Preferred Stock and Notes Payable	6 Months Ended
Jun. 30, 2026
Preferred Stock And Notes Payable
Preferred Stock and Notes Payable	Note 7. Preferred Stock and Notes Payable On June 2, 2026, the Company entered into a Securities Purchase Agreement (the “June 2026 Securities Purchase Agreement”) with Streeterville Capital, LLC (the “Investor”), providing for the issuance and sale by the Company, and the purchase by the Investor, of (i) 250 shares (the “Preferred Shares”) of the Company’s Series A Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), at an issued value of $10,000 per share and a stated value of $12,000 per share, for aggregate gross proceeds of $2,500,000; (ii) a Secured Promissory Note A-1 in an original principal amount of $2,720,000 (the “A-1 Note”); and (iii) a Secured Promissory Note B in an original principal amount of $5,000,000 (the “B Note” and together with the A-1 Note, the “Notes”). The transactions contemplated by the Securities Purchase Agreement (collectively, the “Transaction”) closed on June 3, 2026 (the “Closing Date”). At closing, the Company received $10,000,000 from the Investor, $5,000,000 of which was deposited into a bank account owned by a wholly owned subsidiary of the Company as cash collateral for the Notes (the “Cash Collateral Account”). The $5,000,000 amount is classified as restricted cash on the balance sheet. The obligations under the Notes are secured by substantially all of the assets of the Company, other than its intellectual property assets, and are guaranteed by certain of the Company’s subsidiaries. The Company intends to utilize the $5,000,000 of proceeds from the closing of the Transaction, along with any proceeds later released from the Cash Collateral Account, for general corporate purposes, including research and development activities, capital expenditures and working capital. The Company agreed to pay the placement agents for financing a fee of 7.0% of the gross proceeds received by the Company in connection with the Transaction. If the aggregate outstanding balance of the A-1 Note or the aggregate number of outstanding Preferred Shares is reduced by $2,000,000, the Company will have the right to exchange up to $1,000,000, plus interest (or, if less than $1,000,000, the entire remaining amount of the B Note, or such other amount as the parties mutually agree), of the B Note for a new secured note in the same form and having the same terms as the A-1 Note (each, a “Note Exchange”). Upon the completion of each Note Exchange, an amount of cash equal to the amount of the B Note exchanged in such Note Exchange will be released from the Cash Collateral Account to the Company. The A-1 Note will bear interest at 8% per annum and will mature 18 months following the Closing Date. The B Note will bear interest at 5% per annum and will mature 18 months following the Closing Date. The Notes can be prepaid by the Company in whole or in part at any time, subject to a 10% prepayment premium on any principal amounts prepaid. Beginning six months after the Closing Date, the Investor may redeem up to $250,000 of the principal amount of the A-1 Note each calendar month. In addition, on any trading day when the Company’s common stock trades at a price that is at least 15% greater than the “Minimum Price” as defined under Nasdaq Stock Market LLC Rule 5635(d), the Investor may redeem an additional principal amount of the Notes equal to 5% of the trading volume of the Company’s common stock on such trading day. The Company will be subject to customary covenants while the Notes remain outstanding. The Notes also contain customary events of default, the occurrence of which would permit the Investor to accelerate the obligations under the Notes and exercise remedies against any collateral (including amounts on deposit in the Cash Collateral Account) or guarantees in respect of the Notes. In addition, following the occurrence of an event of default, the interest rate of each Note would increase to the lesser of 15% per year or the maximum rate permitted by applicable law. Broker fees totaling $350,000 were allocated between the preferred stock and Note A based on their values. Issuance costs, which primarily include legal fees totaling $292,310, were allocated between the preferred stock and Note A and Note B based on the face value of each financial instrument and will be amortized over the life of the instruments. The original issuance discount associated with Note A was recorded as a contra-liability to be amortized over the life of the note. *Permanent Equity Classification* The Company classified the 250 shares of Series A Preferred Stock as permanent stockholders’ equity as of the Closing Date. Under ASC 480-10-S99-3A, an equity instrument must be classified outside of permanent equity if it is redeemable upon the occurrence of an event not solely within the control of the issuer. On July 29, 2026, the Company and the Investor executed an Irrevocable Waiver and Covenant Not to Exercise Redemption Rights (the “Waiver”), effective as of June 2, 2026, under which the Investor irrevocably waived the default redemption right under Section 12(b)(i) of the Certificate of Designation with respect to all events of default. The Waiver is a Type 1 recognized subsequent event under ASC 855-10-25-1 that provides evidence of conditions existing at the June 3, 2026 closing date and confirms the permanent-equity classification applied as of that date. Accordingly, because the Series A Preferred Stock is not redeemable upon an event outside the Company’s control, it is classified as permanent stockholders’ equity in accordance with ASC 480-10-S99-3A. *Restricted Cash* At June 30, 2026, $5,000,000 was held in a restricted collateral account at Lakeside Bank in the name of a wholly-owned subsidiary of the Company in connection with the B Note. This amount is classified as restricted cash on the condensed consolidated balance sheet and is included in cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows. *B Note Amendment* On July 14, 2026, effective as of June 2, 2026, the Company and the Investor amended the B Note to remove its limited redemption feature — the feature permitting the Investor to redeem principal based on the trading volume of the Company’s common stock on days the stock trades at or above 115% of the Nasdaq Minimum Price. As a result, that feature applies only to the A-1 Note, and no derivative liability was recorded in connection with the B Note. *Embedded Derivative Liability A-1 Note Limited Redemption* The A-1 Note contains a limited redemption feature that permits the Investor, beginning six months after closing, to redeem A-1 Note principal on any trading day on which the Company’s common stock trades at or above 115% of the Nasdaq Minimum Price, in an amount up to 5% of the cumulative daily dollar trading volume in aggregate across the outstanding Notes. The Company determined that this feature is not clearly and closely related to the debt host and meets the definition of a derivative. The feature has been bifurcated and is recorded as a derivative liability measured at fair value, with changes in fair value recognized in the condensed consolidated statements of operations as “Change in fair value of derivative liability.” The fair value of the bifurcated derivative was $130,156 at the June 3, 2026 closing date and $107,969 at June 30, 2026, resulting in a gain of $22,187 recognized during the three and six-months ended June 30, 2026. Fair value was determined using a Monte Carlo simulation model classified within Level 3 of the fair value hierarchy. Significant inputs at June 30, 2026 included a common stock price of $1.78, a redemption trigger price of $2.461 (115% of the $2.14 Nasdaq Minimum Price), annualized volatility of 42.60%, a risk-free rate of 4.5%, and normalized average daily trading volume of 46,166 shares. At the June 3, 2026 closing date, the corresponding inputs included a common stock price of $2.10, annualized volatility of 22.84%, and normalized average daily trading volume of 41,177 shares.

Preferred Stock and Notes Payable

6 Months Ended

Jun. 30, 2026

Note 7. Preferred Stock and Notes Payable

On June 2, 2026, the Company entered into a Securities Purchase Agreement (the “June 2026 Securities Purchase Agreement”) with Streeterville Capital, LLC (the “Investor”), providing for the issuance and sale by the Company, and the purchase by the Investor, of (i) 250 shares (the “Preferred Shares”) of the Company’s Series A Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), at an issued value of $10,000 per share and a stated value of $12,000 per share, for aggregate gross proceeds of $2,500,000; (ii) a Secured Promissory Note A-1 in an original principal amount of $2,720,000 (the “A-1 Note”); and (iii) a Secured Promissory Note B in an original principal amount of $5,000,000 (the “B Note” and together with the A-1 Note, the “Notes”). The transactions contemplated by the Securities Purchase Agreement (collectively, the “Transaction”) closed on June 3, 2026 (the “Closing Date”). At closing, the Company received $10,000,000 from the Investor, $5,000,000 of which was deposited into a bank account owned by a wholly owned subsidiary of the Company as cash collateral for the Notes (the “Cash Collateral Account”). The $5,000,000 amount is classified as restricted cash on the balance sheet. The obligations under the Notes are secured by substantially all of the assets of the Company, other than its intellectual property assets, and are guaranteed by certain of the Company’s subsidiaries. The Company intends to utilize the $5,000,000 of proceeds from the closing of the Transaction, along with any proceeds later released from the Cash Collateral Account, for general corporate purposes, including research and development activities, capital expenditures and working capital. The Company agreed to pay the placement agents for financing a fee of 7.0% of the gross proceeds received by the Company in connection with the Transaction.

If the aggregate outstanding balance of the A-1 Note or the aggregate number of outstanding Preferred Shares is reduced by $2,000,000, the Company will have the right to exchange up to $1,000,000, plus interest (or, if less than $1,000,000, the entire remaining amount of the B Note, or such other amount as the parties mutually agree), of the B Note for a new secured note in the same form and having the same terms as the A-1 Note (each, a “Note Exchange”). Upon the completion of each Note Exchange, an amount of cash equal to the amount of the B Note exchanged in such Note Exchange will be released from the Cash Collateral Account to the Company. The A-1 Note will bear interest at 8% per annum and will mature 18 months following the Closing Date.

The B Note will bear interest at 5% per annum and will mature 18 months following the Closing Date. The Notes can be prepaid by the Company in whole or in part at any time, subject to a 10% prepayment premium on any principal amounts prepaid. Beginning six months after the Closing Date, the Investor may redeem up to $250,000 of the principal amount of the A-1 Note each calendar month. In addition, on any trading day when the Company’s common stock trades at a price that is at least 15% greater than the “Minimum Price” as defined under Nasdaq Stock Market LLC Rule 5635(d), the Investor may redeem an additional principal amount of the Notes equal to 5% of the trading volume of the Company’s common stock on such trading day. The Company will be subject to customary covenants while the Notes remain outstanding. The Notes also contain customary events of default, the occurrence of which would permit the Investor to accelerate the obligations under the Notes and exercise remedies against any collateral (including amounts on deposit in the Cash Collateral Account) or guarantees in respect of the Notes. In addition, following the occurrence of an event of default, the interest rate of each Note would increase to the lesser of 15% per year or the maximum rate permitted by applicable law.

Broker fees totaling $350,000 were allocated between the preferred stock and Note A based on their values. Issuance costs, which primarily include legal fees totaling $292,310, were allocated between the preferred stock and Note A and Note B based on the face value of each financial instrument and will be amortized over the life of the instruments. The original issuance discount associated with Note A was recorded as a contra-liability to be amortized over the life of the note.

Permanent Equity Classification

The Company classified the 250 shares of Series A Preferred Stock as permanent stockholders’ equity as of the Closing Date. Under ASC 480-10-S99-3A, an equity instrument must be classified outside of permanent equity if it is redeemable upon the occurrence of an event not solely within the control of the issuer. On July 29, 2026, the Company and the Investor executed an Irrevocable Waiver and Covenant Not to Exercise Redemption Rights (the “Waiver”), effective as of June 2, 2026, under which the Investor irrevocably waived the default redemption right under Section 12(b)(i) of the Certificate of Designation with respect to all events of default. The Waiver is a Type 1 recognized subsequent event under ASC 855-10-25-1 that provides evidence of conditions existing at the June 3, 2026 closing date and confirms the permanent-equity classification applied as of that date. Accordingly, because the Series A Preferred Stock is not redeemable upon an event outside the Company’s control, it is classified as permanent stockholders’ equity in accordance with ASC 480-10-S99-3A.

Restricted Cash

At June 30, 2026, $5,000,000 was held in a restricted collateral account at Lakeside Bank in the name of a wholly-owned subsidiary of the Company in connection with the B Note. This amount is classified as restricted cash on the condensed consolidated balance sheet and is included in cash, cash equivalents and restricted cash in the condensed consolidated statements of cash flows.

B Note Amendment

On July 14, 2026, effective as of June 2, 2026, the Company and the Investor amended the B Note to remove its limited redemption feature — the feature permitting the Investor to redeem principal based on the trading volume of the Company’s common stock on days the stock trades at or above 115% of the Nasdaq Minimum Price. As a result, that feature applies only to the A-1 Note, and no derivative liability was recorded in connection with the B Note.

Embedded Derivative Liability A-1 Note Limited Redemption

The A-1 Note contains a limited redemption feature that permits the Investor, beginning six months after closing, to redeem A-1 Note principal on any trading day on which the Company’s common stock trades at or above 115% of the Nasdaq Minimum Price, in an amount up to 5% of the cumulative daily dollar trading volume in aggregate across the outstanding Notes. The Company determined that this feature is not clearly and closely related to the debt host and meets the definition of a derivative. The feature has been bifurcated and is recorded as a derivative liability measured at fair value, with changes in fair value recognized in the condensed consolidated statements of operations as “Change in fair value of derivative liability.”

The fair value of the bifurcated derivative was $130,156 at the June 3, 2026 closing date and $107,969 at June 30, 2026, resulting in a gain of $22,187 recognized during the three and six-months ended June 30, 2026. Fair value was determined using a Monte Carlo simulation model classified within Level 3 of the fair value hierarchy. Significant inputs at June 30, 2026 included a common stock price of $1.78, a redemption trigger price of $2.461 (115% of the $2.14 Nasdaq Minimum Price), annualized volatility of 42.60%, a risk-free rate of 4.5%, and normalized average daily trading volume of 46,166 shares. At the June 3, 2026 closing date, the corresponding inputs included a common stock price of $2.10, annualized volatility of 22.84%, and normalized average daily trading volume of 41,177 shares.