Note 11 - Earnings Per Share

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Net loss attributable to common stockholders represents net income (loss) adjusted for deemed dividends on preferred stock. When the Company redeems shares of Series B Convertible Preferred Stock, the excess of the cash redemption price paid over the carrying value of the shares redeemed is treated as a deemed dividend to such stockholders. This deemed dividend is not recognized in the unaudited condensed consolidated statements of operations but is added to net loss in computing net loss attributable to common stockholders for purposes of the basic and diluted loss per share calculation.

Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and potentially dilutive securities outstanding for the period. For the Company’s diluted net loss per share calculation, the Company uses the “if-converted method” for the Series B Convertible Preferred Stock and the “treasury stock method” for warrants and stock options. The Company applies the more dilutive of the two-class method or the if-converted / treasury stock method for each class of potentially dilutive instruments. Because the Company incurred a net loss for all periods presented, all potentially dilutive securities have been excluded from the computation of diluted net loss per share as their inclusion would be anti-dilutive. Accordingly, basic and diluted weighted-average shares outstanding are identical for both periods presented.

Voluntary Market Adjustment to Series B Preferred Stock

During the period from May 6, 2026 through July 31, 2026 (the “Offer Period”), pursuant to Section 8(i) of the Certificate of Designations of the Series B Convertible Preferred Stock, and with the prior written consent of the Required Holders (as defined in the Certificate of Designations of the Series B Convertible Preferred Stock), the Company temporarily reduced the conversion price of the Preferred Stock from $1.5528 to $0.65 per share. The reduced conversion price reverted to $1.5528 on August 1, 2026, for any Preferred Shares not converted during the Offer Period.

Preferred Stock Conversions

The Company accounted for conversions of Preferred Stock during the Offer Period as induced conversions under ASC 260-10-S99-2, applying the framework of ASC 470-20-40-13 through 40-16 by analogy, as the reduced conversion price was available only for a limited period of time. Because the Preferred Stock is equity-classified, the induced conversions, including the resulting deemed dividend, were recorded entirely within permanent stockholders’ equity, with no charge to the statement of operations. The deemed dividend for each conversion was measured, on the applicable conversion date, as the excess of the fair value of the Common Stock issued at $0.65 over the fair value of the shares that would have been issued at the original $1.5528 conversion price, using the closing market price of the Common Stock on the conversion date.

During the three and six months ended June 30, 2026, holders converted 3,198 shares of Preferred Stock into 4,920,008 shares of Common Stock at the reduced conversion price, resulting in a deemed dividend of $0.9 million. The deemed dividend was added to the net loss in computing net loss attributable to common stockholders for purposes of basic and diluted loss per share. The deemed dividend did not affect the Company’s net loss, total stockholders’ equity, or cash flows from operations.

Warrant Modification

No Warrants were exercised during the three and six months ended June 30, 2026, and accordingly no deemed dividend related to the Warrant modification has been recognized.

The Company evaluated the temporary reduction in the exercise price of the Series B Warrants and the mandatory cash exercise requirement as a modification of equity-classified warrants under ASC 815-40, and concluded that the Warrants remained equity-classified both before and after the modification.

Issuance of Class A Common Stock

During the three and six months ended June 30, 2026, the Company issued Common Stock and raised $1.0 million and $1.1 million, receptively. As per the term of the ELOC, the Company is required to redeem shares of its Series B Convertible Preferred Stock for total cash consideration raised under the ELOC, pursuant to the mandatory use of proceeds provision. The Series B Convertible Preferred Stock was originally issued at a fair value of $589 per share, reflecting the relative fair value allocation of the $800 per unit transaction price between the Series B Convertible Preferred Stock and the accompanying Series B Warrants, based on standalone fair values determined using a Monte Carlo simulation model. For the three and six months ended June 30, 2026, the redemption price exceeded the aggregate carrying value of the redeemed shares by $ 0.1 million and $0.2 million, respectively. This excess represents a deemed dividend to such stockholders and has been added to the net loss in computing net loss attributable to common stockholders for purposes of loss per share. The deemed dividend is a non-cash item and does not affect the Company’s unaudited net loss, unaudited stockholders’ equity, or unaudited cash flows from operations for the three and six months ended June 30, 2026.

The schedule of loss per share, basic and diluted is as follows:

 Schedule of Earning Per Shares, Basic and Diluted 

Certain share-based equity awards and warrants were excluded from the computation of dilutive earnings per share because inclusion of these awards would have had an anti-dilutive effect. The following table reflects the awards that were excluded.

 Schedule of Share-based Equity Awards and Warrants Excluded from Computation of Earnings  

Excluded from the computation of loss per share is the Series A Convertible Preferred Stock. The shareholders are entitled to receive dividends on shares of Series A Convertible Preferred Stock equal (on an as-if-converted-to-Common-Stock basis) to and in the same form as dividends actually paid on shares of the Common Stock when, as and if such dividends are paid on shares of the Common Stock. No other dividends shall be paid on shares of Series A Convertible Preferred Stock.