(12) EQUITY

Preferred Stock and Warrants

On February 18, 2025, the Company entered into a Securities Purchase Agreement (the “February 18, 2025 SPA”) with Lazar, and Cao Yu, Hu Bin, and Youxin Consulting Limited (collectively, the “Purchasers”), which was subsequently amended on May 9, 2025. Pursuant to the February 18, 2025 SPA and its amendment, Lazar, a former director and officer of the Company, sold to the Purchasers (i) 2,219,447 shares of Series A Preferred Stock, (ii) a warrant to purchase up to 2,800,000 shares of Common Stock at an exercise price of $1.00 per share, subject to adjustment (the “Warrant”), and (iii) certain receivables owed by the Company to Lazar associated with the transaction (the “Lazar Receivables”). On April 10, 2025, Lazar transferred an additional 31,258 shares of Series A Preferred Stock to the Purchasers (together with the previously transferred shares and the Warrant, the “Securities”). The aggregate purchase price for the Securities and the Lazar Receivables was $500,000, of which $300,000 was directed by Lazar to be paid to the Company in exchange for a convertible note. The Purchasers also paid a $3.4 million earn-out payment to Lazar for his efforts related to the Company’s successful relisting on Nasdaq as of June 30, 2025. As of June 30, 2025, the Lazar Receivables were forgiven for the benefit of the Company, and the Warrant was amended and restated to eliminate the beneficial ownership limitations previously contained therein. No dividends have been declared or paid on the Common Stock or the Series A Preferred Stock as of June 30, 2026 and December 31, 2025.

As of June 30, 2026 and December 31, 2025, the Company had 2,305,357 shares of Series A Preferred Stock issued and outstanding. Each share of Series A Preferred Stock is convertible, at the option of the holder, into 1.4 shares of Common Stock, votes on an as-if-converted basis, and has full ratchet protection in any subsequent offerings. The Warrants remained outstanding as of June 30, 2026.

Securities Purchase Agreements

On May 9, 2025, the Company entered into, and simultaneously closed the transactions under, certain securities purchase agreements with Cao Yu and Hu Bin, pursuant to which the Company sold an aggregate of 2,439,025 shares of Common Stock - 1,585,366 shares to Cao Yu for an aggregate purchase price of $2,600,000 and 853,659 shares to Hu Bin for an aggregate purchase price of $1,400,000.

On January 30, 2026, the Company entered into a securities purchase agreement (the “2026 Purchase Agreement”) with certain purchasers named therein (the “2026 Purchasers”), pursuant to which the Company agreed to sell and issue to the 2026 Purchasers, at the closing of the private placement (the “Closing”) in March 2026, an aggregate of 394,476 shares of Common Stock (the “Shares”), at an offering price of $5.07 per Share. The Closing occurred on March 31, 2026. The Company received total gross proceeds of $1,999,993 from the 2026 Purchasers. As of June 30, 2026, $3,945 was recorded as Common Stock and $1,996,048 was recorded as additional paid-in capital (“APIC”), net of $53,823 of legal fees related to the offering, which were charged to APIC.

Helena Purchase Agreement

On May 9, 2025, the Company entered into a Purchase Agreement (the “Helena Purchase Agreement”) with Helena Global Investment Opportunities I Ltd. (“Helena”) whereby the Company shall have the right to issue and sell to Helena, from time to time, and Helena shall purchase from the Company, up to $15,000,000 of Common Stock, during the period commencing on May 9, 2025 and ending on the first day of the month immediately following the 36-month anniversary of May 9, 2025.

The closing of each Advance (as defined in the Helena Purchase Agreement) and each sale and purchase of Common Stock related to each Advance shall take place on the applicable Settlement Date (as defined in the Helena Purchase Agreement), at a Purchase Price (as defined in the Helena Purchase Agreement) based on 95% of the lowest VWAP for the Common Stock, in respect of any Advance, during the three (3) trading days commencing on the date of Helena’s receipt of the shares of Common Stock relating to such Advance.

In consideration for Helena’s execution and delivery of the Helena Purchase Agreement, the Company issued to Helena, as a commitment fee, shares of Common Stock (the “Commitment Fee Shares”), having an aggregate value of $150,000, of which (i) 71,572 shares of Common Stock were issued on May 14, 2025, and (ii) 71,572 shares of Common Stock were issued on August 11, 2025. The Commitment Fee Shares were fully earned as of the execution date of the Helena Purchase Agreement, and the issuance of the Commitment Fee Shares was not contingent upon any other event or condition. The number of the Commitment Fee Shares issued in each tranche was determined by dividing $75,000 by the lowest Volume Weighted Average Price (VWAP) of the Common Stock during the five trading days immediately preceding the agreement date. As of June 30, 2026, the $150,000 commitment fee previously recorded as deferred offering costs was fully amortized and expensed, as the Company had not sold any shares and does not expect to sell any shares in the future under the Helena Purchase Agreement.

July 2025 Warrant

On July 2, 2025, the Company issued a warrant to purchase 404,002 shares of Common Stock with an exercise price of $0.01 per share, subject to stockholder approval (the “July 2025 Warrant”), to Lazar. This warrant was issued as compensation for services provided by Lazar.

In accordance with the accounting requirements of ASC 718, “Compensation - Stock Compensation,” the Company measured this equity instrument at fair value and recognized the compensation cost immediately on the grant date. Using the Black-Scholes option pricing model, with key inputs including a fair value of the underlying Common Stock of $2.67, an exercise price of $0.01 per share, an expected term of 0.405 years, a risk-free interest rate of 4.33%, expected volatility of 90%, and a dividend yield of 0%, the fair value of this warrant was determined to be $1,074,715.55 as of July 2, 2025. On the grant date, the Company recognized the compensation expense with a corresponding credit to APIC.

On November 12, 2025, Lazar exercised the warrant through a cashless exercise mechanism. Pursuant to the cashless exercise, 402,347 shares of Common Stock were issued. The warrant was fully settled upon this exercise and no longer remains outstanding.

ATM Sales Agreement

In June 2026, the Company entered into a sales agreement (the “Sales Agreement”) with A.G.P./Alliance Global Partners (“A.G.P.”) under which the Company may offer and sell up to an estimated $6,272,809 of shares of Common Stock from time to time through an “at the market” offering program under which A.G.P. will act as sales agent. Pursuant to the Sales Agreement, the Company has agreed to pay A.G.P. a commission of 3.25% of the aggregate gross proceeds from any shares of Common Stock sold by A.G.P. The Company has no obligation to sell any shares under the Sales Agreement and may at any time suspend solicitation and offers under the Sales Agreement. During the six months ended June 30, 2026, the Company did not sell any shares of Common Stock pursuant to the Sales Agreement.

Stock-Based Compensation

Director Equity Fees

On April 29, 2025, the Company entered into director agreements with two independent directors, pursuant to which each director is entitled to receive 100,000 shares of Common Stock, provided they remain a director for one year from the effective date of the director agreements. The grant date for these equity awards was April 29, 2025, with a one-year service period ending on April 29, 2026.

Compensation expense is recognized on a straight-line basis over the service period. For the six months ended June 30, 2026, the Company recognized $61,333 of stock-based compensation expense related to these awards, representing the portion of the service period completed during the six months ended June 30, 2026. This amount is recorded as an increase to additional paid-in capital and is included in general and administrative expenses in the consolidated statements of operations.

On May 5, 2026, upon the completion of the requisite service period, the Company issued an aggregate of 200,000 shares of Common Stock to the two directors in settlement of these awards. The issuance was recorded as an increase to common stock of $2,000 (representing the par value of $0.01 per share), with a corresponding reduction to additional paid-in capital of $2,000. The $2,000 reduction to additional paid-in capital represents the net effect of reclassifying the accumulated stock-based compensation expense previously recognized in additional paid-in capital upon the issuance of the shares.

The following table summarizes the stock-based compensation expense for the director equity fees by line item in the consolidated statements of operations and comprehensive income (loss):

2025 Equity Incentive Plan

On October 27, 2025, the Company’s stockholders approved the 2025 Equity Incentive Plan (the “2025 Plan”), which authorized 1,394,230 shares of Common Stock for issuance to employees, directors, and other eligible participants. The 2025 Plan permits the grant of stock options, stock appreciation rights (“SARs”), restricted stock, restricted stock units (“RSUs”), and other stock-based awards.

On May 12, 2026 (the “Grant Date”), the Company granted an aggregate of 585,288 RSUs under the 2025 Plan to two officers and six business partners in exchange for their future services. The RSUs granted vest in three annual tranches on May 12, 2027, May 12, 2028, and May 12, 2029, subject to the grantee’s continued service through each applicable vesting date. The fair value of the RSUs was determined based on the closing price of the Company’s common stock on the Grant Date, which was $6.81 per share. The aggregate grant date fair value of the RSUs was approximately $3.99 million. For employee awards, compensation cost is recognized using the graded vesting attribution method over the requisite service period for each separate vesting tranche. For non-employee awards, compensation cost is recognized on a straight-line basis over the three-year service period as a whole.

The following table summarizes the stock-based compensation expense for the 2025 Plan by line item in the consolidated statements of operations and comprehensive income (loss):

As of June 30, 2026, there was approximately $3.7 million of unrecognized compensation cost related to these RSUs, which is expected to be recognized over a weighted-average period of approximately 2.43 years.