NOTE 10. SUBSEQUENT EVENTS

On April 9, 2026, the Company issued a promissory note of $150,000 to Arthur Sames, the Company’s CEO, for a personal loan to the Company for the Company’s payment of NASDAQ listing fees, audit expenses relating to the Company’s Form 10-K filings, and related regulatory compliance costs. The payment under the note is due April 10, 2027 with finance charges of 18%.

On May 1, 2026, the Company received a letter from the Nasdaq Stock Market, LLC (the “Nasdaq”) stating that the Company was not in compliance with Nasdaq’s continued listing standards under the Rules of the Nasdaq Stock Market, specifically Listing Rule 5550(b)(1) which requires the Company to have a minimum shareholders’ equity of $2.5 million. The Company reported $144 in stockholders’ equity in its Form 10-K for the period ended December 31, 2025, filed April 30, 2026. The Nasdaq letter granted the Company 45 days, or until June 15, 2026, to provide a plan to regain compliance with the minimum stockholders’ equity of $2.5 million for continued listing. If the plan is accepted by Nasdaq, the company may be extended to 180 calendar days from May 1, 2026, to evidence compliance. The Company intends to submit such a plan to Nasdaq. If Nasdaq does not accept the Company’s plan, or if it accepts the plan but the Company does not then regain compliance by the 180-day deadline, Nasdaq will begin delisting procedures, which the Company may appeal to a Nasdaq Hearings Panel.

On May 13, 2026, the Company entered into a Revolving Loan Agreement (the “Stone Loan Agreement”) with Stone Brothers Capital (the “Lender”). The Stone Loan Agreement provides for a revolving credit facility under which the Lender may, in its sole discretion upon the request of the Company, make loans (the “Loans”) to the Company, in an aggregate principal amount at any one time outstanding not to exceed $2,500,000. Each Loan shall bear interest accruing at an annual rate of 12%.

On May 14, 2026, Keith Albrecht and Katherine Koster, two of the Company’s independent directors, resigned as members of the Board of the Company, effective May 19, 2026. On May 18, 2026, Keith Albrecht rescinded his resignation as a director, and the Board approved the rescinding of Keith Albrecht’s resignation, effective immediately.

On May 18, 2026, the Company sent a written termination notice to the Lender to terminate the Loan Agreement. The termination is effective after five business days. The Lender has not made any loans to the Company as of May 18, 2026.

Headquarters and Warehouse Facilities

On May 11, 2026, the Company entered into a Settlement Agreement with the landlord for each of its headquarters facility and its warehouse facility that became effective as of May 7, 2026. The Settlement Agreement addressed the matter of delinquent rents and an expired lease. Regarding the Company’s headquarters facility, the Company agreed to make immediate payment of $400 towards past due rents, and the landlord agreed to cease eviction procedures. The landlord also agreed to extend the property lease commencing June 1, 2026, to April 1, 2027, and reduce the monthly rent from $84 to $55. Regarding the warehouse facility, the Company agreed to vacate the facility by August 31, 2026 and leave the premises in the condition required by the relevant lease agreement; in exchange, the landlord agreed to waive rents for the months of June, July, and August 2026. Each landlord reserved the right to charge for any waived rents or continue with eviction action should the Company fail to meet the requirements listed in the Settlement Agreement. The Company also may have to pay liquidated damages if it fails to vacate the properties in the event either or both landlords decide to exercise their rights for eviction.

As of May 19, 2026, the Company had not made a payment per the Settlement Agreement, and on May 19, 2026, the landlord for the Company’s headquarters facility evicted the Company from that facility. The headquarters facility is where the Company, among other things, has its offices, conducts design work, and assembles and tests it products. The Company is currently relocating these activities to its warehouse facility. The Company is continuing its operations, but expects there to be disruptions and difficulties with this change. Further, if the landlord for the warehouse facility were to evict the Company from that facility, the Company could have difficulty finding an appropriate location from which to operate its business, which would have a material adverse effect on its operations, financial results and financial condition.

As of the date hereof, the Company is pursuing third-party financing that it would use to pay the landlords and certain other expenses. There is no guarantee that Company will raise sufficient capital to pay the delinquent rent or that the landlord for the headquarters facility would agree to let the Company use that facility if the Company were to pay the rent. It is possible that the Company will be forced to vacate from both facilities, and if that happens, it may have difficulty securing new headquarters, or new manufacturing or warehouse facilities that are adequate. Our production could be significantly delayed, access to our inventory could be impaired, and our operations could halt for a significant period of time. As of March 31, 2026, the Company was delinquent in $858 of rent to these landlords which is included in accounts payable.