Janover Inc

OTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Janover Inc. (“Janover” or the “Company”) was originally formed as Janover Ventures, LLC on November 28, 2018 in the State of Florida as a limited liability company and converted to a corporation, incorporated in the State of Delaware on March 9, 2021. The Company provides a technology platform that connects commercial mortgage and small business borrowers looking for debt to refinance, build, or buy commercial property including apartment buildings to commercial property lenders. These property lenders include traditional banks, credit unions, real estate investment trusts (“REITs”), debt funds, and other financial institutions looking to deploy capital into commercial mortgages. The Company is headquartered in Boca Raton, Florida.

Acquisition of Groundbreaker

On November 17, 2023, the Company, and Groundbreaker Tech Inc., a Delaware corporation and a wholly owned subsidiary of the Company (“Buyer”), simultaneously (i) entered into an Asset Purchase Agreement with Groundbreaker Technologies Inc., a Delaware corporation (“Seller”), and its principal stockholder, pursuant to which the Buyer agreed to acquire substantially all of the assets of the Seller and certain liabilities related to Seller’s business activities (the “Seller’s Business”) and (ii) closed the Seller acquisition. Following the closing of the Seller acquisition, the Purchased Assets are now being held by the Buyer, and the Seller’s Business is being operated by and through the Company. See Note 4 for further detail.

Janover Insurance Group Inc.

On November 27, 2023, the Company formed a wholly-owned subsidiary, Janover Insurance Group Inc. (

“Insurtech”

), a Delaware corporation. With the new Insurtech subsidiary, the Company aims to transform the landscape of commercial property insurance through the application of generative AI and its unique access to data on the commercial property market. The Company has received licensing in certain states and is pursuing licensure in various additional states.

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company sustained net losses of approximately $2,240,711 and $2,196,565 during the nine months ended September 30, 2024, and 2023, respectively, and had cash used in operations of approximately

$2.2 million during the nine months ended September 30, 2024.

Management’s Plans

As of the issuance date of these condensed consolidated financial statements, the Company expects that its cash and cash equivalents of approximately $2.8 million as of September 30, 2024 will be sufficient to fund its operating expenses and capital expenditure requirements for at least one year from the date these financial statements are issued.

Basis of Presentation

The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America ("GAAP").

Unaudited Interim Financial Information

The unaudited interim condensed consolidated financial statements and related notes have been prepared in accordance with U.S. GAAP for interim financial information, within the rules and regulations of the SEC. Certain information and disclosures normally included in the annual consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. The unaudited interim financial statements have been prepared on a basis consistent with the audited financial statements and in the opinion of management, reflect all adjustments, consisting of only normal recurring adjustments, necessary for the fair presentation of the results for the interim periods presented and of the financial condition as of the date of the interim balance sheet. The financial data and the other information disclosed in these notes to the interim financial statements related to the three-month periods are unaudited. Unaudited interim results are not necessarily indicative of the results for the full fiscal year.

The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and the notes thereto for the year ended December 31, 2023 included in the Company’s Form 10-K filed on March 28, 2024.

Principles of Consolidation

These unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All inter-company transactions and balances have been eliminated on consolidation.

Use of Estimates

The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, the valuation of assets acquired and liabilities assumed pursuant to business combinations, contingent consideration, and stock-based compensation. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company generally maintains balances in various operating accounts at financial institutions that management believes to be of high credit quality, in amounts that may exceed federally insured limits. The Company has not experienced any losses related to its cash and cash equivalents and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships. At September 30, 2024 and December 31, 2023, the Company’s cash and cash equivalents were held at accredited financial institutions.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents.

Fair Value Measurements

Certain assets and liabilities of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

The carrying values of the Company’s accounts receivable, prepaid expenses and accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

At September 30, 2024 and December 31, 2023, the Company’s approximately $2.8 million and $5.1 million in cash and cash equivalents of which approximately $1.4 million and $3.8 million were invested in money market funds which are classified within Level 1, all respectively.

Also, as of September 30, 2024 and December 31, 2023, the Company had

$173,000 and $0 in marketable securities, respectively, which were valued with a quoted price in an active market. The securities were classified as a Level 1 financial asset.

The Company’s contingent consideration recorded in connection with the Groundbreaker acquisition (see Note 4) is a Level 3 liability. The liability is valued using a probability weighted analysis of the respective earn out provisions.

Marketable Securities

In August 2024, the Company entered into a contract with a customer whereby the Company received common shares of the customer in exchange for the Company’s services. The equity securities have a readily determinable fair value as sales prices and bid-and-asked quotations are available in the over-the-counter market and publicly reported. The fair value of the marketable securities received was approximately $226,000. The securities are recognized as a Level 1

instrument

.

Under Accounting Standards Codification (“ASC”) 321 and Accounting Standards Update (“ASU”) 2016-01, equity securities are measured at fair value and any changes in fair value are recorded to earnings. During the nine months ended September 30, 2024, the Company recorded a loss on the change in fair value of marketable securities of

$52,000, which was included in other income (expense) in the consolidated statement of operations. As of September 30, 2024, the fair value of the marketable securities was approximately $173,000.

Accounts Receivable

Accounts receivable are derived from services delivered to customers and are stated at their net realizable value. Each month, the Company reviews its receivables on a customer-by-customer basis and evaluates whether an allowance for doubtful accounts is necessary based on any known or perceived collection issues. Any balances that are eventually deemed uncollectible are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. As of September 30, 2024 and December 31, 2023, the Company determined there wasno allowance for doubtful accounts necessary.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation expense is recognized using the straight-line method over the estimated useful life of the asset, which is three (3) to five (5) years for computer and hardware and five (5) to seven (7) years for the Company’s furniture and fixtures. Estimated useful lives are periodically assessed to determine if changes are appropriate. Maintenance and repairs are charged to expense as incurred. When assets are retired or otherwise disposed of, the cost of these assets and related accumulated depreciation or amortization are eliminated from the balance sheets and any resulting gains or losses are included in the statement of operations in the period of disposal.

Intangible Assets

Intangible assets represent various domain names the Company purchased. The Company owns the domain names indefinitely. Costs to renew domains are expensed as incurred. In connection with the Groundbreaker acquisition, the Company identified developed technology and the brand name (see Note 4). The brand name is indefinite lived. The Company amortizes the developed technology intangibles on a straight-line basis over a useful life of three (3) years.

Impairment of Long-Lived Assets

The Company continually monitors events and changes in circumstances that could indicate carrying amounts of long-lived assets may not be recoverable. When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or the fair value less costs to sell.

Acquisitions, Goodwill and Other Intangible Assets

The Company allocates the cost of an acquired business to the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. The excess value of the cost of an acquired business over the estimated fair value of the assets acquired and liabilities assumed is recognized as goodwill. The Company uses a variety of information sources to determine the value of acquired assets and liabilities, including identifiable intangibles.

Goodwill and indefinite-lived intangibles are not amortized but are instead evaluated annually in the fourth quarter for impairment as part of the Company’s annual financial review, or when indicators of a potential impairment are present. The annual test for impairment performed for goodwill can be qualitative or quantitative, taking into consideration certain factors surrounding the fair value of the goodwill including, level by which fair value exceeded carrying value in the prior valuation, as well as macroeconomic factors, industry conditions and actual results at the test date. As of September 30, 2024, and December 31, 2023, the Company determined that no impairment was necessary.

Contingent Consideration

The Company records a contingent consideration liability relating to potential earnout payments based on revenue targets pursuant to the Groundbreaker acquisition. The estimated fair value of the contingent consideration is recorded using significant unobservable measures and other fair value inputs and is therefore classified as a Level 3 financial instrument.

The Company estimates and records the acquisition date fair value of contingent consideration as part of purchase price consideration for acquisitions. Additionally, each reporting period, the Company estimates changes in the fair value of contingent consideration and recognizes any change in fair in the consolidated statement of operations. The estimate of the fair value of contingent consideration requires very subjective assumptions to be made of future operating results, discount rates and probabilities assigned to various potential operating result scenarios. Future revisions to these assumptions could materially change the estimate of the fair value of contingent consideration and, therefore, materially affect the Company’s future financial results. The contingent consideration liability is to be settled with either the payment of cash or the issuance of shares of common stock once contingent provisions set forth in respective acquisition agreements have been achieved. Upon achievement of contingent provisions, respective liabilities are relieved and offset by increases to common stock and additional paid-in capital in the stockholders’ equity section of the Company’s condensed consolidated balance sheets.

Revenue Recognition

The Company accounts for revenue under ASC 606

, Revenue from Contracts with Customers

. The Company determines revenue recognition through the following steps:

Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. As a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less.

The Company derives its revenue primarily from platform fees, which also includes referral and advisory fees. Revenue is recognized when performance obligations under the terms of a contract with a customer are satisfied and the promised services have transferred to the customer. The Company's services are generally transferred to the customer at a point in time, which is when the underlying lending transaction has closed and successfully funded. The Company may act as an agent for both lenders and borrowers.

Groundbreaker, which is a real estate syndication software and investor portal, which primarily derives its revenue from software as a service (“SaaS”) subscription fees, which is recognized over time throughout the term of the customer contract. Our Insurtech subsidiary, derives its revenue from subscriptions pertaining to annual insurance premium commissions, which is recognized at the start of the annual term, when the insurance coverage is bound.

In 2024, the Company started to market its artificial intelligence software technology (“AI Software”), its lender marketplace (“Janover Pro”), and its equity marketplace (“Janover Engage”) as a software as a service. The revenue derived from these SaaS subscriptions will be recognized over the term of the SaaS agreement. As of September 30, 3024, there was approximately $201,000 in deferred revenue, the majority of which is pertaining to these SaaS fees received in advance. The revenue will be recognized in 2024 and 2025.

The disaggregation of revenue is as follows:

Subscription revenue includes SaaS fees from our Groundbreaker subsidiary and annual insurance premium commissions from our Insurtech subsidiary. For the three and nine months ended September 30, 2024, subscription revenue included a one-time setup fee of $

28,000

for a new AI Software SaaS arrangement which was recognized in the quarter ended September 30, 2024.

Cost of Revenues

Cost of revenues consist of direct software and hosting fees associated with Groundbreaker’s SaaS activities.

Advertising and Promotion

Advertising and promotional costs are expensed as incurred. Advertising expenses were approximately $15,000 and $30,000 for the three months ended September 30, 2024, and 2023, and $72,000 and $63,000 for the nine months ended September 30, 2024 and 2023, respectively.

Research and Development Costs

Research and development costs include costs to develop and refine technological processes used to carry out business operations, including personnel costs for website and non-capitalizable software design and development functions and related software and hosting costs. Research and development costs charged to expense were approximately $151,000 and $247,000 for the three months ended September 30, 2024, and 2023, and approximately $479,000 and $443,000 for the nine months ended September 30, 2024 and 2023, respectively.

Concentrations

During the three months ended September 30, 2024, two lenders accounted for 50% of the Company’s revenues. During the three months ended September 30, 2023, t

hree

lenders accounted for 53% of the Company’s revenues.

During the nine months ended September 30, 2024, three lenders accounted for 37% of the Company’s revenues. During the nine months ended September 30, 2023, three lenders accounted for 51% of the Company’s revenues.

The Company may be negatively affected by the loss of one of these lenders.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with ASC 718,

Compensation – Stock Compensation.

The Company measures all stock-based awards granted to employees, directors and non-employee consultants based on the fair value on the date of the grant and recognizes compensation expense for those awards over the requisite service period, which is generally the vesting period of the respective award. For awards with service-based vesting conditions, the Company records the expense for using the straight-line method. For awards with performance-based vesting conditions, the Company records the expense if and when the Company concludes that it is probable that the performance condition will be achieved. The Company classifies stock-based compensation expense in its statement of operations in the same manner in which the award recipient’s costs are classified.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-pricing model. The Company was a private company and lacks company-specific historical and implied volatility information for its stock. Therefore, it estimates its expected stock price volatility based on the historical volatility of publicly traded peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future. Forfeitures are recognized as they occur. Determining the appropriate fair value of stock-based awards requires the input of subjective assumptions.

The assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and management uses different assumptions, stock-based compensation expense could be materially different for future awards.

Net Loss per Share

Net earnings or loss per share is computed by dividing net income or loss by the weighted-average number of common shares outstanding during the period, excluding shares subject to redemption or forfeiture. The Company presents basic and diluted net earnings or loss per share. Diluted net earnings or loss per share reflect the actual weighted average of common shares issued and outstanding during the period, adjusted for potentially dilutive securities outstanding. Potentially dilutive securities are excluded from the computation of the diluted net loss per share if their inclusion would be anti-dilutive. As all potentially dilutive securities are anti-dilutive as of September 30, 2024, and 2023, diluted net loss per share is the same as basic net loss per share. Other potentially dilutive items outstanding as of September 30, 2024, and 2023 are as follows:

Offering Costs

The Company complies with the requirements of ASC 340,

Other Assets and Deferred Costs

, with regards to offering costs. Prior to the completion of an offering, offering costs are capitalized. The deferred offering costs pertaining to future equity obligations are charged to interest expense upon completion of an offering. As of September 30, 2024, the Company had capitalized

$49,000 in deferred offering costs.

Recently Adopted Accounting Pronouncements

Management does not believe that any other recently issued, but not yet effective, accounting standards could have a material effect on the accompanying financial statements. As new accounting pronouncements are issued, the Company will adopt those that are applicable under the circumstances.

Groundbreaker Acquisition

On November 17, 2023, the Company issued 1,051,908 shares of common stock pursuant to the Asset Purchase Agreement for a fair value of approximately $946,000, or $0.90 per share. Additionally, the Company paid the Seller $60,000 in cash consideration.

Additionally, the Company issued the right to three earnout payments

totalling

up to $4,000,000 in value combined (the “Earnout Payments”) which may be paid to Seller, subject to and payable in accordance with earnout thresholds specified in the Purchase Agreement. Each of these Earnout Payments may be comprised of cash and/or shares of common stock (the “Earnout Shares”) and will have to be earned during the period between closing and December 31, 2026. The Seller has the option to receive either cash or shares of common stock. The Earnout Shares will be valued at the greater of the closing price at the time of the closing, or the market price at the time of issuance based on the thirty-day volume weighted average price of the

c

ommon

s

tock prior to the date of the issuance in the applicable measurement year. In accordance with the earn out provisions per the Asset Purchase Agreement, the Company determined an initial fair value of approximately $179,000 based on the fair value of the shares at the acquisition date and probabilities of the respective earnout terms (see Note 5).

Unaudited Pro Forma Financial Information

The following unaudited pro forma financial information presents the Company’s financial results as if the Groundbreaker acquisition had occurred as of January 1, 2023. The unaudited pro forma financial information is not necessarily indicative of what the financial results would have been, had the acquisitions been completed on this date. In addition, the unaudited pro forma financial information is not indicative of, nor does it purport to project, the Company’s future financial results. The following unaudited pro forma financial information includes incremental intangible asset amortization as a result of the acquisition. The pro forma information does not give effect to any estimated and potential cost savings or other operating efficiencies that could result from the

acquisition:

The Company’s financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used for

s

uch measurements were as follows:

Marketable Securities

In August 2024, the Company entered into a contract with a customer whereby the Company received common shares of the customer in exchange for the Company’s services. The equity securities have a readily determinable fair value as sales prices and bid-and-asked quotations are available in the over-the-counter market and publicly reported. The fair value of the marketable securities received was approximately $226,000. The securities are recognized as a Level 1 investment.

Under Accounting Standards Codification (“ASC”) 321 and Accounting Standards Update (“ASU”) 2016-01, equity securities are measured at fair value and any changes in fair value are recorded to earnings. During the nine months ended September 30, 2024, the Company recorded a loss on the change in fair value of marketable securities of

$52,000, which was included in other income (expense) in the consolidated statement of operations. As of September 30, 2024, the fair value of the marketable securities was approximately $173,000.

Contingent Consideration

The Company measured the contingent consideration

liability at fair value based on significant inputs not observable in the market, which causes it to be classified as a Level 3 measurement within the fair value hierarchy. The valuation of the contingent consideration liability uses assumptions and estimates the Company believes would be made by a market participant in making the same valuation. The Company assesses these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained. Changes in the fair value of the contingent consideration liability related to updated assumptions and estimates are recognized within the statements of operations.

The fair value of the contingent consideration liability related to the Company’s business combination is valued using the potential earnout payment schedule per the Groundbreaker Agreement, the underlying revenue projections of the Seller and revenue growth and volatility assumptions. In connection with the business combination, the Company utilized the following inputs for the fair value of the contingent consideration: industry revenue growth of (1.0%), revenue volatility of 148%, a discount rate of 13.9% and a term of 3 years. The Company determined there was no change in fair value as of September 30, 2024, or December 31, 2023.

Future Equity Obligations

The Company measured the future equity obligations at fair value based on significant inputs not observable in the market, which causes it to be classified as a Level 3 measurement within the fair value hierarchy. The valuation of the future equity obligations uses assumptions and estimates the Company believes would be made by a market participant in making the same valuation. The Company assesses these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained. Changes in the fair value of the future equity obligations related to updated assumptions and estimates are recognized within the statements of operations.

The Company utilized a probability-weighted average approach based on the estimated market value of the underlying securities and the potential settlement outcomes of the future equity obligations, including a liquidity event or future equity financing as well as other settlement alternatives. Both the market value of the underlying securities and the probability of the settlement outcomes include unobservable Level 3 inputs.

During the nine months ended September 30, 2024 and 2023, the Company recorded a change in fair value of future equity obligations of $0 and ($119,826), respectively.

Property and Equipment

Depreciation expense was approximately $2,000 and $107 for the three months and approximately $5,000 and $107 for the nine months ended September 30, 2024, and 2023, respectively.

Intangible Assets

The following is a summary of intangible assets:

Amortization expense was approximately $49,000 and $0 for the three months and approximately $168,000 and $0 for the nine months ended September 30, 2024 and 2023, respectively. Amortization expense relates to Groundbreaker’s developed technology, which

is being

amortized over a

three

-year period.

In January 2024, a director exercised 17,595 options for shares of common stock for proceeds of

$1,000. In July 2024, the Company issued 117,647 shares of common stock in exchange for prepaid marketing services at a value of

$90,000. The marketing services contract is over a six

month period ending January 8, 2025. In September 2024, the Company issued 71,441 shares of common stock pursuant to accrued professional fees at a value of

$31,000. In September 2024, the Company repurchased 10,322 shares of common stock for

$5,000.

As of September 30, 2024, the company had approximately $995,000 remaining in its share repurchase plan authorization, which was authorized by the Company’s Board on November 15, 2023.

Janover Inc. 2021 Equity Incentive Plan

In November 2021, the Board of Directors adopted the Company’s 2021 Equity Incentive Plan (the “2021 Plan”), effective as of November 1, 2021. The 2021 Plan provides for the grant of the following types of stock awards: (i) incentive stock options, (ii) non statutory stock options, (iii) stock appreciation rights, (iv) restricted stock awards, (v) restricted stock unit awards and (vi) other stock awards. The 2021 Plan is intended to help the Company secure and retain the services of eligible award recipients, provide incentives for such persons to exert maximum efforts for the success of the Company and any affiliate and provide a means by which the eligible recipients may benefit from increases in value of the common stock. The Board reserved 659,824 shares of common stock issuable upon the grant of awards. Stock options comprise all of the awards granted since the 2021 Plan’s inception.

Janover Inc. 2023 Equity Incentive Plan

In September 2023, the Board of Directors adopted the Company’s 2023 Equity Incentive Plan (the “2023 Plan”), effective as of September 29, 2023. The 2023 Plan provides for the grant of the following types of stock awards: (i) incentive stock options, (ii) stock appreciation rights, (iii) restricted stock awards, (iv) restricted stock unit awards and (v) performance awards. The 2023 Plan is intended to help the Company secure and retain the services of eligible award recipients, provide incentives for such persons to exert maximum efforts for the success of the Company and any affiliate and provide a means by which the eligible recipients may benefit from increases in value of the common stock.

The Board reserved 1,500,000 shares of common stock issuable upon the grant of awards, which includes the 659,824 shares reserved per the 2021 Plan noted above. Stock options and restricted stock units comprise all of the awards granted since the 2023 Plan’s inception. The Company has historically granted stock options that vest between one and four years, with a contractual period of ten years. As of September 30, 2024, there were 669,355 shares in aggregate available for grant under both the 2021 and 2023 Plans.

A summary of information related to stock options for the nine months ended September 30, 2024 is as follows:

The weighted average duration to expiration for outstanding options at September 30, 2024 was 8.84 years.

The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted:

The weighted average grant date fair value of stock options granted during the nine months ended September 30, 2024 was $1.95. There wereno options granted during the nine months ended September 30, 2023. Stock-based compensation expense related to stock options was approximately $28,000 and $114,000 for the three months ended September 30, 2024 and 2023, respectively, and approximately $206,000 and $316,000 for the nine months ended September 30, 2024 and 2023, respectively. Total unrecognized compensation cost related to non-vested stock option awards amounted to approximately $61,000 as of September 30, 2024, which will be recognized over a weighted average period of 1.95 years.

Warrants

In connection with the Company’s IPO, the Company granted an aggregate of 70,625 warrants to purchase common stock to the underwriters at an exercise price of $4.40, which is equal to 110% of the offering price. The warrants may be exercised beginning on January 25, 2024,

and expire

July 24, 2028.

Restricted Stock Units

In September 2023, the Company granted 225,000 restricted stock units (“RSUs”) under the 2021 Plan to the Chief Financial Officer (see Note 9). In July 2024, the Company granted 70,000 RSUs to the independent Board of Directors in accordance with their Board of Director agreements. The RSUs vest over a period of 4 years and 2 years respectively. The Company recorded stock-based compensation expense of approximately $22,000 and $58,000 for the three and nine months ended September 30, 2024. Total unrecognized compensation cost related to non-vested RSUs amounted to approximately $254,000 as of September 30, 2024, which is expected to be recognized over 2.72 years. As of September 30, 2024,238,750 RSUs remained unvested.

Classification

Total stock-based compensation is as follows:

See Note 7 for options exercised by a director.

During the three months ended September 30, 2024, and 2023, the Company incurred $0 and approximately $13,000, and during the nine months ended September 30, 2024 and 2023, the Company incurred $0 and approximately $128,000, respectively, to an entity owned by the Chief Executive Officer for compensation. The amounts are included in general and administrative expenses in the statements of operations.

Contingencies

The Company may be subject to pending legal proceedings and regulatory actions in the ordinary course of business. The results of such proceedings cannot be predicted with certainty, but the Company does not anticipate that the final outcome, if any, arising out of any such matters will have a material adverse effect on its business, financial condition or results of operations.

On November 5, 2024, the Company issued 66,000 stock options to employees.

Management has evaluated subsequent events through

November 7

, 2024, the date the condensed

consolidated

financial statements were available to be issued. Based on this evaluation, no additional material events were identified which require adjustment or disclosure in these condensed

consolidated

financial statements.

I