3. STOCKHOLDERS’ DEFICIT

Common Stock

The Company has authorized 500,000,000 shares of common stock with $0.001 par value. As of June 30, 2026 and December 31, 2025, 96,537,349 and 86,153,918 shares of common stock were issued and outstanding, respectively.

Preferred Stock

The Company has authorized 5,000,000 shares of preferred stock with $0.001 par value. The board of directors has the authority to issue these shares and to set dividends, voting and conversion rights, redemption provisions, liquidation preferences, and other rights and restrictions.

Series C Preferred Stock

The board designated 9,000 shares of preferred stock as Series C Preferred Stock. At June 30, 2026 and December 31, 2025, there were no shares of Series C Preferred Stock issued or outstanding.

Holders of the Series C Preferred Stock were entitled to quarterly cumulative dividends at an annual rate of 12.0% until 42 months after the original issuance date (the “Dividend End Date”), payable in cash or, subject to certain conditions, the Company’s common stock. Unpaid accrued dividends were $120 thousand as of June 30, 2026 and December 31, 2025.

Series C1 Convertible Preferred Stock

The board designated 20,250 shares of preferred stock as Series C1 Convertible Preferred Stock (“Series C1”), of which 374.25 shares were issued and outstanding at June 30, 2026 and December 31, 2025. Shares of Series C1 are convertible into common stock by their holder at any time and may be mandatorily convertible upon the achievement of specified average trading prices for the Company’s common stock. The Series C1 shares have a conversion price of $0.50 per share.

The terms of the Series C1 Preferred Stock are substantially similar to those of the Series C Preferred Stock, except that Series C1 does not accrue dividends or provide for at-the-market make-whole payments and does not automatically adjust in connection with reverse stock splits or conversions of outstanding convertible debt.

Series C2 Preferred Stock

On August 31, 2018, the Company entered into agreements with certain holders of its Series C1 Preferred Stock to exchange those shares for an equal number of newly created Series C2 Preferred Stock. At June 30, 2026 and December 31, 2025, there were no shares of Series C2 Preferred Stock issued and outstanding.

Series D Preferred Stock

The Board designated 6,000 shares of preferred stock as Series D Preferred Stock, of which 50 shares were issued and outstanding at June 30, 2026 and December 31, 2025. The Series D Preferred Stock was issued in 2021 in connection with a financing transaction that included common stock and warrants. Each share has a par value of $0.001 and a stated value of $750. The Series D Preferred Stock is not currently convertible; however, conversion may occur at the request of the holder with the Company’s approval. The Series D Preferred Stock accrued dividends for a period of five years from the date of issuance, after which dividends no longer accrue. As the five-year accrual period has ended, no additional dividends are accruing as of June 30, 2026. Accrued dividends as of June 30, 2026 and December 31, 2025 were not material.

Series E Preferred Stock

The Board designated 5,000 shares of preferred stock as Series E Preferred Stock, of which 200 and 300 shares were issued and outstanding at June 30, 2026 and December 31, 2025, respectively. During the six months ended June 30, 2026, the Company issued 25,338 shares of common stock in payment of accrued dividends on the Series E Preferred Stock and 400,000 shares of common stock upon the conversion of 100 shares of Series E Preferred Stock. These transactions were with Dr. Imhoff, a member of the Company's Board of Directors.

The Series E Preferred Stock is not currently convertible; however, conversion may occur at the request of the holder with the Company’s approval. The Series E Preferred Stock no longer accrues dividends. Each share of Series E Preferred Stock has a par value of $0.001 and a stated value of $1,000. Holders were entitled to cumulative dividends at a rate of 8% per annum for a period of five years from the date of issuance, payable annually in cash or, at the Company’s option, shares of common stock.

Series F Preferred Stock

The Board designated 1,500 shares of preferred stock as Series F Preferred Stock, of which 271 and 981 shares were issued and outstanding at June 30, 2026 and December 31, 2025, respectively. During the six months ended June 30, 2026, the Company issued 2,840,000 shares of common stock upon the conversion of 710 shares of Series F Preferred Stock and issued 211,645 shares of common stock in payment of accrued dividends.

Each share of Series F Preferred Stock has a stated value of $1,000 and was originally convertible into 4,000 shares of common stock. The Series F Preferred Stock is not currently convertible; however, conversion may occur at the request of the holder with the Company’s approval. The Series F Preferred Stock no longer accrues dividends. Holders were entitled to cumulative dividends at a rate of 6% per annum for a period of five years from the date of issuance, after which no further dividends accrue. Accrued dividends related to the Series F Preferred Stock were not material as of June 30, 2026 and totaled $45 thousand as of December 31, 2025.

Series F-2 Preferred Stock

The Company was oversubscribed for its Series F Preferred Stock, resulting in the designation of Series F-2 Preferred Stock with substantially similar terms. The Board designated 3,500 shares of preferred stock as Series F-2 Preferred Stock, of which 245 and 480 shares were issued and outstanding at June 30, 2026 and December 31, 2025, respectively. During the six months ended June 30, 2026, the Company issued 940,000 shares of common stock upon the conversion of 235 shares of Series F-2 Preferred Stock and issued 101,143 shares of common stock for payment of accrued dividends.

Each share of Series F-2 Preferred Stock has a stated value of $1,000 and was originally convertible into 4,000 shares of common stock. The Series F Preferred Stock no longer accrues dividends. Holders were entitled to cumulative dividends at a rate of 6% per annum for a period of five years from the date of issuance, after which no further dividends accrue. Accrued dividends related to the Series F-2 Preferred Stock were not material as of June 30, 2026 and totaled $22 thousand as of December 31, 2025.

Series G Preferred Stock

During January 2021, the board designated 1,000,000 shares of preferred stock as Series G Preferred Stock, none of which remained outstanding as of June 30, 2026 or December 31, 2025. The Series G Convertible Preferred Stock had a mandatory redemption feature and was fully redeemed prior to January 1, 2022.

Warrants

The following table summarizes changes in the Company’s outstanding warrants to purchase common stock for the six months ended June 30, 2026 and 2025:

Warrant Transactions (Current Period)

Issuance of Warrant to Chief Executive Officer

During the three months ended June 30, 2026, the Company issued Dr. Faupel a warrant to purchase 2,000,000 shares of common stock at an exercise price of $0.25 per share, upon satisfaction of the performance condition requiring the Company to file data from its U.S. pivotal trial with the FDA. The warrant includes a cashless exercise feature and expires five years from the date of issuance. As the Company had previously concluded in 2025 that achievement of this performance condition was probable and recognized compensation expense of approximately $270 thousand during the year ended December 31, 2025, no additional compensation expense was recognized in connection with the issuance during the three months ended June 30, 2026.

Warrant Exchange Transactions

On February 25, 2026, the Company entered into a series of warrant exchange agreements with certain holders of its outstanding warrants originally issued in 2022. Under these agreements, holders were offered two alternatives: (i) exchange one of their existing warrants with exercise prices of $0.50 and $0.65 per share for new warrants with reduced exercise prices of $0.20 or $0.25 per share, respectively, which were required to be exercised immediately, and retain the remaining warrants with their original exercise prices of $0.50 or $0.65 per share and receive a one-year extension of the original expiration date, or (ii) keep the terms of the existing warrants unchanged. These transactions were conducted pursuant to individually negotiated exchange agreements with each holder. 

As a result of these transactions, approximately 4,825,000 warrants were exchanged for new warrants at a reduced exercise price and exercised immediately, resulting in the issuance of approximately 4,825,000 shares of common stock and cash proceeds of approximately $980 thousand to the Company. The remaining approximately 4,425,000 warrants retained their original exercise prices and had their expiration dates extended by one year and remain outstanding, expiring in 2027. The one-year extension of the remaining warrants resulted in incremental fair value of approximately $510 thousand, which was recognized as a deemed dividend recorded as an adjustment to additional paid-in capital. Holders of approximately 11,973,080 warrants elected to keep the terms of their existing warrants unchanged pursuant to Alternative (ii); these warrants retain their original exercise prices and expiration dates and are scheduled to expire in 2026.

Debt Conversion and Warrant Issuance

On March 16, 2026, the Company entered into an exchange agreement with the holder of a $75 thousand convertible promissory note, pursuant to which the holder agreed to convert the outstanding principal and accrued interest of $8 thousand into 414,082 shares of the Company’s common stock at a conversion price of $0.20 per share. In connection with the exchange, the Company also issued warrants to purchase 300,000 shares of common stock. The warrants have an exercise price of $0.30 per share and expire three years from the date of issuance.

The fair value of the warrants issued was estimated using the Black-Scholes option pricing model with the following assumptions: an expected term of 3.0 years, stock price of $0.28, exercise price of $0.30, volatility of 204.8%, a risk-free interest rate of 3.69%, and no expected dividends. The estimated fair value per warrant was approximately $0.26.

The issuance of the warrants represented additional consideration to induce the conversion of the note. Accordingly, the Company recognized an inducement charge of approximately $78 thousand during the six months ended June 30, 2026, which is presented as “Inducement charges” in the unaudited condensed consolidated statements of operations.

Deferred Compensation and Warrant Issuance

On February 20, 2026, the Company entered into an Exchange and Deferred Compensation Agreement with a former employee and consultant pursuant to which the Company agreed to provide compensation for services previously rendered. Under the terms of the agreement, the Company issued warrants to purchase 22,500 shares of the Company’s common stock and agreed to make cash payments totaling $20 thousand, payable in five equal monthly installments of $4 thousand beginning March 1, 2026.

The fair value of the warrants issued was estimated using the Black-Scholes option pricing model with the following assumptions: an expected term of 3.0 years, stock price of $0.40, exercise price of $0.35, volatility of 203.3%, a risk-free interest rate of 3.5%, and no expected dividends. The estimated fair value per warrant was $0.37.

Based on these assumptions, the Company recognized stock-based compensation expense of approximately $8 thousand during the six months ended June 30, 2026 related to the issuance of 22,500 warrants.

Warrants Issued in Connection with Promissory Note

On February 6, 2026, the Company issued a promissory note in the principal amount of $30 thousand to an investor. In connection with the issuance of the note, the Company issued warrants to purchase 30,000 shares of common stock. The warrants have an exercise price of $0.40 per share, were exercisable upon issuance, and expire three years from the issuance date. The fair value of the warrants was estimated using the Black-Scholes option pricing model with the following assumptions: expected term of 3.0 years, stock price of $0.40, exercise price of $0.40, volatility of 202.8%, risk-free interest rate of 3.6%, and no expected dividends. The estimated fair value per warrant was $0.37.

Based on these assumptions, the total fair value of the warrants was approximately $11 thousand, which was recorded as a discount to the note and is being amortized to interest expense over the term of the note.

Warrant Transactions (Prior Period)

March 2025 Private Placement Offering

On March 18, 2025, the Company entered into a Securities Purchase Agreement with certain investors for a private placement of 2,045,009 units at a purchase price of $0.10 per unit, generating gross proceeds of $205 thousand. Each unit consisted of one share of common stock and one warrant to purchase one share of common stock. The warrants were exercisable immediately, expire four years from issuance, and have an exercise price of $0.13 per share.

In connection with the offering, the Company entered into exchange agreements with Dr. Imhoff and Mr. James, pursuant to which an aggregate of $53 thousand of outstanding principal and accrued interest was exchanged for units issued in the offering. The Company recognized a loss on extinguishment of debt of $32 thousand during the six months ended June 30, 2025 related to these exchanges.

In total, the Company issued 2,571,023 warrants in connection with the offering and related exchange agreements. The fair value of the warrants was estimated using the Black-Scholes option pricing model with an expected term of 4.0 years, stock price of $0.08, exercise price of $0.13, volatility of 191.6%, a risk-free interest rate of 4.0%, and no expected dividends. The estimated allocated value per warrant was $0.04. Proceeds from the offering were allocated between the common stock and warrants based on their relative fair values, and the fair value of warrants issued in the exchange agreements was included in the loss on extinguishment of debt.

Warrants Issued in Connection with Promissory Note

During the six months ended June 30, 2025, the Company issued 85,000 warrants in conjunction with the issuances of $85 thousand of notes payable to unaffiliated third parties. See Note 7, “Notes Payable” for additional details. Management estimated the fair value of the warrants issued utilizing the Black-Scholes Option Pricing model with the following weighted-average assumptions: