Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's discussion and analysis of financial condition and results of operations.

Overview

The following discussion of our financial condition and results of operations should be read in conjunction with the other information contained in this Form 10-Q, including our unaudited Condensed Consolidated Financial Statements and notes thereto included elsewhere in this Form 10-Q, as well as our audited Consolidated Financial Statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2025 ("Form 10-K"), filed with the SEC. This discussion, as well as various other sections of this Form 10-Q, contain and refer to statements that constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. Such statements are any statements other than those of historical fact and relate to our intent, belief or current expectations primarily with respect to our future operating, financial and strategic performance. Any such forward-looking statements are not guarantees of future performance and may involve risks and uncertainties. These risks and uncertainties include, but are not limited to, those described in Part I, "Item 1A. Risk Factors," and elsewhere in our Form 10-K, Part I, "Item 1A. Risk Factors," and elsewhere in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2026 and those described from time to time in other reports filed with the SEC. Actual results may differ from those contained in or implied by the forward-looking statements as a result of various factors. For more information, see "Cautionary Statement Regarding Forward-Looking Information" in our Form 10-K.

Overview and Business Trends

Licensing Relationships. On June 1, 2026, the Company announced an expanded licensing agreement with SanPellegrino Cosmetics Private Limited, effective May 21, 2026, covering Photocil and Hair Enzyme Booster. The agreement provides for an initial five-year term and an expanded set of territories, including certain Latin American countries, Russia, Australia and New Zealand, in addition to India. Commercial activity and the timing and extent of any resulting revenue remain subject to applicable market, regulatory and contractual considerations. This agreement predates the third quarter and is included as background to the Company's licensing-led business strategy.

Emesyl License. On December 31, 2025, the Company entered into a license agreement with Itonis Pharmaceuticals under which the Company obtained an exclusive, worldwide license to manufacture, market and sell the homeopathic Emesyl product (see Note 1). The Company bears the cost of manufacturing the product and is obligated to pay royalties equal to 8% of net sales, as defined in the agreement. The Company did not record any sales of, or royalties on, the Emesyl product during the nine months ended September 30, 2026. This agreement predates the third quarter and is included as background to the Company's licensing-led business strategy.

Caring Brands, Inc., a Nevada corporation ("Caring Brands" and together with its subsidiaries, the "Company," or "we"), is a wellness consumer products company. We offer several over-the-counter, or (OTC) and cosmetic, consumer products. Our product pipeline includes a diverse range of products, such as hair loss treatments, Eczema and Psoriasis Treatments, vitiligo solutions, and a Jellyfish sting protective suncare line, that cater to different health and wellness needs. Our method of operation is to ensure that (1) the mechanism of action of all products is established, (2) efficacy is determined through controlled clinical trials, (3) products are protected by issued and filed patents, and (4) products have acceptable commercial stability.

Recent Developments

Nasdaq Listing. On April 7, 2026, the Company received a notice from The Nasdaq Stock Market LLC ("Nasdaq") that it was not in compliance with the minimum stockholders' equity requirement of Nasdaq Listing Rule 5550(b)(1). On July 15, 2026, the Company received a Staff Delisting Determination from Nasdaq and requested a hearing before a Nasdaq Hearings Panel, which was held on August 25, 2026. [Status of the Panel's determination through the date of this report to be provided by the Company.] As of September 30, 2026, after giving effect to the Series B private placement and the reclassification of the Series A Preferred Stock to stockholders' equity, the Company's stockholders' equity was $7,803,392.

Series B Private Placement and Series A Amendments. On August 21, 2026, the Company entered into a Securities Purchase Agreement for the private placement of Series B Preferred Stock and Common Warrants A and B, and completed closings on September 1, 2026 and September 11, 2026 for an aggregate of 7,149.9 shares of Series B Preferred Stock and warrants to purchase 14,299,800 shares of common stock, for gross proceeds of $7,149,900 and net proceeds of $6,994,890. In connection with the Series B private placement, the Company amended and restated the Certificate of Designation of the Series A Preferred Stock to, among other things, eliminate the holder's redemption right, and the Series A Preferred Stock was reclassified from mezzanine equity to stockholders' equity. During the three months ended September 30, 2026, the holder converted 420 shares of Series A Preferred Stock into 1,050,000 shares of common stock. On July 9, 2026, the Company's stockholders approved the Additional Investment Right under the Series A Securities Purchase Agreement, the issuance of shares of common stock upon conversion of the Series A Preferred Stock and exercise of the related warrants in excess of 19.99% of the shares outstanding prior to the PIPE Offering, and an increase in the number of authorized shares of common stock from 100,000,000 to 500,000,000. See Note 10 - Stockholders' Equity and Mezzanine Equity.

Management Changes. On September 4, 2026, Brian R. Meadows was appointed as a director of the Company. On September 16, 2026, Brian John ceased serving as the Company's Interim Chief Financial Officer and resigned as a director and Chairman of the Board of Directors. On September 18, 2026, Mr. Meadows was appointed Chief Financial Officer and Dr. Glynn Wilson, the Company's Chief Executive Officer, was appointed Chairman of the Board of Directors. See Note 13 - Related Party Transaction for the consulting agreement with Myall Luna Ventures Inc., of which Mr. Meadows is the President.

Consulting Agreement. On September 8, 2026, the Company entered into a consulting agreement with Blue Sky Trading and Consulting Ltd. for advisory services over a twelve-month term and paid a one-time fee of $600,000 on September 16, 2026, which is recorded in prepaid expenses and other current assets as of September 30, 2026. See Note 8 - Commitments and Contingencies.

Intellectual Property Portfolio. On August 6, 2026, the Company announced that its intellectual property portfolio included five issued U.S. patents relating to its Hair Enzyme Booster and Photocil platforms. Four issued patents relate to Hair Enzyme Booster compositions and methods, and one relates to Photocil technology. Additional U.S. and international patent applications remained pending. The issuance of patents does not establish regulatory approval or assure commercial success.

Results of operations

The following table sets forth our consolidated statements of operations data in dollars for the periods presented:

		For the Three Months Ended September 30, 2026				For the Three Months Ended September 30, 2025
Summary Statement of Operations Data
Revenue		$	-			$	740
Cost of revenue			-				292
Gross profit (loss)			-				448
Total operating expenses			701,166				999,923
Operating loss			(701,166	)			(999,475	)
Other income			211				-
Interest income (expense)			(23	)			(19,293	)
Total other income (expense)			188				(19,293	)
Net loss		$	(700,978	)		$	(1,018,768	)
Accretion to redeemable preferred equity		$	-			$	-
Dividends on Series A and Series B preferred stock			126,078				-
Net Loss attributable to common stockholders		$	(827,056	)		$	(1,018,768	)
Net loss per share attributable to common stockholders:
Net loss per share attributable to common stockholders - basic		$	(0.08	)		$	(0.08	)
Net loss per share attributable to common stockholders - diluted		$	(0.08	)		$	(0.08	)
Weighted average shares outstanding:
Weighted average shares outstanding - basic and diluted *			10,126,697				13,436,925

		For the Nine Months Ended September 30, 2026				For the Nine Months Ended September 30, 2025
Summary Statement of Operations Data
Revenue		$	-			$	3,795
Cost of revenue			-				1,692
Gross profit (loss)			-				2,103
Total operating expenses			3,061,402				2,200,504
Operating loss			(3,061,402	)			(2,198,401	)
Other income			273				-
Interest income (expense)			(287,051	)			(19,720	)
Total other income (expense)			(286,778	)			(19,720	)
Net loss		$	(3,348,180	)		$	(2,218,121	)
Accretion to redeemable preferred equity		$	2,062,360			$	-
Dividends on Series A and Series B preferred stock			214,586				-
Net Loss attributable to common stockholders		$	(5,625,126	)		$	(2,218,121	)
Net loss per share attributable to common stockholders:
Net loss per share attributable to common stockholders - basic		$	(0.50	)		$	(0.17	)
Net loss per share attributable to common stockholders - diluted		$	(0.50	)		$	(0.17	)
Weighted average shares outstanding:
Weighted average shares outstanding - basic and diluted *			11,173,600				13,330,451

*Due to the anti-dilutive effect, the computation of basic and diluted EPS did not include the shares underlying the exercise of warrants, options, RSUs, common stock payable and Series A and Series B preferred stock as the Company had a net loss for the three and nine months ended September 30, 2026 and 2025.

Comparison of the three and nine months ended September 30, 2026 to the three and nine months ended September 30, 2025.

Revenue and Cost of revenue

For the three months ended September 30, 2026, the Company generated no revenue, compared to revenue of $740 for the three months ended September 30, 2025, and cost of revenue was $0, compared to $292 for the same period. The prior-year amounts were inconsequential and reflected early-stage product activity.

For the nine months ended September 30, 2026, the Company generated no revenue, compared to revenue of $3,795 for the nine months ended September 30, 2025, and cost of revenue was $0, compared to $1,692 for the same period. The Company is still in the process of developing and commercializing its products and has not yet generated meaningful commercial revenue.

Operating expenses

Total operating expenses for the three months ended September 30, 2026 were $701,166, compared to $999,923 for the three months ended September 30, 2025, a decrease of $298,757, or approximately 30%. Selling, general and administrative expenses increased by $82,883, or approximately 761%, to $93,773, primarily due to higher stock transfer agent fees, directors' and officers' insurance expense and employer payroll taxes. Payroll expenses increased by $187,361, or approximately 96%, to $382,808, primarily due to $125,000 of compensation paid to the Company's former Chairman and Interim Chief Financial Officer (see Note 13) and $110,581 of non-cash stock-based compensation, consisting of $97,516 for stock options granted on September 28, 2026 and $13,065 of restricted stock unit amortization, partially offset by lower cash compensation. Professional service fees decreased by $494,001, or approximately 69%, to $224,585, primarily because the prior-year quarter included $400,000 of professional fees settled through the issuance of shares of common stock, partially offset by $100,000 of investor relations fees expensed in the current quarter . Depreciation and amortization decreased to $0 from $75,000, due to the full impairment of the Company's intellectual property license recorded during the year ended December 31, 2025.

Total operating expenses for the nine months ended September 30, 2026 were $3,061,402, compared to $2,200,504 for the nine months ended September 30, 2025, an increase of $860,898, or approximately 39%. Selling, general and administrative expenses increased by $146,117, or approximately 234%, to $208,496, reflecting higher corporate overhead costs, including public company compliance, insurance and administrative expenses. Payroll expenses increased by $846,100, or approximately 80%, to $1,897,694, primarily reflecting non-cash stock-based compensation, including restricted stock unit and stock option amortization and shares committed under consulting, advisory and settlement arrangements, $125,000 of compensation paid to the Company's former Chairman and Interim Chief Financial Officer, as well as expanded management personnel; the prior-year period included $607,000 of shares issued for services. Professional service fees increased by $93,681 to $955,212, primarily attributable to higher legal, accounting, consulting and audit fees incurred in connection with the Series A Convertible Redeemable Preferred Stock financings, settlement matters, and ongoing public company compliance obligations, including $300,000 of consulting fees, of which $200,000 relates to the Genesis One Consulting Agreement (see Note 10), and $100,000 of investor relations fees. Depreciation and amortization decreased to $0 from $225,000, due to the full impairment of the intellectual property license recorded during the year ended December 31, 2025.

No impairment charges were recorded during the three and nine months ended September 30, 2026 or the comparable prior-year periods.

As a result of the foregoing, the Company reported an operating loss of $701,166 for the three months ended September 30, 2026, compared to an operating loss of $999,475 for the three months ended September 30, 2025, a decrease of $298,309, or approximately 30%, primarily due to the decrease in professional service fees described above, partially offset by the increase in payroll expenses.

For the nine months ended September 30, 2026, the Company reported an operating loss of $3,061,402, compared to an operating loss of $2,198,401 for the nine months ended September 30, 2025, an increase of $863,001, or approximately 39%, primarily driven by higher stock-based compensation, the $125,000 payment to the former Chairman and Interim Chief Financial Officer and higher professional service fees, partially offset by the absence of depreciation and amortization in the current period.

Other income (expense)

For the three months ended September 30, 2026, interest expense, net was $23 and other income was $211, compared to interest expense of $19,293 and other expense of $0 for the three months ended September 30, 2025. Amounts in both quarters were immaterial.

Interest expense, net was $287,051 for the nine months ended September 30, 2026, compared to $19,720 for the nine months ended September 30, 2025. The increase of $267,331 was recorded entirely in the first quarter of 2026 and was primarily attributable to non-cash charges consisting of $144,123 of guaranteed interest on convertible debt ($148,867 settled upon conversion, less $4,744 accrued as of December 31, 2025), $141,350 of amortization of debt discounts and $1,500 of conversion fees, all associated with the Greentree Promissory Note converted into common stock in March 2026, as further discussed in Note 7 - Debt.

Financial condition, liquidity and capital resources

Overview

As of September 30, 2026, the Company had cash and cash equivalents of $7,668,775, compared to $2,189,232 as of December 31, 2025. The increase of $5,479,543 during the nine months ended September 30, 2026 was primarily attributable to net cash provided by financing activities of $7,639,890, consisting primarily of the net proceeds from the private placements of the Company's Series A and Series B Convertible Preferred Stock (the "PIPE Financing"), net of the repurchase of common stock, partially offset by net cash used in operating activities of $2,160,347.

During the nine months ended September 30, 2026, the Company raised net proceeds of $3,870,000 from private placements of its Series A Convertible Redeemable Preferred Stock, consisting of $3,470,000 received in March 2026 and $400,000 received in June 2026 under the second tranche of the PIPE Financing. Concurrent with the initial PIPE Financing, the Company repurchased 6,250,000 shares of its common stock for an aggregate consideration of $3,075,000. In September 2026, the Company received net proceeds of $6,994,890 from the private placement of its Series B Convertible Preferred Stock and Common Warrants A and B, after issuance costs of $155,010.

Total assets increased to $8,312,911 as of September 30, 2026, compared to $2,326,818 as of December 31, 2025. The increase of $5,986,093 was primarily driven by a net increase in cash and cash equivalents of $5,479,543, an increase in prepaid expenses and other current assets of $506,550, primarily reflecting a $600,000 fee paid under a twelve-month consulting agreement (see Note 8), while inventory remained unchanged. The Company had no non-current assets as of either balance sheet date.

Total liabilities increased to $509,519 as of September 30, 2026, compared to $235,494 as of December 31, 2025. The increase of $274,025 was primarily attributable to an increase in accounts payable of $122,250, primarily related to consulting services incurred in connection with the Genesis agreement, and an increase in accrued expenses and other current liabilities of $210,425, largely reflecting accrued dividends on the Series A and Series B Preferred Stock, partially offset by a decrease in long-term debt of $58,650 due to the conversion of the Greentree Promissory Note.

The Company's primary cash requirements consist of funding operating expenses, including payroll and professional service fees, and supporting corporate development and compliance activities as a public company.

Based on current operating plans and available cash on hand, management believes that existing cash resources are sufficient to fund operations for at least the next twelve months. The Company may seek additional capital in the future to support long-term growth initiatives, strategic investments, or acquisitions. Such financing, if pursued, may include equity offerings, debt financing, or other strategic transactions; however, there can be no assurance that additional capital will be available on acceptable terms, or at all.

Our ability to meet our operating, investing and financing needs depends to a significant extent on our future financial performance, which will be subject in part to general economic, competitive, financial, regulatory and other factors that are beyond our control, including those described elsewhere in Part II, Item 1A "Risk factors."

Cash flows

		For the Nine Months Ended September 30, 2026				For the Nine Months Ended September 30, 2025
Net cash (used in) provided by:
Net cash used in operating activities		$	(2,160,347	)		$	(631,875	)
Net cash provided by financing activities		$	7,639,890			$	179,000
Net change in cash and cash equivalents		$	5,479,543			$	(452,875	)

Series A and Series B Preferred Stock Financing and Capitalization

During the nine months ended September 30, 2026, the Company completed significant equity financing transactions and amendments to its outstanding preferred stock arrangements that strengthened its liquidity and affected the classification and composition of stockholders' equity.

During the third quarter of 2026, amendments to the Series A Convertible Preferred Stock eliminated certain redemption provisions that had previously required classification outside permanent stockholders' equity. As a result, the Company reclassified $3,812,686 from mezzanine equity to permanent stockholders' equity. This reclassification was noncash and did not itself increase the Company's total assets or liquidity.

The Company also completed a private placement of Series B Convertible Preferred Stock and related warrants, generating $6,994,890 in net cash proceeds. The transaction increased available cash resources and provided additional financial flexibility. Management continues to evaluate the allocation of available resources among ongoing corporate obligations and potential business opportunities; no particular level of expenditure on sales, marketing, commercialization or acquisitions is committed by the completion of this financing.

The Series A Preferred Stock has an initial conversion price of $0.40 per share, subject to adjustment and a minimum conversion price of $0.16 per share under an amendment filed subsequent to September 30, 2026, with a stated effective date of September 22, 2026. The Series B Preferred Stock has an initial conversion price of $0.70 per share, subject to adjustment and a minimum conversion price of $0.266 per share under an amendment filed subsequent to September 30, 2026, with a stated effective date of September 30, 2026. Related Series B warrants are also subject to a minimum exercise price of $0.266 per share under amendments with a stated effective date of September 30, 2026, subject to the terms of the applicable instruments. These minimum prices are subject to specified adjustments and approval requirements as more fully described in Notes 10 and 14 to the condensed consolidated financial statements.

Future conversions of preferred stock and exercises of warrants may result in the issuance of additional shares of common stock and dilution to existing common stockholders. The ultimate number of shares issued will depend on the applicable conversion and exercise provisions, market conditions, stockholder approval requirements and other limitations contained in the governing agreements.

Management believes the financing transactions increased the Company's financial flexibility. Future capital requirements will depend on operating expenditures and the nature and timing of any business initiatives the Company elects to pursue. There can be no assurance that additional financing, if required, will be available on acceptable terms. Additional information regarding the terms, classification, amendments and accounting treatment of the Series A and Series B Preferred Stock and related warrants is included in Notes 2, 10 and 14.

For the nine months ended September 30, 2026, net cash used in operating activities was $2,160,347, compared to net cash used of $631,875 for the nine months ended September 30, 2025. For the nine months ended September 30, 2026, cash used in operating activities included a net loss of $3,348,180, partially offset by non-cash expenses consisting primarily of:

●

$1,147,077 of stock-based compensation, including restricted stock unit and stock option amortization and shares committed under consulting, advisory and settlement arrangements;

●

$137,500 of loss on stock repurchased from related parties; and

●

$141,350 of amortization of debt discounts.

Changes in working capital also impacted operating cash flows during the nine months ended September 30, 2026. Increases in accounts payable of $122,250 and in accrued expenses and other current liabilities of $146,206 increased operating cash, while the increase in prepaid expenses and other current assets of $506,550 decreased operating cash; inventory was unchanged. For the nine months ended September 30, 2025, net cash used in operating activities of $631,875 was primarily attributable to a net loss of $2,218,121, partially offset by $1,007,000 of shares issued for services and $225,000 of depreciation and amortization, together with working capital changes including an increase in accounts payable of $232,497, an increase in accrued expenses of $76,608, a decrease in prepaid expenses of $27,818 and a decrease in inventory of $797.

For the nine months ended September 30, 2026 and 2025, net cash used in investing activities was $0. The Company had no investing activity in either period.

For the nine months ended September 30, 2026, net cash provided by financing activities was $7,639,890, compared to $179,000 for the nine months ended September 30, 2025, consisting of:

	●	$3,870,000 in net proceeds from the issuance of Series A Convertible Redeemable Preferred Stock (PIPE Financing), including $400,000 of second-tranche subscription proceeds received in June 2026,
	●	$6,994,890 in net proceeds from the issuance of Series B Convertible Preferred Stock and Common Warrants A and B, net of issuance costs of $155,010; and
	●	$(3,225,000) for the repurchase of 6,400,000 shares of common stock from related parties, including $150,000 for the repurchase and retirement of 150,000 shares pursuant to the use-of-proceeds provisions of the Securities Purchase Agreement.

The Management's Discussion and Analysis ("MD&A") is based upon our unaudited condensed consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these unaudited condensed consolidated financial statements required the use of estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses. Management bases estimates on historical experience and other assumptions it believes to be reasonable under the circumstances and evaluates these estimates on an on-going basis. Actual results may differ from these estimates. There have been no significant changes to the critical accounting policies and estimates included in the Company's Annual Report on Form 10-K for the year ended December 31, 2025, except as described below.

Intellectual property, including license agreements, is recorded at cost and amortized over the estimated useful life of the license using the straight-line method. The Company evaluates its intellectual property for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable, in accordance with ASC 360. During the year ended December 31, 2025, management determined that the carrying value of the intellectual property was not recoverable and recorded a full impairment charge of $2,550,000. As a result, the Company had no remaining intellectual property balance as of December 31, 2025 or September 30, 2026, and accordingly no amortization expense was recorded during the three and nine months ended September 30, 2026. No impairment charges were recorded during the three and nine months ended September 30, 2026 or the comparable prior-year periods.

Stock Based Compensation

The Company recognizes compensation costs to employees under FASB Accounting Standards Codification 718 "Compensation - Stock Compensation" ("ASC 718"). Under ASC 718, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options and warrants. As such, compensation cost is measured on the date of grant at their fair value. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

The Company has adopted ASU No. 2018-07 "Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting." These amendments expand the scope of Topic 718, Compensation - Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to non-employees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned.

Mezzanine Equity - Redeemable Preferred Stock

The Company's Series A Convertible Redeemable Preferred Stock was classified outside of permanent equity ("mezzanine equity") in accordance with ASC 480-10-S99, as the preferred stock was redeemable upon the occurrence of events not solely within the Company's control. The preferred stock is initially recorded at the proceeds allocated to it upon issuance and is subsequently adjusted to its redemption value at each reporting period end through charges to additional paid-in capital. The accretion to redemption value is treated as a deemed dividend and is reflected as an adjustment to net loss to arrive at net loss attributable to common stockholders in the Condensed Consolidated Statements of Operations. For the nine months ended September 30, 2026, the Company recorded accretion of $2,062,360 to reflect the Series A Preferred Stock at its redemption value. Following the filing of the Amended and Restated Certificate of Designation of the Series A Preferred Stock on August 21, 2026, which eliminated the holder's Triggering Event redemption right, the carrying amount of the Series A Preferred Stock of $3,812,686 was reclassified from mezzanine equity to stockholders' equity (see Note 10).

Convertible Preferred Stock and Warrants

The Company evaluates convertible preferred stock and the freestanding warrants issued with it under ASC 480 and ASC 815-40 to determine whether the instruments are liabilities, mezzanine equity or permanent equity, which requires judgment regarding redemption features that are outside the Company's control, whether the instruments are indexed to the Company's own stock, and the settlement provisions of the instruments. The Series B Preferred Stock and the Common Warrants A and B issued in September 2026 were determined to be equity-classified. The net proceeds of $6,994,890 were allocated between the Series B Preferred Stock $3,462,120 and the warrants $3,532,770 based on their relative fair values. The fair value of the warrants was estimated using the Black-Scholes option pricing model, which requires assumptions for expected volatility, expected term and the risk-free interest rate, and the fair value of the preferred stock was determined on an as-converted basis using the closing price of the Company's common stock on each closing date. Cumulative dividends on the Series A and Series B Preferred Stock are accrued at the stated rate of 8% per annum and are deducted from net loss in determining net loss attributable to common stockholders (see Note 9 - Net Loss Per Share and Note 10 - Stockholders' Equity and Mezzanine Equity).

Fair Value of Financial Instruments

The fair value of the Company's assets and liabilities, which qualify as financial instruments under ASC Topic 820, "Fair Value Measurements and Disclosures," approximates the carrying amounts represented in the accompanying balance sheet, primarily due to their short-term nature.

Recent accounting pronouncements

New accounting pronouncements issued but not yet adopted

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40). The standard requires additional disclosures, in the notes to financial statements, of specified information about certain costs and expenses included in the captions presented on the face of the income statement. The new guidance is effective for the Company's annual reporting period beginning January 1, 2027, and interim reporting periods beginning January 1, 2028. The guidance will be applied on a prospective basis with the option to apply the standard retrospectively and early adoption is permitted. The Company expects ASU 2024-03 to only impact its disclosures with no impacts to the Company's results of operations, cash flows, and financial condition.

In May 2025, the FASB issued ASU No. 2025-04, Compensation - Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606), which is intended to reduce diversity in practice and improve existing guidance, primarily by revising the definition of a "performance condition" and eliminating forfeiture policy election for service conditions associated with share-based consideration payable to a customer. In addition, ASU No. 2025-04 clarifies that the guidance in ASC 606 on the variable consideration constraints does not apply to share-based consideration payable to a customer regardless of whether an award's grant date has occurred (as determined under ASC 718). ASU No. 2025-04 is effective for fiscal years beginning after December 15, 2026, with early adoption permitted. We plan to adopt ASU No. 2025-04 in the first quarter of fiscal year 2027. We are currently evaluating the impact of this ASU on our financial statements and disclosures.

In April 2026, the FASB issued ASU No. 2026-01, Equity (Topic 505): Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock, which requires that dividends on equity-classified preferred stock that are payable in additional shares of preferred stock or other equity instruments be initially measured using the dividend rate stated in the preferred stock agreement rather than at fair value. ASU No. 2026-01 is effective for fiscal years beginning after December 15, 2026, including interim periods within those fiscal years, with early adoption permitted. The Company's Series A and Series B Preferred Stock provide for cumulative dividends at a stated rate of 8% per annum, payable in cash or shares of common stock at the election of the holder, which the Company currently accrues based on the stated rate. The Company plans to adopt ASU No. 2026-01 on January 1, 2027 and does not expect the adoption to have a material effect on its consolidated financial statements.

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the effect of recently issued standards that are not yet effective will not have a material effect on its consolidated financial position or results of operations upon adoption.

From time to time, the Company may be involved in legal proceedings arising in the ordinary course of business. The Company stated in its June 30, 2026 Form 10-Q that it was not a party to litigation or proceedings that management believed were likely to have a material adverse effect on its business.

The risks described in Part I, Item 1A of the Annual Report on Form 10-K for the year ended December 31, 2025, as supplemented in the June 30, 2026 Form 10-Q, continue to be relevant. During the third quarter, the Company completed financing transactions and amended the Series A preferred stock terms, while pursuing a Nasdaq hearing process following a July 15, 2026 Staff Delisting Determination. The Company may be unable to achieve or maintain compliance with Nasdaq listing standards, including continued stockholders' equity requirements; any Panel exception may be conditioned on milestones. Failure to satisfy those requirements could result in suspension or delisting, reducing liquidity for common stockholders.

The issuance or conversion of Series A and Series B preferred stock and exercise of related warrants may significantly dilute existing stockholders, subject to contractual ownership limitations and applicable exchange caps. Some issuances may require stockholder approval and may be subject to price-adjustment provisions. The Series B registration rights agreement may expose the Company to liquidated damages for failures to meet specified filing or effectiveness deadlines. The Company has incurred operating losses and may require additional capital; financing may be unavailable on acceptable terms.

During the third quarter of 2026, the Company entered into a July 10 securities purchase agreement involving Series A preferred stock and related common stock warrants, with reported cash proceeds of $400,000. The Company also completed Series B preferred stock closings on September 1 and September 11, 2026 for reported aggregate gross proceeds of $7,149,900, together with related Series A and Series B warrants. These offerings and their material terms are described in Note 10 of the unaudited condensed consolidated financial statements and in the relevant Forms 8-K filed during the quarter.