Stockholders' Equity (Deficit) |
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Jun. 30, 2026 | |||||||||||||||||||||||||||
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| Stockholders' Equity (Deficit) | (14) Stockholders’ Equity (Deficit) (a) Overview The Company’s Certificate of Incorporation (the “Charter”), originally filed on January 11, 2016, was amended on April 15, 2020, to increase the number of shares of common stock authorized and to authorize the issuance of preferred stock. The Company’s Certificate of Incorporation was further amended and restated on April 27, 2021, on May 22, 2023, to effect the May 2023 Reverse Split, on January 16, 2024, to effect the January 2024 Reverse Split, on December 4, 2024, to effect the December 2024 Reverse Split, and on May 5, 2025, to effect the May 2025 Reverse Split. The total number of shares of capital stock which the Company is authorized to issue is 300,000,000, each with a par value of $0.0001 per share. Of these, 290,000,000 shall be common stock and 10,000,000 shall be preferred stock. The Company’s restated Certificate of Incorporation, as amended, permits its Board to designate the number of shares constituting such series, and fix by resolution, the powers, privileges, preferences and relative, option or special rights thereof, including liquidation preferences and dividends, and conversion and redemption rights of each such series. A Certificate of Designation of Preferences, Rights and Limitations of Series A Non-Voting Convertible Preferred Stock and Series B Non-Voting Convertible Preferred Stock was filed on October 8, 2025, and amended on October 23, 2025, and further amended on August 3, 2026, (as amended, the “Certificate of Designation”) to give effect to the designation of the Series A Preferred Stock (as defined below) and Series B Preferred Stock (as defined below). On March 2, 2026, the Company filed a Certificate of Designation of Preferences, Rights and Limitations of Series C Non-Voting Convertible Preferred Stock (the “Series C Certificate of Designation”). The Series C Certificate of Designation, which was amended on July 16, 2026, designated that 1,214,204 shares of preferred stock shall be the Series C Preferred Stock. At June 30, 2026, and December 31, 2025, the Company had 1,011,595 and 916,968 shares of common stock issued and outstanding, respectively. At June 30, 2026, and December, 31 2025, the Company had approximately 1,215,670 and 1,436 shares of preferred stock issued and outstanding, respectively. (b) Preferred Stock In October 2025, the Board designated 1,242.0718 shares of preferred stock to be Series A Non-Voting Convertible Preferred Stock (“Series A Preferred Stock”) and 223.7337 shares of preferred stock to be Series B Non-Voting Convertible Preferred Stock (“Series B Preferred Stock”). On March 2, 2026, the Board designated 1,214,204 shares of preferred stock to be Series C Non-Voting Convertible Preferred Stock (“Series C Preferred Stock”). As of June 30, 2026, the Company had authorized, issued and outstanding 1,242.0717 shares of Series A Preferred Stock, 223.7337 shares of Series B Preferred Stock, and 1,214,204 shares of Series C Preferred Stock totaling approximately 1,215,670 shares of preferred stock. As of June 30, 2026, the Company had approximately 8,784,330 authorized but unissued or outstanding shares of preferred stock. Pursuant to a contractual obligation related to the Acquisition, on April 6, 2026, the Company paid holders of Series A Preferred Stock a one-time dividend paid in shares of Series A Preferred Stock at a rate equal to five percent (5.0%) per annum on each share of Series A Preferred Stock. The Company accrued this dividend into its equity accounts. (14) Stockholders’ Equity (Deficit) (continued) Except as otherwise required by law, the Series A Preferred Stock and Series B Preferred Stock do not have voting rights. However, as long as any shares of Series A Preferred Stock or Series B Preferred Stock are outstanding, the Company may not, without the affirmative vote of the holders of a majority of the then-outstanding shares of the Series A Preferred Stock and Series B Preferred Stock, (i) alter or change adversely the powers, preferences or rights given to the Series A Preferred Stock or Series B Preferred Stock or alter or amend the Certificate of Designation, amend or repeal any provision of, or add any provision to, the Charter or Amended and Restated Bylaws of the Company, or file any articles of amendment, certificate of designation, preferences, limitations and relative rights of any series of Preferred Stock, if such action would adversely alter or change the preferences, rights, privileges or powers, or restrictions provided for the benefit, of the Series A Preferred Stock or Series B Preferred Stock, regardless of whether any of the foregoing actions shall be by means of amendment to the Company’s Charter or by merger, consolidation, recapitalization, reclassification, conversion or otherwise, (ii) issue further shares of Series A Preferred Stock or Series B Preferred Stock, or increase or decrease (other than by conversion) the number of authorized shares of Series A Preferred Stock or Series B Preferred Stock, (iii) prior to the Stockholder Approval (as defined in the Certificate of Designation) or at any time while at least 30% of the originally issued Series A Preferred Stock or Series B Preferred Stock, as applicable, remains issued and outstanding, consummate either (A) any Fundamental Transaction (as defined in the Certificate of Designation) or (B) any merger or consolidation of the Company with or into another entity or any stock sale to, or other business combination in which the stockholders of the Company immediately before such transaction do not hold at least a majority of the capital stock of the Company immediately after such transaction, or (iv) enter into any agreement with respect to any of the foregoing. The Series A Preferred Stock and Series B Preferred Stock shall rank on parity with the Common Stock as to distributions of assets upon liquidation, dissolution or winding-up of the Company, whether voluntarily or involuntarily. At any time and from time to time after 5:00 p.m. Eastern Time on July 23, 2026, the third business day after the date the Company’s stockholders approved the conversion of the Series A Preferred Stock and Series B Preferred Stock (the “Stockholder Approval”), each share of Series A Preferred Stock may be converted at the option of the holder thereof into 10,000 shares of Common Stock, subject to certain limitations provided in the Certificate of Designation, including that the Company shall not effect any conversion of Series A Preferred Stock into shares of Common Stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than a specified percentage of the total number of shares of Common Stock issued and outstanding immediately after giving effect to such conversion (the “Beneficial Ownership Limitation”). At any time and from time to time after April 8, 2026, each share of Series B Preferred Stock may be converted at the option of the Holder thereof into 10,000 shares of Common Stock, subject to certain limitations provided in the Certificate of Designation, including that the Company shall not effect any conversion of Series B Preferred Stock into shares of Common Stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own Common Stock in excess of the Beneficial Ownership Limitation. At any time following the earlier to occur of (i) the receipt of the Stockholder Approval or (ii) the consummation of a Fundamental Transaction, holders of Series A Preferred Stock and Series B Preferred Stock may waive or change the Beneficial Ownership Limitation effective upon written notice to the Company; provided, that to the extent such waiver or change is solely permitted pursuant to the Stockholder Approval or the consummation of a Fundamental Transaction, such notice must be delivered not less than 60 days prior to the effectiveness of such waiver or change. (14) Stockholders’ Equity (Deficit) (continued) The Company shall be obligated to make a cash payment in lieu of delivering shares of Common Stock (a “Cash Settlement”) upon the occurrence of any of the following events (each, a “Cash Settlement Trigger Event”): (i) the conditions set forth in section 5.3 of the Repurchase Agreement dated as of October 8, 2025, by and between the Company and DEFJ (the “Repurchase Agreement”) are triggered; (ii) the Company fails to deliver to the holder of Series A Preferred Stock a certificate or certificates representing shares of Common Stock, or electronically deliver such shares on or prior to the third trading day after the applicable Share Delivery Date (as defined in the Certificate of Designation); or (iii) the Company fails to deliver to the holder of Series A Preferred Stock a certificate or certificates representing shares of Common Stock, or to electronically deliver such shares, on or prior to April 8, 2027. Unless the holder of Series A Preferred Stock has rescinded the applicable Notice of Conversion, the Company will, at the request of the holder of Series A Preferred Stock, pay an amount equal to the Fair Value (as defined in the Certificate of Designation) of such undelivered shares, with such payment to be made within business days from the date of such request by such holder, whereupon the Company’s obligations to deliver such shares underlying the Notice of Conversion (as defined in the Certificate of Designation) shall be extinguished upon payment in full of the Fair Value of such undelivered shares; provided, however that such request shall be presumed to have been duly and properly made by such holder if Stockholder Approval with respect to the Series A Preferred Stock shall not have been obtained prior to the date on which the Notice of Conversion is delivered to the Company. Upon the occurrence of the conditions set forth in section 5.3 of the Repurchase Agreement, or if upon a valid conversion by holders of the Series B Preferred Stock, the Company fails to deliver to the holder of Series B Preferred Stock a certificate or certificates representing shares of Common Stock, or electronically deliver such shares, on or prior to the third trading day after the applicable Share Delivery Date, then, unless the holder of Series B Preferred Stock has rescinded the applicable Notice of Conversion, the Company will, at the request of the holder of Series B Preferred Stock, pay an amount equal to the Fair Value of such undelivered shares, with such payment to be made within business days from the date of such request by such holder, whereupon the Company’s obligations to deliver such shares underlying the Notice of Conversion shall be extinguished upon payment in full of the Fair Value of such undelivered shares; provided, however that such request shall be presumed to have been duly and properly made by such holder if Stockholder Approval with respect to the Series B Preferred Stock shall not have been obtained prior to the date on which the Notice of Conversion is delivered to the Company. Prior to April 8, 2026, the Company’s Series B Preferred Stock was not convertible and was classified within permanent equity. Effective April 8, 2026, the Series B Preferred Stock became convertible in accordance with the terms of its issuance. In conjunction with the Series B Preferred Stock becoming convertible, certain rights and settlement provisions became operative which in certain circumstances not solely within the Company’s control could have required the Company to settle the Series B Preferred Stock in cash. Accordingly, beginning April 8, 2026, the Company concluded that the Series B Preferred Stock met the criteria for classification in temporary equity at which time the Company reclassified the carrying amount of the Series B Preferred Stock of approximately $22.7 million from stockholders’ equity to temporary equity. The cash settlement provisions set forth in the Certificate of Designation shall be available irrespective of the reason for the Company’s failure to timely deliver the applicable shares of Common Stock including due to not having obtained Stockholder Approval with respect to the Preferred Stock. (c) Repurchase Agreement The terms of the Repurchase Agreement signed in connection with the Acquisition (the “Repurchase Agreement”) provide that DEFJ has the right, but not an obligation, after the Closing and upon the occurrence of certain conditional events including continued listing requirements, to acquire all of the Company’s and its subsidiaries’ rights in and to the membership interests of ABCJ (the “Interests”) from the Company in accordance with the terms and conditions of the Repurchase Agreement. The aggregate purchase price for the Interests (the “Repurchase Price”) shall equal one hundred percent (100%) of the Purchaser Preferred Stock Payment Shares (as defined in the Repurchase Agreement) (or the number of shares of Purchaser Common Stock shares issued upon conversion thereof) initially issued to DEFJ pursuant to the Purchase Agreement (the “Share Consideration”). (14) Stockholders’ Equity (Deficit) (continued) (d) Redeemable Preferred Stock The Company applies ASC 480 when determining the classification and measurement of its preferred stock. Preferred shares subject to mandatory redemption are classified as liability instruments and are measured at fair value. Conditionally redeemable preferred shares (including preferred shares that feature redemption rights that are either within the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within the Company’s control) are classified as temporary equity. At all other times, preferred shares are classified as stockholders’ equity (deficit). (e) Series A Preferred Stock In connection with the Acquisition, the Company initially issued 1,212.1822 shares of Series A Preferred Stock. The Series A Preferred Stock does not have voting rights except for voting on specific corporate matters including (i) changes to the rights and preferences of the Series A Preferred Stock, (ii) issuance of additional Series A Preferred Stock, and (iii) entry into a Fundamental Transaction such as a sale of the Company. Certain provisions of the Series A Preferred Stock are as follows:
(f) Series B Preferred Stock In connection with the Investment Agreement, the Company issued 223.7337 shares of Series B Preferred Stock. The Series B Preferred Stock does not have voting rights except for voting on specific corporate matters including (i) changes to the rights and preferences of the Series B Preferred Stock, (ii) issuance of additional Series B Preferred Stock, and (iii) entry into a Fundamental Transaction such as a sale of the Company. Certain provisions of the Series B Preferred Stock are as follows:
(14) Stockholders’ Equity (Deficit) (continued) (g) Series C Preferred Stock In connection with the Company’s licensing agreement with Unleash, the Company issued 1,214,204 shares of Series C Preferred Stock. The Series C Preferred Stock does not have voting rights except for voting on specific corporate matters including (i) changes to the rights and preferences of the Series C Preferred Stock, and (ii) issuance of additional Series C Preferred Stock. Certain provisions of the Series C Preferred Stock are as follows:
(h) Common Stock
(i) Issuances of Common Stock and Warrants On January 22, 2024, the Company closed an offering under a Securities Purchase Agreement with purchasers named therein pursuant to which the Company sold approximately 465 shares of common stock, approximately 5,968 pre-funded warrants (“PFWs”), and approximately 12,864 warrants to purchase common stock (the “January 2024 Warrants”), in a registered direct offering at a purchase price of $1,127.28 per share (or $1,118.04 per PFW) (the “January 2024 RDO”). The January 2024 Warrants became exercisable commencing on issuance and are exercisable for from the date of issuance at an exercise price of $1,127.28 per share. Net proceeds from the January 2024 RDO, after deducting fees payable to the placement agent and other offering expenses, were approximately $6.1 million. The PFWs sold in the January 2024 RDO were exercisable at an exercise price of $9.24 per share. All PFWs sold in the January 2024 RDO were exercised prior to April 30, 2024. In connection with the January 2024 RDO, the Company also issued the placement agent warrants to purchase up to approximately 388 shares of common stock (the “January 2024 Placement Agent Warrants”). The January 2024 Placement Agent Warrants became exercisable on issuance, expire following the date of sale and have an exercise price per share of $1,409.10. See Note 15. (14) Stockholders’ Equity (Deficit) (continued) On July 22, 2024, the Company entered into a Placement Agency Agreement with ThinkEquity LLC pursuant to which the Company issued and sold approximately 10,823 shares of common stock in a best efforts public offering at a purchase price of $277.20 per share (the “July 2024 Offering”). Net proceeds from the July 2024 Offering, after deducting discounts, commissions and fees paid to the placement agent and other offering expenses, were approximately $2.4 million. In connection with the July 2024 Offering, the Company also issued warrants to the placement agent to purchase up to approximately 548 shares of common stock (the “July 2024 Placement Agent Warrants”). The July 2024 Placement Agent Warrants become exercisable January 18, 2025, expire July 22, 2029, and have an exercise price of $346.50 per share. See Note 15. On December 2, 2024, the Company entered into a Placement Agency Agreement with The Benchmark Company LLC pursuant to which the Company issued and sold approximately 6,180 shares of common stock and 16,786 PFWs, together with 22,966 Series C Warrants to purchase common stock (the “Series C Warrants”), and 22,966 Series D Warrants to purchase common stock (the “Series D Warrants”) in a private offering at a purchase price of $348.35 per share (or $348.25 per PFW) (the “2024 PIPE”). The Series C and Series D Warrants became exercisable commencing on stockholder approval of the 2024 PIPE which approval was obtained on February 25, 2025. The Series C Warrants are exercisable for five years from such stockholder approval; the Series D Warrants were exercisable for from such approval. The initial exercise prices for the Series C and Warrants were $348.35 per share, subject to adjustments and resets. In addition, the Series D Warrants included an alternative cashless exchange provision whereby the holder could exchange each Series D Warrant for three shares of Common Stock. Net proceeds from the 2024 PIPE, after deducting fees payable to the placement agent and other offering expenses, were approximately $7.2 million. All PFWs sold in the 2024 PIPE were exercised prior to March 31, 2025. See Note 15. The Company has accounted for the Series C and D Warrants in accordance with the guidance contained in ASC 815-40. Such guidance provides that because the Series C and D Warrants do not meet the criteria for equity treatment thereunder, they must be recorded as a liability. On March 23, 2025, the Company entered into a Placement Agency Agreement with ThinkEquity LLC pursuant to which the Company issued and sold approximately 366,080 shares of common stock and warrants (the “March 2025 Offering Warrants”) to purchase approximately 366,080 shares of common stock at an exercise price of $24.08 per share in a best efforts public offering at a purchase price of $27.44 per share and accompanying warrant (the “March 2025 Offering”). Net proceeds from the March 2025 Offering, after deducting discounts, commissions and fees paid to the placement agent and other offering expenses, were approximately $8.9 million. In connection with the March 2025 Offering, the Company also issued warrants to the placement agent to purchase up to 18,290 shares of common stock (the “March 2025 Placement Agent Warrants”). The March 2025 Placement Agent Warrants became exercisable on issuance, expire March 24, 2030, and have an exercise price of $29.96 per share. See Note 15. (j) Registration Rights Agreement In connection with the Acquisition, the Company entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with the holders (the “Holders”) of the Common Stock, the Series A Preferred Stock and the Series B Preferred Stock issued in connection with the Acquisition (collectively the “Acquisition Transaction Shares”). Pursuant to the Registration Rights Agreement, the Company was required to prepare and file a resale registration statement with the SEC on or prior to the 75th calendar day following the Closing (the “Filing Deadline”), with respect to the shares of Common Stock issued in the Acquisition and the shares of Common Stock issuable upon conversion of the Series A Preferred Stock and the Series B Preferred Stock issued in the Acquisition, subject to the Beneficial Ownership Limitation. This resale registration statement was filed on May 1, 2026, and declared effective by the SEC on May 6, 2026. Pursuant to a Registration Rights Agreement with Unleash, the Company agreed to file a resale registration statement on Form S-3 registering the shares of Common Stock issuable on conversion of the Series C Preferred Stock under the Unleash Registration Rights Agreement. This resale registration statement was filed on May 1, 2026, and declared effective by the SEC on May 6, 2026. The Company also granted Unleash customary demand registration rights.
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