Note 15 - Stockholders’ Equity

Preferred Stock

Holders of preferred stock are entitled to receive dividends only if and when dividends are paid on the Company’s Common Stock. In that event, preferred stockholders receive dividends on an as-converted-to-Common-Stock basis, in the same form as dividends paid to the Common Stockholders. No additional or separate dividends are payable on the preferred stock.

The preferred stock is convertible into shares of Common Stock. The initial conversion price was $200 per share. The conversion price is subject to downward adjustment at five specified intervals 10, 55, 100, 145, and 190 days after the effectiveness of a registration statement covering the shares issuable upon conversion. At each adjustment date, the conversion price resets to the lower of (i) the then-current conversion price and (ii) the greater of 80% of the five-day volume weighted average price of the Common Stock and $50 (the “Floor Price”). Regardless of any price resets, each preferred stockholder retains the right to receive the total number of shares of Common Stock that would have been issuable at the adjusted conversion price based on their original investment amount.

On January 25, 2023, stockholders approved a reduction in the Floor Price to $25.00 per share at a special meeting.

Series B Convertible Preferred Stock

On September 30, 2025, the Company entered into a Securities Stock Purchase Agreement (the “Series B SPA”) with certain institutional and accredited investors, pursuant to which it issued 31,052 shares of Series B Convertible Preferred Stock and accompanying Series B Warrants to purchase 1,999,544 shares of Common Stock. The aggregate gross consideration received was $24.3 million, consisting of $6.1 million from the sale of the Company’s Series B Convertible Preferred Stock and the Series B Warrants (approximately $5.9 million from third-party accredited investors and $0.2 million from management and board participation, whose participation was approved by stockholders on November 6, 2025), approximately $0.6 million in cash proceeds from unsecured Notes issued in August and September 2025 that were subsequently exchanged for Series B Convertible Preferred Stock and warrants at closing, along with $10.7 million from the cancellation of debt and $7.3 million from the termination of the Forward Purchase Agreement. Offering costs of $0.4 million were charged to additional paid-in capital. During the three months ended December 31, 2025, the Company redeemed 244 shares of its Series B Convertible Preferred Stock for total cash consideration of $0.5 million pursuant to the mandatory use-of-proceeds provision of the ELOC. This redemption reduced the number of shares for Series B Convertible Preferred Stock to 30,808. The Company refers to the foregoing transactions collectively as the “September 2025 Recapitalization.”

The Series B Convertible Preferred Stock has a stated value of $1,000 per share, ranks senior to all classes of Common Stock with respect to dividends and liquidation, and is convertible at the holder’s option into Common Stock. Both the Series B Convertible Preferred Stock and Series B Warrants are classified within permanent stockholders’ equity and are not subject to remeasurement in subsequent periods.

The initial conversion price of $7.7644 per share was subject to automatic price resets. In January 2026, the conversion price and the Series B Warrant exercise price each reset to the contractual floor of $1.5528 per share, as the Company’s Common Stock was trading below the floor at the time of the reset. No further automatic resets remain. This reset significantly increases the number of shares of Common Stock potentially issuable upon conversion and exercise of these instruments. On May 6, 2026, the Company filed a registration statement on Form S-1 to register, among other things, these additional shares.

At a special meeting held on November 6, 2025, stockholders approved the issuance of Common Stock upon conversion of the Series B Convertible Preferred Stock and exercise of the Series B Warrants, an increase in authorized Common Stock from 130,000,000 to 1,000,000,000 shares, and authorization for the Board to effect a reverse stock split at a ratio between 2-for-1 and 12-for-1 at its discretion. As of June 30, 2026, no reverse stock split had been effected.

On May 6, 2026, the Company offered the holders of its Series B Convertible Preferred Stock and Series B Warrants a voluntary, time-limited inducement during the Offer Period to reduce the conversion price of the Preferred Stock and the cash exercise price of the Warrants from $1.5528 to $0.65 per share, a 20% discount to the closing price of the Company’s Common Stock on the day before the beginning of the Offer Period. The conversion price and exercise price will revert to $1.5528 on August 1, 2026. Warrants exercised during the Offer Period, subject to an effective registration statement for the shares underlying the Series B Warrants, must be settled on a cash basis; the net–share settlement alternative previously available is not permitted during this period. Participation is voluntary; holders who do not accept retain their Preferred Stock and Warrants on the original terms. On May 6, 2026, the Company filed a registration statement on Form S-1 to register, among other things, these additional shares. As of June 30, 2026, the aforementioned registration statement had not become effective.

Between May 6, 2026 and June 30, 2026, holders converted 3,198 shares of Series B Convertible Preferred Stock into 4,920,008 shares of Common Stock. No Series B Warrants have been exercised as of that date.

The Company accounts for the Preferred Stock conversions as an induced conversion under ASC 260-10-S99-2, applying the induced-conversion framework in ASC 470-20-40-13 through 40-16 by analogy, given that the reduced conversion price is available only for a limited period.

The voluntary market adjustment related to the Series B Preferred Stock gives rise to a deemed dividend, measured as the excess of the fair value of the consideration transferred to holders under the reduced terms over the fair value that would have been transferred under the original terms. The Company recognized a deemed dividend of $0.9 million in connection with the Preferred Stock conversions, measured on each respective conversion as of the modification date. The deemed dividends are entirely within permanent stockholders’ equity, and is reflected as an increase to net loss available to common stockholders in the calculation of basic and diluted loss per share for the three and six months ended June 30, 2026. The deemed dividend is considered a non-cash item and had no effect on the Company’s net loss, total stockholders’ equity, or cash flows from operations.

Common Stock

Holders of Common Stock are entitled to one vote for each share held. As of June 30, 2026 and December 31, 2025, there were 12,332,955 and 4,281,523 shares of Common Stock issued and outstanding, respectively.

Equity Line of Credit and Related Series B Redemption Obligation

On September 17, 2025, the Company entered into the ELOC with the ELOC Investor, pursuant to which the Company may issue and sell up to $150.0 million of newly issued shares of Common Stock at its sole discretion. The facility expires on September 17, 2028. Shares sold under the ELOC are priced at a 10% discount to the lowest intraday stock price on the draw date. The facility may be expanded up to $500.0 million with the mutual consent of both parties.

As consideration for the ELOC Investor’s purchase commitment, the Company issued 1,000 shares of Series B Convertible Preferred Stock and a Series B Warrant to purchase 64,369 shares of Common Stock, valued at $0.8 million in aggregate, which was expensed in full, upon issuance.

Pursuant to Amendment No. 1 to the ELOC, 25% of net cash proceeds from each draw must be applied toward the redemption of outstanding Series B Convertible Preferred Stock at a redemption price of $1,200 per share.

This mandatory use-of-proceeds provision represents a contractual earmark of future equity proceeds but does not create a separate liability at issuance, because no redemption obligation arises until the Company actually receives proceeds by electing to draw under the facility. Consistent with ASC 480-10-25-4 through 25-14, the Series B Convertible Preferred Stock continues to be classified in permanent equity, as any redemption remains conditional on the Company’s discretionary decision to utilize the ELOC and does not constitute an unconditional obligation to transfer assets.

Under the ELOC, a “Material Adverse Effect” includes any material adverse change in the enforceability of the agreement, our results of operations, assets, business, or financial condition taken as a whole, or our ability to perform our material obligations in a timely manner. Company specific deterioration, including a significant decline in revenues or cash flows, loss of key customers or contracts, material litigation or regulatory action, failure to maintain required licenses or permits, a material weakness in internal controls, or loss of key management personnel, is not excluded from this definition and could independently trigger the ELOC Investor’s termination rights. The Company’s use of the ELOC may be limited if a delisting occurs.

The Company’s representations and warranties regarding the absence of a Material Adverse Effect must remain true and correct not only at the initial closing of the facility, but also at the time of each subsequent VWAP Purchase Notice throughout the term of the agreement. As a result, even after the facility has commenced and initial drawings have been made, any supervening adverse development could prevent the Company from accessing the remaining unfunded commitment.

If a Material Adverse Effect occurs and is continuing, the ELOC Investor has the right to terminate the ELOC upon ten (10) trading days’ written notice. In that event, we would lose access to any remaining unfunded portion of the $150 million commitment. While the ELOC excludes certain broad macroeconomic, industry-wide, and geopolitical events from the definition of Material Adverse Effect, no such exclusion applies to adverse developments that are specific to our business or operations.

There can be no assurance that a Material Adverse Effect will not occur during the term of the ELOC. Should one occur, and should we be unable to secure alternative financing on acceptable terms, or at all, our liquidity position, business operations, financial condition, and results of operations could be materially adversely affected. See Note 2, Basis of Presentation – Liquidity and Going Concern.

During the three and six months ended June 30, 2026, the Company issued 2,907,462 and 3,131,424 shares of Common Stock under the ELOC, generating net proceeds of $1.0 million and $1.1 million, respectively, at an average price of $0.33 and $0.36 per share, respectively. These shares were sold at a contractual 10% discount to the lowest intraday stock price on each respective draw date. The Company is obligated to apply 25% of the proceeds to redeem the Series B Convertible Preferred Stock. As of June 30, 2026 and December 31, 2025, the Company accrued $0.5 million and $0.18 million for such redemption, respectively.

For the three and six months ended June 30, 2026, the Company recorded financing costs of $0.2 million and $0.2 million, which are presented in the condensed unaudited consolidated statements of operations under “Other income expense.” This amount represents the difference between the fair market value of the shares on the settlement date and the proceeds received under the ELOC.

2022 Equity Incentive Plan

The Amended and Restated - 2022 Equity Incentive Plan (the “Plan”) was approved by the Company’s stockholders on June 28, 2022. On April 30, 2025, the Plan was amended to provide that the total number of shares of Common Stock that may be issued, under the Plan will automatically increase upon the occurrence of a Dilution Event (as defined in the Plan) and on the first trading day of each calendar year, beginning with calendar year 2026, by such number of shares of Common Stock necessary to make the total shares of Common Stock authorized under the Plan equal to fifteen percent (15%) of the total outstanding shares of Common Stock on the last day of the prior calendar year (subject to a maximum annual increase of 50,000 shares of Common Stock). The Plan permits the grant of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock units, stock bonus awards, and performance compensation awards.

Under the Series B Certificate of Designations and related Warrants, shares issued to employees, officers, and directors under Company stock plans are exempt from anti-dilution protection so long as the aggregate number of such issuances does not exceed 15% of the number of shares of Common Stock that were outstanding as of September 30, 2025. If the Company issues shares under its stock plans above that 15% cap, and the effective price per share is below the then-current Series B conversion price or Warrant exercise price, that issuance would trigger an automatic downward reset of both the Series B conversion price and the Warrant exercise price, along with a corresponding increase in the number of shares issuable on conversion or exercise.

The Company has not issued stock appreciation rights, restricted stock, stock bonus awards, or performance compensation awards as of June 30, 2026 and December 31, 2025. As of June 30, 2026, a total of 642,229 shares of Common Stock were authorized for issuance under the Plan, of which 94,279 shares remained available for future issuances without triggering an automatic downward reset of both the Series B conversion price and the Warrant exercise price. Under the Series B Certificate of Designations and related Warrants, shares issued to employees, officers, and directors under Company stock plans are exempt from anti-dilution protection only up to 15% of the Common Stock outstanding as of September 30, 2025.

Stock Options

Stock options are awarded to encourage ownership of the Company’s Common Stock by employees and to provide incentives for employees to render services and to exert maximum effort for the success of the Company. The Company’s incentive stock options generally permit net share settlement upon exercise. The option exercise price, vesting schedule and exercise period are determined for each grant by the administrator (person appointed by board to administer the stock plans) of the applicable plan. The Company’s stock options generally have a 10-year contractual term.

There were no options granted during the three and six months ended June 30, 2026. The assumptions used to determine the fair value of options granted for the three and six months ended June 30, 2025, using the Black-Scholes-Merton model are as follows:

Schedule of Fair Value of Options Granted Black-Scholes-Merton Model

A summary of the Company’s stock option activities and related information for the six months ended June 30, 2026, is as follows:

Schedule of Stock Option Activities and Related Information

A summary of the Company’s stock option activities and related information for the six months ended June 30, 2025, is as follows:

The following options were outstanding at their respective exercise price as of June 30, 2026 and December 31, 2025.

Schedule of Options Outstanding

Stock compensation expense for the three months ended June 30, 2026 and June 30, 2025, is as follows:

Schedule of Stock Compensation Expenses

Stock compensation expense for the six months ended June 30, 2026, and June 30, 2025, is as follows:

As of June 30, 2026, there was $0.2 million of unrecognized stock compensation expense related to outstanding stock options. The unrecognized compensation expense is expected to be recognized over a weighted-average period of approximately 1.3 years based on vesting under the award service conditions.

Restricted Stock

The Company did not have any outstanding restricted stock units (“RSUs”) as of June 30, 2026. A summary of the Company’s RSU activity and related information for the six months ended June 30, 2025, is presented below:

Schedule of Restricted Stock Units

Stock compensation expense for restricted stock awards for the period ended June 30, 2025 was $0.02 million.