Note 5 – Stockholders’ Equity (Deficit)

The Company’s authorized capital as of June 30, 2025 was 250,000,000 shares of common stock, par value $0.001 per share, and 15,000,000 shares of preferred stock, par value $0.01 per share.

Common Stock

2025 Private Placement of Equity Facility

On May 14, 2025, and as amended on June 10, 2025, the Company entered into a common shares purchase agreement (the “Purchase Agreement”) with investors (collectively, the “Investors”) relating to a committed equity facility (the “Facility”). Pursuant to the Purchase Agreement, the Company has the right from time to time at its option to sell to the Investors up to $20 million of its common stock subject to certain conditions and limitations set forth in the Purchase Agreement.

Sales of the shares of common stock to the Investors under the Purchase Agreement, and the timing of any sales, will be determined by the Company from time to time in its sole discretion and will depend on a variety of factors, including, among other things, market conditions, the trading price of the common stock and determinations by the Company regarding the use of proceeds from the sale of such shares of common stock. The net proceeds from any sales under the Purchase Agreement will depend on the frequency with, and prices at, which the shares of common stock are sold to the Investors.

The purchase price of the shares of common stock that the Company elects to sell to the Investors pursuant to the Purchase Agreement will be 93% of the volume weighted average price of the shares of common stock during the applicable purchase date on which the Company has timely delivered written notice to the Investors directing it to purchase shares of common stock under the Purchase Agreement.

In connection with the execution of the Purchase Agreement, the Company agreed to issue to the Investors pre-funded warrants to purchase an aggregate of 300,000 shares of common stock as consideration for their irrevocable commitment to purchase the shares of common stock upon the terms and subject to the satisfaction of the conditions set forth in the Purchase Agreement.

2025 Warrant Inducement Transaction

On February 26, 2025, the Company received gross proceeds of $686,000 before deducting placement agent fees and other offering expenses of $70,000 in relation to a warrant exercise inducement agreement with certain holders of existing warrants. The existing warrants were exercisable into 302,069 shares of the Company’s common stock at $4.35 per share. The holders agreed to exercise these existing warrants at a reduced exercise price of $2.27 per share in exchange for the Company’s agreement to issue the holders new warrants (the “Inducement Warrants”) exercisable for an aggregate of up to 604,138 shares of common stock.

The Inducement Warrants consist of (i) new Series A Inducement Warrants, representing warrants to purchase up to 302,069 shares of Common Stock at $2.02 per share exercisable immediately upon issuance with a term of five years from the date of issuance, and (ii) new Series B Inducement Warrants, representing warrants to purchase up to 302,069 shares of common stock at $2.02 per share exercisable immediately upon issuance with a term of eighteen months from the date of issuance. In addition, the Company issued warrants to the placement agent to purchase 21,145 shares of common stock at $2.8375 per share exercisable immediately upon issuance with a term of five years from the date of issuance.

The Company determined that under ASC 815, the 2025 inducement and placement agent warrants are considered indexed to the Company’s own stock and eligible for an exception from derivative accounting. Accordingly, the fair value of the 2025 inducement and placement agent warrants are classified as equity.

The Company recognized the aggregate effect of the modification of warrants and grant of inducement warrants of $1.1 million as an equity issuance cost and the accounting effect is recognized in the Statement of Stockholders’ Equity (Deficit).

Preferred Stock

2025 Private Placement of Series L Convertible Preferred Stock and Warrants

On May 12, 2025, and as amended on May 21, 2025, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with the purchasers identified therein (collectively, the “Purchasers”) providing for the issuance and sale to the Purchasers of (i) 6,611.11 shares of the Company’s Series L 10% Convertible Preferred Stock (the “Series L Convertible Preferred Stock”), (ii) warrants to purchase up to a number of shares of common stock of the Company equal to 100% of the shares of the Company’s common stock issuable upon conversion of the shares of Series L Convertible Preferred Stock (the “Common Warrants”), and (iii) warrants to purchase up to a number of shares of Company’s common stock equal to the number of Greenshoe Conversion Shares (as defined in the Securities Purchase Agreement) issuable upon exercise of the Greenshoe Right (as defined below) (the “Vesting Warrants” and together with the Common Warrants, the “Warrants”), with an aggregate stated value of $6,611,111, for an aggregate purchase price of $5,950,000.

Pursuant to the Securities Purchase Agreement, each Purchaser may elect to purchase shares of Series L Convertible Preferred Stock with an aggregate stated value of up to $24,018,349 (the “Greenshoe Rights”) for an aggregate purchase price of $21,616,514, subject to adjustments, as further described in the Securities Purchase Agreement. Each Purchaser is entitled to exercise its respective Greenshoe Rights for an amount of Series L Convertible Preferred Stock equal to the ratio of such Purchaser’s original subscription amount to the original aggregate subscription amount of all Purchasers.

On May 12, 2025, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series L 10% Convertible Preferred Stock (the “Certificate of Designation”) with the Secretary of State of the State of Delaware. On May 22, 2025, the Company filed with the Secretary of State of the State of Delaware a Certificate of Increase (the “Certificate of Increase”) increasing the shares of Series L 10% Convertible Preferred Stock as designated in the Certificate of Designations from 28,056 shares to 30,630 shares. The Certificate of Designation creates and specifies the rights of Series L 10% Convertible Preferred Stock, including the terms and conditions on which shares of such preferred stock would convert into shares of our common stock, as well as its liquidation preference.

Pursuant to the Certificate of Designation and subject to certain ownership limitations, the Series L Convertible Preferred Stock may be converted at any time at the option of the Purchasers into shares of the Company’s common stock at an initial conversion price of $2.043, subject to certain conditions, as further described in the Certificate of Designation. In addition, the holders of the Series L Convertible Preferred Stock are entitled to receive cumulative dividends at the rate per share (as a percentage of the stated value per share) of 10% per annum until May 11, 2026, increasing to 12% per annum thereafter, payable quarterly on January 1, April 1, July 1 and October 1, beginning on the first date after the date of issuance of the Series L Convertible Preferred Stock and on each Conversion Date (as defined in the Certificate of Designation), in cash, shares of the Company’s common stock (subject to the Company’s satisfaction of the conditions set forth in the Certificate of Designation), or a combination thereof. Upon the occurrence of certain triggering events, each holder has the right to require the Company to redeem the Preferred Shares at a premium, in accordance with and subject to certain conditions as further described in the Certificate of Designation.

Pursuant to the Securities Purchase Agreement, each Purchaser was issued (i) a Common Warrant, each to purchase up to a number of shares of the Company’s common stock equal to 100% of the Conversion Shares (as defined in the Securities Purchase Agreement) underlying the Preferred Shares issued to such Purchaser and (ii) a Vesting Warrant (the exercisability of which shall vest ratably from time to time in proportion to the Purchaser’s (or its permitted assigns’) exercise of such Purchaser’s Greenshoe Rights pursuant to Section 2.4 of the Purchase Agreement), each to purchase up to a number of shares of the Company’s common stock equal to the number of Greenshoe Conversion Shares (as defined in the Securities Purchase Agreement) applicable to such Purchaser, in accordance with the Securities Purchase Agreement. An aggregate of 3,235,978 Common Warrants were issued with an initial exercise price of $2.043 per share, they are exercisable, subject to certain ownership limitations, immediately upon issuance and have a term of exercise equal to five years. An aggregate of 11,576,406 Vesting Warrants were issued with an initial exercise price of $2.043 per share, they are exercisable subject to certain vesting and ownership limitations, and have a term of exercise equal to five years from the date that the applicable warrant shares vest.

The Preferred Shares and Warrants both have full ratchet price protection and are subject to other adjustments, as further described in the Certificate of Designation or the Warrants, as applicable, subject, solely with respect to adjustments in connection with the exercise of Greenshoe Rights, a floor price of $0.454 per share (subject to adjustment for reverse and forward splits, recapitalizations and similar transactions).

The Company and the Purchasers entered into a registration rights agreement pursuant to which the Company agreed to file a registration statement with the Securities and Exchange Commission covering the public resale of the common stock issuable upon conversion of the Series L Convertible Preferred Stock and upon exercise of the Warrants. The Company has agreed to file a registration statement within 30 days after the initial closing and after each closing of the exercise of a Greenshoe Right in accordance with the Securities Purchase Agreement, to become effective no later than 90 days after filing. If these deadlines are not met, the Company will be liable for liquidated damages of 1.5% of the subscription amount paid by each Purchaser pursuant to the Securities Purchase Agreement. Further, if the Company fails to pay such liquidated damages within 7 days from the date payable, the Company will pay interest thereon at the prime rate plus 12% to each holder of the registrable securities.

Pursuant to the Securities Purchase Agreement, the Company agreed to hold a meeting of its stockholders at the earliest practical date after the execution of the Securities Purchase Agreement for the purpose of obtaining stockholder approval for the issuance, in the aggregate, of more than 19.99% of the number of shares of the Company’s common stock outstanding on the date of the initial closing (“Shareholder Approval”). In connection with the required Shareholder Approval, all of the Company’s officers and directors (each a “Voting Agreement Party”) entered into a Voting Agreement pursuant to which each Voting Agreement Party agreed to vote all shares of voting stock over which the Voting Agreement Party has voting control in favor of any resolution presented to the stockholders of the Company seeking Shareholder Approval. Shareholder Approval was obtained on July 24, 2025.

Dividends to holders of the Series L Convertible Preferred Stock in the amount of $85,000 were declared and unpaid as of June 30, 2025.

Series C Preferred Stock

As of June 30, 2025, there were 96,230 shares of series C preferred stock, par value $0.01 per share (the “Series C Preferred Stock”) issued and outstanding.

As a result of numerous reverse stock-splits in previous years and the agreement terms for adjusting the rights of the related shares, the 96,230 shares of Series C Preferred Stock are convertible into an infinitesimal amount of common stock, have no voting rights, and in the event of liquidation, the holders of the Series C Preferred Stock would not participate in any distribution of the assets or surplus funds of the Company. The holders of Series C Preferred Stock also are not currently entitled to any dividends if and when declared by the Board. No dividends to holders of the Series C Preferred Stock were declared or unpaid through June 30, 2025.

Mezzanine Equity

2025 Private Placement of Series L Convertible Preferred Stock and Warrants

The May 12, 2025 private placement of Series L Convertible Preferred Stock and Warrants produced net proceeds of $5,441,000, which was allocated to mezzanine equity and additional paid in capital based on the relative fair value of the Series L Convertible Preferred Stock and Warrants at issuance, respectively. Series L Convertible Preferred Stock is classified as mezzanine equity as it is conditionally redeemable upon the occurrence of certain events that are not solely within the control of the Company, and upon such event, the Series L Convertible Preferred Stock would become redeemable at the option of the holders, while Warrants are classified as additional paid in capital. The relative fair values and allocation of net proceeds is below:

 Schedule of fair values and allocation of net proceeds

As Series L Convertible Preferred Stock is converted into common stock it is reclassified from mezzanine equity to additional paid in capital based on a pro-rata basis.