Note 5 – Stock Purchase Warrants

The following schedule reflects outstanding stock purchase warrants as of June 30, 2026 and December 31, 2025:

During the six months ended June 30, 2026 in connection with the issuance of secured notes payable (See Note 6 – Secured Promissory Notes), we issued a series of warrants to purchase up to 361,665 shares of common stock at an exercise price of $1.50 per share and expiring January 23, 2031. The issued warrants consisted of (i) 148,000 immediately vested commitment, origination and capital warrants issued in January upon the initial closing (the "Original Warrants"), (ii) an additional 120,125 immediately vested commitment, origination, and capital warrants issued in May upon an interim funding (the "Interim Warrants"), (iii) 56,875 unvested origination and capital warrants that will vest in the event of Second Funding on September 30, 2026 (the " Contingent Warrants"), and (iv) up to 36,665 contingent prepayment fee warrants (the "Prepayment Warrants") that will vest in different amounts only in the event of a voluntary or mandatory prepayment that occurs (a) before December 31, 2026 or (b) on or after December 31, 2026 but before December 31, 2027.  The number of Interim Warrants reflects a net reduction of 250 shares to account for a $50,000 decrease in the commitment amount of two of the Lenders since the Initial Funding.  In addition, upon the Interim Funding, we cancelled, as previously issued to the four Lenders in the Initial Funding, securities representing (i) unvested origination and capital warrants which would vest upon a Second Funding and exercisable for an aggregate of 105,000 shares, and (ii) unvested original prepayment warrants exercisable for an aggregate of up to 29,332 shares.  The cancelled warrants were replaced by the Contingent Warrants and the Prepayment Warrants discussed above.

The Original Warrants have a fair value at the date of issuance of $149,635 while the Interim Warrants have a fair value of $63,660 at their May 2026 date of issuance. Both fair value calculations are based on a Black-Scholes option pricing model where the inputs to calculation were our underlying stock price, the $1.50 exercise price of the warrants, an expected volatility of 75%, the five-year term of the warrants, and the risk-free interest rate corresponding to the term of 3.74% and 4.15% for the January and May issuances, respectively.  The allocation of proceeds from the debt transaction to the warrants based on their fair value resulted in a debt discount and was immediately expensed as interest expense due to our election to carry the debt at fair value.   

The 200,000 sales incentive warrants outstanding at December 31, 2025 were legally cancelled upon the January 2026 determination date as the sales milestones were not achieved.