Note 5 – Stockholders’ Equity (Deficit)

The Company’s authorized capital as of December 31, 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.

2025 Private Placement of Equity Facility (the “Committed Equity Facility”)

On May 14, 2025, and as amended on June 10, 2025, the Company entered into a common shares purchase agreement (the “Common Shares Purchase Agreement”) with investors (collectively, the “Investors”) relating to the Committed Equity Facility. Pursuant to the Common Shares 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 Common Shares Purchase Agreement.

Sales of the shares of common stock to the Investors under the Common Shares 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 Common Shares 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 Common Shares 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 Common Shares Purchase Agreement.

In connection with the execution of the Common Shares 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 Common Shares 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

Series C Preferred Stock

As of December 31, 2025 and 2024, 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 December 31, 2025.

Series L Preferred Stock and Warrants

As of December 31, 2025, there were 3,642 shares of Series L 10% Convertible Preferred Stock, par value $0.01 per share (the “Series L Preferred Stock”), issued and outstanding that were convertible into 6,847,354 shares of common stock using a conversion price of $0.5319 per share (the conversion price in effect as of December 31, 2025).

On May 12, 2025, the Company entered into a securities purchase agreement (as amended on May 21, 2025, the “Securities Purchase Agreement”) with certain purchasers (the “Purchasers”) providing for the issuance and sale of (i) 6,611.11 shares of the Company’s Series L Preferred Stock with an aggregate stated value of $6,611,111; (ii) warrants to purchase up to 3,235,976 shares of the Company’s common stock (the “Common Warrants”) with an initial exercise price of $2.043 per share, exercisable immediately subject to certain ownership limitations, with a term of five years; and (iii) warrants to purchase 11,756,406 shares of the Company’s common stock that vest upon exercise of the Greenshoe Right as defined below with an initial exercise price of $2.043 per share, exercisable immediately subject to certain vesting and ownership limitations, with a term of five years from the date that the applicable warrant shares vest (the “Vesting Warrants,” and together with the Common Warrants, the “2025 Warrants”). The conversion price was initially $2.043 per share and was subsequently adjusted to $0.5319 per share as of December 31, 2025 pursuant to the full-ratchet anti-dilution provisions described below. The aggregate purchase price of the Series L Preferred Stock and the 2025 Warrants was $5,950,000, and net proceeds were $5,441,000.

Pursuant to the Securities Purchase Agreement, each Purchaser may elect to purchase up to 24,018 additional shares of Series L 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. Each Purchaser is entitled to exercise its respective Greenshoe Rights in the ratio of such Purchaser’s original subscription amount to the original aggregate subscription amounts 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.

Pursuant to the Securities Purchase Agreement, each Purchaser was issued (i) a Common Warrant and (ii) a Vesting Warrant. An aggregate of 3,235,978 Common Warrants were issued and, an aggregate of 11,576,406 Vesting Warrants were issued.

The shares of Series L Preferred Stock and 2025 Warrants both have full-ratchet price and anti-dilution protections and are subject to other adjustments, as further described in the Certificate of Designation or the 2025 Warrants, as applicable, subject, solely with respect to adjustments in connection with the exercise of Greenshoe Rights, to a floor price of $0.454 per share (subject to adjustment for reverse and forward splits, recapitalizations and similar transactions). For the year ended December 31, 2025, the incremental change in the fair value of equity classified instruments upon reduction of exercise prices was determined to be $5,775,000, and was treated as a deemed dividend.

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 Preferred Stock and upon exercise of the 2025 Warrants. The Company 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. 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”). Shareholder Approval was obtained on July 24, 2025.

During the year ended December 31, 2025, Purchasers elected to exercise their Greenshoe Rights and purchased 5,833 additional shares of the Company’s Series L Preferred Stock with a stated value of $5,833,333 for a purchase price of $5,250,000. As a result of these transactions, the conversion price of the Series L Preferred Stock was reduced from $2.043 upon issuance to $0.5319 as of December 31, 2025. The conversion price adjustment constitutes a Dilutive Issuance (as defined in each of the Common Warrants and Vesting Warrants) and as a result, the exercise price of the 2025 Warrants have been decreased, and the number of warrant shares have been increased, such that the aggregate exercise price of the 2025 Warrants, after taking into account the decrease in the exercise price, shall be equal to the aggregate exercise price prior to such adjustment.

As of December 31, 2025, dividends to the holders of the Series L Preferred Stock in the amount of $320,000, which included 170,451 shares of common stock with a fair value of $91,000, were declared and paid.

Series L Convertible Preferred Stock initially classified as Mezzanine Equity

The May 2025 private placement of Series L Preferred Stock and 2025 Warrants described above was allocated to mezzanine equity and additional paid in capital based on the relative fair value of the Series L Preferred Stock and 2025 Warrants at issuance, respectively. Initially, upon the occurrence of certain triggering events, each Purchaser had the right to require the Company to redeem the shares of Series L Preferred Stock, which could require cash settlement upon events outside the Company’s control, as further described in the Certificate of Designation. Because the redemption provisions were not solely within the control of the Company, the Series L Convertible Preferred Stock was initially classified as mezzanine equity in accordance with ASC 480 and ASC 505-10-S99. In September 2025, all the holders of Series L Preferred Stock provided waivers and agreed to waive the rights to redemption set forth in the Certificate of Designation. Accordingly, the Series L Preferred Stock was reclassified from mezzanine equity to shareholders’ equity as it is no longer conditionally redeemable upon the occurrence of certain events that were not solely within the control of the Company.

Greenshoe Rights

The Greenshoe Rights, as additional investment rights linked to the Series L Convertible Preferred Stock, were initially classified as a liability under ASC 480 due to their association with the Preferred Stock’s redemption features, which could require cash settlement upon events outside the Company’s control. They were recognized at fair value of $28,736,000 upon issuance. In September 2025, following the waiver of redemption rights, the Greenshoe Rights were remeasured at a fair value of $17,323,000 and reclassified to additional paid-in capital within shareholders’ equity.