Mangoceuticals, Inc. (MGRX) Risk Analysis

The exchange ratio under the BCA is calculated as the product of (a) the fully diluted Company shares divided by the fully diluted Nuclea shares, multiplied by (b) 24. Based on this formula, and prior to giving effect to the PIPE share issuance, former Nuclea shareholders are expected to hold approximately 96% of the Company's equity on a fully diluted, as-exchanged basis, with our existing stockholders retaining only approximately 4%. Stockholders should expect their proportionate ownership, voting power, and economic interest in the Company to be reduced dramatically as a result of the Transaction. The PIPE financing of at least $15,000,000 contemplated by the BCA, as well as any additional equity issuances prior to or in connection with Closing or Completion, will result in further dilution to existing stockholders beyond the dilution described above. The actual exchange ratio, and therefore the actual dilutive effect on existing stockholders, will depend on the fully diluted share counts of both companies as of Closing, which may differ from current estimates.

Rather than issuing the Company common stock directly to Nuclea shareholders, the Transaction uses a Canadian exchangeable share structure under which former Nuclea shareholders will receive exchangeable shares of ExchangeCo, a wholly-owned subsidiary of the Company, that are intended to be exchangeable on a one-for-one basis for the Company common stock. A single Company Special Voting Share, carrying aggregate voting rights corresponding to the outstanding Exchangeable Shares (subject to the Nasdaq Cap), will be issued to a trustee at Closing. This structure is more complex than a conventional stock-for-stock merger and may make it more difficult for our stockholders to understand and evaluate the actual voting power, economic rights, and potential dilution associated with the Transaction. Until the Required Approvals are obtained, the aggregate economic rights, voting rights, and exchange rights attributable to the Exchangeable Shares and any the Company common stock issued in the Transaction are limited to 19.99% of the Company common stock outstanding immediately prior to Closing. Once the Required Approvals are obtained, this cap is removed and the full dilutive and voting effect of the Transaction, including the approximately 96% ownership position expected to be held by former Nuclea shareholders, will be realized. Stockholders approving the Transaction, or trading in the Company securities, prior to receipt of the Required Approvals may not have a full picture of the ultimate ownership and governance structure of the combined company.

In connection with the Transaction, Mr. Cohen and the Company entered into a Release and Separation Agreement providing for cash severance of $1,500,000 payable at Closing, 2,000,000 bonus shares of the Company common stock, a cashless warrant for $10,000,000 worth of the Mango & Peaches Corp. common stock issuable upon Completion, full acceleration of unvested equity awards, and 12 months of Company-paid COBRA coverage, in lieu of the change of control, bonus, severance, and health payments otherwise provided under his existing employment agreement. In addition, certain directors and officers received fully vested equity awards under the Company's equity incentive plan on July 28, 2026. These arrangements could be viewed as giving Mr. Cohen and other officers and directors a financial incentive to support and complete the Transaction that differs from, or is in addition to, the interests of stockholders generally, and stockholders should consider these interests in evaluating the Transaction.

The market price of our common stock may fluctuate significantly as a result of developments relating to the Transaction, including announcements regarding satisfaction or waiver of closing conditions, receipt or denial of regulatory or Nasdaq approvals, the outcome of the stockholder vote, changes in the anticipated exchange ratio or dilution, or speculation regarding whether and when the Transaction will be completed. In addition, because the Transaction represents a fundamental change in our business strategy, from our current business to the nuclear energy business conducted by Nuclea, our stock price may reflect substantial uncertainty regarding the value, prospects, and risk profile of the combined company, which may differ significantly from the market's prior valuation of the Company as a standalone company.

Business combination transactions of this type are sometimes subject to lawsuits filed by stockholders challenging the adequacy of disclosure, the process leading to the Transaction, or the fairness of its terms, including the exchange ratio, the Nasdaq Cap mechanics, or the compensation arrangements for departing officers. Such litigation, if it occurs, could result in significant costs to the Company, divert management's attention from our business and the pending Transaction, and could delay or prevent Closing or Completion, regardless of the outcome of any such litigation.

Moving forward, funding permitting, we plan to purchase up to $100 million to purchase or otherwise acquire Solana and for the establishment of cryptocurrency treasury operations. Digital assets generally are highly volatile assets. In addition, digital assets do not pay interest or other returns and so the ability to generate a return on investment from the net proceeds of any capital raises will depend on whether there is appreciation in the value of digital assets following our purchases of digital assets with the net proceeds from such capital raises. Future fluctuations in digital asset trading prices may result in our converting digital assets into cash with a value substantially below what we paid for such digital assets.

Pursuant to the December 13, 2024, Contribution Agreement, the Company contributed substantially all of its assets, including ownership of: (a) its 98% ownership of MangoRx Mexico S.A. de C.V., a Mexican Stock Company; and (b) its 100% ownership of MangoRx UK Limited, a company incorporated under the laws of the United Kingdom, to Mango & Peaches, in order to restructure the ownership and operations of the Company, better segregate such operations and liabilities and provided for the issuance of a portion of the capital of Mango & Peaches to Mr. Jacob Cohen, the Chief Executive Officer of the Company, as additional consideration to Mr. Cohen. In consideration for the transfer of the assets, the Company received 4,999,999 shares of Mango & Peaches' common stock, bringing its ownership to 5,000,000 shares of common stock of Mango & Peaches upon the closing of the Contribution Agreement. Pursuant to the Contribution Agreement, Mango & Peaches assumed all of the liabilities of the Company relating to the Contributed Assets contributed, but none of the other liabilities of the Company and the Company agreed to indemnify Mango & Peaches against any damages relating to a breach of any representation or warranty of the Company in the Contribution Agreement, or any claim relating to the Contributed Assets, before the Contribution Effective Date; and Mango & Peaches agreed to indemnify the Company against any damages relating to a breach of any representation or warranty of Mango & Peaches in the Contribution Agreement, or any claim relating to the Contributed Assets, after the Contribution Effective Date. The Contribution Agreement and the contribution and assumption provided for therein was effective December 15, 2024. The Mango & Peaches Series A Designation provides for the Series A Super Majority Voting Preferred Stock of Mango & Peaches to have the following rights: No dividend, liquidation, redemption or conversion rights; voting rights providing that for so long as any shares of Series A Super Majority Voting Preferred Stock remain issued and outstanding, the holders thereof, voting separately as a class, have the right to vote on all shareholder matters (including, but not limited to at every meeting of the stockholders of Mango & Peaches and upon any action taken by stockholders of Mango & Peaches with or without a meeting) equal to fifty-one percent (51%) of the total vote (the "Total Series A Vote" and the "Voting Rights"), and that so long as Series A Super Majority Voting Preferred Stock is outstanding, Mango & Peaches shall not, without the affirmative vote of the holders of at least 66-2/3% of all outstanding shares of Series A Super Majority Voting Preferred Stock, voting separately as a class (i) amend, alter or repeal any provision of the Certificate of Formation or the Bylaws of Mango & Peaches so as to adversely affect the designations, preferences, limitations and relative rights of the Series A Super Majority Voting Preferred Stock, (ii) effect any reclassification of the Series A Super Majority Voting Preferred Stock, (iii) designate any additional series of preferred stock, the designation of which adversely effects the rights, privileges, preferences or limitations of the Series A Super Majority Voting Preferred Stock; or (iv) amend, alter or repeal any provision of the Series A Designation (except in connection with certain non-material technical amendments). Additionally, subject to the rights of series of preferred stock which may from time to time come into existence, so long as any shares of Series A Super Majority Voting Preferred Stock are outstanding, Mango & Peaches cannot without first obtaining the approval (by written consent, as provided by law) of the holders of a majority of the then outstanding shares of Series A Super Majority Voting Preferred Stock, voting together as a class: (a) issue any additional shares of Series A Super Majority Voting Preferred Stock after the original issuance of shares of Series A Super Majority Voting Preferred Stock; (b) increase or decrease the total number of authorized or designated shares of Series A Super Majority Voting Preferred Stock; (c) effect an exchange, reclassification, or cancellation of all or a part of the Series A Super Majority Voting Preferred Stock; (d) effect an exchange, or create a right of exchange, of all or part of the shares of another class of shares into shares of Series A Super Majority Voting Preferred Stock; or (e) alter or change the rights, preferences or privileges of the shares of Series A Super Majority Voting Preferred Stock so as to affect adversely the shares of such series, including the rights set forth in the Series A Designation. On May 13, 2025, Mango & Peaches issued 4,892,906 shares of its common stock and 100 shares of its Series A Super Majority Voting Preferred Stock (collectively, the "M&P Stock") to Jacob Cohen, the Chief Executive Officer and Chairman of the Company and the Chief Executive Officer of Mango & Peaches, which was due pursuant to the terms of Mr. Cohen's employment agreement with the Company, as amended. Following the issuance of the M&P Stock, Mr. Cohen owns 49% of the outstanding common stock of Mango & Peaches and separately has the right to vote fifty-one percent (51%) of the total vote on all Mango & Peaches shareholder matters, voting separately as a class, pursuant to his ownership of the Series A Super Majority Voting Preferred Stock, giving him 75.2% voting control over Mango & Peaches, which provide him the right to approve any merger or consolidation of Mango & Peaches and/or any amendment to the Certificate of Formation of Mango & Peaches. Additionally, Mr. Cohen, pursuant to the terms of his Employment Agreement, as amended, discussed in greater detail under "Item 11. Executive Compensation"-"Employment and Consulting Agreements"- "Jacob D. Cohen, Chief Executive Officer", has the right to earn up to $10 million bonus (the "Mango & Peaches Bonus"), which is convertible at his option, at a conversion price of $0.50 per share, into up to 20,000,000 shares of common stock of Mango & Peaches. In the event the full amount of the Mango & Peaches Bonus, vests to Mr. Cohen and he converts such entire Mango & Peaches Bonus into 20,000,000 Mango & Peaches Bonus Shares pursuant to the conversion terms thereof, he will own 81.3% of Mango & Peaches outstanding common stock (not factoring in any other issuances), and 92.8% of Mango & Peaches' outstanding voting stock (as a result of the ownership of the Mango & Peaches Series A Shares and not factoring in any future issuances). There is no assurance that any of the milestones will be reached by Mango & Peaches and/or that any portion of the Mango & Peaches Bonus will vest to Mr. Cohen or that any Mango & Peaches Bonus Shares will be issued to Mr. Cohen. As a result, Mr. Cohen controls the Mango & Peaches shareholder vote. Consequently, he has the ability to influence matters affecting Mango & Peaches and therefore exercises control in determining the outcome of all corporate transactions or other matters involving Mango & Peaches, including (i) making amendments to Mango & Peaches' certificate of formation; (ii) whether to issue additional shares of common stock and preferred stock of Mango & Peaches, including to himself; (iii) employment decisions, including compensation arrangements; (iv) whether to enter into material transactions with related parties; (v) election of directors; and (vi) any merger or significant corporate transactions, including with himself or other related parties. Additionally, it will be difficult if not impossible for investors to remove Mr. Cohen as a director of Mango & Peaches, which will mean he will remain in control of who serves as officers of the Company as well as whether any changes are made in the Board of Directors. Because Mr. Cohen significantly influences the vote on all Mango & Peaches shareholder matters, investors may find it difficult to replace our management if they disagree with the way our business is being operated. The interests of Mr. Cohen may not coincide with our interests or the interests of other shareholders of the Company or Mango & Peaches. In addition, this concentration of ownership might adversely affect the market price of our common stock by: (1) delaying, deferring or preventing a change of control of our Company or Mango & Peaches; (2) impeding a merger, consolidation, takeover or other business combination involving our Company or Mango & Peaches; or (3) discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of our Company or Mango & Peaches.

Our limited operating history in the health and wellness industry may hinder our ability to successfully meet our objectives and makes it difficult for potential investors to evaluate our business or prospective operations. As an early-stage company, we are subject to all the risks inherent in the financing, expenditures, operations, regulatory compliance, complications and delays inherent in a new business. Accordingly, our business and success face risks from uncertainties faced by developing companies in a competitive environment. The likelihood of our success must be considered in light of the problems, expenses, difficulties, regulatory challenges, complications and delays frequently encountered in connection with the formation of a new business, the development of a new strategy and the competitive environment in which we operate. There can be no assurance that our efforts will be successful or that we will ultimately be able to attain profitability. Additionally, our industry segment is relatively new and constantly evolving. As a result, there is a lack of available information with which to forecast industry trends or patterns. There is no assurance that sustainable industry trends or preferences will develop that will lead to predictable growth or earnings forecasts for individual companies or the industry segment as a whole. We are also unable to determine what impact future governmental regulation may have on trends and preferences or patterns within our industry segment.

Our Certificate of Formation, Bylaws and Texas law provide for us to indemnify and hold harmless, to the fullest extent permitted by applicable law, each person who is or was made a party or is threatened to be made a party to or is otherwise involved in any threatened, pending or completed action, suit or proceeding by reason of the fact that he or she is or was a director or officer of the Company or, while a director or officer of the Company, is or was serving at the request of the Company as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, other enterprise or nonprofit entity, including service with respect to an employee benefit plan. Our Certificate of Formation also provides that the personal liability of our directors is eliminated to the fullest extent permitted by the Texas Business Organizations Code, as such may be amended or supplemented. These indemnification obligations and limitations of liability may result in a major cost to us and hurt the interests of our shareholders because corporate resources may be expended for the benefit of officers or directors. We have been advised that, in the opinion of the SEC, indemnification for liabilities arising under federal securities laws is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification for liabilities arising under federal securities laws, other than the payment by us of expenses incurred or paid by a director, officer or controlling person in the successful defense of any action, suit or proceeding, is asserted by a director, officer or controlling person in connection with our activities, we will (unless in the opinion of our counsel, the matter has been settled by controlling precedent) submit to a court of appropriate jurisdiction, the question whether indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. The legal process relating to this matter if it were to occur is likely to be very costly and may result in us receiving negative publicity, either of which factors is likely to materially reduce the market and price for our shares.

We have 10,000,000 shares of preferred stock authorized, of which 6,000 shares have been designated as Series B Convertible Preferred Stock, discussed in greater detail under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Funding Arrangements" and 6,250,000 shares have been designated as Series C Preferred Stock, discussed in greater detail under "Item 1. Business-Material Agreements-Patent Purchase Agreements-Intramont Technologies", which are also discussed in greater detail below under "Risks Related to our Preferred Stock". Additional shares of our preferred stock may be issued from time to time in one or more series, each of which shall have a distinctive designation or title as shall be determined by our Board of Directors prior to the issuance of any shares thereof. The preferred stock shall have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof as adopted by the Board of Directors. Because the Board of Directors is able to designate the powers and preferences of the preferred stock without the vote of a majority of our shareholders, our shareholders will have no control over what designations and preferences our preferred stock will have. The currently outstanding preferred stock or issuance of additional shares of preferred stock or the rights associated therewith, could cause substantial dilution to our existing shareholders. Additionally, the dilutive effect of any preferred stock which we have or may issue may be exacerbated given the fact that such preferred stock may have voting rights and/or other rights or preferences which could provide the preferred shareholders with substantial voting control over us and/or give those holders the power to prevent or cause a change in control, even if that change in control might benefit our shareholders. As a result, the issuance of shares of preferred stock may cause the value of our securities to decrease.

Our Certificate of Formation, Bylaws and Texas law contain provisions that may discourage, delay or prevent a merger, acquisition or other change in control that shareholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares of our common stock. These provisions may also prevent or delay attempts by our shareholders to replace or remove our management. Our corporate governance documents include provisions: - requiring advance notice of shareholder proposals for business to be conducted at meetings of our shareholders and for nominations of candidates for election to our Board of Directors;         - authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock; and         - providing indemnification to, our directors and officers. The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.

Our Series B Preferred Stock includes a liquidation preference of $1,100 per share, which may be increased from time to time pursuant to the terms of such Series B Preferred Stock (currently totaling an aggregate of $55,000 for all 50 outstanding shares of Series B Preferred Stock) which is payable upon liquidation, before any distribution to our common stock shareholders. Our Series C Preferred Stock includes a liquidation preference of $20 per share, which may be increased from time to time pursuant to the terms of such Series C Preferred Stock (currently totaling an aggregate of $19,600,000 for all outstanding shares of Series C Preferred Stock) which is payable upon liquidation, before any distribution to our common stock shareholders, but after distributions to our Series B Preferred Stock holders. As a result, if we were to dissolve, liquidate or sell our assets, the holders of our Series B Preferred Stock would have the right to receive up to the first approximately $55,000in proceeds from any such transaction and holders of our Series C Preferred Stock would have the right to receive up to approximately $19.6 million of the remaining proceeds from any such transaction. The payment of the liquidation preferences could result in common stock shareholders not receiving any consideration if we were to liquidate, dissolve or wind up, either voluntarily or involuntarily. Additionally, the existence of the liquidation preferences may reduce the value of our common stock, make it harder for us to sell shares of common stock in offerings in the future, or prevent or delay a change of control. Because our Board of Directors is entitled to designate the powers and preferences of the preferred stock without a vote of our shareholders, subject to Nasdaq rules and regulations, our shareholders will have no control over what designations and preferences our future preferred stock, if any, will have.

Each holder of Series B Preferred Stock may, at its option, convert its shares of Series B Preferred Stock into that number of shares of common stock equal to the Stated Value of such share of Series B Preferred Stock (initially $1,100 per share), divided by $1.50. Each holder of Series C Preferred Stock may, at its option, convert its shares of Series C Preferred Stock into that number of shares of common stock equal to the Stated Value of such share of Series C Preferred Stock, divided by the conversion price of $150.00 per share (i.e., initially a 2-for-1 conversion ratio), subject to adjustment for stock splits and stock dividends, with any fractional shares rounded up to the nearest whole share. The issuance of common stock upon conversion of the Series B Preferred Stock and Series C Preferred Stock will result in immediate and substantial dilution to the interests of other stockholders since the holders of the Series B Preferred Stock and Series C Preferred Stock may ultimately receive and sell the full amount of shares issuable in connection with the conversion of such Series B Preferred Stock and Series C Preferred Stock. Although the Series B Preferred Stock, and Series C Preferred Stock may not be converted by the holders thereof if such conversion would cause such holder to own more than 4.99% (4.999% in the case of the Series C Preferred Stock) of our outstanding common stock (which may be increased to 9.999% with at least 61 days prior written notice on a per shareholder basis for holders of our Series C Preferred Stock), these restrictions do not prevent such holders from converting some of their holdings, selling those shares, and then converting the rest of their holdings, while still staying below the 4.99%/9.999% limit. In this way, the holders of the Series B Preferred Stock and Series C Preferred Stock could sell more than these limits while never actually holding more shares than the limits allow. If the holders of the Series B Preferred Stock or Series C Preferred Stock choose to do this, it will cause substantial dilution to the then holders of our common stock. The availability of shares of common stock upon conversion of the Series B Preferred Stock and Series C Preferred Stock for public resale, as well as any actual resales of these shares, could adversely affect the trading price of our common stock. We cannot predict the size of future issuances of our common stock upon the conversion of our Series B Preferred Stock and Series C Preferred Stock and/or upon exercise of warrants, or the effect, if any, that future issuances and sales of shares of our common stock may have on the market price of our common stock. Sales or distributions of substantial amounts of our common stock upon the conversion of our Series B Preferred Stock and Series C Preferred Stock and upon exercise of warrants, or the perception that such sales could occur, may cause the market price of our common stock to decline. In addition, the common stock issuable upon the conversion of our Series B Preferred Stock and Series C Preferred Stock and upon exercise of warrants may represent overhang that may also adversely affect the market price of our common stock. Overhang occurs when there is a greater supply of a company's stock in the market than there is demand for that stock. When this happens the price of our stock will decrease, and any additional shares which stockholders attempt to sell in the market will only further decrease the share price. If the share volume of our common stock cannot absorb shares sold by holders of the Series B Preferred Stock and Series C Preferred Stock and warrants, then the value of our common stock will likely decrease. We have filed a registration statement to permit the public resale of certain of the shares of common stock that may be issued upon the conversion of the Series B Preferred Stock and Series C Preferred Stock and the exercise of certain of our warrants. The influx of those shares into the public market could potentially have a negative effect on the trading price of our common stock.

Wherever possible, our Board of Directors will attempt to use non-cash consideration to satisfy obligations. In many instances, we believe that the non-cash consideration will consist of restricted shares of our common stock or where shares are to be issued to our officers, directors and applicable consultants. Our Board of Directors has authority, without action or vote of the stockholders, but subject to Nasdaq rules and regulations (which generally require stockholder approval for any transactions which would result in the issuance of more than 20% of our then outstanding shares of common stock or voting rights representing over 20% of our then outstanding shares of stock), to issue all or part of the authorized but unissued shares of common stock. In addition, we may attempt to raise capital by selling shares of our common stock, possibly at a discount to market. These actions will result in dilution of the ownership interests of existing stockholders, which may further dilute common stock book value, and that dilution may be material. Such issuances may also serve to enhance existing management's ability to maintain control of the Company because the shares may be issued to parties or entities committed to supporting existing management.

The market price of our common stock may be highly volatile and subject to wide fluctuations. Our financial performance, government regulatory action, tax laws, interest rates, and market conditions in general could have a significant impact on the future market price of our common stock. Some of the factors that could negatively affect or result in fluctuations in the market price of our common stock include: - actual or anticipated variations in our quarterly operating results;         - changes in market valuations of similar companies;         - adverse market reaction to the level of our indebtedness;- additions or departures of key personnel;         - actions by shareholders;         - speculation in the press or investment community;         - general market, economic, and political conditions, including an economic slowdown or dislocation in the global credit markets;         - announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations, or capital commitments;         - general economic and market conditions;         - disputes or other developments related to our intellectual property or other proprietary rights, including litigation;         - our operating performance and the performance of other similar companies;         - changes in accounting principles; and         - passage of legislation or other regulatory developments that adversely affect us or our industry.

The market price of our common stock could be subject to wide fluctuations in response to, among other things, the risk factors described in this Report, and other factors beyond our control, such as fluctuations in the valuation of companies perceived by investors to be comparable to us For example, since our common stock began trading on the Nasdaq Capital Market in connection with our IPO on March 20, 2023, the trading price of our common stock has traded as high as $65.55 and as low as [$0.3401] per share. Furthermore, the stock markets have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general economic, political, and market conditions, such as recessions, interest rate changes or international currency fluctuations, may negatively affect the market price of our common stock. In the past, many companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could result in substantial costs and divert our management's attention from other business concerns, which could seriously harm our business.

Our common stock is currently listed on Nasdaq under the symbol "MGRX". There is no guarantee that we will be able to maintain our listing on Nasdaq for any period of time. Among the conditions required for continued listing on Nasdaq, Nasdaq requires us to maintain at least $2.5 million in stockholders' equity, $35 million in market value of listed securities, or $500,000 in net income over the prior two years or two of the prior three years, to have a majority of independent directors (subject to certain "controlled company" exemptions), to comply with certain audit committee requirements, and to maintain a stock price over $1.00 per share. On February 4, 2026, the Company received written notice (the "Notification Letter") from the Listing Qualifications Department of The Nasdaq Stock Market LLC ("Nasdaq") notifying the Company that it is not in compliance with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of thirty (30) consecutive business days (the "Minimum Bid Price Requirement"). The Notification Letter did not impact the Company's listing of its common stock on the Nasdaq Capital Market at that time. The Notification Letter stated that the Company had 180 calendar days or until August 3, 2026. To regain compliance, the bid price of the Company's common stock must have a closing bid price of at least $1.00 per share for a minimum of 10 consecutive business days. Nasdaq Listing Rule 5810(c)(3)(A)(iv) provides that if a listed company's security fails to meet the Minimum Bid Price Requirement and (a) the Company has effected a reverse stock split over the prior one-year period; or (b) has effected one or more reverse stock splits over the prior two-year period with a cumulative ratio of 250 shares or more to one, then the Company is not eligible for a compliance period to address the Minimum Bid Price Requirement and will be automatically suspended from Nasdaq, subject to rights to appeal the delisting to a hearings panel. This restriction applies even if the listed company was in compliance with the Minimum Bid Price Requirement at the time of its prior reverse stock split. As a result of the above, if a listed company effects a reverse stock split but its security subsequently falls out of compliance with the Minimum Bid Price Requirement within a one-year period or has affected reverse stock splits with a cumulative ratio of 1-to-250 or more over the prior two year period, it will be issued a delisting determination rather than being granted a compliance period. As discussed above under "Reverse Stock Split", effective on October 8, 2024 at 12:01 a.m. Eastern Time, we affected a 1-for 15 reverse stock split of our then outstanding common stock (the "October 2024 Reverse Stock Split"), to cure our non-compliance with the Minimum Bid Price Requirement. As a result, if we fail to meet the Minimum Bid Price Requirement more than one year, but before two years after the effective date of the October 2024 Reverse Stock Split (i.e., before October 8, 2026), and the cumulative ratio of the October 2024 Reverse Stock Split and any future reverse stock split is greater than 1-to-250, Nasdaq will issue a delisting notification and our common stock will be automatically suspended from trading on Nasdaq, subject to our right to appeal the delisting determination to a hearings panel, provided that our common stock will trade in the over-the-counter (OTC) market while the appeal is pending. Separately, prior to October 8, 2026, we will be limited to a reverse stock split ratio of no more than 1-for-16 2/3rds (which together with the October 2024 Reverse Stock Split ratio of 1-for-15, would not exceed 1-for-250, which may limit our ability to remedy our failure to regain compliance with the Minimum Bid Price Requirement as discussed above. Separately, Nasdaq Listing Rule 5810(c)(3)(A) provides that if a listed company takes a corporate action, such as a reverse stock split, to regain compliance with the Minimum Bid Price Requirement, and that action results in the listed company falling below the threshold for another Nasdaq listing requirement (e.g., the Nasdaq Capital Market continued listing requirement that a listed company have at least 500,000 publicly held shares), the listed company will not be granted a compliance period for the new deficiency. In that case, the listed company must cure both deficiencies within the compliance period(s) applicable to the Minimum Bid Price Requirement deficiency. Finally, pursuant to Nasdaq Listing Rule 5810(c)(3)(A)(iii), if our common stock has a closing bid price of $0.10 or less for 10 consecutive business days during any compliance period imposed as a result of noncompliance with the Minimum Bid Price Requirement, Nasdaq will issue a delisting determination; however, unlike the process as discussed above for the determination of excessive reverse stock splits, suspension of trading of our common stock will generally be stayed while any appeal is pending. As discussed above, we are not currently in compliance with the Minimum Bid Price Requirement and our stockholders' equity has in the past not been above Nasdaq's $2.5 million minimum, we may not generate over $500,000 of yearly net income moving forward, we may not maintain $35 million in market value of listed securities, we may not be able to maintain independent directors (to the extent required), and as discussed above, we have in the past not maintained a stock price over $1.00 per share. Nasdaq's determination that we fail to meet the continued listing standards of Nasdaq or our failure to comply with the Minimum Bid Price Requirement in the future may result in our securities being delisted from Nasdaq. The absence of such a listing on Nasdaq may adversely affect the acceptance of our common stock as currency or the value accorded by other parties. Further, if we are delisted, we would also incur additional costs under state blue sky laws in connection with any sales of our securities. These requirements could severely limit the market liquidity of our common stock and the ability of our stockholders to sell our common stock in the secondary market. If our common stock is delisted by Nasdaq, our common stock may be eligible to trade on an over-the-counter quotation system, such as the OTCQB Market or the OTCID Market, where an investor may find it more difficult to sell our securities or obtain accurate quotations as to the market value of our securities. In the event our common stock is delisted from Nasdaq in the future, we may not be able to list our common stock on another national securities exchange or obtain quotation on an over-the counter quotation system. A delisting of our common stock from the Nasdaq could adversely affect our business, financial condition and results of operations and our ability to attract new investors, reduce the price at which our common stock trades, decrease, investors' ability to make transactions in our common stock, decrease the liquidity of our outstanding shares, increase the transaction costs inherent in trading such shares, and reduce our flexibility to raise additional capital without overall negative effects for our stockholders.

The trading market for our common stock relies in part on the research and reports that industry or financial analysts publish about us, our business, our markets and our competitors. We do not control these analysts. If securities analysts do not cover our common stock, the lack of research coverage may adversely affect the market price of our common stock. Furthermore, if one or more of the analysts who do cover us downgrade our stock or if those analysts issue other unfavorable commentary about us or our business, our stock price would likely decline. If one or more of these analysts cease coverage of us or fails to regularly publish reports on us, we could lose visibility in the market and interest in our stock could decrease, which in turn could cause our stock price or trading volume to decline and may also impair our ability to expand our business with existing customers and attract new customers.

We currently have outstanding warrants to purchase 2,928,401 shares of common stock with a weighted average exercise price of $1.98 per share. The exercise price of a total of 544,857 of those warrants, with an exercise price of $1.50 per share have anti-dilutive rights, such that if the Company or any subsidiary at any time while the warrants are outstanding, shall sell, enter into an agreement to sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any offer, sale, grant or any option to purchase or other disposition) any common stock or common stock equivalents, at an effective price per share less than the exercise price of the warrants then in effect (such lower price, the "Base Share Price" and such issuances collectively, a "Dilutive Issuance") then simultaneously with the consummation (or, if earlier, the announcement) of each Dilutive Issuance the exercise price shall be reduced and only reduced to equal the Base Share Price. No adjustment however is to be made for certain customary exempt issuances. The warrants also include customary buy-in rights in the event the Company fails to timely deliver the shares of common stock issuable upon exercise thereof. Anti-dilutive rights of the warrants may cause the exercise price of the warrants to decrease significantly, may result in significant dilution to existing stockholders, and may prevent us from completing otherwise accretive transactions.

The issuance of shares of common stock pursuant to the terms of an April 5, 2024, Equity Purchase Agreement (the "ELOC"), discussed in greater below under "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Funding Arrangements", will have a dilutive effect on the Company's existing stockholders, including, over time, the voting power of the existing stockholders. The issuance of shares of common stock pursuant to the terms of the ELOC (pursuant to which we are able to sell up to $25 million shares of common stock, subject to certain requirements, of which $1,787,580 of gross proceeds or 666,667 total shares of common stock have been sold to date) will also dilute the ownership interests of our existing stockholders. The availability of these shares for public resale, as well as any actual resales of these shares, could adversely affect the trading price of our common stock. We cannot predict the size of future issuances of our common stock pursuant to the terms of the ELOC, or the effect, if any, that future issuances and sales of shares of our common stock may have on the market price of our common stock. Sales or distributions of substantial amounts of our common stock pursuant to the terms of the ELOC, or the perception that such sales could occur, may cause the market price of our common stock to decline. In addition, the common stock issuable pursuant to the terms of the ELOC may represent overhang that may also adversely affect the market price of our common stock. Overhang occurs when there is a greater supply of a company's stock in the market than there is demand for that stock. When this happens the price of our stock will decrease, and any additional shares which stockholders attempt to sell in the market will only further decrease the share price. If the share volume of our common stock cannot absorb shares sold by the Purchaser, then the value of our common stock will likely decrease. We have filed a registration statement to permit the public resale of the shares of common stock issuable pursuant to the terms of the ELOC. The influx of those shares into the public market could potentially have a negative effect on the trading price of our common stock. The shares of common stock to be sold pursuant to the terms of the ELOC are to be sold based on a discount to fluctuating market prices and as a result, we are unable to accurately forecast or predict with certainty the total amount of shares of Company common stock that may be issued to the Purchaser under the ELOC; however, we expect such sales, if any to cause significant dilution to existing shareholders.

Our Board of Directors is authorized, without your approval, to cause us to issue additional shares of our common stock or to raise capital through the creation and issuance of additional preferred stock, other debt securities convertible into common stock, options, warrants and other rights, on terms and for consideration as our Board of Directors in its sole discretion may determine. Sales of substantial amounts of our common stock or of preferred stock could cause the market price of our common stock to decrease significantly. We cannot predict the effect, if any, of future sales of our common stock, or the availability of our common stock for future sales, on the value of our common stock. Sales of substantial amounts of our common stock by large shareholders, or the perception that such sales could occur, may adversely affect the market price of our common stock.

As of the date of this Report, we had a total of 2,928,401 warrants outstanding with a weighted average exercise price of $1.98 per share and term ranging from August 16, 2027 through May 26, 2030. If the holders of the warrants choose to exercise the warrants, it may cause significant dilution to the then holders of our common stock. If exercises of the warrants and sales of such shares issuable upon exercise thereof take place, the price of our common stock may decline. In addition, the common stock issuable upon exercise of the warrants may represent overhang that may also adversely affect the market price of our common stock. Overhang occurs when there is a greater supply of a company's stock in the market than there is demand for that stock. When this happens the price of our stock will decrease, and any additional shares which shareholders attempt to sell in the market will only further decrease the share price. If the share volume of our common stock cannot absorb shares sold by the warrant holders, then the value of our common stock will likely decrease.

We expect that significant additional capital will be needed to continue our planned operations, including increased marketing, hiring new personnel, commercializing our products, and continuing activities as an operating public company. To the extent we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. We may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities in more than one transaction, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights superior to our existing stockholders. Furthermore, sales of a substantial number of our shares of common stock in the public markets or the perception that such sales could occur, could depress the market price of our common stock and impair our ability to raise capital through the sale of additional equity securities.

We cannot predict whether future issuances or sales of our common stock or the availability of shares for resale in the open market will decrease the per share trading price of our common stock. The issuance of a substantial number of shares of our common stock in the public market or the perception that such issuances might occur, could adversely affect the per share trading price of our common stock.