NOTE 10. – CAPITAL RAISES AND WARRANTS FOR COMMON STOCK

The following table summarizes the Company’s warrant activity from January 1, 2026 through June 30, 2026:

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The following table summarizes the Company’s outstanding warrants as of June 30, 2026:

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The incremental value of modifications to financial instruments, such as warrants or convertible preferred stock, is determined based on Monte-Carlo and Black-Scholes valuation models. Amounts recorded as Deemed dividends in determining Net loss available to common shareholders in the Condensed Consolidated Statements of Operations and Comprehensive Loss are as follows:

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June 2026 Warrant Inducement and Amendment

On June 8, 2026, the Company commenced a warrant inducement offering (the “June 2026 Warrant Inducement”) with the holders of certain outstanding warrants to purchase up to an aggregate of 267,284 shares of common stock (collectively, the “June 2026 Existing Warrants”), which June 2026 Existing Warrants are exercisable at an exercise price of $71.40. The Company offered the holders of the June 2026 Existing Warrants an inducement period whereby the Company agreed to issue new warrants (the “June 2026 Inducement Warrants”) to purchase up to a number of shares of common stock equal to 100% of the number of shares of common stock issued pursuant to the exercise by the holders of the June 2026 Existing Warrants, for cash, at a reduced exercise price equal to $9.252. Each holder agreed to exercise all of their June 2026 Existing Warrants immediately. The Company received aggregate gross cash proceeds of approximately $463 after redemption of $2,010 or 2,010 shares of Series B Preferred Stock from the exercise of the June 2026 Existing Warrants.

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To account for the redemption of Series B convertible preferred stock in accordance with ASC 260-10-S99-2, the Company recorded a reduction of Capital in excess of par value of $1,140 to extinguish the carrying value of the Series B convertible preferred stock and a dividend to the holders of the Series B convertible preferred stock of $870, which is a deduction in net income (loss) to arrive at income (loss) available to common shareholders (see Note 11 “Loss Per Common Share”).

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The Company measured the fair value of the June 2026 Existing Warrants before and after the modification to decrease the cash exercise price, and concluded there was an increase in fair value of $540 recorded as a deemed dividend.

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The provisions of the June 2026 Inducement Warrants regarding stock combination events were triggered as a result of the 1-for-20 reverse stock split on June 12, 2026. The anti-dilution adjustment resulted in the issuance of an additional 2,752,302 Inducement Warrants and a deemed dividend from issuance of the Inducement Warrants of $17,005. Stockholder approval for issuance and terms of the June 2026 Inducement Warrants is required to be obtained at the August 5, 2026 Special Meeting of the Stockholders.

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On August 13, 2026, the Company entered into an amendment with the holders of all of the outstanding June 2026 Inducement Warrants whereby the exercise price was reduced to $0.3675 and to allow all of the June 2026 Inducement Warrants to be exercised on a cashless basis. Following the amendment, all 3,019,586 warrants were exercised on a cashless basis for an aggregate of 2,742,397 shares of common stock, with 2,531,242 of such shares held in abeyance. Following the exercise, no warrants remain outstanding. See Note 13 “Subsequent Events” for additional information.

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March 2026 Series B Convertible Preferred Stock Offering

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On March 20, 2026, the Company and certain investors entered into a securities purchase agreement with respect to the offer and sale of $20,000 of shares of Series B Convertible Preferred Stock, stated value $1,000 per share (the “Series B convertible preferred stock”), initially convertible into shares of the Company’s common stock at an initial conversion price of $71.40 (subject to adjustment in certain circumstances with a floor price of $14.28) and, alternatively, at a 15% discount to the lowest daily volume-weighted average price (“VWAP”) during the prior 20 trading days (the “Alternative Conversion Price”) and warrants to purchase shares of common stock pursuant to a registered direct offering. The Company has the ability to reset the fixed conversion price (lower), subject to board approval and the floor price. Stockholder approval for the offering was obtained at the February 20, 2026 Special Meeting of the Stockholders.

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At the initial closing, the investors purchased $16,000 of shares of Series B convertible preferred stock and warrants. The remaining 4,000 shares of Series B Preferred Stock and warrants are expected to be delivered at second closings, of which 25 shares have been purchased through June 30, 2026. The investors may request the second closing at any time until the one-year anniversary of the initial closing date and we may require the second closing at any time until the one-year anniversary of the initial closing date by individual investor once less than 50% of such Investor’s Series B convertible preferred stock purchased at the initial closing remains outstanding and certain equity conditions have been satisfied for at least 7 of the prior 10 trading days, including: (1) the common stock closes above 2.5 times the floor price and (2) the daily dollar trading volume of the Common Stock exceeds $500. The warrants are immediately exercisable at an exercise price of $71.40 per share of common stock and expire on the date that is five years after issuance. In addition, the Company issued placement agent warrants to purchase an aggregate of 9,412 shares of common stock with substantially the same terms as the Warrants, except that the exercise price of the Placement Agent Warrants is $78.54.

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The Company used the net proceeds from the offering to repurchase at par all of the shares of outstanding Series A convertible preferred stock issued in August 2025 in the amount of $9,650.  The balance of the net proceeds from the offering was approximately $5,680, after deducting placement agent case fees but before any other offering expenses.  

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August 2025 Series A Convertible Preferred Stock Offering

On August 22, 2025, the Company and certain investors entered into a securities purchase agreement with respect to the offer and sale of $10,650 of shares of Series A Convertible Preferred Stock, stated value $1,000 per share (the “Series A convertible preferred stock”), initially convertible into an aggregate of 16,210 shares of the Company’s common stock at an initial conversion price of $657 (subject to adjustment in certain circumstances with a floor price of $118.20) and warrants to purchase shares of Common Stock pursuant to a registered direct offering. The Investors purchased $10,650 of shares of Series A convertible preferred stock and warrants. The warrants are immediately exercisable at an exercise price of $591 per share of common stock and expire on the date that is five years after issuance. The net proceeds to the Company from the offering was $9,893. In addition, the Company issued placement agent warrants to purchase an aggregate of 1,893 shares of common stock with substantially the same terms as the warrants, except that the exercise price of the placement agent warrants is $651. Following the offering, 1,000 shares of Series A Preferred Stock were converted into 1,522 shares of common stock.

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On December 17, 2025, the Company entered into an Omnibus Amendment and Waiver (the “Amendment Agreement”) with the holders of the outstanding Series A convertible preferred stock to amend the Series A convertible preferred stock, the warrants and certain placement agent warrants issued in connection with the August 2025 offering described above.

Pursuant to the Amendment Agreement, the Company and the holders agreed to provide an alternative conversion feature to the Certificate of Designation whereby the Series A convertible preferred stock can be converted at a conversion price equal to 85% of the lowest VWAP in any of the twenty trading days preceding the conversion.  Pursuant to the Amendment Agreement, the Company also agreed to provide certain anti-dilution adjustments to the exercise price of the warrants and placement agent warrants to provide protection against future dilutive issuances.

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Following execution of the Amendment Agreement, the Company re-evaluated conclusions on classification and embedded features, resulting in no changes from the date of issuance of the Series A convertible preferred stock, as further described below.  The impacts of the Amendment Agreement are accounted for as an extinguishment, as the fair value of the instruments before and after modification increased by greater than 10%, resulting in the incremental value being recorded within Capital in excess of par value as a deemed dividend of $4,679 recorded in the period ended December 31, 2025.

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Subsequent to December 31, 2025, stockholder approval for the provisions of the Amendment Agreement was obtained at the February 20, 2026 Special Meeting of the Stockholders.  

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On March 24, 2026, in connection with an offering of newly issued Series B convertible preferred stock, the Company redeemed all 9,650 shares of Series A convertible preferred stock at par in the amount of $9,650.  The Company evaluated the redemption to determine whether it is treated as an exchange transaction, assessing qualitative factors, to conclude whether the accounting would be a modification or extinguishment.  The Company believes the changes in fixed conversion price and floor price of the Series B convertible preferred stock are so significant that the accounting should be an extinguishment of the Series A convertible preferred stock and issuance of new Series B convertible preferred stock. Therefore, in accordance with ASC 260-10-S99-2, the Company recorded a reduction of Capital in excess of par value of $2,734 to extinguish the carrying value of the Series A convertible preferred stock and a dividend to the holders of the Series A convertible preferred stock of $6,916, which is a deduction in net income (loss) to arrive at income (loss) available to common shareholders (see Note 11 “Loss Per Common Share”).

Mezzanine Classification

ASC 480-10-S99-3A(2) of the SEC's Accounting Series Release No. 268 ("ASR 268") requires preferred securities that are redeemable for cash or other assets to be classified outside of permanent equity if they are redeemable (i) at a fixed or determinable price on a fixed or determinable date, (ii) at the option of the holder, or (iii) upon the occurrence of an event that is not solely within the control of the issuer. Preferred securities that are mandatorily redeemable are required to be classified by the issuer as liabilities whereas under ASR 268, a company should classify a preferred security whose redemption is contingent on an event not entirely in control of the issuer as mezzanine equity. The Series A convertible preferred stock is redeemable at the option of the holder if "shareholder approval" (as defined in the agreements) is not obtained, which is not solely within control of the Company, and accordingly, the Company determined that mezzanine treatment is appropriate for the Series A convertible preferred stock. The Series A convertible preferred stock was initially measured at the amount of total proceeds less any offering costs and proceeds allocated to the accompanying warrants based on relative fair value, and was previously presented as such in the Condensed Consolidated Balance Sheets. Following stockholder approval at the February 20, 2026 Special Meeting of the Stockholders, the Company reclassified the carrying value of the Series A convertible preferred stock from mezzanine equity to permanent equity in accordance with ASC 480-10-S99-3A.

Further, upon issuance the Company evaluated all embedded features against an equity-like host and concluded none of the embedded features identified within the Series A and the newly issued Series B convertible preferred stock that may require bifurcation as they are either deemed clearly and closely related or not net settleable as a result of a lack of an active market.

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Convertible preferred stock transaction activity is summarized in the table below:

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April 2025 Warrant Inducement and Amendment

On April 29, 2025, the Company commenced a warrant inducement offering with the holders of outstanding warrants to purchase 1,605 shares of common stock (the “April 2025 Existing Warrants”). The Company offered the holders of the Existing Warrants an inducement period whereby the Company agreed to issue new warrants (the “Inducement Warrants”) to purchase up to a number of shares of common stock equal to 100% of the number of shares of common stock issued pursuant to the exercise by the holders of the Existing Warrants, for cash, at a reduced exercise price. Each holder agreed to exercise 60% of their Existing Warrants immediately (the “Initial Exercise”) and will exercise the remaining 40% within 30 calendar days following the Effectiveness Date (as defined in the agreements), provided that the Company’s stock price at such time equals or exceeds 90% of the Nasdaq Minimum Price on that date (the “Additional Exercise”).

The net proceeds to the Company from the Initial Exercise, after deducting placement agent fees and the Company’s offering expenses were $5,075. In connection with the Initial Exercise, the Company issued 998 Inducement Warrants. Of the aggregate net proceeds, the Company was obligated under the Debentures of the convertible senior secured credit facility to repay outstanding debt in the amount of $1,017. The Company also measured the fair value of the April 2025 Existing Warrants before and after the modification to decrease the cash exercise price and concluded there was no incremental fair value to be recorded as issuance costs due to the alternative cashless exercise features of the warrants.

Additionally, on April 29, 2025, the Company entered into amendments with the holders of the outstanding warrants issued on October 24, 2024, which adjusted the provisions of the warrants regarding recapitalization events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Company’s common stock. The anti-dilution adjustment resulted in the issuance of an additional 4,729 October 2024 PIPE Warrants and October 2024 PIPE Placement Agent warrants.

ATM Offering

On November 4, 2025, the Company established an at-the-market common equity offering program (“ATM Program”), through which it had the ability to offer and sell shares of common stock having an aggregate gross sales price of up to $25,000, which program was reduced to a maximum of $6,400 on May 1, 2026. The Company will pay a 3.00% sales commission based on the gross proceeds of the sales price per share of common stock sold and incurred initial offering costs of $130, deducted from gross proceeds. The following table shows the number of shares sold under the ATM Program:

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