NOTE 11 – WARRANTS CLASSIFIED AS LIABILITY

A summary of warrants classified as a liability for the six months ended June 30, 2026 is as follows:

SCHEDULE OF WARRANTS

Series A Warrants

The Series A Warrant agreements provide for adjustments to the exercise price and number of shares issuable upon exercise following certain specified events. The Series A Warrant agreements also provide for adjustments to the exercise price and number of shares issuable if the Company issues common stock or common stock equivalents at a price below the then-current exercise price, subject to the applicable Floor Price of $8.40 per share.

After issuance of the Series A Warrants, the Company effected a 1-for-30 reverse stock split. Pursuant to the Series A Warrant agreements, the reverse split resulted in a proportional adjustment to the Series A Warrants, including an increase in the exercise price from $2.40 to $72.00 per share. The Series A Warrant agreements also contain a Share Combination Event Adjustment pursuant to which, following a stock split, reverse stock split, stock dividend, recapitalization or similar transaction, the exercise price is subject to further adjustment based on the lowest volume-weighted average price (“VWAP”) of the Company’s common stock, as defined, following the applicable event, subject to a Floor Price. Upon effectiveness of the Company’s 1-for-30 reverse stock split, the Floor Price was proportionately adjusted to $8.40 per share.

In accordance with the Share Combination Event Adjustment provision, the exercise price of the Series A Warrants was reduced to the Floor Price of $8.40 per share, which proportionately increased the number of shares of common stock issuable upon exercise of the Series A Warrants to approximately 2.3 million shares, such that aggregate potential cash exercise proceeds remained approximately $19.3 million. The exercise price and number of Warrant Shares presented above reflect the Share Combination Event Adjustment.

As of June 30, 2026, no Series A Warrant instruments had been exercised. The fair value of the Series A Warrant liability was approximately $312,000 as of December 31, 2025, and approximately $1,187,000 as of June 30, 2026.

The fair value of the Series A Warrant Liability as of June 30, 2026 was estimated using a trinomial valuation model based on 2.3 million shares underlying the Series A Warrants and the following assumptions: exercise price of $8.40 per Warrant Share, an underlying stock price of $0.84 per share, a remaining contractual term of 1,261 days, expected volatility of 152%, a dividend yield of 0%, and a risk-free interest rate of 4.19%.

Series B Warrants

The Series B Warrants are exercisable at $72.00 per share, subject to adjustment, and expire 30 months from the date of the Warrant Stockholder Approval. The fair value of the Series B Warrants was valued by the Company based on the subsequent settlements of these warrants.

Beginning on the date of the Warrant Stockholder Approval, in lieu of a cash exercise, the holders of the Series B Warrants have the right to elect to receive an aggregate number of shares of common stock equal to the product of (x) the aggregate number of shares of common stock that would be issuable upon a cash exercise of the Series B Warrants and (y) 2.0. Also, the Series B Warrants provide for a Reverse Split Reset subject to the Floor Price. Additionally, effective on the 11th trading day following the date of the Warrant Stockholder Approval, the exercise price and the number of shares underlying the Series A Warrants and the Series B Warrants (collectively, the “Purchase Warrants”) reset to the then-current lowest VWAP in the period commencing on the first trading day following the date of the Warrant Stockholder Approval and ending at the close of trading on the 10th trading day thereafter. Such reset was subject to the Floor Price. With respect to all of the Purchase Warrants, with the consent of the holder, the Company may adjust the exercise price to such amount and for such time as may be agreed upon. None of the Purchase Warrants were exercisable until the Warrant Stockholder Approval. The Series B Warrants allow an alternative cashless conversion, which is determined by multiplying the number of exercised Series B Warrants by the exercise price and dividing the result by the lesser of the VWAP price or the $8.40 floor. This amount is then doubled to arrive at the final share total.

Therefore, pursuant to ASC 815, the Company has classified the Purchase Warrants as liabilities in its condensed balance sheets. The classification of the Purchase Warrants, including whether the Purchase Warrants should be recorded as liabilities or as equity, is evaluated at the end of each reporting period with changes in the fair value reported in other income (expense) in the condensed statements of operations. Upon the closing of the registered direct offering, the fair value of the Series B Warrant liability was $12,456,000.

As of June 30, 2026, holders had exercised 251,484 Series B Warrants on an alternative cashless basis, resulting in the issuance of 4,233,238 shares of common stock. No Series B Warrants were exercised during the six months ended June 30, 2026.

As of December 31, 2025, the fair value of the Series B Warrants liability was $433,000. As of June 30, 2026, the fair value of the Series B Warrants liability was $242,000, resulting in the Company recognizing a $191,000 gain from the change in fair value of the warrant liability during the six months ended June 30, 2026.

The fair value of the Series B Warrants as of June 30, 2026 was determined based on the estimated number of shares issuable under the alternative cashless exercise provisions, multiplied by the Company’s closing stock price on June 30, 2026.

Based on the alternative cashless exercise, the Company estimates issuing 288,834 shares of common stock when the remaining 16,849 Series B Warrants are exercised.

The Company’s warrant liabilities are measured at fair value on a recurring basis using Level 3 inputs within the fair value hierarchy. The following table presents changes in the fair value of the Company’s Level 3 warrant liabilities for the six months ended June 30, 2026. Changes in fair value are recognized in “Change in fair value of warrant liabilities” within other income (expense) in the condensed statements of operations.

SCHEDULE OF WARRANT LIABILITIES

The change in fair value for the six months ended June 30, 2026 relates to warrant liabilities still held as of June 30, 2026. Significant unobservable inputs used in the fair value measurement of the warrant liabilities include expected volatility. A significant increase (decrease) in expected volatility would result in a significantly higher (lower) fair value measurement.