v3.26.1
Note 6 - Common Stock and Preferred Stock
 6 Months Ended
Jun. 30, 2026
Notes to Financial Statements  
Equity [Text Block]

6. COMMON STOCK AND PREFERRED STOCK

 

Common Stock

 

The Company is authorized to issue 50,000,000 shares of common stock with a par value of $ 0.0001 as of June 30, 2026 and December 31, 2025.  Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Subject to preferences that  may apply to any outstanding preferred stock, holders of common stock are entitled to receive ratably any dividends that the Company’s Board of Directors  may declare out of funds legally available for that purpose on a non-cumulative basis. No dividends had been declared through June 30, 2026.

 

See Note 7 – Share-Based Compensation - Restricted Stock Unit ("RSU") Awards for details regarding RSU grants.

 

Common Stock Warrants

 

As of June 30, 2026, the total amount of outstanding common stock warrants is 5,780,955. See Note 8 – Fair Value Measurement – Warrant Liabilities for additional details regarding the Company’s outstanding warrants.

 

A summary of the warrant activity during the six months ended June 30, 2026 is presented below:

  

Number of Warrants

  

Weighted Average Exercise Price

  

Weighted Average Remaining Life in Years

  

Intrinsic Value

 

Outstanding, January 1, 2026

  5,780,955  $4.00         

Issued

  -   -         

Exercised

  -   -         

Expired

  -   -         

Canceled

  -   -         

Outstanding, June 30, 2026

  5,780,955  $4.00   3.2  $579,962 
                 

Exercisable, June 30, 2026

  5,780,955  $4.00   3.2  $579,962 

 

The following table presents information related to stock warrants at June 30, 2026:

 

Warrants Outstanding

  

Warrants Exercisable

 
               

Exercise Price

  

Outstanding Number of Warrants

  

Weighted Average Remaining Life in Years

  

Exercisable Number of Warrants

 
$2.50   2,071,293   3.2   2,071,293 
$3.05   2,885,246   3.6   2,885,246 
$7.80   177,490   1.7   177,490 
$12.00   646,926   2.0   646,926 
     5,780,955   3.2   5,780,955 

 

Preferred Stock

 

The Company’s Board of Directors is authorized, subject to limitations prescribed by Delaware law, to issue preferred stock in one or more series, to establish from time to time the number of shares to be included in each series, and to fix the designation, powers, preferences, and rights of the shares of each series.  There were 22,000 issued and outstanding shares of preferred stock as of June 30, 2026 and  December 31, 2025. 

 

On August 5, 2024, the Company completed the North Run Private Placement, selling (i) an aggregate of 22,000 shares of Series A convertible preferred stock (the “Preferred Shares”), which are initially convertible into 7,213,115  shares (the “Conversion Shares”) of the Company’s common stock, and (ii) warrants to purchase an aggregate of 2,885,246 shares of common stock at an exercise price of $3.05 per share (the 'North Run Warrants') for an aggregate gross purchase price of $22.0 million. The securities were sold to NR-PRL Partners, LP, a Delaware limited partnership and an affiliate of North Run Capital, LP (the “Buyer”) pursuant to a Securities Purchase Agreement entered into by the Company and the Buyer on August 2, 2024 (the “Purchase Agreement”). The net proceeds from the North Run Private Placement was approximately $21.6 million after transaction expenses.

 

For so long as the Buyer of the Preferred Shares beneficially owns at least 20% of the Conversion Shares underlying the Preferred Shares issued pursuant to the Purchase Agreement (the “Buyer Ownership Condition”), the Company may not, without the consent of Buyer, create, authorize, or issue shares of capital stock that are senior or pari passu to the Preferred Shares; incur aggregate indebtedness for borrowed money (subject to certain exceptions) in excess of $10.0 million; change its line of business; or amend, alter or repeal any provision of the Amended and Restated Certificate of Incorporation or bylaws in a manner that adversely affects the special rights, powers and preferences of the Preferred Shares. In addition, the Purchase Agreement provides that, for so long as the Buyer Ownership Condition is satisfied, the Company may not, without the consent of Buyer, issue more than 10% of its outstanding shares of common stock as of August 2, 2024 (subject to exceptions for stock plans and acquisitions) or within 120 days of the closing of the offering issue any equity securities (subject to exceptions for stock plans and acquisitions).

 

The Purchase Agreement required that the Board of Directors of the Company increase the size of the Board from eight to ten directors and appoint each of Thomas B. Ellis and Todd B. Hammer (the “Board Designees”) to the Board effective immediately following the closing of the offering. The Purchase Agreement further provides that, at any stockholders’ meeting at which directors are to be elected and for so long as the Buyer satisfies the Buyer Ownership Condition, the Board will nominate and recommend the reelection of any Board Designees whose terms of office expire at such stockholder meeting.

 

Under the Purchase Agreement, the Company has agreed that for so long as the Buyer Ownership Condition is satisfied, the Buyer will have a right to participate on a pro rata basis in equity financings or issuances of securities convertible, exercisable, or exchangeable into equity securities of the Company or any subsidiaries (including debt securities with an equity component), subject to certain exceptions.

 

The Series A convertible preferred stock is subject to automatic redemption for cash upon a “Fundamental Transaction” by the Company, which includes a merger, sale of all or substantially all the assets of the Company, recapitalization, or the sale of more than 50% of the voting stock of the Company which results in the Series A convertible preferred stock being classified as temporary equity. Because redemption upon a Fundamental Transaction is an event that is not solely within the Company's control, the Series A convertible preferred stock is classified as temporary equity, outside of permanent stockholders' deficit, in accordance with ASC 480-10-S99. In such event, the redemption price would be equal to the greater of the stated value of the Series A convertible preferred stock or the consideration per share of common stock in the Fundamental Transaction (or in the absence of such consideration, the volume-weighted average price of the Company’s common stock immediately preceding the closing of the Fundamental Transaction). Based on the stated value of $1,000 per share, the aggregate redemption amount of the Series A convertible preferred stock was $22.0 million as of June 30, 2026 and December 31, 2025, which exceeds its carrying value of $20.0 million. Additionally, after analyzing the cashless exercise provision within the North Run Warrants, the Company has determined that the North Run Warrants are classified as liabilities to be carried at fair value (See Note 8 – Fair Value Measurement – Warrant Liabilities for additional details). As a result, the Company allocated the gross proceeds and offering costs to the Preferred Shares and the North Run Warrants on a fair value basis.  As a result, the Company recorded approximately $20.4 million of gross proceeds, which was partially offset by $403 thousand of offering costs, with a credit to temporary equity to account for the Preferred Shares.  Additionally, the Company initially recorded a warrant liability of approximately $1.6 million to account for the North Run Warrants, and expensed approximately $31 thousand of offering costs which were allocated to the North Run Warrants. The Company has not made any adjustments to the carrying value of the Series A convertible preferred stock to reflect the redemption value of the shares upon a change of control because the Company has determined that a change of control event is not probable of occurring.