11. Convertible Preferred Stock and Stockholders’ Equity

The holders of common stock are entitled to one vote for each share held and to receive dividends whenever funds are legally available and when declared by the Board of Directors subject to the rights of holders of all classes of stock having priority rights as dividends. No dividends have been declared or paid as of December 31, 2025.

Controlled Equity Offering

On August 29, 2025, the Company entered into a Controlled Equity Offering sales agreement (the “Sales Agreement”) with Roth Capital Markets (“Roth”), as sales agent and/or principal, pursuant to which the Company may issue and sell, from time to time, through Roth as sales agent and/or principal, shares of its common stock having an aggregate gross sales price of up to $50.0 million (the “ATM Program”). Sales may be made by any method deemed an “at-the-market offering” as defined in Rule 415(a)(4) under the Securities Act or through privately negotiated transactions. The Company will pay Roth a commission of up to 3.0% of the gross proceeds from any common stock sold through the Sales Agreement, along with reimbursement of certain expenses. Roth may also buy shares as principal for its own account at prices agreed upon at the time of sale, in which case the Company will enter into a separate terms agreement with Roth.

During the year ended December 31, 2025, the Company sold an aggregate of 963,723 shares of common stock under the Sales Agreement, at an average price of approximately $3.17 per share for gross proceeds of $3.1 million and net proceeds of $2.9 million, after deducting Roth’s commission and other expenses. As of December 31, 2025, $46.9 million of common stock remained available to be sold under this program, subject to certain conditions as specified in the Sales Agreement. The Company intends to use the net proceeds from any sales of common stock under the ATM Program for working capital, research and development and other general corporate purposes, including the accelerated commercialization of the Company’s innovation pipeline.

2025 Equity Financing

On July 17, 2025, the Company entered into a placement agency agreement (the “Placement Agency Agreement”) with Lake Street Capital Markets, LLC (“Placement Agent”) and a securities purchase agreement (the “Purchase Agreement”) with certain investors (the “Investors”) pursuant to which the Company agreed to sell, in a registered direct offering (the “Offering”), $12.5 million shares of its common stock, as described below. The public offering price for each per share of common stock in the Offering was $2.00. The initial closing (the “Initial Closing”) under the Purchase Agreement occurred on July 18, 2025. The Company issued an aggregate of 4,250,000 shares of its common stock (the “Initial Shares”) to the Investors and received net proceeds of $7.8 million after deducting the Placement Agent’s fees and other offering expenses payable by the Company with respect to such Initial Shares. The Company agreed to pay the Placement Agent as compensation a cash fee equal to 5.5% as to $7.5 million of the gross proceeds received at the Initial Closing, plus reimbursement of certain expenses. In addition, the Company agreed to issue, and one of the Investors agreed to purchase, 2,000,000 additional Shares (the “Additional Shares”) on November 25, 2025 (or such earlier date as the Company and such Investor agrees) (the “Additional Closing”). At the Additional Closing, the Company received gross proceeds of $4.0 million for such Additional Shares, before deducting Offering expenses payable by the Company with respect to such Additional Shares

Series A Convertible Preferred Stock and Warrants

In September 2016, the Company issued (i) 24,000 shares of Series A Convertible Preferred Stock, par value $0.001 per share, with a stated value of $1,000 per share (the “Series A Preferred Stock”), which are convertible into shares of the Company’s common stock at an initial conversion rate of $0.65 per share, subject to adjustment for events such as stock splits, combinations and the like as provided in the certificate of designations covering such Series A Preferred Stock, and (ii) warrants (the “SPA Warrants”) to purchase an aggregate of 36,923,078 shares of common stock. The shares of Series A Preferred Stock are entitled to vote on an as-converted basis with the common stock, subject to specified beneficial ownership issuance limitations. The Series A Preferred Stock bear dividends at a rate of six percent (6%) per annum, which are cumulative and accrue daily from the date of issuance on the $1,000 stated value. Such dividends will not be paid in cash except in connection with any liquidation, dissolution or winding up of the Company or any redemption of the Series A Preferred Stock. Each holder of convertible preferred shares has the right to require us to redeem such holder’s shares of Series A Preferred Stock upon the occurrence of specified events, which include certain business combinations, the sale of all or substantially all of the Company’s assets, or the sale of more than 50% of the outstanding shares of the Company’s common stock. In addition, the Company has the right to redeem the Series A Preferred Stock in the event of a defined change of control. The Series A Preferred Stock ranks senior to our common stock as to distributions and payments upon the liquidation, dissolution, and winding up of the Company. The liquidation preference of the Series A Preferred Stock is $32.7 million as of December 31, 2025. Since the Series A Preferred Stock are subject to conditions for redemption that are outside the Company’s control, the Series A Preferred Stock are presently reported in the mezzanine section of the balance sheet.

The SPA Warrants were modified on February 28, 2018 to allow for a reduction in the exercise price from $0.70 per share to $0.28 per share for a period between March 1, 2018 and March 5, 2018 and to modify certain beneficial ownership limitations and to eliminate certain redemption rights, resulting in, among other things, the exercise of a substantial number of the SPA Warrants for cash. The remaining unexercised 15,385 Warrants expired on September 29, 2021.

2021 CEO Performance Award Unit Grant

On February 23, 2021, the Company`s Board of Directors, upon recommendation of the Compensation Committee, approved the grant of the CEO Performance Award to the Company’s Chief Executive Officer. The CEO Performance award is a 10-year performance award of up to 13,000,000 shares, tied to the achievement of market capitalization milestones and subject to minimum service requirements.

As detailed in the table below, the CEO Performance Award consists of ten vesting tranches. The first market capitalization milestone is $1.0 billion, and each of the remaining nine market capitalization milestones are in additional $500 million increments, up to $5.5 billion.

 Summary of Performance Award And Market Capitalization Milestones

Each tranche represents a portion of the PSUs covering the number of shares outlined in the table above. Each tranche vests upon (i) satisfaction of the market capitalization milestones and (ii) continued employment as CEO of the Company from the grant date through December 31, 2030. Absent an earlier termination, the PSUs will expire on December 31, 2030. If our CEO ceases employment as CEO of the Company for any reason including death, disability, termination for cause or without cause (as defined in the award agreement), or if he voluntary terminates after service as CEO for at least five years, the remaining service period will be waived and he will retain any PSUs that have vested through the date of termination.

The Company received Shareholder approval at its annual meeting on May 20, 2021, for shares to be issued under the award.

The market capitalization requirement is considered a market condition under FASB Accounting Standards Codification Topic 718 “Compensation – Stock Compensation” and is estimated on the grant date using Monte Carlo simulations. Recognition of stock-based compensation expense of all the tranches commenced on February 23, 2021, the date of grant, as the probability of meeting the ten market capitalization milestones is not considered in determining the timing of expense recognition. The expense will be recognized on an accelerated basis through 2030. Key assumptions for estimating the performance-based awards fair value at the date of grant included share price on grant date, volatility of the Company’s common stock price, risk free interest rate, and grant term.

Total stock-based compensation recorded as operating expense for the CEO Performance Award was $7.1 million and $7.2 million for the years ended December 31, 2025 and 2024, respectively. The Company had approximately $22.7 million and $29.8 million of total unrecognized stock-based compensation expense remaining as of December 31, 2025 and 2024, respectively, under the CEO Performance Award assuming the grantee’s continued employment as CEO of the Company, or in a similar capacity, through 2030. As of December 31, 2025, none of the performance milestones established by the 2021 CEO Incentive Program have been achieved and no awards have been earned.

Stock Award Plans

The Company has various stock plans that permit the Company to provide incentives to employees, directors, and third-party consultants of the Company in the form of equity compensation. In February 2022, the Compensation Committee of the Board of Directors adopted the 2022 Stock Incentive Plan (the “Plan”) which was subsequently approved by the Company’s shareholders. This plan replaced the 2012 Stock Incentive Plan which expired on May 19, 2022.

As of December 31, 2025, the Company had 3,884,295 remaining shares of the Company’s common stock to provide for current and future grants under its various equity plans.

The 2022 Stock Incentive Plan allows for the grant of incentive stock options, non-qualified stock options, stock appreciation rights, stock, restricted shares and restricted share units to employees, directors, and third-party consultants. Options granted under the 2022 Stock Incentive Plan expire no later than ten years from the date of grant. The exercise price of each incentive stock option shall not be less than 100% of the fair value of the stock subject to the option on the date the option is granted. The vesting provisions of individual options may vary, but incentive stock options generally vest 25% on the first anniversary of each grant and 1/48 per month over the next three years. Stock appreciation rights are rights to acquire a calculated number of shares of the Company’s common stock upon exercise of the rights. The number of shares to be issued is calculated as the difference between the exercise price of the right and the aggregate market value of the underlying shares on the exercise date divided by the market value as of the exercise date. Stock appreciation rights granted under the 2022 Stock Incentive Plan generally vest 25% on the first anniversary of such grant and 1/48 per month over the next three years and expire no later than ten years from the date of grant. The Company generally issues new shares upon the exercise of stock options and stock appreciation rights.

The fair value of the grants for stock, restricted shares and units is determined based on the closing price of our stock on the date of grant. Restricted stock unit grants are time-based and generally vest over a period of four years except for grants to directors which are generally earned over a period of six months. Stock compensation expense for performance-based restricted shares is amortized on a straight-line basis over the anticipated vesting period and is subject to adjustment based on the actual achievement of objectives. Compensation expense is recognized only for those awards instruments expected to vest, net of actual forfeitures.

As of December 31, 2025, the total compensation cost related to options, stock appreciation rights, and non-vested stock granted to employees and non-employees under the Company’s stock award plans but not yet recognized was approximately $2.0 million, excluding compensation not yet recognized related to the CEO Performance Award discussed above. This cost will be amortized over a period of up to four years over the underlying estimated service periods and will be adjusted for subsequent changes in performance achievement, actual forfeitures and anticipated vesting periods.

A summary of the option and stock appreciation rights activity for the year ended December 31, 2025, is as follows:

 Summary of Option and Stock Appreciation Rights Activity

As of December 31, 2025, the weighted average remaining contractual life of the options and stock appreciation rights outstanding was 6.16 years. Of the 4,270,381 options and stock appreciation rights that were outstanding as of December 31, 2025, 3,076,786 were vested and exercisable with a weighted average exercise price of $4.01 per share and a weighted average remaining term of 5.2 years.

A summary of the options and stock appreciation rights outstanding by range of exercise price is as follows:

 Summary of Option and Stock Appreciation Rights Outstanding by Range of Exercise Price

The intrinsic value of options and stock appreciation rights is calculated as the difference between the exercise price of the underlying awards and the quoted price of the Company’s common stock for the options and stock appreciation rights that were in-the-money as of December 31, 2025. The intrinsic value of the options and stock appreciation rights outstanding as of December 31, 2025, was approximately $1.0 million based on a closing share price of $2.30 on December 31, 2025. There were 713,484 fully vested options or stock appreciation rights outstanding as of December 31, 2025, with an exercise price lower than the closing stock price on December 31, 2025. During the year ended December 31, 2025, the aggregate intrinsic value of options and stock appreciation rights exercised under the Company’s stock option plans was less than $0.1 million.

The intrinsic value of the options and stock appreciation rights outstanding as of December 31, 2024, was approximately $0.5 million based on a closing share price of $2.28 on December 31, 2024. There were 725,326 fully vested options or stock appreciation rights outstanding as of December 31, 2024, with an exercise price lower than the closing stock price on December 31, 2024. During the year ended December 31, 2024, the aggregate intrinsic value of options and stock appreciation rights exercised under the Company’s stock option plans was $0.1 million.

The weighted average grant date fair value of options granted during the years ended December 31, 2025 and 2024, was $1.63 per share and $2.90 per share, respectively.

A summary of the restricted stock unit activity for the year ended December 31, 2025, is as follows:

 Summary of Restricted Stock Unit Activity

The intrinsic value of restricted stock units outstanding as of December 31, 2025, was $5.7 million based on a closing share price of $2.30 as of December 31, 2025. The intrinsic value of restricted stock units outstanding as of December 31, 2024, was $3.5 million based on a closing share price of $2.28 as of December 31, 2024. During the year ended December 31, 2025, the aggregate intrinsic value of restricted stock units vested was $0.5 million determined at the date of vesting.

2022 Employee Stock Purchase Plan

In 2022, the Company adopted its 2022 Employee Stock Purchase Plan (“ESPP”). Eligible employees can participate in a new purchase period every 3 months. Under the terms of the plan, employees can purchase up to 15% of their compensation of the Company’s common stock, subject to an annual maximum of $25,000, at 95% of the fair market value of the stock at the end of the purchase period, subject to certain plan limitations. As of December 31, 2025, there were 243,604 remaining shares available for issuance under the Employee Stock Purchase Plan.

The Company has reserved shares of common stock for conversion of convertible preferred stock, estimated additional earnout shares to APT, and the issuance of options granted under the Company’s stock option plan and its stock purchase plan as follows:

 Summary of Reserved Shares of Common Stock for Conversion