FiEE, Inc. 10-Q

ITEM 1. FINANCIAL STATEMENTS FIEE, INC. AND SUBSIDIARIES Condensed Consolidated Balance Sheets March 31, 2025 (Unaudited) December 31, 2024 ASSETS Current assets Cash and cash equivalents $ 9,104 $ 30,162 Prepaid expenses and other current assets 94,349 134,757 Total current assets 103,453 164,919 Equipment, net 70,020 119,871 Operating lease right-of-use assets, net 74,545 - Other assets 109,876 22,245 Total assets $ 357,894 $ 307,035 LIABILITIES AND STOCKHOLDERS’ DEFICIT Current liabilities Accounts payable $ 100,766 $ 143,414 Other payables and accrued expenses 332,079 293,613 Current maturities of operating lease liabilities 58,688 - Due to related party 355,170 - Total current liabilities 846,703 437,027 Operating lease liabilities, less current maturities 15,093 - Total liabilities $ 861,796 $ 437,027 Commitments and Contingencies (Note 6) Stockholders’ deficit Preferred Stock, authorized: 3,000,000 shares at $ 0.001 par value; issued and outstanding: 2,305,357 shares at March 31, 2025 and December 31, 2024 1,639,779 1,639,779 Common Stock, authorized: 60,000,000 shares at $ 0.01 par value; issued and outstanding: 3,713,792 shares at March 31, 2025 and December 31, 2024 respectively 490,145 490,145 Additional paid-in capital 94,433,140 94,433,140 Accumulated deficit ( 97,066,966 ) ( 96,693,056 ) Total stockholders’deficit ( 503,902 ) ( 129,992 ) Total liabilities and stockholders’ deficit $ 357,894 $ 307,035 See accompanying notes to the unaudited condensed consolidated financial statements. 1 FIEE, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, 2025 2024 Net sales $ 125 $ 639,893 Cost of goods sold 750 432,634 Gross (loss) margin ( 625 ) 207,259 Operating expenses: Selling and marketing - 21,037 General and administrative 340,496 1,018,516 Research and development 30,000 72,430 Vendor liability forgiveness, net of asset transfers (Note 7) - 2,364,955 Total operating expenses 370,496 3,476,938 Operating loss ( 371,121 ) ( 3,269,679 ) Other expense: Interest (expense), net ( 2,789 ) 62 Total other (expense) ( 2,789 ) 62 Loss before income taxes ( 373,910 ) ( 3,269,617 ) Income tax benefit - 10,662 Net loss $ ( 373,910 ) $ ( 3,258,955 ) Basic and diluted net loss per share $ ( 0.10 ) $ ( 1.18 ) Weighted average common and common equivalent shares: Basic and diluted 3,713,792 2,770,382 See accompanying notes to the unaudited condensed consolidated financial statements. 2 FIEE, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Stockholders’ (Deficit) Equity (Unaudited) For the three months ended March 31, 2025 Preferred Stock Common Stock Additional Paid In Accumulated Stockholders’ Shares Amount Shares Amount Capital Deficit Deficit Balance at December 31, 2024 2,305,357 $ 1,639,779 3,713,792 $ 490,145 $ 94,433,140 $ ( 96,693,056 ) $ ( 129,992 ) Net loss - - - - - ( 373,910 ) ( 373,910 ) Common stock issued - - - Stock-based compensation - - - - - - - Balance at March 31, 2025 2,305,357 $ 1,639,779 3,713,792 $ 490,145 $ 94,433,140 $ ( 97,066,966 ) $ ( 503,902 ) For the three months ended March 31, 2024 Preferred Stock Common Stock Additional Paid In Accumulated Stockholders’ Shares Amount Shares Amount Capital Deficit Deficit Balance at December 31, 2023 - $ - 2,632,809 $ 479,335 $ 92,105,360 $ ( 92,468,778 ) $ 115,917 Net loss - - - - - ( 3,258,955 ) ( 3,258,955 ) Preferred stock issuance 2,000,000 1,358,573 - - - - 1,358,573 Issuance of warrants - - - - 1,441,427 - 1,441,427 Stock-based compensation - - 176,880 1,769 424,512 - 426,281 Balance at March 31, 2024 2,000,000 $ 1,358,573 2,809,689 $ 481,104 $ 93,971,299 $ ( 95,727,733 ) $ 83,243 See accompanying notes to the unaudited condensed consolidated financial statements. 3 FIEE, INC. AND SUBSIDIARIES Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2025 2024 Cash flows used in operating activities: Net loss $ ( 373,910 ) $ ( 3,258,955 ) Adjustments to reconcile net loss to net cash (used in) operating activities: Depreciation and amortization 49,851 103,545 Amortization of right-of-use assets 9,939 13,451 Non-cash interest expense 619 - Stock based compensation - 426,281 Provision for accounts receivable allowances - ( 29,741 ) Vendor liability forgiveness, net of asset transfers - 2,364,954 Changes in operating assets and liabilities: Accounts receivable - 709,383 Inventories - 404,299 Prepaid expenses and other current assets 40,408 6,936 Other assets ( 87,631 ) 15,184 Accounts payable ( 42,648 ) ( 3,157,987 ) Accrued expenses 27,144 ( 66,164 ) Due to related party 5,170 - Operating lease liabilities - ( 13,451 ) Net cash used in operating activities ( 371,058 ) ( 2,482,265 ) Cash flows from investing activities: Net cash used in investing activities - - Cash flows from financing activities: Proceeds from preferred stock issuance - 2,800,000 Proceeds from debt 350,000 - Net cash provided by financing activities 350,000 2,800,000 Net increase (decrease) in cash and cash equivalents ( 21,058 ) 317,735 Cash and cash equivalents - Beginning 30,162 709,322 Cash and cash equivalents - Ending $ 9,104 $ 1,027,057 Supplemental disclosures of cash flow information: Cash paid during the period for: Interest $ - $ - Income taxes $ $ - Cash is reported on the condensed consolidated statements of cash flows as follows: Cash and cash equivalents $ 9,104 $ 1,027,057 Total cash, cash equivalents and restricted cash $ 9,104 $ 1,027,057 See accompanying notes to the unaudited condensed consolidated financial statements. 4 FIEE, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (1) NATURE OF OPERATIONS AND BASIS OF PRESENTATION FiEE, Inc. (formerly, Minim, Inc.) was founded in 1977 as a networking company and pivoted into delivering intelligent software to protect and improve the WiFi connections we depend on to work, learn, and live. FiEE held the exclusive global license to design, manufacture, and sell consumer networking products under the Motorola brand until 2023. Our cable and WiFi products, with an intelligent operating system and bundled mobile app, were sold in leading retailers and e-commerce channels in the United States (“U.S.”). Our AI-driven cloud software platform and applications make network management and security simple for home and business users, as well as the service providers that assist them— leading to higher customer satisfaction and decreased support burden. FiEE, Inc. (formerly, Minim, Inc.) and its wholly owned subsidiaries, FiEE (HK) Limited, which was incorporated in March 2025, MTRLC LLC, and Minim Asia Private Limited, are herein collectively referred to as “FiEE” or the “Company”. The Company delivered intelligent networking products that reliably and securely connected homes and offices around the world. We were the exclusive global license holder to the Motorola brand for home networking hardware until 2023. The Company designed and manufactured products including cable modems, cable modem/routers, mobile broadband modems, wireless routers, Multimedia over Coax (“MoCA”) adapters and mesh home networking devices. Our AI-driven cloud software platform and applications made network management and security simple for home and business users, as well as the service providers that assisted them. We continue to grow and expand our operations a digital service provider focused on integrating artificial intelligence and data analytics into content creation and brand management. We offer a range of SaaS solutions designed to support our clients in developing, managing, and optimizing their digital presence across global platforms, including customized graphic and posts, short videos, and editorial calendars aligned with brand goals. We provide digital content management solutions and brand growth strategies primarily through three service verticals: (1) digital account management, (2) content operations and growth analytics, and (3) community engagement and creator partnerships. These services are structured to support clients at varying stages of digital development, from initial account setup to multi-platform brand promotion. On February 27, 2025, the Company filed with the Secretary of State of the State of Delaware a Certificate of Amendment to its Amended and Restated Certificate of Incorporation (the “Certificate of Amendment”) to change the name of the Company from Minim, Inc. to FiEE, Inc., effective as of February 27, 2025. Basis of Presentation The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with the requirements of the U.S. Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. generally accepted accounting principles (“GAAP”) can be condensed or omitted. In the opinion of management, the financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of the Company’s financial position and operating results. All intercompany balances and transactions have been eliminated in consolidation. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. The results of the Company’s operations can vary during each quarter of the year. Therefore, the results and trends in these interim financial statements may not be the same as those for the full year or any future periods. 5 Liquidity The Company’s operations have historically been financed through the issuance of common stock and preferred stock. Since inception, the Company has incurred significant losses and negative cash flows from operations. During the three months ended March 31, 2025, the Company incurred a net loss of $374 ( 373,910 ) thousand, and used cash from operations of $371 ( 371,058 ) thousand, which was offset by $350 350,000 thousand in cash provided from financing activities. As of March 31, 2025, the Company had an accumulated deficit of $97 97,066,966 million and cash and cash equivalents of $9 9,104 thousand. The Company will continue to monitor its costs in relation to its sales and adjust its cost structure accordingly. Non-binding Letter of Intent On March 25, 2025, the Company entered into a non-binding letter of intent (“LOI”) with Hongyan Sun and Lin Lin (collectively, the “Sellers”), pursuant to the terms of which the Sellers will transfer 100% of their equity interests in Suzhou Yixuntong Network Technology Co., Ltd. (the “Target Company”) to the Company (the “Potential Transaction”) for a purchase price not to exceed $2,000,000. The Company shall make a prepayment of $300,000 to the Sellers upon the signing of the LOI and the prepayment had not been paid as of March 31, 2025. Upon the signing of this LOI, the Target Company and the Sellers (i) have granted the access of the Target Company’s service ports to the Company; (ii) have connected the Company to the Target Company’s Software as a Service platform; (iii) and is working with the Company to ensure it can carry out the Multi-Channel Network business in the second quarter of 2025. The Potential Transaction is subject to the Company’s satisfactory completion of legal, tax, financial, operation, human resources and administration, and environmental due diligence of Target Company and such other due diligence as the Company may deem necessary. The Company and the Sellers expect to complete the Potential Transaction as soon as reasonably practicable, but in no event later than six (6) months after signing of the LOI (the “Long-Stop Date”). The Sellers have agreed that that, from the date of the LOI through the Long-stop Date, or the date when the Company informs the Sellers that the exclusivity expires, whichever occurs earlier, the Sellers shall refrain, directly or indirectly from (i) soliciting offers from third parties to acquire Target Company and/or its business, and from offering Target Company or its business to any person, firm, group or corporation other than the Company; and (ii) entering into any agreement aimed at selling or otherwise transferring Target Company or the business or that may otherwise prevent the parties from consummating the Potential Transaction. The Company expects to announce additional details regarding the Potential Transaction if and when a definitive agreement is executed. No assurances can be made that the Company will successfully negotiate and enter into a definitive agreement with respect to the Potential Transaction, or that the Potential Transaction will be consummated on the terms or timeframe currently contemplated, or at all. Any transaction is subject to board and shareholder holder approval of the Company, regulatory approvals and other customary conditions. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company’s significant accounting policies are disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024. The Company’s significant accounting policies did not change during the three months ended March 31, 2025. Recently Issued Accounting Standards There have been no other new accounting pronouncements that have significance, or potential significance, to the Company’s financial position, results of operations and cash flows . (3) REVENUE AND OTHER CONTRACTS WITH CUSTOMERS Revenue recognized for each distinct performance obligation as control is transferred to the customer. Revenue attributable to hardware products bundled with Software-as-a-Service (“SaaS”) offerings are recognized at the time control of the product transfers to the customer. The transaction price allocated to the SaaS offering is recognized ratably beginning when the customer is expected to activate their account and over a period of one to three years that the Company has estimated based on the expected replacement of the hardware. 6 Transaction Price Allocated to the Remaining Performance Obligations The remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. Unsatisfied and partially unsatisfied performance obligations consist of contract liabilities, in-transit orders with destination terms, and non-cancellable backlog. Non-cancellable backlog includes goods for which customer purchase orders have been accepted, that are scheduled or in the process of being scheduled for shipment, and that are not yet invoiced. Contract costs The Company recognizes the incremental costs of obtaining a contract with a customer if the Company expects the benefit of those costs to be longer than one year. The Company has determined that certain sales commissions meet the requirements to be capitalized, and the Company amortizes these costs on a consistent basis with the pattern of transfer of the goods and services in the contract. Total capitalized costs to obtain a contract were immaterial during the periods presented and are included in other current and long-term assets on our condensed consolidated balance sheets. The Company applies a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period is one year or less. These costs include sales commissions on SaaS contracts with a contract period of one year or less as sales commissions on contract renewals are commensurate with those paid on the initial contract. Contract Balances The Company records accounts receivable when it has an unconditional right to the consideration. The Company did no t have contract liabilities at March 31, 2025 and December 31, 2024. Disaggregation of Revenue The following table sets forth our revenues by distribution channel: Schedule of disaggregation of revenue by distribution channel Three Months Ended March 31, 2025 2024 Retailers $ - $ 638,904 Other online and offline channels 125 989 $ 125 $ 639,893 The following table sets forth our revenues by product: Three Months Ended March 31, 2025 2024 Cable modems & gateways $ - $ 638,804 Other networking products - 1,089 SaaS 125 - $ 125 $ 639,893 7 (4) BALANCE SHEET COMPONENTS Other payables and accrued expenses Other payables and accrued expenses consist of the following: Schedule of accrued expenses March 31, 2025 March 31, 2024 Payroll & related benefits $ 64,344 $ 141,559 Professional fees 116,690 104,947 Board of director fees 12,500 173,000 Sales allowances - 26,905 Sales and use tax 81,708 150,009 Vendor contingent payments (Note 6) 26,905 415,259 Rental Fee and Security Deposit​ 28,557 - Contract liabilities 1,375 - Total other payables and accrued expenses $ 332,079 $ 1,011,679 (5) LEASES The Company ​​previously had entered into agreements to lease certain office space as well as its former warehouses and distribution centers under operating leases, which have been expired​​. ​​Following the expiration, the Company’s newly established Hong Kong subsidiary in February 2025 executed new office lease agreements.​​The Company recognizes lease expense for these leases on a straight-line basis over the lease term. Right-of-use (“ROU”) assets and lease liabilities are recorded on the balance sheet for all leases, except leases with an initial term of 12 months or less. The components of lease liabilities were as follows: Schedule of components of lease costs Three Months Ended March 31, 2025 2024 Current operating lease liabilities $ 58,688 $ 9,061 Long-term operating lease liabilities 15,093 - Total lease liabilities $ 73,781 $ 9,061 The weighted-average remaining lease term and discount rate were as follows: Schedule of weighted average remaining lease term and discount rate Three Months Ended March 31, 2025 2024 Operating leases: Weighted average remaining lease term (years) 0.06 0.2 Weighted average discount rate 4.65 % 5.0 % 8 Supplemental cash flow information and non-cash activity related to our operating leases are as follows: Schedule of supplemental cash flow information related to operating leases Three Months Ended March 31, 2025 2024 Operating cash flow information: Amounts included in measurement of lease liabilities $ - $ 13,676 Non-cash activities: ROU asset obtained in exchange for lease liability $ 619 $ - ( 6) COMMITMENTS AND CONTINGENCIES (a) Commitments The Company was a party to a license agreement with Motorola Mobility LLC pursuant to which the Company has an exclusive license to use certain trademarks owned by Motorola Trademark Holdings, LLC for the manufacture, sale and marketing of consumer cable modem products, consumer routers, WiFi range extenders, MoCa adapters, cellular sensors, home powerline network adapters, and access points worldwide through a wide range of authorized sales channels. The license agreement had a term ending December 31, 2025 prior to its cancellation in 2023. In connection with the license agreement, the Company had committed to reserve a certain percentage of wholesale prices for use in advertising, merchandising and promotion of the related products. Additionally, the Company was required to make quarterly royalty payments equal to a certain percentage of the preceding quarter’s net sales with minimum annual royalty payments. Following the Company’s agreement with Motorola Mobility LLC on January 22, 2024, the Company’s quarterly royalty payments, in addition to current and future obligations, were satisfied in exchange for certain assets of the Company. The Company did not incur royalty expenses under the License Agreement for the three months ended March 31, 2025 and 2024. On January 22, 2024, the Company, entered into a Letter Agreement re Product Purchase (the “Letter Agreement”) and a Debt Settlement Agreement (the “Settlement Agreement,” and the Letter Agreement, the “Agreements”) with Motorola Mobility, LLC (“Motorola”). Pursuant to the Letter Agreement, the Company (A) initially transferred a portion of its inventory to Motorola and (B) agreed to transfer the reminder of such inventory upon receipt of certain funding in order to satisfy liabilities owed to Motorola, while agreeing to continue to provide certain customer and technical support. Pursuant to the Settlement Agreement, the Company agreed (i) to pay Motorola a settlement amount of $1,167,071 and (ii) to transfer additional funds as collected from the Company’s customers in an amount up to $263,752. The Company believes that the Agreements, together with arrangements it has finalized with other major vendors, will allow the Company to streamline its operations while reducing its current liabilities. (b) Vendor Obligation Releases In its efforts to manage its liquidity and cash-flow position, the Company negotiated and executed liability release agreements with certain vendors in Q4 2023 who comprised $ 5.0 million of outstanding accounts payable as of December 31, 2023. In aggregate, the executed release agreements resulted in a reduction of outstanding accounts payable obligations by $3.6 million from $5.0 million to $1.4 million. The executed release agreements became effective and are contingent upon payment of the $ 1.4 million negotiated amounts received during the period of Q1 2024. In addition, the Company agreed to pay certain vendors an additional adjusted $ 0.3 million contingent upon successful collection of customer receivables. As of March 31, 2024, the contingent amount had not been paid and is accounted in accrued expenses on the accompanying condensed consolidated balance sheets. In July 2024, the Company paid the contingent amount of $ 0.3 million to its vendors. 9 (c) Contingencies The Company is party to various lawsuits and administrative proceedings arising in the ordinary course of business. The Company evaluates such lawsuits and proceedings on a case-by-case basis, and its policy is to vigorously contest any such claims which it believes are without merit. The Company reviews the status of its legal proceedings and records a provision for a liability when it is considered probable that both a liability has been incurred and the amount of the loss can be reasonably estimated. This review is updated periodically as additional information becomes available. If both criteria are not met, the Company reassesses whether there is at least a reasonable possibility that a loss, or additional losses, may be incurred. If there is a reasonable possibility that a loss may be incurred, the Company discloses the estimate of the amount of the loss or range of losses - that the amount is not material, or that an estimate of the loss cannot be made. At March 31, 2025, the Company is not currently a party to any legal proceedings that, if determined adversely to the Company, in management’s opinion, are currently expected to individually or in the aggregate have a material adverse effect on the Company’s business, operating results or financial condition taken as a whole. The Company expenses its legal fees as incurred. In the ordinary course of its business, the Company is subject to lawsuits, arbitrations, claims, and other legal proceedings in connection with their business. Some of the legal actions include claims for substantial or unspecified compensatory and/or punitive damages. A substantial adverse judgment or other unfavorable resolution of these matters could have a material adverse effect on the Company’s financial condition, results of operations, and cash flows. Management believes that the Company has adequate legal defenses with respect to the legal proceedings to which it is a defendant or respondent, and that the outcome of these pending proceedings is not likely to have a material adverse effect on the financial condition, results of operations, or cash flows of the Company. However, the Company is unable to predict the outcome of these matters. (7) SIGNIFICANT CUSTOMERS AND DEPENDENCY ON KEY SUPPLIERS During the three months ended March 31, 2025, the Company had 1 new customer upon launching our SAAS product on March 28, 2025. As of April 30, 2025, the number of our customers was 39 . As of April 30, 2025, prepaid subscription fees received from customers for our SaaS service amounted to $ 203 thousand. During the three months ended March 31, 2024, two companies, including a marketplace facilitator, accounted for 10% or greater individually and 100 % in the aggregate of the Company’s total net sales. As of March 31, 2024, one company with an accounts receivable balance of 10% or greater individually accounted for 100 % of the Company’s accounts receivable. During the three months ended March 31, 2025 and 2024, the Company did not have any concentration of suppliers. (8) RELATED PARTY TRANSACTIONS Rent expense charged by related party and amount due to related party: The Company leased office space located at 848 Elm Street, Manchester, NH. The landlord was an affiliate entity owned by Mr. Jeremy Hitchcock, who was the Company’s former Chairman of the Board. On July 18, 2022, the lease agreement, which originated in August 2019, was amended to a month-to-month lease arrangement. The lease was not renewed in September 2024. The facility lease agreement provided for 2,656 square feet. For the three-months period ended March 31, 2025 and 2024, the rent expense was $ 0 and $ 14 thousand, respectively. Amount due to Shareholder and related party: Schedule of due to shareholder and related party Three Months Ended March 31, 2025 2024 Due to the shareholder – Cao Yu $ 53,000 $ - Due to the shareholder – David Lazar 302,170 - Total $ 355,170 $ - 10 $50,000 of the $53,000 due to Cao Yu for the period ended March 31, 2025 was made by Cao Yu on behalf of the Company to Beckles & Co for auditor services. The Company and David Lazar (“Noteholder”) entered into an unsecured promissory note (the “Convertible Note”), under which, effective as of February 18, 2025 (the “Effective Date”), the Company agreed to pay to the Noteholder a principal amount of $ 300,000 , together with interest on the balance of the principal from time to time outstanding, at the rates and at the times described therein. The outstanding principal balance of the Convertible Note shall be paid in full on or prior to December 31, 2025. (9) EARNINGS (LOSS) PER SHARE Net loss per share for the three months ended March 31, 2025 and 2024, respectively, are as follows: Schedule of net income (loss) per share Three Months Ended March 31, 2025 2024 Numerator: Net loss $ ( 373,910 ) $ ( 3,258,955 ) Denominator: Weighted average common shares – basic 3,713,792 2,770,382 Effect of dilutive common share equivalents - - Weighted average common shares – dilutive 3,713,792 2,770,382 Basic and diluted net loss per share $ ( 0.10 ) $ ( 1.18 ) Diluted loss per common share for the three months ended March 31, 2025 and 2024 excludes the effects of 0 and 5,230,769 common share equivalents, respectively, since such inclusion would be anti-dilutive. The common share equivalents consist of shares of common stock issuable upon exercise of outstanding preferred stock, warrants, restricted stock units, and stock options. (10) EQUITY Preferred Stock and Warrants On January 23, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with David Lazar (“Lazar”), a member of our Board of Directors, whereby, at the closing of the transactions contemplated by the Purchase Agreement (the “Closing”), the Company sold and Lazar (or to any transferee of Lazar’s which acquires the Securities Purchase Rights, as defined below, hereinafter a “Lazar Transferee”) purchased 2,000,000 shares of the Company’s preferred stock, $ 0.001 par value per share (the “Preferred Stock”), at a price per share of $ 1.40 , for an aggregate purchase price of $ 2,800,000 , subject to the conditions described below, pursuant to the exemptions afforded by the Securities Act of 1933, as amended, and Regulation S thereunder. Under the Purchase Agreement, the Company agreed to designate 2,000,000 of the Preferred Stock as Series A Preferred Stock (the “Series A Preferred Stock”) for the sale to Lazar (or a Lazar Transferee). Each share of Series A Preferred Stock shall be convertible, at the option of the holder, into 1.4 shares of common stock of the Company, $.01 par value per share (the “Common Stock”), and vote on an “as-if-converted” basis and shall have full ratchet protection in any subsequent offerings. Pursuant to the Purchase Agreement, the Company shall also issue Lazar (or a Lazar Transferee) warrants to purchase up to an additional 2,800,000 shares of Common Stock, with an exercise price equal to $1.00 per share, subject to adjustment therein (the “Warrants”, and together with the Series A Preferred Stock, the “Purchased Securities”). 11 The Company evaluated the Series A Preferred Stock and Warrants for liability or equity classification in accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity , and determined that equity treatment was appropriate because neither the Series A Preferred Stock nor the Warrants met the definition of liability instruments. The Warrants are classified as component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permit the holder to receive a fixed number of shares of common stock upon exercise. In addition, the Warrants do not provide any guarantee of value or return. The Company valued the Warrants at issuance using the Black-Scholes option pricing model and determined the fair value of the Warrants to purchase 2,800,000 shares of the Company’s common stock at $ 4.7 million. The key inputs to the valuation model included a weighted average volatility of 162.0 % and an expected term of 3.0 years. The proceeds from the issuance of the Series A Preferred Stock to the Company were allocated based on the relative fair value of the Warrants as compared to the fair value of the Series A Preferred Stock. The fair value of the Warrants incorporates assumptions regarding our common stock price, dividend yield, stock price volatility, as well as assumptions regarding the risk-free interest rate. Using this model, the Warrants was valued at $ 1.4 million at January 23, 2024 and was included in additional paid in capital on our condensed consolidated balance sheet. The fair value of the Series A Preferred Stock was determined based on assumptions that incorporated our common stock price and dividend rate. The Company valued the Series A Preferred Stock at $ 4.5 million. Based on the fair value model to allocate the Series A Preferred Stock proceeds, the Series A Preferred Stock was valued at $ 1.4 million at January 23, 2024 and was included in Series A Preferred Stock on our condensed consolidated balance sheet. On February 26, 2024, the Company held a special meeting of stockholders, who voted and approved (i) the issuance of shares of our common stock, par value $0.01 per share (“Common Stock”) upon conversion of Series A Preferred Stock or exercise of the Warrants to be issued at Closing of the Purchase Agreement, which conversions or exercise would result in a “change of control” of the Company under the applicable rules of Nasdaq and (ii) an amendment to the Company’s Amended and Restated Certificate of Incorporation to effect the increase in authorized shares of Preferred Stock to 10,000,000 . On February 18, 2025, the Company entered into an Amended and Restated Securities Purchase Agreement (the “February 18, 2025 SPA”) with David Lazar (“Seller”) on the one hand, and Cao Yu, Hu Bin, and Youxin Consulting Limited (collectively, “Purchasers”), on the other hand, whereby Seller, a director and former officer of the Company, sold to the Purchasers (i) 2,219,447 shares (the “Seller Preferred Stock”) of Series A Convertible Preferred Stock, $0.001 par value per share (the “Preferred Stock”) of the Company, (ii) a warrant to purchase up to an additional 2,800,000 shares of Common Stock, with an exercise price equal to $1.00 per share, subject to adjustment therein (the “Warrant”), and (iii) certain amounts owed by the Company to Seller (the “Lazar Receivables”). On April 10, 2025, Seller transferred 31,258 additional shares of Preferred Stock (the “Additional Shares” and collectively with the Seller Preferred Stock and the Warrant, the “Securities”) to Purchasers. The aggregate purchase price for the Securities and the Lazar Receivables paid to Seller was $500,000 (the “Purchase Price”), of which $300,000 was directed by Seller to be contributed to the Company in exchange for 1,200,000 newly issued shares of Common Stock to be issued to Seller (the “Lazar Common Stock”). Pursuant to the February 18, 2025 SPA, in the event certain milestones were achieved, Seller was to be issued newly issued shares of Common Stock (the “Earnout Shares”). On May 9, 2025, the Company entered into a Second Amended and Restated Securities Purchase Agreement with Seller and Purchasers to remove references to the issuance of the Lazar Common Stock, which issuance was rescinded and replaced with the Convertible Note described below, and remove references to the Earnout Shares. Pursuant to such Second Amended and Restated Purchase Agreement, Seller sells and delivers to Purchasers, and Purchasers purchases and accepts all of Seller’s right, title and interest in and to the Lazar Receivables and the Securities for the Purchase Price, which Seller acknowledges and agrees had been previously paid by Purchasers. Purchasers agree that they will surrender the Warrant to the Company for cancellation and irrevocably waive and forgive the Lazar Receivables for the benefit of the Company. 12 (11) SUBSEQUENT EVENTS Director Appointments Effective as of April 24, 2025, which is the expiration of the 10-day period after the filing and mailing of the Company’s Schedule 14F-1 filed and mailed on April 14, 2025, Hu Bin and Cao Yu were appointed to the Company’s board of directors. Effective as of April 30, 2025, David Natan and Chan Oi Fat were appointed to the Company’s board of directors. Effective as of April 30, 2025, Hu Bin, David Natan and Chan Oi Fat were appointed to the audit committee, compensation committee and the nominating committee of the Company’s board of directors. Non-binding Letter of Intent On March 25, 2025, the Company entered into a non-binding letter of intent (“LOI”) with Hongyan Sun and Lin Lin (collectively, the “Sellers”), pursuant to the terms of which the Sellers will transfer 100% of their equity interests in Suzhou Yixuntong Network Technology Co., Ltd. (the “Target Company”) to the Company (the “Potential Transaction”) for a purchase price not to exceed $2,000,000. The Company shall make a prepayment of $300,000 to the Sellers, as soon as practicable, upon the signing of the LOI. Upon the signing of this LOI, the Target Company and the Sellers (i) have granted the access of the Target Company’s service ports to the Company; (ii) have connected the Company to the Target Company’s Software as a Service platform; (iii) and is working with the Company to ensure it can carry out the Multi-Channel Network business in the second quarter of 2025. The Potential Transaction is subject to the Company’s satisfactory completion of legal, tax, financial, operation, human resources and administration, and environmental due diligence of Target Company and such other due diligence as the Company may deem necessary. The Company and the Sellers expect to complete the Potential Transaction as soon as reasonably practicable, but in no event later than six (6) months after signing of the LOI (the “Long-Stop Date”). The Sellers have agreed that that, from the date of the LOI through the Long-stop Date, or the date when the Company informs the Sellers that the exclusivity expires, whichever occurs earlier, the Sellers shall refrain, directly or indirectly from (i) soliciting offers from third parties to acquire Target Company and/or its business, and from offering Target Company or its business to any person, firm, group or corporation other than the Company; and (ii) entering into any agreement aimed at selling or otherwise transferring Target Company or the business or that may otherwise prevent the parties from consummating the Potential Transaction. The Company expects to announce additional details regarding the Potential Transaction if and when a definitive agreement is executed. No assurances can be made that the Company will successfully negotiate and enter into a definitive agreement with respect to the Potential Transaction, or that the Potential Transaction will be consummated on the terms or timeframe currently contemplated, or at all. Any transaction is subject to board and shareholder holder approval of the Company, regulatory approvals and other customary conditions. Nasdaq Developments As previously disclosed, on June 26, 2024, the Company received a letter (the “June 26, 2024 Letter”) from the staff at the Listing Qualifications Department (the “Staff”) of the Nasdaq Stock Market LLC (the “Nasdaq”) notifying the Company that the Staff had determined that it did not meet the terms of the minimum stockholders’ equity requirement of at least $2,500,000 (the “Stockholders’ Equity Requirement”) for continued listing on the Nasdaq Capital Market pursuant to the Nasdaq Listing Rule 5550(b)(1). On April 7, 2025, the Company received a second letter from the Staff (the “April 7, 2025 Letter”) stating that in addition to the failure to meet the Stockholders’ Equity Requirement, the Staff made additional determinations (the “Additional Deficiencies”) that the Company (1) failed to comply with the Nasdaq’s shareholder approval requirements pursuant to the Nasdaq Listing Rule 5635 (b), (c) and (d), in connection with the closing of transactions under that certain Amended and Restated Securities Purchase Agreement, dated February 18, 2025, attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “SEC”) on February 24, 2025, and (2) does not currently comply with the Nasdaq’s majority independent board, independent audit committee, compensation committee and nomination committee requirements as set forth in the Nasdaq Listing Rule 5605(b)(1), 5605(c)(2), 5605(d)(2) and 5605(e), respectively. 13 In connection with the issuance of the April 7, 2025 Letter, on April 7, 2025, the Company and the Nasdaq also entered into a Confidential Settlement and Mutual Release Agreement, pursuant to which the Nasdaq has agreed not to delist the Company’s securities at this time. The Company will have the opportunity to present its views and challenge in writing (1) the Additional Deficiencies, (2) the previously noticed Stockholders’ Equity Requirement in the June 26, 2024 Letter, and (3) the Form 25 filed by the Nasdaq on April 9, 2025 with the SEC, to the Nasdaq Hearings Panel (the “Panel”), in advance of a hearing in front of the Panel. Consistent with the Nasdaq Listing Rule 5815(a)(4)-(5), the Panel will set the applicable deadlines for written submissions from the Company, and the hearing shall take place, to the extent practicable, within 45 days of the April 7, 2025 Letter. In addition to the Additional Deficiencies, the April 7, 2025 Letter also included a bid price notification that based upon the closing price of the Company’s common stock on the OTC Pink Sheets for the last 30 consecutive business days, the Company no longer meets the requirement to maintain a minimum bid price of $1 per share. The Company has 180 calendar days, or by October 6, 2025, to regain compliance with the minimum bid price requirement under the Nasdaq Listing Rule 5550(a)(2) but could be eligible for an additional 180-day compliance period. On May 9, 2025, the Company entered into, and simultaneously closed the transactions under, a Securities Purchase Agreement with Cao Yu (“Cao SPA”), whereby the Company sold 1,585,366 shares of the Company’s common stock, par value $ 0.01 per share (“Common Stock”) to Cao Yu, for an aggregate purchase price of $ 2,600,000 . On May 9, 2025, the Company entered into, and simultaneously closed the transactions under, a Securities Purchase Agreement with Hu Bin (“Hu SPA”), whereby the Company sold 853,659 shares of Common Stock to Hu Bin, for an aggregate purchase price of $ 1,400,000 . On May 9, 2025, the Company entered into a Second Amended and Restated Securities Purchase Agreement with Seller and Purchasers to remove references to the issuance of the Lazar Common Stock, which issuance was rescinded and replaced with the Convertible Note described below, and remove references to the Earnout Shares. Pursuant to such Second Amended and Restated Purchase Agreement, Seller sells and delivers to Purchasers, and Purchasers purchases and accepts all of Seller’s right, title and interest in and to the Lazar Receivables and the Securities for the Purchase Price, which Seller acknowledges and agrees had been previously paid by Purchasers. Purchasers agree that they will surrender the Warrant to the Company for cancellation and irrevocably waive and forgive the Lazar Receivables for the benefit of the Company. On May 9, 2025, the Company and David Lazar (“Noteholder”) entered into an unsecured promissory note (the “Convertible Note”), under which, effective as of February 18, 2025 (the “Effective Date”), the Company agreed to pay to the Noteholder a principal amount of $ 300,000 , together with interest on the balance of the principal from time to time outstanding, at the rates and at the times described therein. The outstanding principal balance of the Convertible Note shall be paid in full on or prior to December 31, 2025. On May 9, 2025, the Company entered into a services agreement with David Lazar (“Service Provider”), pursuant to which the Company engages Service Provider as an independent contractor, to (i) use best efforts to obtain a decision from the Securities and Exchange Commission that Nasdaq Stock Market (the “Nasdaq”) must hold a hearing to consider the merits of the Company’s appeal from being delisted from Nasdaq, (ii) use best efforts to achieve a Nasdaq Listing for the Company on or before December 31, 2025 (such date of achievement being the “Listing Date”) and (iii) continue to provide additional services to the Company in furtherance of achieving a Nasdaq Listing through the earlier of December 31, 2025, or the Listing Date. 14