NOTE 10—CAPITAL STOCK

General

On November 17, 2025, the Company entered a securities purchase agreement (the “Preferred Purchase Agreement”) with Streeterville, pursuant to which the Company agreed to offer and sell to Streeterville (i) up to $40,000,000 (the “Commitment Amount”) of series E convertible preferred stock at a purchase price of $1,000 per share; (ii) 50,000 shares of common stock (the “Commitment Shares”); (iii) 475,000 shares of common stock (the “Pre-Delivery Shares”); and (iv) a warrant to purchase a number of shares of common stock equal to the Commitment Amount divided by the Nasdaq Price ($11.42).

The Preferred Purchase Agreement provides for closings in multiple tranches. At the first closing, which occurred on November 17, 2025, the Company issued the Commitment Shares and the Pre-Delivery Shares to Streeterville for a purchase price of $4,750. At the second closing, which occurred on February 19, 2026, the Company issued 5,000 shares of series E convertible preferred stock and a warrant to purchase 3,502,627 shares of common stock at an exercise price of $11.42 per share (subject to standard adjustments for stock splits, stock dividends, recapitalizations and similar transactions) for a purchase price of $5,000,000. At any time and from time to time following the second closing and ending two (2) years thereafter, subject to the satisfaction of certain conditions set forth in the Preferred Purchase Agreement, which includes, among others, certain trading volume requirements, the Company may request that Streeterville purchase additional shares of series E convertible preferred stock, at a purchase price of $1,000 per share, in an amount of no more than the Maximum Purchase Amount and no less than $250,000 by providing a written notice of such request to Streeterville. “Maximum Purchase Amount” means $40,000,000 less the total Stated Value of all outstanding shares of series E convertible preferred stock plus accrued but unpaid interest held by Streeterville as of the applicable measurement date.

The gross proceeds of $5,000,000 were allocated between the series E convertible preferred stock and the warrant based on their relative fair values on February 19, 2026. In addition, the related offering costs totaling approximately $4,416,631 were also allocated between the series E convertible preferred stock and the warrant based on their relative fair values on February 19, 2026, and offset against their recorded amounts.

Pursuant to the Preferred Purchase Agreement, the Company shall have the right, at any time after the earlier of: (i) Streeterville owning 250 or fewer shares of series E convertible preferred stock and the unfunded Commitment Amount equaling zero, or (ii) the date that is three (3) years from the first closing (provided that the Company is not in default under the Certificate of Designation), to repurchase the Pre-Delivery Shares upon a written request delivered to Streeterville at a purchase price of $0.01 for each such Pre-Delivery Share (as adjusted for any stock splits, stock dividends, stock combinations, recapitalizations or other similar transactions).

The Preferred Purchase Agreement also includes other customary representations, warranties and covenants, including a most favored nation provision, which provides that, so long as Streeterville owns any shares of series E convertible preferred stock or the warrant, upon the Company’s issuance of any security with any term or condition more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to Streeterville in the Transaction Documents (as defined in the Preferred Purchase Agreement), then the Company shall notify Streeterville of such additional or more favorable term, which notice may be provided by means of a current report on Form 8-K or other filing with the SEC, and such term, at Streeterville’s option, shall become a part of the Transaction Documents for the benefit of Streeterville. The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing fixed purchase prices, conversion discounts, conversion lookback periods, interest rates/preferred return rates, dividend rights, original issue discounts, floor prices, conversion prices, anti-dilution protection and exercise prices. Notwithstanding the foregoing, this provision shall not apply to certain exempt issuances set forth in the Preferred Purchase Agreement or to the issuance of debt securities.

Redeemable Preferred Stock

Series E Convertible Preferred Stock

On February 13, 2026, the Company filed a certificate of designation (the “Certificate of Designation”) with the Delaware Secretary of State to establish the rights and preferences of the Company’s series E convertible preferred stock. The following is a summary of the terms of the series E convertible preferred stock.

The Company recognizes the series E convertible preferred stock as mezzanine equity in accordance with ASC 480, “Distinguishing Liabilities from Equity.”

Number and Stated Value. Pursuant to the Certificate of Designation, the Company designated 45,000 shares of its preferred stock as series E convertible preferred stock. Each share of series E convertible preferred stock has a stated value of $1,098.90 (the “Stated Value”); provided that upon the occurrence of an Event of Default (as defined in the Certificate of Designation), the Stated Value will automatically increase by ten percent (10%).

Ranking. The series E convertible preferred stock ranks senior to all classes of the Company’s capital stock, including the common stock, with respect to preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company. Without the prior express written consent of the holders of at least a majority of the outstanding shares of series E convertible preferred stock, voting separately as a single class, the Company shall not authorize or issue any additional or other shares of capital stock that is of senior or pari passu rank to the series E convertible preferred stock in respect of preferences as to dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company.

Dividend Rights. Each share of series E convertible preferred stock shall accrue a rate of return on the Stated Value at a rate of 9% per annum (the “Preferred Return”); provided that following the occurrence of an Event of Default (as defined in the Certificate of Designation), the Preferred Return will increase to 15% per annum until such Event of Default has been cured. The Preferred Return shall accrue on each share of series E convertible preferred stock from its issuance date, shall compound daily and be payable on a quarterly basis within five (5) trading days following the end of each calendar quarter, either in cash or via the issuance to the applicable holder of an additional number of shares of series E convertible preferred stock equal to the Preferred Return then accrued and unpaid, divided by the Stated Value, with the election as to payment in cash or via the issuance of additional shares of series E convertible preferred stock to be determined in the discretion of the Company. For the three months ended March 31, 2026, cumulative dividends earned on the series E convertible preferred stock were $54,192.

Liquidation Rights. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or a Deemed Liquidation Event (as defined in the Certificate of Designation), each share of series E convertible preferred stock shall be entitled to be paid out of the assets of the Company available for distribution to its stockholders, before any payment shall be made to the holders of junior securities, an amount per share of series E convertible preferred stock equal to the Stated Value at such time, plus any accrued and unpaid Preferred Return (the “Series E Preferred Liquidation Amount”). If upon any such liquidation, dissolution or winding up or Deemed Liquidation Event, the Company’s assets available for distribution to stockholders shall be insufficient to pay the Series E Preferred Liquidation Amount, the holders of the series E convertible preferred stock shall share ratably in any distribution of the assets available for distribution in proportion to the respective amounts which would otherwise be payable in respect of the shares held by them upon such distribution if all amounts payable on or with respect to such shares were paid in full.

Voting Rights. The holders of the series E convertible preferred stock shall not have any voting rights and shall not vote on any matter submitted to the holders of common stock, or any class thereof, for a vote; provided that, the Company shall not amend or repeal the Certificate of Designation without the prior written consent of the holders of at least a majority of the outstanding shares of series E convertible preferred stock, voting separately as a single class, and any such act or transaction entered into without such vote or consent shall be null and void ab initio, and of no force or effect.

Conversion Rights. Each share of series E convertible preferred stock will be convertible at any time at the option of the holder into a number of shares of common stock determined by dividing the Stated Value of the shares being converted by a conversion price equal to the lower of $11.42 and a price equal to 89% of the lowest daily volume weighted average price of the common stock on its principal market during the ten (10) trading day period prior to the conversion date, but in no event lower than a floor price of 20% of the “Minimum Price” as defined in Nasdaq Rule 5635 (subject to adjustment for stock splits, stock dividends, stock combinations, recapitalizations or other similar events), calculated as of the most recent issuance date after the first issuance. Since no additional issuances were made in the first quarter, the floor price as of March 31, 2026 could not be determined (see also Note 12). Notwithstanding the foregoing, the Company will not effect any conversion, and a holder will not have the right to convert, shares of series E convertible preferred stock to the extent that, after giving effect to the conversion, the holder (together with its affiliates) would beneficially own in excess of 9.99% of the number of shares of common stock outstanding immediately after giving effect to the issuance of shares of common stock upon such conversion.

Redemption Rights. At any time after the date that is six (6) months from the applicable issuance date of the series E convertible preferred stock, the Company may elect, in the sole discretion of its board of directors, to redeem all or any portion of the series E convertible preferred stock then issued and outstanding from all of the holders by paying to the holders an amount in cash equal to the Series E Preferred Liquidation Amount then applicable to such shares of series E convertible preferred stock being redeemed multiplied by 120%. In addition, if an Event of Default (as defined in the Certificate of Designation) has occurred, the holders of at least a majority of the outstanding shares of series E convertible preferred stock may, by notice to the Company, force the Company to redeem all of the issued and outstanding shares of series E convertible preferred stock for a price equal to (i) the Stated Value of all such shares; plus (ii) any accrued and unpaid Preferred Return with respect to all such shares, provided that such Preferred Return shall be paid in cash in an amount equal to the number of shares otherwise issuable for the Preferred Return multiplied by the Stated Value; plus (iii) any and all other amounts due and payable to the holders pursuant to the Certificate of Designation.

The Certificate of Designation also includes customary covenants and events of default, including a covenant that the Company will not, without the prior written consent of the holders of at least a majority of the outstanding shares of series E convertible preferred stock: (i) issue, incur or guaranty any debt or additional Liabilities (as defined in the Certificate of Designation) other than (a) trade payables incurred in the ordinary course of business, (b) indebtedness or Liabilities incurred pursuant to equipment leases, purchase money financings, or capital leases entered into in the ordinary course of business, (c) indebtedness or Liabilities incurred in connection with bona fide commercial banking or credit card arrangements on customary terms, or (d) intercompany indebtedness; or (ii) issue (a) any shares of common stock, preferred stock or any option, warrant, or right to subscribe for, acquire or purchase shares of common stock or preferred stock, or (b) any securities that are convertible into or exchangeable for shares of common stock or any class or series of preferred stock, subject to certain exceptions set forth in the Certificate of Designation.

As of March 31, 2026, there were 5,000 shares of series E convertible preferred stock issued and outstanding.

Non-Redeemable Preferred Stock

Conversion of Preferred Stock

On February 19, 2026, all outstanding shares of the Company’s series A preferred stock, series A-1 preferred stock, series A-2 preferred stock, series B preferred stock, series C preferred stock and series D preferred stock were converted into an equivalent number of shares of common stock.

Common Stock

On February 19, 2026, the Company issued (i) 846,368 shares of common stock upon the conversion of 846,368 shares of series A preferred stock, (ii) 651,465 shares of common stock upon the conversion of 651,465 shares of series A-1 preferred stock, (iii) 442,402 shares of common stock upon the conversion of 442,402 shares of series A-2 preferred stock, (iv) 1,471,487 shares of common stock upon the conversion of 1,471,487 shares of series B preferred stock, (v) 1,204,040 shares of common stock upon the conversion of 1,204,040 shares of series C preferred stock and (vi) 101,565 shares of common stock upon the conversion of 101,565 shares of series D preferred stock.

On February 19, 2026, the Company issued 173,505 shares of common stock to Maxim as partial compensation for its services in connection with the Company’s direct listing and included within stock offering costs.

On February 19, 2026, the Company issued 14,151 shares of common stock upon the conversion all principal and accrued interest in the aggregate amount of $73,857 due under the convertible promissory notes issued in January 2025 (see Note 7).

On February 25, 2026, the Company issued 91,535 shares of common stock upon the conversion all principal and accrued interest in the aggregate amount of $760,955 due under the convertible promissory notes issued in connection with equity crowdfunding offerings in 2025 (see Note 7).

On March 2, 2026, the Company issued 4,193 shares of common stock to a service provider.

As of March 31, 2026 and December 31, 2025, there were 10,442,960 and 5,442,249 shares of common stock issued and outstanding, respectively.

Stock Options

On March 3, 2026, the Company issued a non-qualified stock option under the Company’s 2022 Stock Incentive Plan for the purchase of 352,936 shares of common stock at an exercise price of $3.39 per share, which vests quarterly over four (4) years commencing on April 1, 2026. Management determines the value of options granted using the closing market price of the Company’s common stock and the Black-Scholes option pricing model. The fair value of the stock option was determined using the Black-Scholes option pricing model with the following assumptions: dividend yield: 0%; volatility: 79.4%; risk free rate %; estimated term six years for a total fair market value of $712,715.

During the three months ended March 31, 2026 and 2025, the Company recorded stock-based compensation of $128,440 and $129,650, respectively, which is an expense of $4,657 and $4,657 in cost of revenues, $98,379 and $99,589 in the sales, general and administrative expenses, and $25,404 and $25,404 in research and development, respectively. As of March 31, 2026, there was approximately $1,274,285 of total unrecognized share-based compensation related to unvested stock options, which the Company expects to recognize over approximately four years.

A summary of the Company’s non-qualified stock option activity is as follows:

The Company recognizes compensation expense for stock option awards on a straight-line basis over the applicable service period of the award. The service period is generally the vesting period. The following assumptions were used to calculate share-based compensation expense for three months ended March 31, 2026:

Warrants

On February 9, 2026, the Company issued a warrant to purchase 62,500 shares of common stock at an exercise price of $8.00 (subject to standard adjustments for stock splits, stock dividends, recapitalizations and similar transactions) to Streeterville pursuant to the Note Purchase Agreement (see Note 7), which expires on February 28, 2027.

On February 9, 2026, the Company issued a five-year warrant to purchase 2,022 shares of common stock at an exercise price of $8.16 per share (subject to standard adjustments for stock splits, stock dividends, recapitalizations and similar transactions) to Maxim as partial compensation for placement agent services (see Note 7).

On February 19, 2026, the Company issued a warrant to purchase 3,502,627 shares of common stock at an exercise price of $11.42 per share (subject to standard adjustments for stock splits, stock dividends, recapitalizations and similar transactions) to Streeterville pursuant to the Preferred Purchase Agreement, which expires on November 30, 2026.

On February 19, 2026, the Company issued a five-year warrant to purchase 24,057 shares of common stock at an exercise price of $13.704 per share (subject to standard adjustments for stock splits, stock dividends, recapitalizations and similar transactions) to Maxim as partial compensation for placement agent services.

A summary of the Company’s warrant activity is as follows:

The following assumptions were used to calculate the warrant values: