NOTE 13 – PRIVATE PLACEMENT

Issuance of common stock

On June 17, 2026, the Company issued 869,840 shares of its common stock in a private placement financing transaction entered into pursuant to a Securities Purchase Agreement dated May 14, 2026 with the Lytton‑Kambara Foundation and Alice W. Lytton Family LLC (the "Investors"). The common stock was issued together with convertible debentures and warrants for aggregate gross proceeds to the Company of approximately $9.0 million. Following the issuance, the Company had 10,264,262 shares of common stock issued and outstanding.

As the common stock, warrants, and convertible debentures were issued together in a single transaction, the Company allocated the $9.0 million of gross proceeds to each freestanding instrument based on its relative fair value. Of the total proceeds, $1,854,150 was allocated to the common stock. The shares of common stock issued in the transaction rank equally with the Company's other outstanding shares of common stock and carry no preferential dividend, liquidation, redemption, or conversion rights.

The Company incurred total issuance costs of approximately $800,000 in connection with the private placement financing transaction, of which $164,879 was allocated to the common stock on the same relative fair value basis used to allocate the proceeds. Issuance costs allocated to the common stock were recorded as a reduction of the proceeds recognized in equity. Accordingly, the net amount recognized in common stock for the shares issued was $1,689,271.

Convertible Notes (Series B Preferred Stock)

The Convertible Notes were issued under the private placement financing transaction on June 17, 2026, pursuant to the Securities Purchase Agreement dated May 14, 2026. The Notes were issued in a transaction to the Lytton-Kambara Foundation and to Alice W. Lytton Family LLC, with principal balances of $4.55 million and $2.28 million, respectively. The Notes are direct, unsecured debt obligations of the Company and rank equally in right of payment with all other Debentures now or hereafter issued under the series. These are five-year Notes maturing on June 16, 2031, unless earlier converted, and bear interest at a rate of 4.0% per annum, payable semiannually on November 1 and May 1, beginning on the first such date after the original issue date of the Notes, on each conversion date (as to that principal amount then being converted), and on the maturity date. The interest is paid in cash, or at the Company’s option and under certain circumstances, in Series B Convertible Preferred Stock of the Company.

The Investors may convert the Notes into shares of Preferred Stock at a conversion price of $1,000 per share, representing 6,825 shares of Series B Preferred Stock into which the Notes are potentially convertible. Investors may convert all or a portion of the Notes at any time. Beginning 36 months after the effective date, the Company may redeem outstanding Notes for 130% of principal, accrued interest and other amounts due. However, following the stockholder approval required under Nasdaq rules to permit issuance of all underlying shares contemplated by the transaction, particularly where issuances would exceed 19.99% of the Company's outstanding Common Stock as of the Closing Date (“Shareholder Approval”), all remaining principal and accrued interest automatically convert into Series B Preferred Stock without further Investor action. The potentially dilutive shares associated with the Company's convertible notes were excluded from the computation of diluted earnings per share because their inclusion would have been anti-dilutive. As of June 30, 2026, the unamortized discount on the Notes was $617,718, the net carrying amount was $6.2 million, and the fair value of the Notes was approximately $10,881,000. The fair value of the Notes was determined using a binomial lattice model in a risk-neutral framework using significant unobservable inputs, resulting in a Level 3 fair value classification. Significant estimates include the Company’s stock price, volatility, risk-free rate, and credit spread.

Conversion of the Notes into Series B Preferred Stock was contingent upon receipt of shareholder approval required under Nasdaq rules. Prior to such approval, the number of common shares issuable pursuant to conversion was subject to contractual issuance limitations. Absent Shareholder Approval, the Company could not issue more than 1,877,945 common shares pursuant to the financing transaction.

The Company incurred total issuance costs of approximately $800,000 in connection with the private placement financing transaction, of which $521,770 was allocated to the Notes on the same relative fair value basis used to allocate the proceeds.  Together with the issuance discount, the issuance costs attributable to the Note are amortized as interest expense using the effective interest method over the expected life of the Notes. The effective interest rate on the Notes for the period from June 17, 2026 through June 30, 2026 was 452%, due to the shortened discount accretion term relative to the contract term. For the period ended June 30, 2026, the coupon interest on the Convertible Notes was $9,859 and amortization of the debt discount was $862,890.

Warrants

The Warrants were issued under the private placement financing transaction on June 17, 2026 pursuant to the Securities Purchase Agreement dated May 14, 2026. These Warrants are exercisable for an aggregate of 1,080,000 shares of Common Stock at an exercise price of $3.00 per share for a period of five years, expiring June 16, 2031 (see table below). The exercise price and warrant shares are subject to customary antidilution adjustments. The Holder controls the manner of exercise and may exercise the Warrants in whole or in part at any time during the exercise period, paying the exercise price in cash or, at any time after the six-month anniversary of the Closing Date when no effective registration statement is available for the issuance of Common Stock issuable upon exercise of the Warrants (the “Warrant Shares”), elect a cashless (net share) exercise; the Company is not required to make any cash payment or net cash settlement in lieu of delivering Warrant Shares. Any Warrant remaining outstanding on the Termination Date is automatically exercised on a cashless basis.

As of June 30, 2026, the Company had the following warrants issued and outstanding:

Under the cashless (net share) alternative, the Holder receives a net number of shares equal to (A − B) × X ÷ A, where "A" is the five-trading-day volume-weighted average price (VWAP) preceding exercise, "B" is the $3.00 exercise price, and "X" is the number of shares issuable on a cash exercise; accordingly, the number of shares issuable varies with the Company's share price. As the five-day VWAP of the Common Stock increases above the exercise price, both the number of shares issued on a cashless exercise and the aggregate fair value of those shares increase; conversely, as the five-day VWAP approaches the exercise price, the number of shares issued and their aggregate fair value decrease, and no shares would be issued if the five-day VWAP were equal to or below the exercise price. As of June 30, 2026, if the Holders elect to exercise the Warrants for cash, the Company would deliver one share of Common Stock for each Warrant exercised and would receive cash equal to the fixed $3.00 exercise price per share; the aggregate fair value of the shares issued upon such cash exercise would vary directly with the then-current five-day VWAP of the Common Stock, whereas the per-warrant exercise price and resulting cash proceeds to the Company remain fixed in accordance with the Warrant Agreement.

The Company incurred total issuance costs of approximately $800,000 in connection with the private placement financing transaction, of which $113,735 was allocated to the Warrants on the same relative fair value basis used to allocate the proceeds.

The Warrants may not be exercised to the extent (i) such conversion or issuance would result in the investor having beneficial ownership of more than 9.99% of the outstanding shares of Common Stock or (ii) absent stockholder approval, the aggregate number of shares issued would exceed 19.9%of the outstanding shares of Common Stock. All 1,080,000 Warrant Shares were exercisable in full from the issue date, the Warrants contain no vesting conditions, and no Warrants had been exercised as of June 30, 2026.