The Company issued convertible notes with embedded conversion features and warrants. The embedded redemption features do not qualify for equity classification under ASC 815, Derivatives and Hedging, and were bifurcated and carried at fair value, and the associated warrants were recognized as liabilities, in each case with changes in fair value recorded in earnings.

Upon the consummation of the Direct Listing on May 20, 2026, the outstanding principal and accrued interest of the Convertible Notes automatically converted into shares of Common Stock at a price equal to 80% of the price paid by new investors in the qualified financing (see Notes 10 and 12), and the associated bifurcated conversion features were settled. As of June 30, 2026, derivative liabilities consist of the Series C Convertible Preferred Stock conversion feature derivative of $874,707 (see below) and warrant liabilities of $8,460 that remain outstanding. The carrying amount of the derivative liabilities was $883,167 and $37,962 as of June 30, 2026 and December 31, 2025, respectively. Changes in the fair value of derivative liabilities of $236,969 (net gain) and $0 were recognized for the three months ended June 30, 2026 and 2025, respectively, and $187,753 (net gain) and $0 for the six months then ended.

Series C Convertible Preferred Stock conversion feature – In connection with the issuance of 7,000 shares of Series C Convertible Preferred Stock at the Second Closing on May 20, 2026 (see Note 12), the Company evaluated the instrument’s conversion features under ASC 815, Derivatives and Hedging. Because the Series C Convertible Preferred Stock becomes convertible, after the earlier of six months from the listing date, a trigger event, or an event of default, at a variable price equal to the lesser of the Fixed Price and 90% of the lowest daily volume-weighted average price during the ten trading days prior to conversion (subject to a floor), the Company concluded that the conversion feature is required to be bifurcated from the host instrument and accounted for as a derivative liability at fair value, with changes in fair value recognized in earnings. At issuance, the Company allocated the proceeds as follows:

$4,824,382 to the warrant issued to Streeterville (recorded within additional paid-in capital) based on a relative fair value basis,

$849,236 to the conversion feature derivative at its issuance-date fair value, and

issuance costs of $142,305 allocated to the Series C Convertible Preferred Stock

of the Series C Convertible Preferred Stock was

During the three months ended June 30, 2026, the Company recognized a loss of $25,471 from the change in fair value of the conversion feature derivative, which had a carrying value of $874,707 as of June 30, 2026.