NOTE 6. EQUITY

Common Stock

The Company is authorized to issue 50,000,000 shares of common stock, $0.086 par value (the “Common Stock”). Each share of issued and outstanding common stock entitles the holder thereof to fully participate in all shareholder meetings, to cast one vote on each matter with respect to which shareholders have the right to vote, and to share ratably in all dividends and other distributions declared and paid with respect to common stock, as well as in the net assets of the Company upon liquidation or dissolution.

On May 18, 2026, the Company effectuated a 1-for-40 reverse stock split of the Company’s issued and outstanding common stock (the “Reverse Split-2026”). The par value remained unchanged following the Reverse Split-2026. All share and per share information as well as common stock and additional paid-in capital have been retrospectively adjusted to reflect the Reverse Split-2026 for all periods presented, unless otherwise indicated. The Reverse Split-2026 resulted in a rounding addition of approximately 480 shares valued at par.

During the first quarter of 2026, the Company issued 250 shares of Common Stock with a value of $15,500 for equity-based compensation under certain disclosed (see Equity-based Compensation) equity-based compensation programs, 2,241 shares of common stock shares with a net value of $34,080 through its ATM Program, and 262,732 shares of common stock with a net value of $2,544,125 in the Series K Public Offering of common shares and warrants.

During the second quarter of 2026, the Company issued 250 shares of Common Stock with a value of $15,618 for equity-based compensation under certain disclosed equity-based compensation programs, 480 shares of common stock with a value of $0 in connection with the rounding of fractional shares resulting from the reverse stock split, 9,156 shares of common stock with a value of $130,743 for services rendered, 3,000 shares of common stock with a value of $11,367 under its Equity Line of Credit, and 276,737 shares of common stock with a value of $1,082,573 through its ATM Program. Additionally, the Company recorded a charge of $17,825 to additional paid-in capital related to second quarter offering costs associated with the Series K Public Offering of common shares and warrants.

As of June 30, 2026, and December 31, 2025, there were 820,948 and 266,103 shares of common stock outstanding, respectively.

Equity-based Compensation

Pursuant to the April 2025 second amendment to an employment agreement between the Company and an executive, the executive was awarded 1,000 shares of the Company’s Common Stock annually over the 4four-year employment term, with each annual tranche vesting equally at 250 shares per quarter, pro-rated for any partial periods. The total fair value of the award is approximately $248,000. During the three and six months ended June 30, 2026, 250 and 500 shares were issued pursuant to the award. As of June 30, 2026, unrecognized compensation expense related to the award was approximately $174,758, which is expected to be recognized through June 2029. For the three and six month periods ended, June 30, 2025, compensation expense on this grant was $7,253.

Total stock-based compensation expense recorded in the unaudited condensed consolidated statements of operations for the three months ended June 30, 2026, and 2025 was $15,600 and $877,368, respectively, and for the six months ended June 30, 2026 and 2025; $31,000 and $1,852,353, respectively.

2025 Equity Incentive Plan

On May 6, 2026, the Company’s stockholders approved an amendment to the Company’s 2025 Equity Incentive Plan (the “2025 Plan”) to increase the number of shares of common stock authorized for issuance under the 2025 Plan by 350,000 shares, from 50,000 shares to 400,000 shares. The amendment was approved at the Company’s 2026 Annual Meeting of Stockholders.

On June 24, 2026, the Compensation Committee approved 285,931 equity awards of restricted shares of Common Stock with a value of $987,892 under the Company’s 2025 Equity Incentive Plan (the “June 2026 Grant”) to certain directors, officers, and employees. The shares vest in tranches between July 1, 2026 and July 27, 2026, and the cost will be amortized over the applicable vesting periods, with no equity-based compensation expense recognized for the three and six month periods ended June 30, 2026. As of June 30, 2026, no shares had vested or been issued under the June 2026 Grant.

Following the June 2026 Grant, and after giving effect to the reverse stock split effective May 18, 2026, there remained 1,792 shares available for issuance under the Company’s 2025 Equity Incentive Plan.

At-the-Market Offering Program

During the six months ended June 30, 2026, the Company sold 278,978 shares of Common Stock under the ATM Program for net proceeds of approximately $1,117,000. As of June 30, 2026, approximately $632,000 of Common Stock remained available for issuance under the ATM Program. Subsequent to June 30, 2026, the Company sold an additional 74,251 shares of Common Stock under the ATM Program for net proceeds of approximately $167,000, and approximately $456,000 of Common Stock remained available for issuance thereafter.

Series K Public Offering

On January 29, 2026, the Company closed a registered public offering (the “Series K Public Offering”) of 185,185 shares of its common stock, which included 4,704 pre-funded warrants issued in lieu of common stock (the “Series K PF Warrants”), together with warrants to purchase up to 370,370 shares of common stock (the “Series K Warrants”), at a combined public offering price of $10.80 per share (or $10.76 per Series K PF Warrant). Each share of common stock (or Series K PF Warrant) was issued together with two Series K Warrants, each exercisable for one share of common stock at an exercise price of $10.80 per share and expiring two years from the initial exercise date. The Series K Warrants and Series K PF Warrants were classified as equity instruments. The Series K Public Offering generated gross proceeds of approximately $2.0 million, before deducting placement agent fees and other offering expenses. The Company intends to use the net proceeds from the Series K Public Offering for working capital, merger and acquisition activities, and general corporate purposes.

In connection with the Series K Public Offering, the Company agreed to pay the placement agent a cash fee equal to 7.0% of the gross proceeds, a management fee equal to 1.0% of the gross proceeds, and reimbursement of certain expenses. In addition, the Company issued 12,963 placement agent warrants (the “Series K PAWs”), representing 7.0% of the aggregate number of shares of common stock and Series K PF Warrants sold in the offering. The Series K PAWs have an exercise price of $13.50 per share and expire two years from the initial exercise date.

During the six months ended June 30, 2026, all 4,704 Series K PF Warrants were exercised, and 77,546 Series K Warrants were exercised for aggregate proceeds of approximately $837,500. As of June 30, 2026, 292,824 Series K Warrants and 12,963 Series K PAWs remained outstanding.

Equity Line of Credit (ELOC)

On March 12, 2026, the Company entered into Amendment No. 2 to the Common Stock Purchase Agreement with White Lion Capital, LLC (the “ELOC Agreement”). The amendment extends the term of the facility by modifying the definition of the “Commitment Period” to continue through the earlier of (i) the date on which the investor has purchased shares equal to the full commitment amount under the ELOC Agreement or (ii) December 31, 2028. In addition, the amendment increased the total committed capital available to the Company under the ELOC Agreement (the “Commitment Amount”) to $50,000,000. During the six months ended June 30, 2026, the Company sold 3,000 shares under the ELOC Agreement for net proceeds of $11,367. As of June 30, 2026, remaining capacity under the facility was approximately $49.1 million.

On May 6, 2026, the Company’s stockholders approved the issuance of shares of the Company’s common stock in excess of the Exchange Cap under Nasdaq Listing Rule 5635(d) pursuant to the ELOC Agreement. The approval provides the Company with additional flexibility to issue shares under the facility, subject to the terms and conditions of the ELOC Agreement.