Innovative Eyewear Inc

NOTES TO THE CONDENSED FINANCIAL STATEMENTS

September 30, 2025 and 2024 (Unaudited)

NOTE 1 –GENERAL INFORMATION

Innovative Eyewear, Inc. (the “Company,” “us,” “we,” or “our”), is a corporation organized under the laws of the State of Florida that develops and sells cutting-edge smart eyewear – including prescription eyeglasses, ready-to-wear sunglasses, safety glasses, and sport glasses – which are designed to allow our customers to remain connected to their digital lives. We sell smart eyewear under our own Lucyd brand, which includes the Lucyd Lyte® and Lucyd Armor product lines, as well as cobranded smart eyewear under the Nautica® Powered by Luycd, Eddie Bauer® Powered by Luycd, and Reebok® Powered by Luycd product lines.

The Company was originally founded by Lucyd Ltd., a portfolio company of Tekcapital Plc through Tekcapital Europe, Ltd. (collectively, together with Lucyd Ltd., “Tekcapital and Affiliates”), which owned approximately 5% of our issued and outstanding shares of common stock as of September 30, 2025.

NOTE 2 –SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed balance sheet as of December 31, 2024 (which has been derived from audited financial statements) and the unaudited interim condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and pursuant to the instructions to Form 10-Q and Article 8 of Regulation S-X promulgated by the United States Securities and Exchange Commission (“SEC”). Certain information or footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted, pursuant to the rules and regulations of the SEC for interim financial reporting. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position, results of operations, or cash flows. These unaudited condensed financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, as filed with the SEC on March 24, 2025.

In the opinion of management, all adjustments considered necessary for the fair presentation of the financial statements for the periods presented have been included. The results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of the results to be expected for future periods or the full year.

Use of Estimates

The preparation of financial statements in conformity with GAAP 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. Actual results could differ from those estimates, particularly given the significant uncertainties associated with the current state of international trade and the overall economic environment.

Cash Equivalents

All highly liquid investments with original maturities of three months or less, including money market funds, certificates of deposit, and U.S. Treasury bills purchased three months or less from maturity, are considered cash equivalents.

Investments

As of December 31, 2024, the Company held investments in U.S. Treasury bills, which were purchased in September 2024 and matured in March 2025. These investments were classified as “held-to-maturity” and, as of December 31, 2024, were recorded at amortized cost of $4,895,184 in the accompanying condensed balance sheet. The aggregate fair value of these investments as of December 31, 2024, based on quoted prices (unadjusted) in active markets for identical assets, was $4,957,750. Upon maturity of these investments, the Company recognized a realized gain $104,816 for the nine months ended September 30, 2025.

As of September 30, 2025, the Company held investments in U.S. Treasury bills, which were purchased in April 2025 and subsequently matured in October 2025. These investments were classified as “held-to-maturity” and, as of September 30, 2025, were recorded at amortized cost of $1,298,687 in the accompanying condensed balance sheet. The aggregate fair value of these investments, based on quoted prices (unadjusted) in active markets for identical assets, was $1,298,830 as of September 30, 2025.

Accounts Receivable

Accounts receivable are uncollateralized obligations due from customers under normal trade terms. For direct-to-consumer sales, payment is required before product is shipped. For wholesale orders, we offer “net 30” payment terms on wholesale orders of $1,500 or more in accordance with industry standards. The Company, by policy, routinely assesses the financial strength of its customers.

Accounts receivable are reported at the amount billed to the customer, net of an allowance for credit losses. The allowance for credit losses is determined based upon a variety of judgments and factors. Factors considered in determining the allowance include historical collection, write-off experience, and management’s assessment of collectibility from customers, including current conditions, reasonable forecasts, and expectations of future collectibility and collection efforts. Management continuously assesses the collectibility of receivables and adjusts estimates based on actual experience and future expectations. Receivable balances are written-off against the allowance when such balances are deemed to be uncollectible.

A roll forward of the allowance for credit losses for the nine months ended September 30, 2025 and 2024 is as follows:

Inventory

Our inventory predominantly consists of purchased eyewear and related accessories, and is stated at the lower of cost or net realizable value, with cost determined on a specific identification method of inventory costing which attaches the actual cost to an identifiable unit of product. Also included within inventory at September 30, 2025 was $30,360 of electronic components purchased from a third-party supplier for use by our manufacturer in their future production of our eyewear; there were no such comparable amounts in inventory at December 31, 2024.

Provisions for excess, obsolete, or slow-moving inventory are recorded after periodic evaluation of historical sales, current economic trends, forecasted sales, estimated product life cycles, and estimated inventory levels. Such provisions were $0 as of both September 30, 2025 and December 31, 2024.

Revenue Recognition

Our revenue is primarily generated from the sales of prescription and non-prescription optical glasses and sunglasses, and shipping charges which are charged to the customer associated with these purchases. We sell products through our retail store resellers, distributors, on our own website Lucyd.co, and on Amazon.com. We have also recently started to generate revenue from the sale of subscriptions to the “Pro” version of our Lucyd app, which provides unlimited ChatGPT interactions and priority tech support for a monthly or annual fee.

To determine revenue recognition, we perform the following steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) we satisfy a performance obligation. At contract inception, we assess the goods or services promised within each contract and determine those that are performance obligations, and also assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

In instances where the collectibility of contractual consideration is not probable at the time of sale, the revenue is deferred on our balance sheet as a contract liability, and the associated cost of goods sold is deferred on our balance sheet as a contract asset; subsequently, we recognize such revenue and cost of goods sold as payments are received. During the three months ended September 30, 2025 and 2024, we recognized $7,500 of revenue for each period, that was included in the contract liability balances as of January 1, 2025 and 2024, respectively. During the nine months ended September 30, 2025 and 2024, we recognized $22,500 of revenue for each period, that was included in the contract liability balances as of January 1, 2025 and 2024, respectively.

All revenue, including sales processed online and through our retail store resellers and distributors, is reported net of discounts, returns, and sales taxes collected from customers on behalf of taxing authorities. Amounts billed to a customer for shipping and handling are reported as revenues; costs incurred for shipping and handling are included in cost of goods sold at the time the related revenue is recognized.

For sales generated through our e-commerce channels, we identify the contract with a customer upon online purchase of our eyewear and transaction price at the manufacturer suggested retail price (“MSRP”). Our e-commerce revenue is recognized upon meeting of the performance obligation when the eyewear is shipped to the end customer. For sales processed through our website, U.S. consumers enjoy free USPS first class postage on orders over $149, with faster delivery options available for extra cost. For Amazon sales, shipping is free for U.S. consumers while international customers pay shipping charges on top of MSRP. Any costs associated with fees charged by the online platforms (i.e., Amazon.com, or Shopify for sales through our Lucyd.co website) are not recharged to customers and are recorded as a component of cost of goods sold as incurred. The Company charges applicable state sales taxes in addition to the MSRP for both online channels and all other marketplaces on which we sell products.

For sales to our retail store partners, we identify the contract with a customer upon receipt of an order of our eyewear through our Shopify wholesale portal or direct purchase order. Revenue is recognized upon meeting the performance obligation, which is delivery of the Company’s eyewear products to the retail store, and is also recorded net of returns and discounts. Our wholesale pricing for eyewear sold to retail store partners includes volume discounts, due to the nature of large quantity orders. The pricing includes shipping charges, while excluding any state sales tax charges applicable. Due to the nature of wholesale retail orders, no e-commerce fees are applicable.

For sales to distributors, we identify the contract with a customer upon receipt of an order of our eyewear through a direct purchase order. If collectibility of substantially all of the contract consideration is probable, revenue is recognized upon meeting the performance obligation, which is delivery of our eyewear products to the distributor, and is also recorded net of returns and discounts. Our wholesale pricing for eyewear sold to retail store partners and distributors includes volume discounts, due to the nature of large quantity orders. The pricing does not include shipping. Due to the nature of wholesale retail orders, no marketplace fees are applicable, only credit card processing fees.

For sales of subscriptions to the “Pro” version of our Lucyd app, we identify the individual contracts with customers through detailed transaction reports from the Apple App Store or Google Play Store, with each individual transaction representing a separate contract. Revenue is recognized upon meeting the performance obligation, which is the right and availability of each customer to access the “Pro” features of the Lucyd app. For those customers that purchase such access on a month-to-month basis, we recognize revenue in the month in which the purchase of such access is made. For those customers that purchase an annual subscription, we recognize revenue on a straight-line basis over the subscription period, using a mid-month convention. The balance of unearned revenue related to app subscriptions that has been deferred on our balance sheet as a contract liability was $3,592 and $2,401 as of September 30, 2025 and December 31, 2024, respectively. During the three and nine months ended September 30, 2025, we recognized $325 and $2,263 of revenue that was included in the contract liability balance as of January 1, 2025.

We allow our customers to return our physical products, subject to our refund policy, which allows any customer to return our physical products for any reason and receive a full refund for frames (prescription lenses excluded) within the first 7 days for sales made through our website (Lucyd.co), 30 days for sales made through Amazon, and 30 days for sales to most wholesale retailers and distributors (although certain sales to independent distributors are ineligible for returns). We charge a standard $15 restocking fee for standard frame returns, which is deducted from applicable refunds to cover shipping and restocking costs, and our return policy prohibits discretionary returns of glasses with prescription lenses.

For all of our product sales, at the time of sale, we establish a reserve for returns, based on historical experience and expected future returns as well as review of individual returns received in the month following the balance sheet date; such reserve is recorded as a reduction of sales. The Company recorded an allowance for sales returns of $11,228 and $15,746 as September 30, 2025 and December 31, 2024, respectively.

Segment Reporting

The Company has a single reportable segment, which generates revenue from the sales of smartglasses, and related accessories and apps. The Company derives revenue primarily in North America and manages its business activities on a consolidated basis. The accounting policies of our single reportable segment are the same as those for the Company as a whole.

The Company’s chief operating decision maker, as such term is defined under GAAP, is our Chief Executive Officer. The chief operating decision maker assesses performance for the single reportable segment and decides how to allocate resources based on net income that also is reported on the income statement as consolidated net income. The measure of segment assets is reported on the balance sheet as total consolidated assets. The Company does not have intra-entity sales or transfers.

NOTE 3 –GOING CONCERN

The Company has a limited operating history. The Company’s business and operations are sensitive to general business and economic conditions in the United States. A host of factors beyond the Company’s control could cause fluctuations in these conditions. Adverse conditions may include recession, downturn, or otherwise, changes in regulations or restrictions in imports, competition, or changes in consumer taste. These adverse conditions could affect the Company’s financial condition and the results of its operations.

The Company meets its day-to-day working capital requirements using monies raised through sales of eyewear and issuances of equity. During the nine months ended September 30, 2025, the Company raised approximately $7.3 million of aggregate gross proceeds through a combination of warrant inducement transactions, other warrant exercises, and at-the-market offerings of common stock (see Note 9 for details). The Company has also entered into agreements with related parties, under which the Company may make net borrowings of up to $0.75 million (see Note 6 for details); as of September 30, 2025, the Company has not borrowed any amounts under such agreements. The Company’s forecasts and projections indicate that the Company expects to have sufficient liquidity to fund operations through at least the next 12 months. However, the Company may raise additional funds if management believes it would be beneficial to do so.

NOTE 4 –INCOME TAX PROVISION / BENEFIT

At the end of each interim reporting period, the Company estimates its effective tax rate expected to be applied for the full year. This estimate is used to determine the income tax provision or benefit on a year-to-date basis and may change in subsequent interim periods. The Company hasnot recorded an income tax provision or benefit for the three and nine months ended September 30, 2025 and 2024 as it maintains a full valuation allowance against its net deferred tax assets.

NOTE 5 –TANGIBLE AND INTANGIBLE ASSETS

Depreciation expense for the three months ended September 30, 2025 and 2024 was $14,922 and $23,956, respectively.

Depreciation expense for the nine months ended September 30, 2025 and 2024 was $53,292 and $83,907, respectively.

Amortization expense for the three months ended September 30, 2025 and 2024 was $13,552 and $9,902, respectively.

Amortization expense for the nine months ended September 30, 2025 and 2024 was $48,931 and $25,199, respectively.

NOTE 6 –RELATED PARTY TRANSACTIONS AND AGREEMENTS

Management Service Agreement

The Company has entered into a management services agreement with Tekcapital Europe, Ltd., for which the Company is billed $35,000 quarterly. While the agreement does not stipulate a specific maturity date, it can be terminated with 30 calendar days written notice by any party.

The related party currently provides the following services:

During the three months ended September 30, 2025 and 2024, the Company incurred $35,000 in each respective period under the management services agreement. During the nine months ended September 30, 2025 and 2024, the Company incurred $105,000 in each respective period under the management services agreement.

Rent of Office Space

Under an agreement between the Company and Tekcapital, Tekcapital bills the Company for an allocation of rent paid by Tekcapital on the Company’s behalf. The Company recognized $38,730 and $22,904 of expense related to this month-to-month arrangement for the three months ended September 30, 2025 and 2024, respectively, and recognized $108,383 and $69,409 of expense related to this month-to-month arrangement for the nine months ended September 30, 2025 and 2024, respectively.

Loan to Tekcapital Europe, Ltd.

On January 11, 2024, the Company entered into an intercompany loan agreement (as lender) with Tekcapital Europe, Ltd. (as borrower) and Tekcapital Plc, the parent of Tekcapital Europe, Ltd. Pursuant to this agreement, the Company loaned 600,000 British pounds sterling (equivalent to approximately $768,000) to Tekcapital Europe, Ltd. The loan bore simple interest at a rate of 10% per annum and was required to be repaid on or before April 11, 2024. Tekcapital Plc executed the agreement as guarantor for Tekcapital Europe, Ltd. on the full amount of the loan.

Tekcapital Europe, Ltd. subsequently repaid all of the outstanding balance of the loan (including principal and accrued interest), and as of December 31, 2024, no amounts remained outstanding or payable to us under this agreement.

New Loan Facility to Tekcapital Europe, Ltd.

On April 23, 2025, the Company entered into an intercompany loan agreement (as lender) with Tekcapital Europe, Ltd. (as borrower) and Tekcapital Plc, the parent of Tekcapital Europe, Ltd. Pursuant to this agreement, the Company agreed to make a loan facility available to Tekcapital Europe, Ltd. for up to a maximum of $500,000. Tekcapital Europe, Ltd. may receive advances under this facility upon request through October 23, 2025. Any amounts advanced to Tekcapital Europe, Ltd. will bear simple interest at a rate of 10% per annum, and are required to be repaid on or before July 23, 2026. Tekcapital Plc executed the agreement as guarantor for Tekcapital Europe, Ltd. on the full amount of the loan.

In May 2025, Tekcapital Europe, Ltd. borrowed $250,000 under this agreement; subsequently in June 2025, Tekcapital Europe, Ltd. repaid such borrowing in full along with $2,503 of interest. As of September 30, 2025, there was no balance outstanding under this agreement.

Lucyd Ltd. Financing Agreement

On March 1, 2024, the Company entered into an agreement with Lucyd Ltd. pursuant to which the Company can receive up to $1,250,000 either (a) in services provided by Lucyd Ltd. to the Company or (b) in cash upon request of funds by the Company. Once funds or services are received by the Company, it will issue a convertible note to Lucyd Ltd. that will bear interest at 10% per annum and include the option to convert the note into shares of the Company’s common stock upon certain defined events. Upon issuance, the convertible note will have a maturity date of September 1, 2025, at which time all outstanding principal and accrued interest, if any, will be payable in full in cash or in the Company’s common stock. The Company will be able to prepay the convertible notes at any time with the written consent of Lucyd Ltd.

On March 1, 2025, the Company and Lucyd Ltd. entered into an amendment of this agreement, such that upon issuance, the convertible note will have a maturity date of September 1, 2026. There were no other changes to the terms and provisions of the agreement.

The Company has not borrowed any amounts under this agreement.

NOTE 7 –COMMITMENTS AND CONTINGENCIES

License Agreements

In 2022 and 2023, we entered into various multi-year license agreements which grant us the right to sell certain branded smart eyewear, including the Nautica, Eddie Bauer, and Reebok brands worldwide. These agreements require us to pay royalties based on a percentage of net retail and wholesale sales during the period of the license, and also require guaranteed minimum royalty payments. The agreements have base terms of 10 years but are cancellable at the option of the Company during the fifth year.

The aggregate future minimum payments due under these license agreements are as follows:

Also, on January 3, 2024, we entered into a multi-year non-exclusive license agreement with a third party (IngenioSpec, LLC) for multiple smart eyewear patents. Pursuant to this license agreement, the Company added licenses for 46 new patents to its portfolio of owned and licensed patents and applications. The Company fully prepaid this license for the term of the agreement and does not have any obligation for future payments under this agreement.

Additionally, the Company had previously entered into certain exclusive License Agreements dated April 1, 2020 and September 15, 2021, having Addenda dated October 5, 2021 and December 7, 2021 (herein the “LL Licenses”) with Lucyd Ltd; such licenses were royalty-free, fully paid up, perpetual licenses. On August 12, 2025, Lucyd Ltd. executed an intellectual property assignment agreement to confirm that all registered intellectual property rights under the LL Licenses, to the extent they had not previously been assigned to the Company in previously executed assignments, were irrevocably assigned to the Company, and that all unregistered intellectual property rights and other assets that were licensed exclusively to the Company under the LL Licenses were also irrevocably assigned to the Company. As such, the Company has acquired full ownership of all registered and unregistered intellectual property and assets that were previously exclusively licensed to the Company from Lucyd Ltd., and the LL Licenses are no longer necessary, thus Lucyd Ltd. and the Company mutually agreed to terminate the LL Licenses.

The Company recognized $124,273 and $51,160 of expense related to all license agreements for the three months ended September 30, 2025 and 2024, respectively, and recognized $404,243 and $173,481 of expense for the nine months ended September 30, 2025 and 2024, respectively.

Long-Term Payment Plan for Information Technology System and Services

The Company has entered into a long-term payment plan agreement with Oracle for the payment of costs related to the implementation of the Company's new ERP system (which went live in April 2025) and related cloud services. Under this agreement, the Company is obligated to make payments of $4,035 per month through July 2027. As of September 30, 2025, the Company's remaining obligation under this arrangement was $88,776, of which $48,424 is included within Accounts payable and accrued expenses in the accompanying condensed balance sheet, and $40,352 is reflected within Non-Current Liabilities in the accompanying condensed balance sheet.

Leases

Our executive offices are located at 11900 Biscayne Blvd., Suite 630 Miami, Florida 33181. Our executive offices are provided to us by a related party (see Note 6). We consider our current office space adequate for our current operations.

Other Commitments

See related party management services agreement discussed in Note 6.

Legal Matters

We are not currently the subject of any material pending legal proceedings; however, we may from time to time become a party to various legal proceedings arising in the ordinary course of business.

International Trade and Tariffs

Beginning in April of 2025, the U.S. government announced new or increased tariffs on goods imported from various countries to the U.S., and countries subject to such tariffs have imposed or may in the future impose retaliatory tariffs and other trade measures. These recent developments have negatively impacted our results of operations. Due to their evolving nature, we cannot predict with certainty the ultimate impacts they may have on our business and results in the future, but those impacts could be material.

We are actively monitoring the ongoing tariff and international trade developments, and continue to evaluate the potential impacts to our business, cost structure, supply chain, and the broader economic environment. We have taken actions and developed contingency plans to mitigate the negative impacts of tariffs on our results, but cannot provide any assurance that such actions and strategies will be successful.

NOTE 8 –STOCK-BASED COMPENSATION

Stock Options

Summary information regarding stock options as of and during the nine months ended September 30, 2025 is as follows:

During the three and nine months ended September 30, 2025, we recognized expense related to stock options of $31,815 and $100,272, respectively. As of September 30, 2025, the aggregate intrinsic value for all options outstanding as well as all options exercisable was zero, and unrecognized stock option expense of approximately $33,000 remains to be recognized over the next 0.27 years.

Stock Grants

Effective April 1, 2024, pursuant to the terms of a brand ambassador agreement, we issued to an individual 4,500 shares of our common stock as compensation for the first year of the agreement. The value of the consideration transferred, measured using the fair value of our common stock at the date of issuance, was $21,690, which was recognized as expense on a straight-line basis from April 1, 2024 through March 31, 2025. We recognized $5,423 and $10,845 of expense for the three and nine months ended September 30, 2024, respectively, $0 for the three months ended September 30, 2025, and $5,423 for the nine months ended September 30, 2025, relative to this stock grant.

Effective April 1, 2025, pursuant to the terms of a brand ambassador agreement, we issued to the same individual 11,539 shares of our common stock as compensation for the second year of the agreement. The value of this consideration transferred, measured using the fair value of our common stock at the date of issuance, was $30,000, which is being recognized as expense on a straight-line basis from April 1, 2025 through March 31, 2026. We recognized $7,500 and $15,000 of expense for the three and nine months ended September 30, 2025, respectively, relative to this stock grant.

Restricted Stock Units

During the three and nine months ended September 30, 2025, we recognized $137,489 and $411,321 of expense, respectively, related to restricted stock units that were awarded to the Company’s officers, management, and non-management employees in the fourth quarter of 2024. As of September 30, 2025, unrecognized restricted stock unit expense of approximately $986,000 remains to be recognized over of the next 1.81 years.

During the three and nine months ended September 30, 2024, we recognized $5,075 and $15,225 of expense, respectively, related to restricted stock units that were awarded to an influencer in 2023. As of December 31, 2024, no expense remained to be recognized related to this award.

NOTE 9 –STOCKHOLDERS’ EQUITY

April 2025 Warrant Inducement Transaction

On April 11, 2025, the Company entered into inducement letter agreements with certain holders of certain of its existing warrants to purchase an aggregate of 595,188 shares of the Company’s common stock, of which warrants to purchase 121,500 shares were originally issued to the holders on September 4, 2024 with an original exercise price of $5.00 per share, and warrants to purchase 473,688 shares were originally issued to the holders on September 24, 2024 with an original exercise price of $9.50 per share.

Pursuant to the inducement letter agreements, the holders agreed to exercise the existing warrants for cash at a reduced exercise price of $2.60 per share in consideration of the Company’s agreement to issue new unregistered Series G warrants to purchase up to an aggregate of 218,646 shares of common stock and new unregistered Series H warrants to purchase up to an aggregate of 1,724,814 shares of common stock, each at a purchase price of $0.125 per warrant. The Series G Warrants have an exercise price of $2.60 per share, are exercisable immediately upon issuance, and have a term of exercise equal to five and one-half years following the effective date of the Resale Registration Statement (as definedin the applicable agreements). The Series H Warrants have an exercise price of $2.60 per share, are exercisable immediately upon issuance, and have a term of exercise equal to eighteen months following the effective date of the Resale Registration Statement.

This transaction closed on April 14, 2025, and the gross proceeds to the Company were approximately $1.8 million prior to deducting placement agent fees and offering expenses (as described below). The net proceeds received by the Company from this transaction amounted to approximately $1.5 million, which the Company intends to use for working capital and general corporate purposes.

H.C. Wainwright & Co., LLC (“HCW”) acted as the exclusive placement agent for the offering. As compensation for such placement agent services, the Company paid HCW an aggregate cash fee equal to 7.5% of the gross proceeds received by the Company from this transaction, plus a management fee equal to 1.0% of the gross proceeds received by the Company. The Company also issued to HCW or its designees warrants to purchase up to 44,639 shares of common stock. These placement agent warrants are immediately exercisable, have a term of five and one-half years following the effective date of the Resale Registration Statement, and have an exercise price of $3.25 per share.

The Resale Registration Statement was subsequently filed with the SEC on Form S-1 on May 9, 2025, and became effective on May 19, 2025.

June 2025 Warrant Inducement Transaction

On June 20, 2025, the Company entered into inducement letter agreements with certain holders of certain of its existing warrants to purchase an aggregate of 746,782 shares of the Company’s common stock, which were originally issued to the holders on April 14, 2025, having an original exercise price of $2.60 per share.

Pursuant to the inducement letter agreements, the holders agreed to exercise the existing warrants for cash at an exercise price of $2.60 per share in consideration of the Company’s agreement to issue new unregistered Series I warrants to purchase up to an aggregate 2,240,346 shares of common stock, each at a purchase price of $0.125 per warrant. The Series I warrants have an exercise price of $2.60 per share, are exercisable immediately upon issuance, and have a term of exercise equal to eighteen (18) months following the effective date of the Resale Registration Statement (as defined in the applicable agreements).

This transaction closed on June 24, 2025, and the gross proceeds to the Company were approximately $2.2 million prior to deducting placement agent fees and offering expenses (as described below). The net proceeds received by the Company from this transaction amounted to approximately $1.9 million, which the Company intends to use for working capital and general corporate purposes.

HCW acted as the exclusive placement agent for the offering. As compensation for such placement agent services, the Company paid HCW an aggregate cash fee equal to 7.5% of the gross proceeds received by the Company from this transaction, plus a management fee equal to 1.0% of the gross proceeds received by the Company. The Company also issued to HCW or its designees warrants to purchase up to 56,009 shares of common stock. These placement agent warrants are immediately exercisable, will expire on June 20, 2030, and have an exercise price of $3.25 per share.

The Resale Registration Statement was subsequently filed with the SEC on Form S-1 on July 18, 2025, and became effective on July 28, 2025.

Other Warrant Activity

From May 30, 2025 through June 20, 2025, certain holders of the Company’s Series G and Series H warrants exercised such warrants to purchase an aggregate of 986,532 shares of the Company’s common stock at an exercise of $2.60 per share, resulting in gross cash proceeds to the Company of approximately $2.6 million.

In connection with the above, and pursuant to the terms of an engagement agreement between the Company and HCW originally dated April 2, 2024, and subsequently amended on September 22, 2024 and March 21, 2025, the Company paid HCW aggregate cash fees of approximately $0.3 million, and also issued to HCW or its designees various placement agent warrants to purchase up to 80,139 shares of common stock, with exercise prices ranging from $3.25 to $6.25.

The Company has entered into an at-the-market offering agreement with HCW (as sales agent) relating to the sale of common stock. From August 15, 2025 through September 30, 2025, the Company sold 341,403 shares of common stock and received approximately $716,000 of gross proceeds before deducting sales agent commissions and offering expenses. The net proceeds received by the Company from these transactions amounted to approximately $692,000, and will be used for working capital and general corporate purposes.

NOTE 10 –EARNINGS PER SHARE

The Company calculates earnings/(loss) per share data by calculating the quotient of earnings/(loss) divided by the weighted average number of common shares outstanding during the respective period. Due to the net losses for all periods presented in the unaudited condensed statements of operations, all shares underlying the common stock options, common stock warrants, and related party convertible debt were excluded from the earnings per share calculation due to their anti-dilutive effect.

Thecalculation of net earnings/(loss) per share is as follows:

NOTE 11 –SUBSEQUENT EVENTS

Legal Settlement

On November 11, 2025, the Company entered into a settlement and release agreement with a shareholder related to certain legal matters. Pursuant to the terms of such agreement, the Company will receive $570,000 from such shareholder.

From October 1, 2025 through October 15, 2025, the Company sold 144,496 shares of common stock and received approximately $291,000 of gross proceeds before deducting sales agent commissions and offering expenses. The net proceeds received by the Company from these transactions amounted to approximately $281,000, and will be used for working capital and general corporate purposes.