Item 1A. Risk Factors
Item 1A. Risk Factors
As of June 30, 2026, there have been no material changes to the risk factors
previously disclosed in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, filed with the Securities and Exchange
Commission (the “SEC”) on December 31, 2025, and in our Registration Statement on Form S-1 filed with the SEC on April 16,
2026 (the “S-1”), which is incorporated by reference herein. The following risk factors supplement and highlight certain risks
from the S-1 that remain particularly material to the Company in light of events occurring during the quarter ended June 30, 2026. These
risks, together with those in the S-1 and our other SEC filings, could materially and adversely affect our business, financial condition,
results of operations, cash flows, and the trading price of our Common Stock. Investors should carefully consider these risks before making
any investment decision.
We have a history of operating losses, limited operating history,
and substantial doubt about our ability to continue as a going concern.
We are an early-stage company with limited operating history. We have incurred
significant net losses since inception, and we expect to continue to incur substantial operating losses as we advance our technology development,
integration initiatives (including Solar Drone and the SaverOne platform), and commercialization efforts. As of June 30, 2026, our liquidity
position and cash runway remain limited. Absent the mitigating plans and the committed financial support described in Note 2 to the accompanying
unaudited condensed consolidated financial statements, these conditions would raise substantial doubt about our ability to continue as
a going concern within one year after the date these financial statements are issued. Although management has concluded that such doubt
has been alleviated, there can be no assurance that the committed support will be sufficient or available when needed. Our ability to
continue operations depends on our ability to obtain additional financing, generate revenue from customer orders, and achieve positive
cash flow, none of which is assured.
Our current business plans require a significant amount of capital.
If we are unable to obtain sufficient funding or do not have access to capital on acceptable terms, we may not be able to execute our
business plans, and our prospects, financial condition, and results of operations could be materially adversely affected.
The extent to which we rely on YA II PN, LTD. (“YA II”) as
a source of funding depends on multiple factors, including the prevailing market price of our common stock, our ability to satisfy the
conditions necessary to deliver Advance Notices under the Standby Equity Purchase Agreement dated July 25, 2025 (as amended, the “SEPA”),
the impact of the Exchange Cap and Ownership Limitation under the SEPA, and our success in securing funding from other sources.
In addition to the SEPA facility (under which we may sell up to $50 million
of common stock, subject to limitations), we have received substantial capital from YA II. We received a $5.0 million Pre-Paid Advance
under the SEPA, evidenced by convertible notes issued at 94% of principal, bearing 6% interest (increasing to 18% upon default), with
a 12-month maturity per tranche (the “Convertible Notes”). On February 26, 2026, we entered into a Letter Agreement with YA
II pursuant to which YA II provided a $20 million senior loan (the “Loan”) evidenced by a Promissory Note (the “Note”)
issued at a 15% original issue discount, resulting in net cash proceeds of approximately $16.975 million after fees. The Note bears 0%
interest (increasing to 18% upon an Event of Default), matures in 12 months, and requires monthly amortization payments of $2.5 million
of principal plus a 2% premium (commencing on the 60th day after issuance). Amortization may be satisfied in cash or, subject to a 30-day
repayment waterfall in favor of YA II, by delivering an Advance under the SEPA. Concurrently, we issued YA II a five-year warrant to purchase
1,333,333 shares of common stock at an exercise price of $9.00 per share. The obligations under the Note are guaranteed by each of our
subsidiaries.
We have experienced operating losses and expect to continue to incur operating
losses as we implement our business plans in the defense technology, advanced sensing, AI, and related sectors. We expect our capital
expenditures to remain significant as we expand operations, including through our network of subsidiaries and strategic initiatives. Our
limited operating history in certain areas means our capital requirements are uncertain and may differ materially from current expectations.
New growth opportunities may also require additional capital.
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As of June 30, 2026, our principal source of
liquidity is our cash balance in the amount of approximately $14 million. While the SEPA provides us with the right, but not the
obligation, to sell shares to YA II, our ability to utilize the facility is subject to conditions that may not be satisfied, including
registration effectiveness, market conditions, and the Exchange Cap (unless stockholder approval is obtained in accordance with Nasdaq
rules). In addition, certain events under the Convertible Notes (including a Floor Price Event or Exchange Cap Event, subject to post-Rule
144 Date provisions) may trigger monthly amortization payments of $750,000 plus a 5.0% premium and accrued interest. An uncured Event
of Default under the Note could result in acceleration of the full amount, 18% default interest, and conversion rights at a discount to
market (subject to a 4.99% beneficial ownership blocker and floor price).
Any additional debt incurred from YA II or third parties could increase
our vulnerability to downturns in operating results or economic conditions. If our cash flow from operations is insufficient to meet debt
service obligations—including monthly amortizations under the Note or potential accelerated payments under the Convertible Notes—we
may be required to refinance, dispose of assets, or seek additional financing on unfavorable terms.
As an early-stage growth company, our ability to access capital is critical.
We expect to continue seeking additional capital through the SEPA (when conditions permit), other equity or equity-linked offerings, credit
facilities, or debt securities to finance future expenditures. Sales of additional equity or equity-linked securities (including under
the SEPA, upon conversion of the Note or Convertible Notes, or exercise of the Warrant) will dilute our existing stockholders. Incurrence
of additional indebtedness would increase debt service obligations and could impose restrictive operating and financial covenants.
Our ability to raise sufficient funds on favorable terms is subject to
general market conditions, investor acceptance of our business model, and our compliance with the terms of existing arrangements with
YA II. If we are unable to obtain adequate financing, we may need to significantly reduce spending, delay or cancel planned activities,
or substantially alter our corporate or operational structure. We might not obtain any such funding, or we might not have sufficient resources
to conduct our business as projected. Either outcome could force us to curtail or discontinue operations, materially adversely affecting
our prospects, financial condition, and consolidated results of operations, in which case investors could lose some or all of their investment.
Our recent strategic transactions, including the SaverOne Exchange
Agreement and BladeRanger/Solar Drone acquisition, involve significant integration, milestone, and execution risks.
The SaverOne transaction is structured in three stages,
with Stage 1 – 3 completed by June 30, 2026. Failure integrate acquired technologies and operations (including Solar Drone), or
satisfy regulatory or shareholder approval requirements could result in loss of strategic benefits, unexpected costs, dilution, or termination
of the arrangements, any of which would materially and adversely affect our business and financial condition.
The senior secured loan from YA II PN Ltd. and associated Warrant
expose us to repayment obligations, restrictive covenants, and dilution risks.
In February 2026, we entered into a $20 million senior loan (with 15% OID)
evidenced by a Promissory Note and issued a Warrant to purchase 1,333,333 shares of Common Stock. The Note carries default interest at
18% and is secured by a global guaranty. Events of default or failure to satisfy payment obligations could accelerate repayment and materially
impair our liquidity. Exercise of the Warrant and any future equity issuances will cause dilution to existing stockholders.
We face significant dilution risk from outstanding and potential
future issuances of Common Stock, Pre-Funded Warrants, and other securities.
As of June 30, 2026, we have outstanding Pre-Funded Warrants (initial and
potential Additional PFWs under the BladeRanger Agreement), the YA II Warrant, and shares issuable under the SaverOne Exchange Agreement
and management pools. The S-1 registers resale of approximately 6,148,943 shares (including Warrant Shares). Additional issuances pursuant
to these instruments, the 2024 and 2025 Incentive Plans, or future financings will dilute existing stockholders and may depress our stock
price.
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Commercialization of our technologies is subject to technical, regulatory,
and market acceptance risks.
Our products are in various stages of development, prototype testing, and
early commercialization (including Solar Drone solar-panel cleaning and defense applications). There can be no assurance that we will
successfully complete development, obtain necessary certifications, secure large-scale purchase orders, or achieve market acceptance.
Delays or failure in any of these areas would materially and adversely affect our revenue, results of operations, and financial condition.
Our intellectual property may not provide adequate protection, and
we may infringe third-party rights.
We rely on patents, trade secrets, and other intellectual property to protect
our technologies, including the recently acquired xClibre™ AI video intelligence portfolio and provisional patent filings. There
can be no assurance that our patents will issue, be enforceable, or provide meaningful commercial protection. We may face claims of infringement
or challenges to our IP rights, any of which could result in costly litigation, licensing obligations, or loss of competitive advantage.
We are subject to stringent regulatory, export-control, and Nasdaq
continued-listing requirements.
Our defense and homeland-security technologies are subject to U.S. and
Israeli export controls, ITAR/EAR requirements, and other governmental approvals. Failure to obtain or maintain necessary clearances could
delay or prevent commercialization. In addition, issuances of Common Stock under our agreements require Nasdaq shareholder approval under
Listing Rule 5635 in certain circumstances. Any failure to comply with listing standards could result in delisting, which would materially
and adversely affect the liquidity and market price of our Common Stock.
Our international operations, particularly in Israel, expose us to
geopolitical, currency, and regulatory risks.
A significant portion of our technology development, manufacturing, and
strategic partnerships (SaverOne, BladeRanger, Solar Drone) is located in Israel. Geopolitical instability, armed conflict, currency fluctuations
(NIS/USD), and changes in Israeli or U.S. regulatory policy could disrupt operations, increase costs, or impair our ability to integrate
acquired assets or fulfill contractual obligations.
We face significant challenges in integrating our recent and contemplated
acquisitions, asset purchases, joint ventures and strategic transactions, and there can be no assurance that we will successfully close
pending stages or future deals or realize the anticipated benefits of our business plan. Any failure could materially and adversely affect
our business, financial condition, results of operations, liquidity and the market price of our common stock.
Since late 2025, the Company has entered into multiple material transactions,
including:
● the January 5, 2026 QuantumSpeed asset purchase from Adrian Holdings
S.R.L. (with 7 million contingent shares subject to Nasdaq stockholder approval and potential subsidiary equity transfer if approval is
not obtained);
●the January 9, 2026 joint venture with BOCA JOM, LLC, GBT Tokenize
Corp. and GBT Technologies, Inc. (subject to Nasdaq Rule 5635 approvals, CFIUS/export controls and other regulatory clearances);
● the three-stage SaverOne equity exchange dated January 26, 2026
(all three stages have closed);
● the December 2025 Blade Ranger acquisition (with additional pre-funded
warrants potentially issuable based on VWAP);
●the February 2026 51% acquisition (not closed) of C.M. Composite
Materials Ltd. and related $5 million loan facility (expressly conditioned on JV Condition in India and subject to Giza Side Letter restrictions,
with closing required by June 30, 2026);
● the March 2026 SolarDrone/Junko solar business acquisition;
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●the March 2026 Letter of Engagement with the National Oil Company
of Liberia for Blocks LB-4 and LB-5 (requiring a $600,000 signing bonus and future payments - $4,000,000 if Production agreement will
be achieved, subject to regulatory and legislative approvals);
● the April 10, 2026 xClibre asset purchase from Dream America Marketing
Services, Ltda. (with 3.5 million contingent shares subject to Nasdaq stockholder approval;
● Proposed Data Center Joint Venture. On June 12, 2026, the Company
entered into a term sheet with Lucky Whale Production Limited to form a joint venture to develop a Tier IV data center in Beth Shemesh,
Israel, in which the Company would hold an effective indirect interest of approximately 51%, with consideration of approximately $40 million
in Common Stock issuable to the land owner;
●T3 Defense Share Exchange. On May 17, 2026, the Company issued 475,492
shares of Common Stock (valued at approximately $2.658 million) to T3 Defense Inc. (Nasdaq: DFNS) in exchange for 6,000,000 shares of
DFNS common stock; and
● Adrian Holdings Assignment Agreement. On June 22, 2026, the Company
assigned to Adrian Holdings S.R.L. its right to receive a portion of the SaverOne shares issuable at the Stage 2 and Stage 3 closings,
reducing the outstanding principal of the Adrian Note by approximately $1.43 million.
These and any future transactions expose us to substantial risks, including:
●Integration difficulties. Combining acquired technologies (QuantumSpeed
IP, SaverOne RF platforms, C.M. Composite materials, Junko operations, Blade Ranger assets, xClibre assets etc.), personnel, operations
and systems across multiple jurisdictions may divert significant management attention, result in higher-than-expected costs, loss of key
personnel, operational disruptions, control weaknesses and failure to achieve expected synergies or revenue growth.
●Failure to close or unwind risks. Many transactions remain subject
to conditions outside our control, such as Nasdaq stockholder approvals under Rule 5635, regulatory clearances (CFIUS, export controls,
Israeli/Indian/Liberian approvals), milestone achievements and the JV Condition. Failure to satisfy these conditions could result in loss
of benefits already partially paid for (including cash advances and issued shares), mandatory equity transfers, or forfeiture of consideration
without refund.
●Dilution and valuation uncertainty. These deals have caused and
will continue to cause substantial dilution through issuance of millions of shares, pre-funded warrants and potential additional securities.
The $1.0 billion internal reference value used in the JV was not supported by an independent valuation or fairness opinion.
●International and regulatory risks. Operations in or targeting Israel,
India, Costa Rica and Liberia expose us to political, economic, currency, anti-corruption (FCPA), sanctions and national-security risks.
Failure to obtain or maintain required approvals could render acquired assets unusable.
Our growth strategy depends heavily on the successful execution and integration
of these and future transactions. Failure to manage these risks effectively could have a material adverse effect on our business, financial
condition, results of operations and stock price.
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We depend on key personnel, and failure to retain or attract qualified
management and technical talent could impair our business.
Our success depends heavily on our executive officers (including Douglas
Davis, our Executive Chairman and CEO) and key technical personnel. The loss of any of these individuals, or our inability to attract
and retain other qualified personnel, could delay technology development, integration efforts, and commercialization, materially and adversely
affecting our business, financial condition, and results of operations.
These risk factors are not exhaustive. Additional risks and uncertainties
not presently known to us or that we currently deem immaterial may also impair our business operations and the value of our securities.
Investors are urged to review the full discussion of risk factors in our S-1 and subsequent SEC filings. All forward-looking statements
in this Quarterly Report are qualified in their entirety by reference to these risk factors.
Bannix’ failure to redeem all remaining public offering shares
may expose the Company to legal, regulatory, and reputational risks
Bannix was required to redeem all remaining public offering shares no later
than June 27, 2025. Bannix Acquisition Corp. did not redeem the remaining public offering shares as required, and the Business Combination
was subsequently consummated on July 14, 2025. The failure to redeem was inconsistent with disclosures in the Bannix IPO prospectus and
the Business Combination proxy statement. This failure may expose the Company to legal, regulatory, and reputational risks.
Any of the above mentioned factors, or any other negative impact on the
global economy, capital markets or other geopolitical conditions resulting from the Russian invasion of Ukraine, the Israel-Hamas conflict,
the Iran conflict and subsequent sanctions or related actions, could adversely affect the Company’s operations in the future or
with future capital raising activities. The Company has not been affected so far by these conflicts or US tariffs.
Substantial Sales or Issuances of Common Stock Under Our Financing
Arrangements with YA II May Cause Our Stock Price to Decline and Result in Dilution to Our Stockholders.
On July 25, 2025, we entered into the Standby Equity Purchase Agreement
(as amended, the “SEPA”) with YA II PN, LTD. (“YA II”), pursuant to which we may sell up to $50 million of our
common stock from time to time. In connection with the SEPA, YA II provided a $5 million Pre-Paid Advance (evidenced by Convertible Notes
issued at 94% of principal, bearing 6% interest, with conversion rights at the lower of $10.00 or 93% of the lowest daily VWAP during
the five preceding trading days, subject to a $1.00 floor price). Following effectiveness of the registration statement registering shares
issuable under the SEPA, on February 26, 2026, we entered into a Letter Agreement with YA II pursuant to which YA II provided a $20 million
senior secured loan (the “Loan”) evidenced by a Promissory Note (the “Note”) issued at a 15% original issue discount,
resulting in net proceeds of approximately $16.975 million after fees. The Note bears 0% interest (increasing to 18% upon default), requires
monthly amortization payments of $2.5 million of principal plus a 2% premium (commencing on the 60th day after issuance and continuing
monthly until maturity in 12 months), and may be satisfied in cash or, subject to a 30-day repayment waterfall in favor of YA II, by delivering
an Advance under the SEPA. Concurrently, we issued YA II a five-year Warrant to purchase 1,333,333 shares of common stock at $9.00 per
share. The obligations under the Note are guaranteed by each of our subsidiaries.
Any sales of shares under the SEPA, issuances upon conversion of the Convertible
Notes or the Note (upon an uncured Event of Default at 90% of the lowest daily VWAP during the 10 preceding trading days, subject to a
4.99% beneficial ownership blocker and floor price), or exercises of the Warrant, or the perception that such sales or issuances may occur,
could cause the market price of our common stock to decline significantly. These issuances will dilute the ownership interests of our
existing stockholders and may dilute earnings per share and book value per share. We have agreed to register the shares issuable upon
exercise of the Warrant and have granted YA II demand registration rights covering shares issuable upon conversion of the Note.
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The Number of Shares Issuable and the Proceeds We May Receive Under
the SEPA Are Uncertain and May Be Materially Less Than the Maximum Commitment.
We control the timing and amount of any Advances under the SEPA, subject
to limitations including the Ownership Limitation, the Exchange Cap (unless stockholder approval is obtained in accordance with Nasdaq
rules), and other conditions in the SEPA. The purchase price for shares sold under an Advance is 97% of the lowest daily VWAP during the
applicable three-trading-day period. Depending on market conditions and the trading price of our common stock, we may not raise the full
$50 million commitment amount even if all currently registered shares are sold, and additional registration statements would be required
to sell shares beyond those registered. These factors, together with our obligations under the Note, could limit our access to capital
and require us to seek alternative financing on less favorable terms.
Our Obligations Under the Convertible Notes and the Promissory Note
May Require Significant Cash Payments That Could Adversely Affect Our Liquidity, Financial Condition, and Operations.
Certain events under the Convertible Notes (including a Floor Price Event,
Exchange Cap Event, or Registration Event, subject to post-Rule 144 Date provisions) trigger monthly amortization payments of $750,000
plus a 5% premium and accrued interest. The Note requires substantial monthly amortization payments and contains customary covenants,
including restrictions on variable rate transactions, additional indebtedness without YA II’s consent, and use of proceeds. An uncured
Event of Default under the Note could result in acceleration, 18% default interest, and immediate conversion rights at a discount to market.
These payment obligations, whether satisfied in cash or through SEPA Advances, could materially strain our liquidity and financial resources,
particularly if market conditions limit our ability to utilize the SEPA or if we experience Events of Default.
Investors Who Purchase Shares at Different Times May Pay Different
Prices and Experience Different Levels of Dilution.
Pursuant to the SEPA, we have discretion over the timing, prices, and number
of shares sold to YA II. YA II may resell such shares, the shares issuable upon conversion of the Note (upon default), or the shares issuable
upon exercise of the Warrant at different times and prices. As a result, investors purchasing shares in this offering or in the secondary
market may experience different levels of dilution and different investment outcomes. The resale of these shares, or the perception that
such resales could occur, could also harm the prevailing market price of our common stock.
These risk factors have been prepared on behalf of VisionWave Holdings
Inc. (Nasdaq: VWAV) in connection with its SEC reporting obligations and reflect all material facts regarding the SEPA (including the
Pre-Paid Advance and Convertible Notes) and the February 26, 2026 Loan transaction with YA II. The disclosures are condensed for clarity
while preserving the substance required for investor protection under the Securities Act of 1933, as amended. No additional risks have
been identified in the Bylaws or Certificate of Incorporation that require disclosure in this context.
Item 2. Unregistered sale of equity securities, use of proceeds, and
issuer purchases of equity securities
During the three months ended June 30, 2026, the Company issued the following
securities that were not registered under the Securities Act of 1933, as amended (the “Securities Act”):
● On April 10, 2026, the Company issued 3,500,000 shares of common
stock to Dream America Marketing Services, Ltda. as partial consideration for the xClibre intellectual property assets acquired pursuant
to the Asset Purchase Agreement dated April 10, 2026 (See Note 10).
● At the Stage 2 and Stage 3 closings under
the Exchange Agreement with SaverOne 2014 Ltd., the Company issued 945,251 shares of common stock to SaverOne, and issued 386,386 shares
of common stock to members of management pursuant to Schedule 1.7 of the Exchange Agreement (See Note 6).
● In May 2026, the Company issued 475,590 shares of common stock
to T3 Defense Inc. (“DFNS”) pursuant to the Share Exchange and Swap Agreement dated May 17, 2026 (See Note 6).
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● On May 7, 2026, the Company issued 55,000 shares of common stock
to a vendor pursuant to a consulting agreement for services to be rendered from May 2026 to October 2026 (See Note 21).
Each of the foregoing issuances was made in reliance upon the exemption
from registration provided by Section 4(a)(2) of the Securities Act as a transaction by an issuer not involving any public offering. Each
recipient acquired the securities for investment and not with a view to, or for resale in connection with, any distribution thereof, and
appropriate restrictive legends were affixed to the securities. No underwriters were involved in, and no general solicitation or general
advertising was used in connection with, any of the foregoing issuances, and no commissions were paid in connection therewith.
Securities Purchase Agreements
On July 15, 2025, the Company entered into
Securities Purchase Agreements (the “July 2025 SPAs”) with two unaffiliated accredited investors (“July 2025
Lenders”), pursuant to which the Company issued promissory notes (the “July 2025 Notes”) to the July 2025 Lenders
in the aggregate principal amount of $354,200, which includes an aggregate original issue discount of $46,200, for a purchase price
of $308,000. The Company incurred an additional $8,000 in fees related to this transaction which is capitalized as part of the debt
issuance cost and amortized over the term of the July 2025 Notes. The July 2025 Notes bear interest at a one-time charge of 12%
applied on the issuance date, mature on May 15, 2026, and is repayable in five monthly payments commencing January 15, 2026. The
July 2025 Notes are convertible into shares of the Company’s common stock, par value $0.01 per share (the “Common
Stock”), solely upon an event of default, at a conversion price equal to 75% of the lowest trading price during the ten
trading days prior to conversion. The Company also entered into an irrevocable transfer agent instructions letter with its transfer
agent in connection with the July 2025 Notes. The proceeds from the issuances of the July 2025 Notes were used for general working
capital purposes. The July 2025 Lenders have piggyback registration rights and have agreed not to engage in short sales of the
Company’s common stock during the term of the July 2025 Notes. The July 2025 Notes include customary representations,
warranties, covenants, and default provisions. The Company may prepay the July 2025 Notes within the first 180 days. The loan
pursuant to the July 2025 Notes closed and funded on July 17, 2025.
The Company repaid $396,704 on the July 2025 Notes (inclusive of $42,504 of interest). For the three months ended June 30, 2026 and 2025 total amortized debt issuance cost of $12,877 and
$0 was included in interest expense on the accompanying consolidated statements of operations, respectively, and $45,463 and $0 for the
nine months ended June 30, 2026 and 2025, respectively. For the three months ended June 30, 2026 and 2025, total interest expense $6,376
and $0 was included in interest expense on the accompanying consolidated statements of operations, respectively, and $31,878 and $0 for
the nine months ended June 30, 2026 and 2025, respectively. At June 30, 2026 and September 30, 2025, the balance of the July Notes of
$0 and 308,737, recorded in convertible notes payable on the accompanying balance sheets, includes $0 and $45,463, respectively, of unamortized
debt issuance cost.
On October 6, 2025, the Company entered into a Securities Purchase Agreement
(the “October 2025 SPA”) with an unaffiliated accredited investor, pursuant to which the Company issued a promissory note
(the “October 2025 Note”) to the investor in the aggregate principal amount of $296,700, which includes an aggregate original
issue discount of $38,700, for a purchase price of $258,000. The Company incurred an additional $8,000 in fees related to this transaction
which is capitalized as part of the debt issuance cost and amortized over the term of the October 2025 Note. The October 2025 Note bear
interest at a one-time charge of 12% applied on the issuance date, mature on July 30, 2026, and is repayable in five monthly payments
commencing March 30, 2026. The October 2025 Note is convertible into shares of the Company’s common stock, par value $0.01 per share,
solely upon an event of default, at a conversion price equal to 75% of the lowest trading price during the ten trading days prior to conversion.
The Company also entered into an irrevocable transfer agent instructions letter with its transfer agent in connection with the October
2025 Note. The proceeds from the issuances of the October 2025 Note were used for general working capital purposes. The October 2025 investor
have piggyback registration rights and have agreed not to engage in short sales of the Company’s common stock during the term of
the October 2025 Note. The October 2025 Note include customary representations, warranties, covenants, and default provisions. The Company
may prepay the October 2025 Notes within the first 180 days.
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For the three and nine months ended June 30, 2026 and 2025, total amortized
debt issuance cost of $14,012 and $0, and $42,035 and$0 was included in interest expense on the accompanying consolidated statements of
operations, respectively. For the three and nine months ended June 30, 2026 and 2025, total interest expense $10,681 and $0, and $35,374
and $0 was included in interest expense on the accompanying consolidated statements of operations, respectively. At June 30, 2026 and
September 30, 2025, the balance of the October Notes of $1,269 and $0, respectively, recorded in convertible notes payable on the accompanying
balance sheets, includes $4,665 and $0, respectively, of unamortized debt issuance cost.
On November 12, 2025, the Company entered into a
Securities Purchase Agreement (the “November 2025 SPA”) with an unaffiliated accredited investor, pursuant to which the
Company issued a promissory note (the “November 2025 Note”) to the November 2025 investor in the aggregate principal
amount of $354,200, which includes an aggregate original issue discount of $46,200, for a purchase price of $308,000. The Company
incurred an additional $8,000 in fees related to this transaction which is capitalized as part of the debt issuance cost and
amortized over the term of the November 2025 Note. The November 2025 Note bear interest at a one-time charge of 12% applied on the
issuance date, mature on September 15, 2026, and is repayable in five monthly payments commencing May 15, 2026. The November 2025
Note is convertible into shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”),
solely upon an event of default, at a conversion price equal to 75% of the lowest trading price during the ten trading days prior to
conversion. The Company also entered into an irrevocable transfer agent instructions letter with its transfer agent in connection
with the November 2025 Notes. The proceeds from the issuances of the November 2025 Notes were used for general working capital
purposes. The investor has piggyback registration rights and have agreed not to engage in short sales of the Company’s common
stock during the term of the November 2025 Note. The November 2025 Note include customary representations, warranties, covenants,
and default provisions. The Company may prepay the November 2025 Note within the first 180 days.
For the three and nine months ended June 30, 2026 and 2025, total amortized
debt issuance cost of $17,533 and $0, and $41,707 and $0 was included in interest expense on the accompanying consolidated statements
of operations, respectively. For the three and nine months ended June 30, 2026 and 2025, total interest expense $12,751 and $0, and $31,878
and $0 was included in interest expense on the accompanying consolidated statements of operations, respectively. At June 30, 2026 and
September 30, 2025, the balance of the November Notes of $93,767 and $0, respectively, recorded in convertible notes payable on the accompanying
balance sheets, includes $12,493 and $0, respectively of unamortized debt issuance cost.
On January 9, 2026, the Company issued promissory notes (the “January
2026 Notes”) to two investors in the aggregate principal amount of $354,200, which includes an aggregate original issue discount
of $46,200, for a purchase price of $293,000. The Company incurred an additional $8,000 in fees related to this transaction which is capitalized
as part of the debt issuance cost and amortized over the term of the January 2026 Notes. The January 2026 Notes bear interest at a one-time
charge of 12% applied on the issuance date, mature on November 15, 2026, and is repayable in five monthly payments commencing July 15,
2026. The January 2026 Notes are convertible into shares of the Company’s common stock, par value $0.01 per share, solely upon an
event of default, at a conversion price equal to 75% of the lowest trading price during the ten trading days prior to conversion. The
Company also entered into an irrevocable transfer agent instructions letter with its transfer agent in connection with the January 2026
Notes. The proceeds from the issuances of the January 2026 Notes were used for general working capital purposes. The investors have piggyback
registration rights and have agreed not to engage in short sales of the Company’s common stock during the term of the January 2026
Notes. The January 2026 Notes include customary representations, warranties, covenants, and default provisions. The Company may prepay
the January 2026 Notes within the first 180 days.
The Company evaluated the embedded conversion features and other terms
of the January 2026 Notes under applicable accounting guidance, including ASC 815, Derivatives and Hedging. The conversion feature is
exercisable solely upon an event of default and accordingly, the Company concluded that bifurcation of the embedded conversion feature
was not required as of issuance. The January 2026 Notes were therefore initially recorded at their principal amount, net of unamortized
original issue discount and debt issuance costs. As the notes were not elected under the fair value option of ASC 825, the Company accounts
for the January 2026 Notes at amortized cost and no recurring fair value measurement is required.
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For the nine months ended June 30, 2026 and 2025, total amortized debt
issuance cost of $31,151 and $0, respectively, was included in interest expense on the accompanying unaudited condensed consolidated statements
of operations. For the three and nine months ended June 30, 2026 and 2025, total interest expense $12,751 and $0, respectively, and $23,377
and $0, respectively, was included in interest expense on the accompanying unaudited condensed consolidated statements of operations.
At June 30, 2026 and September 30, 2025, the balance of the January Notes of $331,150 and $0, respectively, recorded in convertible notes
payable on the accompanying balance sheets, includes $23,050 and $0, respectively of unamortized debt issuance cost.
Standby Equity Purchase Agreement - Pre-Paid Advance
On July 25, 2025, we entered into the SEPA with the Investor. Under the
SEPA, the Company has the right to sell to the Investor up to $50 million of its shares of common stock, subject to certain limitations
and conditions set forth in the SEPA, from time to time during the term of the SEPA. On January 19, 2026, we entered into Amendment No.
1 to the SEPA.
Upon the satisfaction of the conditions to the Investor’s purchase
obligation set forth in the SEPA, including having a registration statement covering the resale of the shares of common stock issuable
under the SEPA declared effective by the SEC, the Company will have the right, but not the obligation, from time to time at its discretion
until the SEPA is terminated to direct Investor to purchase a specified number of shares of common stock (“Advance”) by delivering
written notice to the Investor (“Advance Notice”). While there is no mandatory minimum amount for any Advance, it may not
exceed an amount equal to 100% of the average of the daily traded amount during the five consecutive trading days immediately preceding
an Advance Notice.
The shares of common stock purchased pursuant to an Advance delivered by
the Company will be purchased at a price equal to 97% of the lowest daily VWAP of the shares of common stock during the three consecutive
trading days commencing on the date of the delivery of the Advance Notice, other than the daily VWAP on a day in which the daily VWAP
is less than a minimum acceptable price as stated by the Company in the Advance Notice or there is no VWAP on the subject trading day.
The Company may establish a minimum acceptable price in each Advance Notice below which the Company will not be obligated to make any
sales to THE INVESTOR. “VWAP” is defined as the daily volume weighted average price of the shares of common stock for such
trading day on the Nasdaq Stock Market during regular trading hours as reported by Bloomberg L.P.
Additionally, pursuant to the Employment Agreements and under the Plan
(subject to shareholder approval thereof), the Company granted nonstatutory stock options (each, an “Option”) to the Executives
as follows:
● Mr. Davis was granted Options to purchase 2,000,000 shares of Common
Stock.
● Mr. Rittman was granted an Option to purchase 500,000 shares of
Common Stock.
Each Option has an exercise price of $7.20 per share (to be determined
as the fair market value on the grant date) and vests in twelve (12) equal quarterly instalments over four (4) years, commencing on the
date of shareholder approval of the Plan (the “Approval Date”). The Options are exercisable for five (5) years from the grant
date and allow for cashless exercise. The grants are contingent upon shareholder approval of the Plan; if not approved, the Options will
be null and void.
On January 2, 2026, the Company entered into an employment agreement (the
“Klinger Agreement”) with Erik Klinger, pursuant to which Mr. Klinger will continue to serve as the Company’s Chief
Financial Officer, effective as of January 2, 2026.
The Klinger Agreement provides for an initial three-year term, automatically
renewing for successive one-year periods unless either party provides timely notice of non-renewal. Mr. Klinger’s annual base salary
is $120,000, payable in accordance with the Company’s standard payroll practices. Mr. Klinger is eligible to participate in the
Company’s employee benefit plans available to similarly situated executives, including medical, dental, and vision insurance, and
is entitled to four weeks of paid vacation per year (pro-rated for partial years).
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On January 2, 2026, in connection with the Klinger Agreement, the Company
granted Mr. Klinger a nonstatutory stock option (the “Option”) to purchase 500,000 shares of the Company’s common stock
at an exercise price equal to the closing price of the Company’s common stock on December 31, 2025, pursuant to the Company’s
proposed 2025 Omnibus Equity Incentive Plan (the “Plan”). The Option is subject to twelve equal quarterly vesting instalments
over four years, commencing on the date of shareholder approval of the Plan (the “Approval Date”), and is otherwise subject
to the terms and conditions of the Plan and the Employee Nonstatutory Stock Option Agreement entered into between the Company and Mr.
Klinger. The grant of the Option is expressly contingent upon shareholder approval of the Plan; if the Plan is not approved by shareholders,
the Option will be null and void.
QuantumSpeed IP Asset Acquisition
On January 5, 2026, the Company entered into an Asset Purchase Agreement
(the “Adrian Asset Purchase Agreement”) with Adrian Holdings S.R.L., a Costa Rican company (“Adrian”). Pursuant
to the Adrian Asset Purchase Agreement, the Company agreed to acquire from Adrian, and Adrian agreed to sell, transfer, convey and assign
to the Company, all right, title and interest in and to certain intellectual property assets related to the technology known as QuantumSpeed
(the “Assigned IP”), as more fully described in the Adrian Asset Purchase Agreement.
In consideration for the Assigned IP, the Company agreed to pay Adrian
aggregate consideration consisting of (i) 10,000,000 shares of the Company’s Common Stock (the “Purchase Shares”), and
(ii) a promissory note in the principal amount of $10,000,000 (the “Adrian Note”). At closing which occurred on January 5,
2026, the Company issued and delivered to Adrian 3,000,000 Purchase Shares (the “Closing Shares”) and executed and delivered
the Adrian Note.
The issuance of the remaining 7,000,000 shares of the Company’s Common
Stock (the “Contingent Shares”) is subject to approval by the Company’s shareholders as required under applicable Nasdaq
listing rules. The Company has agreed to use its commercially reasonable efforts to obtain such shareholder approval (the “Shareholder
Approval”) as soon as practicable following the Closing, including by including a proposal for such approval in its next annual
or special meeting of shareholders (but excluding any special meeting to be held on or about February 2026), and in no event later than
nine (9) months after the Closing Date. If Shareholder
Approval is not obtained within nine (9) months after the Closing Date,
then (i) the Company shall promptly cause sixty percent (60%) of the equity interests in QuantumSpeed Inc., a wholly-owned subsidiary
of the Company to which the acquired intellectual property assets will have been assigned, to be transferred to Adrian (or its designee)
free and clear of all encumbrances (other than restrictions under applicable securities laws), (ii) Adrian’s security interest in
such equity interests shall be automatically released, and (iii) Adrian shall retain full ownership of the 3,000,000 shares of common
stock previously issued at Closing and the Adrian Note, without any obligation to return, cancel, or forfeit the same. For the avoidance
of doubt, in such event, no alternative consideration will be provided in lieu of the Contingent Shares.
All such issuances were exempt from the registration requirements of the
Securities Act of 1933, as amended (the “Securities Act”). The securities were offered and sold in reliance on the exemption
provided by Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. Each purchaser represented that it was an
“accredited investor” (as defined in Rule 501(a) of Regulation D) or otherwise qualified under applicable exemptions, and
the Company did not engage in any general solicitation or advertising in connection with the offers or sales. No underwriters were involved
in the transactions.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.