NOTE 9 — STOCKHOLDER’S EQUITY

On June 21, 2024, the Business Combination was completed. The transaction was accounted as a reverse recapitalization in accordance with GAAP. Under this method of accounting, Redwoods was treated as the “acquired” company for financial reporting purposes. Accordingly, for accounting purposes, the financial statements of the Combined Company represent a continuation of the financial statements of Klotho with the Transactions treated as the equivalent of Klotho issuing shares for the net assets of Redwoods, accompanied by a recapitalization. Accordingly, for accounting purposes, the Merger was treated as the equivalent of the Company issuing shares for the net assets of Redwoods, accompanied by a recapitalization. The net assets of Redwoods were stated at historical cost with no goodwill or other intangible assets recorded. See “NOTE 1 — Organization and Business Description” for detail.

Equity Incentive Plan

In connection with the Business Combination, the Company’s Board adopted, and the Company’s stockholders approved, the Equity Incentive Plan (“Equity Incentive Plan”). Although the Company does not have a formal policy with respect to the grant of equity incentive awards to the Company’s executive officers, the Company believes that equity awards provide Company’s executive officers with a strong link to the Company’s long-term performance, create an ownership culture and help to align the interests of the Company’s executives and the Company’s stockholders. In addition, Company believes that equity awards with a time-based vesting feature promote executive retention because this feature provides incentives to Company’s executive officers to remain in Klotho’s employment during the applicable vesting period. Accordingly, Company’s board of directors periodically reviews the equity incentive compensation of the Company’s executive officers and from time to time may grant equity incentive awards to them.

Warrants

During the three months ended June 30, 2025, the Company initiated a warrant exercise inducement program, reducing the exercise price from $3.49 to $1.35 for certain outstanding warrants. The Company accounted for the inducement as a modification of the original warrants in accordance with ASC 505-10 - Equity. The incremental fair value was recorded as a deemed dividend of $0.3 million in accumulated deficit on the condensed consolidated balance sheets. During the three months ended June 30, 2025, holders of common stock warrants exercised a total of 11.0 million warrants for gross proceeds of $11.4 million.

Austria Note Conversion

During the three months ended June 30, 2025, $650,000 of principal related to the Austria Capital LLC Convertible Promissory Note was converted into 2,600,000 shares of common stock at a conversion price of $0.25. The remainder of the note in the amount of $550,000 was settled in cash. Therefore, the Company de-recognized the remaining unamortized original issue discount of $85,554 and deferred financing costs of $438,471, which were recognized in interest expense on the condensed consolidated statements of operations.

3i Note Conversion

During the six months ended June 30, 2025, $823,444 of principal and $57,641 of interest and make whole related to 3i convertible notes was converted into 5,413,474 shares of common stock at conversion prices ranging from $0.12 to $0.25.

Investor Share Purchase

On June 5, 2025, the Company entered into a securities purchase agreement an accredited investor pursuant to Regulation D of the Securities Act of 1933, as amended. Under the terms of the agreement, the Company issued 6,250,000 shares of its common stock at a purchase price of $0.08 per share, for total gross proceeds of $500,000. The proceeds were allocated to common stock based upon their par value of the common stock and the remainder in recorded to additional paid in capital on the condensed consolidated balance sheets.

Preferred B Shares

On June 9, 2025, the Company conducted a private offering and issued 500 preferred B shares at $0.0001 par value per share for a total of $500,000. The 500 preferred shares are convertible into 6,250,000 common shares.

Meteora Agreement

On June 13, 2024, RWOD and Klotho entered into a forward purchase agreement with (i) Meteora Capital Partners, LP (“MCP”), (ii) Meteora Select Trading Opportunities Master, LP (“MSTO”), and (iii) Meteora Strategic Capital, LLC (“MSC” and, collectively with MCP and MSTO, the “Seller”) (the “Forward Purchase Agreement”). Redwoods is the holder of the asset and Sponsor and is also a counterparty to Klotho. Upon Closing of the merger on June 21, 2024 and on September 30, 2024, the value of the contract was $0 as the contract created no receivable or obligation for the Company. On September 19, 2024, the Company modified the settlement amount price of the contract to $2.00 and allowed the shares held with Meteora to be sold at Meteora’s sole discretion, with the reset price subject to weekly changes. During the quarter ending March 31, 2025, Meteora sold and terminated on behalf of the Company 100,000 shares at a reset price of $0.4610, for total proceeds to Klotho in the amount of $46,100. On May 15, 2025, Meteora terminated additional 550,214 shares at a reset price of $0.1717 for total proceeds of $94,472, thereby reducing the number of shares per the agreement to 10,000 shares remaining.