| Restatement of Quarterly Financial Statements (Unaudited) |
Note
10 – Restatement of Quarterly Financial Statements (Unaudited)
As
further described below, our unaudited financial statements covering the quarterly reporting periods during fiscal year 2025, consisting
of the quarters ended June 30, 2025, and September 30, 2025 have been restated to reflect the correction of material errors.
Restatement
Background
The
need for the restatement arose out of the results of certain financial analysis the Company performed in the course of preparing for
the audit of its December 31, 2025 financial statements. Upon reevaluation of the Greenshoe Rights connected to the Series L
Preferred Stock issued in the May 2025 private placement, it was determined that the Greenshoe Rights are purchase options of the
Series L 10% Convertible Preferred Stock, the Greenshoe Rights met the criteria for liability classification in accordance with ASC 480 because
they are exercised into Series L 10% Convertible Preferred Stock that is redeemable upon triggering events outside the
issuer’s control. Accordingly, the Greenshoe Rights required classification as a
liability and marked to market at each reporting date as required under GAAP. Therefore, the Company recognized other income
(expense) for the change in the fair value of the Greenshoe Rights liability at each reporting date, and reclassified the Greenshoe
Rights liability to equity as of the date of the redemption rights waiver.
Restatement
Adjustments
The
Company inadvertently did not classify the Greenshoe Rights as a liability, which led to accounting adjustments to correct the errors
identified. The Company is providing restated quarterly and year-to-date unaudited financial information for June 30, 2025, and September
30, 2025, in its audited financial statements for the year ended December 31, 2025. The following table summarizes the effect of the
errors on the Company’s balance sheets as of June 30, 2025, and September 30, 2025, and on the respective statements of operations
and statements of cash flows.
The
restated balance sheet line items for the second and third fiscal quarters of 2025 are as follows:
Schedule
of Restated Balance Sheet Line Items
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June 30, 2025 (Unaudited) |
|
| |
|
Originally Reported |
|
|
Adjustment |
|
|
Restated |
|
| Total Assets |
|
$ |
7,124,000 |
|
|
$ |
— |
|
|
$ |
7,124,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Greenshoe Rights liability |
|
|
— |
|
|
|
28,736,000 |
|
|
|
28,736,000 |
|
| Total Liabilities |
|
|
2,307,000 |
|
|
|
28,736,000 |
|
|
|
31,043,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Mezzanine Equity |
|
|
1,956,000 |
|
|
|
— |
|
|
|
1,956,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
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|
| Convertible Preferred stock |
|
|
1,000 |
|
|
|
— |
|
|
|
1,000 |
|
| Common stock |
|
|
3,000 |
|
|
|
— |
|
|
|
3,000 |
|
| Additional paid in capital |
|
|
700,378,000 |
|
|
|
— |
|
|
|
700,378,000 |
|
| Accumulated deficit |
|
|
(697,521,000 |
) |
|
|
(28,736,000 |
) |
|
|
(726,257,000 |
) |
| Total Stockholders’ Equity (Deficit) |
|
|
2,861,000 |
|
|
|
(28,736,000 |
) |
|
|
(25,875,000 |
) |
| Total Liabilities and Stockholders’ Equity (Deficit) |
|
$ |
7,124,000 |
|
|
$ |
— |
|
|
$ |
7,124,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
September 30, 2025 (Unaudited) |
|
| |
|
Originally Reported |
|
|
Adjustment |
|
|
Restated |
|
| Total Assets |
|
$ |
4,321,000 |
|
|
$ |
— |
|
|
$ |
4,321,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Greenshoe Rights liability |
|
|
— |
|
|
|
— |
|
|
|
— |
|
| Total Liabilities |
|
|
1,321,000 |
|
|
|
— |
|
|
|
1,321,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Convertible Preferred stock |
|
|
1,000 |
|
|
|
— |
|
|
|
1,000 |
|
| Common stock |
|
|
3,000 |
|
|
|
— |
|
|
|
3,000 |
|
| Additional paid in capital |
|
|
703,772,000 |
|
|
|
17,323,000 |
|
|
|
721,095,000 |
|
| Accumulated deficit |
|
|
(700,779,000 |
) |
|
|
(17,323,000 |
) |
|
|
(718,102,000 |
) |
| Total Stockholders’ Equity (Deficit) |
|
|
3,000,000 |
|
|
|
— |
|
|
|
3,000,000 |
|
| Total Liabilities and Stockholders’ Equity (Deficit) |
|
$ |
4,321,000 |
|
|
$ |
— |
|
|
$ |
4,321,000 |
|
The
restated line items of the statements of operations for the three months ended June 30, 2025, and September 30, 2025, are as follows:
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|
Three Months Ended June 30, 2025 (Unaudited) |
|
| |
|
Originally Reported |
|
|
Adjustment |
|
|
Restated |
|
| Loss from Operations |
|
$ |
(1,513,000 |
) |
|
$ |
— |
|
|
$ |
(1,513,000 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Loss on initial recognition of Greenshoe Rights liability |
|
|
— |
|
|
|
(28,736,000 |
) |
|
|
(28,736,000 |
) |
| Change in fair value of Greenshoe Rights liability |
|
|
|
|
|
|
|
|
|
|
|
|
| Total Other Income (Expense) |
|
|
80,000 |
|
|
|
(28,736,000 |
) |
|
|
(28,656,000 |
) |
| Net Loss |
|
|
(1,433,000 |
) |
|
|
(28,736,000 |
) |
|
|
(30,169,000 |
) |
| |
|
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|
|
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|
|
|
|
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| Dividend on Series L Preferred Stock |
|
|
(85,000 |
) |
|
|
— |
|
|
|
(85,000 |
) |
| Deemed dividend |
|
|
|
|
|
|
|
|
|
|
|
|
| Net Loss attributable to common stockholders’ |
|
|
(1,518,000 |
) |
|
|
(28,736,000 |
) |
|
|
(30,254,000 |
) |
| Net Loss Per Share - Basic and Diluted |
|
$ |
(0.55 |
) |
|
$ |
(10.37 |
) |
|
$ |
(10.92 |
) |
| Weighted average common shares outstanding - basic and diluted |
|
|
2,771,765 |
|
|
|
— |
|
|
|
2,771,765 |
|
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|
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|
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|
Three Months Ended September 30, 2025 (Unaudited) |
|
| |
|
Originally Reported |
|
|
Adjustment |
|
|
Restated |
|
| Loss from Operations |
|
$ |
(3,382,000 |
) |
|
$ |
— |
|
|
$ |
(3,382,000 |
) |
| Change in fair value of Greenshoe Rights liability |
|
|
— |
|
|
|
11,413,000 |
|
|
|
11,413,000 |
|
| Total Other Income (Expense) |
|
|
268,000 |
|
|
|
11,413,000 |
|
|
|
11,681,000 |
|
| Net Loss |
|
|
(3,114,000 |
) |
|
|
11,413,000 |
|
|
|
8,299,000 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Dividend on Series L Preferred Stock |
|
|
(144,000 |
) |
|
|
— |
|
|
|
(144,000 |
) |
| Deemed dividend |
|
|
— |
|
|
|
(4,058,000 |
) |
|
|
(4,058,000 |
) |
| Net Loss attributable to common stockholders’ |
|
|
(3,258,000 |
) |
|
|
7,355,000 |
|
|
|
4,097,000 |
|
| Net Loss Per Share - Basic and Diluted |
|
$ |
(0.83 |
) |
|
$ |
1.87 |
|
|
$ |
1.04 |
|
| Weighted average common shares outstanding - basic and diluted |
|
|
3,940,714 |
|
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|
— |
|
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|
3,940,714 |
|
The
restated line items of the statements of operations for the six months ended June 30, 2025; and the nine months ended September 30, 2025,
are as follows:
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|
Six Months Ended June 30, 2025 (Unaudited) |
|
| |
|
Originally Reported |
|
|
Adjustment |
|
|
Restated |
|
| Loss from Operations |
|
$ |
(3,445,000 |
) |
|
$ |
— |
|
|
$ |
(3,445,000 |
) |
| Loss on initial recognition of Greenshoe Rights liability |
|
|
— |
|
|
|
(28,736,000 |
) |
|
|
(28,736,000 |
) |
| Total Other Income (Expense) |
|
|
1,236,000 |
|
|
|
(28,736,000 |
) |
|
|
(27,500,000 |
) |
| Net Loss |
|
|
(2,209,000 |
) |
|
|
(28,736,000 |
) |
|
|
(30,945,000 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Dividend on Series L Preferred Stock |
|
|
(85,000 |
) |
|
|
— |
|
|
|
(85,000 |
) |
| Net Loss attributable to common stockholders’ |
|
|
(2,294,000 |
) |
|
|
(28,736,000 |
) |
|
|
(31,030,000 |
) |
| Net Loss Per Share - Basic and Diluted |
|
$ |
(0.90 |
) |
|
$ |
(11.22 |
) |
|
$ |
(12.12 |
) |
| Weighted average common shares outstanding - basic and diluted |
|
|
2,559,604 |
|
|
|
— |
|
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|
2,559,604 |
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Nine Months Ended September 30, 2025 (Unaudited) |
|
| |
|
Originally Reported |
|
|
Adjustment |
|
|
Restated |
|
| Loss from Operations |
|
$ |
(6,827,000 |
) |
|
$ |
— |
|
|
$ |
(6,827,000 |
) |
| Loss on initial recognition of Greenshoe Rights liability |
|
|
|
|
|
|
(28,736,000 |
) |
|
|
(28,736,000 |
) |
| Change in fair value of Greenshoe Rights liability |
|
|
— |
|
|
|
11,413,000 |
|
|
|
11,413,000 |
|
| Total Other Income (Expense) |
|
|
1,504,000 |
|
|
|
(17,323,000 |
) |
|
|
(15,819,000 |
) |
| Net Loss |
|
|
(5,323,000 |
) |
|
|
(17,323,000 |
) |
|
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(22,646,000 |
) |
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|
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| Dividend on Series L Preferred Stock |
|
|
(229,000 |
) |
|
|
— |
|
|
|
(229,000 |
) |
| Deemed dividend |
|
|
— |
|
|
|
(4,058,000 |
) |
|
|
(4,058,000 |
) |
| Net Loss attributable to common stockholders’ |
|
|
(5,552,000 |
) |
|
|
(21,381,000 |
) |
|
|
(26,933,000 |
) |
| Net Loss Per Share - Basic and Diluted |
|
$ |
(1.84 |
) |
|
$ |
(7.06 |
) |
|
$ |
(8.90 |
) |
| Weighted average common shares outstanding - basic and diluted |
|
|
3,025,033 |
|
|
|
— |
|
|
|
3,025,033 |
|
While
the adjustments changed net loss and added a change in fair value of Greenshoe Rights in the statements of cash flow statements, they
did not have an impact on total net cash provided by operating activities, net cash used in investing activities, or net cash provided
by (used in) financing activities for any of the applicable periods.
The
restated line items of the statements of cash flows for the six months ended June 30, 2025, and the nine months ended September 30, 2025,
are as follows:
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| |
|
Six Months Ended June 30, 2025 (Unaudited) |
|
| |
|
Originally Reported |
|
|
Adjustment |
|
|
Restated |
|
| Net Loss |
|
$ |
(2,209,000 |
) |
|
$ |
(28,736,000 |
) |
|
$ |
(30,945,000 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Loss on initial recognition of Greenshoe Rights liability |
|
|
— |
|
|
|
28,736,000 |
|
|
|
28,736,000 |
|
| Change in fair value of Greenshoe Rights liability |
|
|
|
|
|
|
|
|
|
|
|
|
| Net cash used in operating activities |
|
$ |
(5,216,000 |
) |
|
$ |
— |
|
|
$ |
(5,216,000 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Nine Months Ended September 30, 2025 (Unaudited) |
|
| |
|
Originally Reported |
|
|
Adjustment |
|
|
Restated |
|
| Net Loss |
|
$ |
(5,323,000 |
) |
|
$ |
(17,323,000 |
) |
|
$ |
(22,646,000 |
) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| Loss on initial recognition of Greenshoe Rights liability |
|
|
|
|
|
|
28,736,000 |
|
|
|
28,736,000 |
|
| Change in fair value of Greenshoe Rights liability |
|
|
— |
|
|
|
(11,413,000 |
) |
|
|
(11,413,000 |
) |
| Net cash used in operating activities |
|
$ |
(8,893,000 |
) |
|
$ |
— |
|
|
$ |
(8,893,000 |
) |
| SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES |
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|
|
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|
| Reclassification of Greenshoe Rights liability to equity |
|
|
— |
|
|
$ |
17,323,000 |
|
|
$ |
17,323,000 |
|
|