,000,000.

As part of the employment agreement, Mr. Kyte was also issued a stock option exercisable into 20,817,500 shares of the Company’s restricted common stock at an exercise price of $0.03 per share, and a stock option exercisable into 3,500,000 shares of the Company’s restricted common stock at an exercise price of $0.03 per share (See Note 8, above). The stock options vested immediately and expire in ten years. Mr. Kyte was also issued stock options exercisable into 7,218,750 shares of the Company’s restricted stock in his capacity as a member of the Board of Directors and as a Chairman of the Board who oversees financial and audit functions, which vest up to one year, and have an exercise price of $0.02 to $0.15 per share.

During the six months ended June 30, 2025, the Company paid $1,248,000 to Mr. Kyte, made up of $210,000 in salary and $1,038,000 in bonus payments. In addition, the Company recorded the fair value of vested stock options issued to Mr. Kyte of $4,581,000. During the six months ended June 30, 2024, there were no employment agreement related transactions with Mr. Kyte. A copy of Mr. Kyte’s Employment Agreement with the Company was included as an attachment to Form 8-K filed with the SEC on February 21, 2025.

The second installment of Mr. Kyte’s Bonus as noted above was paid as follows: $51,917 on May 19, 2025, $250,000 on June 23, 2025; $150,000 on June 24, 2025; and, $67,250 on July 2, 2025.

Reimbursements for Rent

The Company reimburses Mr. Kyte in rent expenses for a home office and partial storage space in Carson City, Nevada at a rate of $1,000 per month under a month-to-month rental agreement. Total rent expense during the six-month period ended June 30, 2025, and 2024 were $3,000 and $6,000, respectively which are included as part of operating expenses in the attached consolidated statement of operations.

Other

During the six months ended June 30, 2025, the Company issued to its corporate secretary 1,500,000 shares of restricted common stock with a fair value of $240,000 (see Note 7, above), and stock options exercisable into 1,500,000 shares of common stock (See Note 8, above). The Company also issued stock options exercisable into 10,263,888 shares of common stock to other members of the Company’s Board of Directors (see Note 8, above). During the six months ended June 30, 2024, there were no similar transactions. In addition, the Company paid a cash bonus of $100,000 to its corporate secretary in May 2025.

We are involved in certain legal proceedings that arise from time to time in the ordinary course of our business. Except for income tax contingencies, we record accruals for contingencies to the extent that our management concludes that the occurrence is probable and that the related amounts of loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. There is no current or pending litigation of any significance with the exception of the matters that have arisen under, and are being handled in, the normal course of business.

The Company operates and manages its business as one reportable and operating segment dedicated to the oil and gas industry. The measure of segment assets is reported on the balance sheet as total consolidated assets. In addition, the Company manages the business activities on a consolidated basis.

The Company’s CODM reviews financial information presented on a consolidated basis and decides how to allocate resources based on consolidated net income (loss).

Significant segment expenses include research and development, salaries, insurance, and stock-based compensation. Operating expenses include all remaining costs necessary to operate our business, which primarily include external services and other administrative expenses. The following table presents the significant segment expenses and other segment items regularly reviewed by our CODM:

During July and August 2025, the Company issued 4,731,310 shares of its common stock upon the exercise of stock warrants of $189,000 with conversion prices of $0.04 per share. The Company issued 33,333 shares of its common stock upon the cashless exercise of warrants at $0.14 per share for $5,000, which were applied to the settlement of vendor accounts payable. The Company issued 1,531,580 shares of its common stock upon the conversion of $38,000 in convertible notes and $31,000 of accrued interest, pursuant to convertible notes conversion prices of $0.035 to $0.05.