Datavault AI Inc. Annual report [Section 13 and 15(d), not S-K Item 405]

Annual report [Section 13 and 15(d), not S-K Item 405]

Subsequent Events

Subsequent Events	12 Months Ended
Dec. 31, 2024
Subsequent Events
Subsequent Events	13.Subsequent Events CSI Purchase Agreement Deposit Pursuant to the CSI Purchase Agreement, on January 2, 2025, the Company paid a break-up fee to CSI of $1,000,000 by depositing the payment with the designated escrow agent. The payment is being made in contemplation of the CSI Asset Acquisition. Nathaniel Bradley Inducement The Company granted Mr. Bradley, effective January 2, 2025, an inducement award agreement (the “Inducement Award Agreement”), pursuant to which Mr. Bradley was granted 1,200,000 units of restricted stock of the Company (the “Units”) as an inducement material to Mr. Bradley’s entering into employment with the Company. The Units were approved by the Board and granted outside of the Company’s 2020 Stock Incentive Plan and 2018 Long-Term Stock Incentive Plan in accordance with Nasdaq Listing Rule 5635(c)(4). The Inducement Award Agreement contemplates half of the Units vesting in equal 3-month installments over a 36-month period beginning March 20, 2025, and the other half of the Units vesting upon the Company’s aggregate revenue equaling or exceeding $40 million over any trailing 12 calendar month period ending on or prior to the date that is 5 years from the grant date. Registered Direct Transaction On February 14, 2025 the Company closed an offering (the “February 2025 Offering”) pursuant to the securities purchase agreement (the “February 2025 Purchase Agreement”) with the investors (the “February 2025 Investors”). In the February 2025 Offering, the Company issued and sold to the February 2025 Investors in a registered direct offering, (a) an aggregate of 4,757,126 shares of common stock, par value $0.0001 per share of the Company, and (b) common stock purchase warrants (the “February 2025 Warrants”, and together with the Shares, the “February 2025 Securities”) exercisable for an aggregate of up to 4,757,126 shares of common stock, at an exercise price of $1.14 per share (the “February 2025 Warrant Shares”) at a combined offering price of $1.14 per share and accompanying February 2025 Warrant, for aggregate gross proceeds of approximately $5.4 million. As a result of the February 2025 Offering, the Company paid $407,000 of the proceeds to pay down the DV Convertible Note. The February 2025 Warrants are immediately exercisable upon issuance and will expire on the fifth anniversary of the issuance date of the warrants. The February 2025 Warrants may be exercised, in certain circumstances, on a cashless basis pursuant to the formula contained in the February 2025 Warrants. The Securities issued in the registered direct offering and the February 2025 Warrant Shares issuable upon exercise of the February 2025 Warrants are being offered pursuant to the Company’s shelf registration statement on Form S-3 (File 333-267211) (the “Shelf Registration Statement”), initially filed by the Company with the SEC on September 1, 2022 and declared effective on September 13, 2022. Obligations Under the Purchase Agreement Under the February 2025 Purchase Agreement, the Company agreed, subject to certain exceptions, (i) not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of its shares of common stock or securities convertible into common stock until 30 days after the closing date of the February 2025 Offering, and (ii) not issue certain securities if the issuance would constitute a variable rate transaction for a period of 4 months from the closing date of the February 2025 Offering, in each case unless the Company is required to complete a financing prior to the applicable date in order to satisfy Nasdaq’s continued listing requirements. Placement Agency Agreement In connection with the February 2025 Offering, on February 13, 2025, the Company entered into a placement agency agreement (the “February 2025 Placement Agency Agreement”) with Maxim Group LLC (the “Placement Agent”), pursuant to which the Placement Agent agreed to act as placement agent on a “reasonable best efforts” basis in connection with the February 2025 Offering. Pursuant to the February 2025 Placement Agency Agreement, the Company agreed to pay the Placement Agent an aggregate fee equal to 7.0% of the gross proceeds raised in the February 2025 Offering and reimburse the Placement Agent an amount up to $75,000 for expenses in connection with the February 2025 Offering. The Company also issued the Placement Agent a private warrant (the “Placement Agent Warrant”) to purchase up to 5.0% of the aggregate number of Securities sold in the February 2025 Offering, or warrants to purchase up to 475,713 shares of common stock (such shares, the “Placement Agent Warrant Shares”), at an exercise price equal to 125.0% of the offering price per share of common stock and accompanying Warrant, or $1.425 per share. The Placement Agent Warrants will be exercisable 6 months after the commencement of sales in the February 2025 Offering and will expire on the five year anniversary of the initial exercise date. 13.Subsequent Events, continued February 26, 2025 RSA Grant to Employees, Directors and Officers On February 26, 2025, the Company granted 6,145,000 RSA awards from the 2018 Plan to employees, directors and officers of the Company with a grant date fair value of $1.04 per share. The award includes 2,155,000 performance-based grants to certain executives which will vest upon the achievement of revenue milestones with the remaining awards containing service-based vesting requirements and are earned in equal increments over the subsequent twelve quarters. Share Exchange Agreement On March 16, 2025, the Company, entered into a share exchange agreement (the “Share Exchange”) with NYIAX, Inc., a Delaware corporation (“NYIAX”), pursuant to which NYIAX shall exchange 900,000 shares of NYIAX’s common stock, par value $0.0001 per share, for aggregate consideration of up to 5,000,000 shares of common stock of the Company, par value $0.0001 per share. The Share Exchange, as full consideration for the sale, assignment, transfer and delivery of the shares by NYIAX to the Company, the Company issued to NYIAX (i) 3,000,000 newly issued, fully paid and nonassessable shares of the Company’s common stock (the “Closing Shares”), and (ii) 2,000,000 newly issued, fully paid and nonassessable shares of the Company’s common stock (the “Additional Shares”). The Closing Shares are issued in four equal quarterly tranches starting from the closing. The Additional Shares shall be issued only upon completion of a complete advertising cycle for a third party clientele, and upon the parties’ mutual written agreement that the Adio Platform has been integrated into the NYIAX Platform upon completion of the advertising cycle. The Additional Shares shall be issued within thirty (30) days from the completion of the integration. The Share Exchange includes customary representations and warranties and various customary covenants and closing conditions that are subject to certain limitations, including, without limitation, certain agreements. Intellectual Property Cross-License Agreement In connection with the Share Exchange, on March 16, 2025, the Company, entered into a white label, co-marketing and intellectual property cross-license agreement (the “License Agreement”) with NYIAX, pursuant to which the Company received a non-exclusive license under certain of NYIAX’s jointly owned patent rights and know-how, and a non-exclusive license to white label NYIAX’s proprietary software-as-a-service advertising brokerage platform, all within the field of data, information and asset monetization and exchange. In exchange, the Company granted to NYIAX a non-exclusive license under certain of the Company’s wholly owned patent rights, know-how and trademarks, including with respect to the Company’s Adio Platform, in the field of advertising buying, selling and brokerage. Pursuant to the License Agreement, as consideration for the services provided by NYIAX pursuant to the License Agreement and the rights to access and use the NYIAX Platform granted to the Company, and upon the terms and subject to all of the conditions contained in the License Agreement, the Company shall issue to NYIAX 2,530,000 newly issued, fully paid and nonassessable shares (such shares, the “Consideration Shares”) of the Company’s common stock. Pursuant to the License Agreement, in consideration of the rights granted to NYIAX under the License Agreement, NYIAX shall pay to the Company a license fee in the form of a convertible promissory note in the aggregate amount $2,500,000 (the “NYIAX Convertible Note”). The NYIAX Convertible Note is due on the first anniversary of the closing. NYIAX agreed to pay interest to the Company on the aggregate unconverted and then outstanding principal amount of the NYIAX Convertible Note at the rate of four percent (4%) per annum, accruing from the closing. The NYIAX Convertible Note may be prepaid in full at NYIAX’s election. 13.Subsequent Events, continued The NYIAX Convertible Note will automatically convert at the earlier of (i) the maturity date, and (ii) the first underwritten public offering of NYIAX pursuant to an effective registration statement under the Securities Act, covering the offer and sale by NYIAX of its equity securities, as a result of or following which NYIAX shall be a reporting issuer under the Securities Exchange Act of 1934, as amended, and NYIAX common stock is listed on the Trading Market (as defined in the Convertible Note), at a conversion price of $2.00 per share. The License Agreement includes customary representations and warranties and various customary covenants and closing conditions that are subject to certain limitations, including, without limitation, certain agreements. Software Development Agreement In connection with the Share Exchange, on March 16, 2025, the Company, entered into a software development agreement (the “Software Development Agreement”) with NYIAX, pursuant to which NYIAX has engaged the Company to develop certain software and provide certain additional professional services as the parties will agree under one or more statements of work. The Software Development Agreement includes customary representations and warranties and various customary covenants and closing conditions that are subject to certain limitations, including, without limitation, certain agreements. Second Amendment to the CSI Asset Purchase Agreement As previously disclosed, on December 19, 2024, the Company entered into an asset purchase agreement, as amended by that certain amendment to the asset purchase agreement, dated as of December 30, 2024 (the “CSI Asset Purchase Agreement”), with CSI, pursuant to which the Company has agreed to purchase, assume and accept from CSI all of the rights, title and interests in, to and under the assets and interests used in the acquired business and products and services solely to the extent they utilize the transferred assets, including CSI’s customer contracts, trademarks, and other intellectual property. On February 25, 2025, the Company and CSI entered into a second amendment to the CSI Asset Purchase Agreement (the “Second Amendment”). Pursuant to the second amendment, the closing cash consideration was reduced to $5,000,000 and as consideration, the parties agreed to a payment at Closing of $5,000,000 payable in the form of the convertible note (the “CSI Initial Convertible Note”). The Company will issue the CSI Initial Convertible Note in an aggregate principal amount of $5,000,000, due on the second anniversary of the closing. The Company agreed to pay interest to CSI on the aggregate unconverted and then outstanding principal amount of the CSI Initial Convertible Note at the rate of ten percent (10%) per annum. If the CSI Initial Convertible Note has not been satisfied in full within three (3) months after the closing date, then at CSI’s option, it shall be convertible to common stock of the Company, par value $0.0001 per share, in increments of $500,000, at a price of $1.14 per share. The Company shall also repay the principal amount and all accrued interest under the CSI Initial Convertible Note in full, without a penalty, within three (3) business days after the Company raises an additional amount of capital totaling at least $15,000,000, after the Company shall have closed an initial offering or financings resulting in aggregate gross proceeds to the Company of at least $15,000,000, from one or more investors and/or financial institutions, by no later than March 31, 2025. The parties agreed that the Company will inform the stockholders of the Company of the receipt of the Stockholder Consent (as defined in the Asset Purchase Agreement) by preparing and filing with the U.S. Securities and Exchange Commission (“SEC”), within two (2) business days after the Company files its Annual Report on Form 10-K, an information statement with respect thereto. The parties further agreed that, at closing, the Company will deliver to CSI $500,000 as reimbursement of certain audit, review, reporting, legal, and other closing costs and expenses CSI has incurred and will incur associated with the closing. Pursuant to the Second Amendment, the parties will instruct the escrow agent to release the Breakup Fee of $1,000,000 from the escrow account and pay it to CSI within three (3) business days from the execution of the Second Amendment. Issuance of Senior 10% Original Issue Discount Convertible Promissory Notes The Company has entered into a securities purchase agreement (the “March 2025 Purchase Agreement”), dated March 31, 2025, with a certain investor (the “March 2025 Investors”), relating to the issuance of senior secured convertible notes in the aggregate principal amount of $16,666,665 (collectively, the “March 2025 Notes”). On the initial closing date, the Company will issue a note in the principal amount of $5,555,555 (the “March 2025 Initial Note”) with the initial warrants for an aggregate subscription amount of $5,000,000. On or after the date that is 20 calendar days after the mailing by the Company of a Definitive Information Statement on Schedule 14(c) with respect to approval, by written consent of the stockholders of the Company, of the issuance of the shares of common stock issuable upon conversion of the March 2025 Notes, the Company will issue the March 2025 Investor an additional March 2025 Note in the principal amount of $11,111,110 and the additional warrants with an aggregate subscription amount of $10,000,000. In a concurrent private placement, the purchasers agreed to purchase from the Company common stock purchase warrants (“March 2025 Warrants”) to purchase up to 19,346,101 shares of common stock of the Company, par value $0.0001 per share, of which Warrants to purchase up to 6,448,700 shares of common stock will be issued in connection with the issuance of the March 2025 Initial Note (the “March 2025 Initial Warrants”) and Warrants to purchase up to 12,897,401 shares of common stock will be issued in connection with the issuance of the March 2025 Additional Notes (the “March 2025 Additional Warrants”). In connection with the March 2025 Purchase Agreement, the Company entered into a Placement Agency Agreement with Maxim and agreedto pay 8% of the proceeds received from the sale of the March 2025 Notes and warrants as fees. The total fees to Maxim are estimated to be $1,200,000. Warrants The March 2025 Warrants will have an initial exercise price of $0.8615 per share. The March 2025 Initial Warrants will be exercisable upon effectiveness of Stockholder Approval and expire five (5) years from the date of such effectiveness. The March 2025 Additional Warrants will be issued in the Additional Closing, exercisable immediately upon issuance and expire five (5) years from the date of issuance. The exercise price of the March 2025 Warrants is subject to (a) downward adjustment in the event the Company issues shares of common stock or common stock equivalents having an effective price lower than the then current exercise price of the March 2025 Warrants, subject to certain exceptions and (b) standard, proportional adjustments in the event of certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate changes. The March 2025 Warrants contain 4.99/9.99% beneficial ownership limitations. The March 2025 Notes carry a 10% original issue discount, and have a term of 18 months from the original issuance date. No interest accrues during the term of the March 2025 Notes, unless an event of default occurs, in which case interest will accrue at a rate of 12% per annum or, if less, the highest amount permitted by law. The Company’s obligations under these March 2025 Notes rank senior to all other existing indebtedness and equity of the Company. Holders of the March 2025 Initial Notes can convert the March 2025 Initial Notes into shares of common stock any time after the date of effectiveness of stockholder approval and holders of the March 2025 Additional Notes can convert the March 2025 Additional Notes into shares of common stock any time after issuance. Holders of any March 2025 Notes can convert such March 2025 Notes into shares of common stock by providing a conversion notice. The March 2025 Notes are convertible at any time beginning on the date of Stockholder Approval at the option of the holders thereof, in whole or in part, into such number of shares of common stock at an initial conversion price equal to $1.00 per share (the “Conversion Price”). Alternatively, the March 2025 Notes are convertible at a price (the “Alternate Conversion Price”) equal to the greater of (x) the Floor Price (as defined below) and (y) 90% of the lowest volume weighted adjusted price of the shares of Common Stock (the “VWAP”) in the ten (10) trading days prior to the applicable conversion date (“Alternate Conversions”). The conversion price cannot fall below the floor price, which is set at $0.1794 per share of Common Stock. If the conversion price is lower than the floor price at the time a conversion notice is received, shares of common stock will be issued based on the floor price, and we will compensate the holder for any economic difference by adding such value back to the principal of the March 2025 Note. The economic difference is determined as the product of (i) the VWAP on the day the holder delivers the applicable conversion notice numbers of and (ii) the difference obtained by subtracting (a) the number of shares of common stock or to be delivered to the holder pursuant to the exercise notice and (b) the quotient obtained by dividing (x) the applicable conversion amount, by (y) the applicable alternative conversion price. Under the Notes, the Company is required to use up to 30% of the proceeds from future financings to redeem the Notes in an amount equal to the aggregate principal amount of the Notes being redeemed from such proceeds multiplied by 105%. The holder of each March 2025 Note does not have the right to convert any portion of the March 2025 Note if, upon conversion, the holder and any other attribution parties would collectively beneficially own more than 4.99% (the “Maximum Percentage”) of our outstanding shares of common stock immediately after giving effect to such conversion. The holder may increase or decrease the Maximum Percentage to any amount not exceeding 9.99% by providing us with written notice. However, (i) any increase in the Maximum Percentage will not take effect until the 61st day after such notice is delivered to the Company, and (ii) any adjustment to the Maximum Percentage will apply only to the holder and the other attribution parties. In connection with the March 2025 Purchase Agreement, the Company entered into the Subsidiary Guarantee in which the Company jointly, and severally, unconditionally and irrevocably, guarantee all obligations under the March 2025 Notes.

Subsequent Events

12 Months Ended

Dec. 31, 2024

Subsequent Events

Subsequent Events

13.Subsequent Events

CSI Purchase Agreement Deposit

Pursuant to the CSI Purchase Agreement, on January 2, 2025, the Company paid a break-up fee to CSI of $1,000,000 by depositing the payment with the designated escrow agent. The payment is being made in contemplation of the CSI Asset Acquisition.

Nathaniel Bradley Inducement

The Company granted Mr. Bradley, effective January 2, 2025, an inducement award agreement (the “Inducement Award Agreement”), pursuant to which Mr. Bradley was granted 1,200,000 units of restricted stock of the Company (the “Units”) as an inducement material to Mr. Bradley’s entering into employment with the Company. The Units were approved by the Board and granted outside of the Company’s 2020 Stock Incentive Plan and 2018 Long-Term Stock Incentive Plan in accordance with Nasdaq Listing Rule 5635(c)(4). The Inducement Award Agreement contemplates half of the Units vesting in equal 3-month installments over a 36-month period beginning March 20, 2025, and the other half of the Units vesting upon the Company’s aggregate revenue equaling or exceeding $40 million over any trailing 12 calendar month period ending on or prior to the date that is 5 years from the grant date.

Registered Direct Transaction

On February 14, 2025 the Company closed an offering (the “February 2025 Offering”) pursuant to the securities purchase agreement (the “February 2025 Purchase Agreement”) with the investors (the “February 2025 Investors”). In the February 2025 Offering, the Company issued and sold to the February 2025 Investors in a registered direct offering, (a) an aggregate of 4,757,126 shares of common stock, par value $0.0001 per share of the Company, and (b) common stock purchase warrants (the “February 2025 Warrants”, and together with the Shares, the “February 2025 Securities”) exercisable for an aggregate of up to 4,757,126 shares of common stock, at an exercise price of $1.14 per share (the “February 2025 Warrant Shares”) at a combined offering price of $1.14 per share and accompanying February 2025 Warrant, for aggregate gross proceeds of approximately $5.4 million. As a result of the February 2025 Offering, the Company paid $407,000 of the proceeds to pay down the DV Convertible Note.

The February 2025 Warrants are immediately exercisable upon issuance and will expire on the fifth anniversary of the issuance date of the warrants. The February 2025 Warrants may be exercised, in certain circumstances, on a cashless basis pursuant to the formula contained in the February 2025 Warrants.

The Securities issued in the registered direct offering and the February 2025 Warrant Shares issuable upon exercise of the February 2025 Warrants are being offered pursuant to the Company’s shelf registration statement on Form S-3 (File 333-267211) (the “Shelf Registration Statement”), initially filed by the Company with the SEC on September 1, 2022 and declared effective on September 13, 2022.

Obligations Under the Purchase Agreement

Under the February 2025 Purchase Agreement, the Company agreed, subject to certain exceptions, (i) not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of its shares of common stock or securities convertible into common stock until 30 days after the closing date of the February 2025 Offering, and (ii) not issue certain securities if the issuance would constitute a variable rate transaction for a period of 4 months from the closing date of the February 2025 Offering, in each case unless the Company is required to complete a financing prior to the applicable date in order to satisfy Nasdaq’s continued listing requirements.

Placement Agency Agreement

In connection with the February 2025 Offering, on February 13, 2025, the Company entered into a placement agency agreement (the “February 2025 Placement Agency Agreement”) with Maxim Group LLC (the “Placement Agent”), pursuant to which the Placement Agent agreed to act as placement agent on a “reasonable best efforts” basis in connection with the February 2025 Offering. Pursuant to the February 2025 Placement Agency Agreement, the Company agreed to pay the Placement Agent an aggregate fee equal to 7.0% of the gross proceeds raised in the February 2025 Offering and reimburse the Placement Agent an amount up to $75,000 for expenses in connection with the February 2025 Offering. The Company also issued the Placement Agent a private warrant (the “Placement Agent Warrant”) to purchase up to 5.0% of the aggregate number of Securities sold in the February 2025 Offering, or warrants to purchase up to 475,713 shares of common stock (such shares, the “Placement Agent Warrant Shares”), at an exercise price equal to 125.0% of the offering price per share of common stock and accompanying

Warrant, or $1.425 per share. The Placement Agent Warrants will be exercisable 6 months after the commencement of sales in the February 2025 Offering and will expire on the five year anniversary of the initial exercise date.

13.Subsequent Events, continued

February 26, 2025 RSA Grant to Employees, Directors and Officers

On February 26, 2025, the Company granted 6,145,000 RSA awards from the 2018 Plan to employees, directors and officers of the Company with a grant date fair value of $1.04 per share. The award includes 2,155,000 performance-based grants to certain executives which will vest upon the achievement of revenue milestones with the remaining awards containing service-based vesting requirements and are earned in equal increments over the subsequent twelve quarters.

Share Exchange Agreement

On March 16, 2025, the Company, entered into a share exchange agreement (the “Share Exchange”) with NYIAX, Inc., a Delaware corporation (“NYIAX”), pursuant to which NYIAX shall exchange 900,000 shares of NYIAX’s common stock, par value $0.0001 per share, for aggregate consideration of up to 5,000,000 shares of common stock of the Company, par value $0.0001 per share.

The Share Exchange, as full consideration for the sale, assignment, transfer and delivery of the shares by NYIAX to the Company, the Company issued to NYIAX (i) 3,000,000 newly issued, fully paid and nonassessable shares of the Company’s common stock (the “Closing Shares”), and (ii) 2,000,000 newly issued, fully paid and nonassessable shares of the Company’s common stock (the “Additional Shares”). The Closing Shares are issued in four equal quarterly tranches starting from the closing.

The Additional Shares shall be issued only upon completion of a complete advertising cycle for a third party clientele, and upon the parties’ mutual written agreement that the Adio Platform has been integrated into the NYIAX Platform upon completion of the advertising cycle. The Additional Shares shall be issued within thirty (30) days from the completion of the integration.

The Share Exchange includes customary representations and warranties and various customary covenants and closing conditions that are subject to certain limitations, including, without limitation, certain agreements.

Intellectual Property Cross-License Agreement

In connection with the Share Exchange, on March 16, 2025, the Company, entered into a white label, co-marketing and intellectual property cross-license agreement (the “License Agreement”) with NYIAX, pursuant to which the Company received a non-exclusive license under certain of NYIAX’s jointly owned patent rights and know-how, and a non-exclusive license to white label NYIAX’s proprietary software-as-a-service advertising brokerage platform, all within the field of data, information and asset monetization and exchange. In exchange, the Company granted to NYIAX a non-exclusive license under certain of the Company’s wholly owned patent rights, know-how and trademarks, including with respect to the Company’s Adio Platform, in the field of advertising buying, selling and brokerage.

Pursuant to the License Agreement, as consideration for the services provided by NYIAX pursuant to the License Agreement and the rights to access and use the NYIAX Platform granted to the Company, and upon the terms and subject to all of the conditions contained in the License Agreement, the Company shall issue to NYIAX 2,530,000 newly issued, fully paid and nonassessable shares (such shares, the “Consideration Shares”) of the Company’s common stock.

Pursuant to the License Agreement, in consideration of the rights granted to NYIAX under the License Agreement, NYIAX shall pay to the Company a license fee in the form of a convertible promissory note in the aggregate amount $2,500,000 (the “NYIAX Convertible Note”). The NYIAX Convertible Note is due on the first anniversary of the closing. NYIAX agreed to pay interest to the Company on the aggregate unconverted and then outstanding principal amount of the NYIAX Convertible Note at the rate of four percent (4%) per annum, accruing from the closing. The NYIAX Convertible Note may be prepaid in full at NYIAX’s election.

13.Subsequent Events, continued

The NYIAX Convertible Note will automatically convert at the earlier of (i) the maturity date, and (ii) the first underwritten public offering of NYIAX pursuant to an effective registration statement under the Securities Act, covering the offer and sale by NYIAX of its equity securities, as a result of or following which NYIAX shall be a reporting issuer under the Securities Exchange Act of 1934, as amended, and NYIAX common stock is listed on the Trading Market (as defined in the Convertible Note), at a conversion price of $2.00 per share.

The License Agreement includes customary representations and warranties and various customary covenants and closing conditions that are subject to certain limitations, including, without limitation, certain agreements.

Software Development Agreement

In connection with the Share Exchange, on March 16, 2025, the Company, entered into a software development agreement (the “Software Development Agreement”) with NYIAX, pursuant to which NYIAX has engaged the Company to develop certain software and provide certain additional professional services as the parties will agree under one or more statements of work.

The Software Development Agreement includes customary representations and warranties and various customary covenants and closing conditions that are subject to certain limitations, including, without limitation, certain agreements.

Second Amendment to the CSI Asset Purchase Agreement

As previously disclosed, on December 19, 2024, the Company entered into an asset purchase agreement, as amended by that certain amendment to the asset purchase agreement, dated as of December 30, 2024 (the “CSI Asset Purchase Agreement”), with CSI, pursuant to which the Company has agreed to purchase, assume and accept from CSI all of the rights, title and interests in, to and under the assets and interests used in the acquired business and products and services solely to the extent they utilize the transferred assets, including CSI’s customer contracts, trademarks, and other intellectual property.

On February 25, 2025, the Company and CSI entered into a second amendment to the CSI Asset Purchase Agreement (the “Second Amendment”). Pursuant to the second amendment, the closing cash consideration was reduced to $5,000,000 and as consideration, the parties agreed to a payment at Closing of $5,000,000 payable in the form of the convertible note (the “CSI Initial Convertible Note”). The Company will issue the CSI Initial Convertible Note in an aggregate principal amount of $5,000,000, due on the second anniversary of the closing. The Company agreed to pay interest to CSI on the aggregate unconverted and then outstanding principal amount of the CSI Initial Convertible Note at the rate of ten percent (10%) per annum. If the CSI Initial Convertible Note has not been satisfied in full within three (3) months after the closing date, then at CSI’s option, it shall be convertible to common stock of the Company, par value $0.0001 per share, in increments of $500,000, at a price of $1.14 per share. The Company shall also repay the principal amount and all accrued interest under the CSI Initial Convertible Note in full, without a penalty, within three (3) business days after the Company raises an additional amount of capital totaling at least $15,000,000, after the Company shall have closed an initial offering or financings resulting in aggregate gross proceeds to the Company of at least $15,000,000, from one or more investors and/or financial institutions, by no later than March 31, 2025.

The parties agreed that the Company will inform the stockholders of the Company of the receipt of the Stockholder Consent (as defined in the Asset Purchase Agreement) by preparing and filing with the U.S. Securities and Exchange Commission (“SEC”), within two (2) business days after the Company files its Annual Report on Form 10-K, an information statement with respect thereto. The parties further agreed that, at closing, the Company will deliver to CSI $500,000 as reimbursement of certain audit, review, reporting, legal, and other closing costs and expenses CSI has incurred and will incur associated with the closing.

Pursuant to the Second Amendment, the parties will instruct the escrow agent to release the Breakup Fee of $1,000,000 from the escrow account and pay it to CSI within three (3) business days from the execution of the Second Amendment.

Issuance of Senior 10% Original Issue Discount Convertible Promissory Notes

The Company has entered into a securities purchase agreement (the “March 2025 Purchase Agreement”), dated March 31, 2025, with a certain investor (the “March 2025 Investors”), relating to the issuance of senior secured convertible notes in the aggregate principal amount of $16,666,665 (collectively, the “March 2025 Notes”). On the initial closing date, the Company will issue a note in the principal amount of $5,555,555 (the “March 2025 Initial Note”) with the initial warrants for an aggregate subscription amount of $5,000,000. On or after the date that is 20 calendar days after the mailing by the Company of a Definitive Information Statement on Schedule 14(c) with respect to approval, by written consent of the stockholders of the Company, of the issuance of the shares of common stock issuable upon conversion of the March 2025 Notes, the Company will issue the March 2025 Investor an additional March 2025 Note in the principal amount of $11,111,110 and the additional warrants with an aggregate subscription amount of $10,000,000. In a concurrent private placement, the purchasers agreed to purchase from the Company common stock purchase warrants (“March 2025 Warrants”) to purchase up to 19,346,101 shares of common stock of the Company, par value $0.0001 per share, of which Warrants to purchase up to 6,448,700 shares of common stock will be issued in connection with the issuance of the March 2025 Initial Note (the “March 2025 Initial Warrants”) and Warrants to purchase up to 12,897,401 shares of common stock will be issued in connection with the issuance of the March 2025 Additional Notes (the “March 2025 Additional Warrants”).

In connection with the March 2025 Purchase Agreement, the Company entered into a Placement Agency Agreement with Maxim and agreedto pay 8% of the proceeds received from the sale of the March 2025 Notes and warrants as fees. The total fees to Maxim are estimated to be $1,200,000.

Warrants

The March 2025 Warrants will have an initial exercise price of $0.8615 per share. The March 2025 Initial Warrants will be exercisable upon effectiveness of Stockholder Approval and expire five (5) years from the date of such effectiveness. The March 2025 Additional Warrants will be issued in the Additional Closing, exercisable immediately upon issuance and expire five (5) years from the date of issuance. The exercise price of the March 2025 Warrants is subject to (a) downward adjustment in the event the Company issues shares of common stock or common stock equivalents having an effective price lower than the then current exercise price of the March 2025 Warrants, subject to certain exceptions and (b) standard, proportional adjustments in the event of certain events, such as stock splits, combinations, dividends, distributions, reclassifications, mergers or other corporate changes.

The March 2025 Warrants contain 4.99/9.99% beneficial ownership limitations.

The March 2025 Notes carry a 10% original issue discount, and have a term of 18 months from the original issuance date. No interest accrues during the term of the March 2025 Notes, unless an event of default occurs, in which case interest will accrue at a rate of 12% per annum or, if less, the highest amount permitted by law. The Company’s obligations under these March 2025 Notes rank senior to all other existing indebtedness and equity of the Company.

Holders of the March 2025 Initial Notes can convert the March 2025 Initial Notes into shares of common stock any time after the date of effectiveness of stockholder approval and holders of the March 2025 Additional Notes can convert the March 2025 Additional Notes into shares of common stock any time after issuance. Holders of any March 2025 Notes can convert such March 2025 Notes into shares of common stock by providing a conversion notice. The March 2025 Notes are convertible at any time beginning on the date of Stockholder Approval at the option of the holders thereof, in whole or in part, into such number of shares of common stock at an initial conversion price equal to $1.00 per share (the “Conversion Price”). Alternatively, the March 2025 Notes are convertible at a price (the “Alternate Conversion Price”) equal to the greater of (x) the Floor Price (as defined below) and (y) 90% of the lowest volume weighted adjusted price of the shares of Common Stock (the “VWAP”) in the ten (10) trading days prior to the applicable conversion date (“Alternate Conversions”). The conversion price cannot fall below the floor price, which is set at $0.1794 per share of Common Stock. If the conversion price is lower than the floor price at the time a conversion notice is received, shares of common stock will be issued based on the floor price, and we will compensate the holder for any economic difference by adding such value back to the principal of the March 2025 Note. The economic difference is determined as the product of (i) the VWAP on the day the holder delivers the applicable conversion notice numbers of and (ii) the difference obtained by subtracting (a) the number of shares of common stock or to be delivered to the holder pursuant to the exercise notice and (b) the quotient obtained by dividing (x) the applicable conversion amount, by (y) the applicable alternative conversion price.

Under the Notes, the Company is required to use up to 30% of the proceeds from future financings to redeem the Notes in an amount equal to the aggregate principal amount of the Notes being redeemed from such proceeds multiplied by 105%.

The holder of each March 2025 Note does not have the right to convert any portion of the March 2025 Note if, upon conversion, the holder and any other attribution parties would collectively beneficially own more than 4.99% (the “Maximum Percentage”) of our outstanding shares of common stock immediately after giving effect to such conversion. The holder may increase or decrease the Maximum Percentage to any amount not exceeding 9.99% by providing us with written notice. However, (i) any increase in the Maximum Percentage will not take effect until the 61st day after such notice is delivered to the Company, and (ii) any adjustment to the Maximum Percentage will apply only to the holder and the other attribution parties.

In connection with the March 2025 Purchase Agreement, the Company entered into the Subsidiary Guarantee in which the Company jointly, and severally, unconditionally and irrevocably, guarantee all obligations under the March 2025 Notes.