General

Reverse Stock Split

On January 16, 2026, the Company filed an amendment to the Company’s Third Amended Certificate, to effect a reverse stock split of the Company’s issued and outstanding shares of common stock at a ratio of 1-for-12 (the “2026 Reverse Split”) (the “2026 Amendment”). The 2026 Amendment became effective on January 23, 2026. As a result of the 2026 Reverse Split, every 12 shares of the Company’s issued and outstanding common stock was automatically combined and converted into one issued and outstanding share of common stock. The 2026 Reverse Split was approved by the Company’s Board on January 2, 2026, and approved by the stockholders of the Company on June 9, 2025.

All references to common stock, warrants to purchase common stock, options to purchase common stock, restricted stock, share data, per share data and related information contained in the financial statements have been retroactively adjusted to reflect the effect of the 2026 Reverse Split (and all other reverse splits described herein) for all periods presented.

Common Stock

Equity Financings

On May 30, 2025, the Company entered into a securities purchase agreement with certain investors, which provided for the sale and issuance by the Company in a registered direct offering (the “May III Offering”) of an aggregate of (i) 79,750 shares of the Company’s common stock, at a purchase price of $4.80 per share (the “May III Shares”), and (ii) pre-funded warrants to purchase up to 59,833 shares of common stock at a purchase price of $4.79 per pre-funded warrant (the “May III Pre-Funded Warrants” and, together with the May III Shares, the “May III Securities”), which represents the per share price for the May III Shares less the exercise price of $0.00001 per share. The May III Offering closed on June 2, 2025. The aggregate gross proceeds to the Company from the May III Offering were approximately $670,000, before deducting placement agent commissions and other estimated offering expenses. The Company utilized the net proceeds of the May III Offering for working capital and general corporate purposes, as well as to repay a portion of the Company’s indebtedness.

On May 30, 2025, the Company also entered into a placement agent agreement (the “May III Placement Agent Agreement”) with Aegis Capital Corp. (the “Placement Agent”). Pursuant to the terms of the May III Placement Agent Agreement, the Placement Agent agreed to use its reasonable best efforts to arrange for the sale of the securities in the May III Offering. The Company agreed to pay the Placement Agent a cash fee equal to 8% of the aggregate gross proceeds from the sale of the May III Securities. The Company also agreed to reimburse the Placement Agent for certain expenses.

On May 29, 2025, the Company entered into an underwriting agreement (the “May II Underwriting Agreement”) with Aegis Capital Corp., (the “Underwriter”), relating to the Company’s public offering (the “May II Offering”) of 104,167 shares (the “May II Shares”) of its common stock. Pursuant to the May II Underwriting Agreement, the Company also granted the Underwriter a 45-day option (“May II Option”) to purchase an additional 10,417 shares of common stock (the “May II Option Securities”, and together with the Shares, the “May II Securities”). On May 30, 2025, the Company issued the May II Shares and closed the May II Offering at a public price of $4.80 per share, for net proceeds to the Company of approximately $380,000 after deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. The Company utilized the net proceeds of the May II Offering for working capital and general corporate purposes, as well as to repay a portion of the Company’s indebtedness. On May 29, 2025, the Underwriter delivered notice to the Company that it elected to exercise the May II Option with respect to an aggregate of 10,417 May II Option Securities. The closing of the sale of the May II Option Shares occurred on May 30, 2025.  

On May 9, 2025, the Company entered into an underwriting agreement (the “May I Underwriting Agreement”) with the Underwriter, relating to the Company’s public offering (the “May I Offering”) of 127,941 shares (the “May I Shares”) of its common stock, par value $0.001 per share. Pursuant to the May I Underwriting Agreement, the Company also granted the Underwriters a 45-day option (“May I Option”) to purchase an additional 19,191 shares of common stock (the “May I Option Securities”, and together with the Shares, the “May I Securities”). On May 12, 2025, the Company issued the firm May I Securities and closed the May I Offering at a public price of $6.80 per share, for net proceeds to the Company of approximately $700,400 after deducting underwriting discounts, commissions and estimated offering expenses payable by the Company. On May 14, 2025, the Underwriter partially exercised its May I Option and purchased an additional 15,441 shares of common stock at a price of $6.80 per share, before deducting underwriting discounts. The issuance by the Company of the May I Option Securities resulted in total gross proceeds of approximately $104,999, before deducting underwriting discounts, commissions, and other offering expenses payable by the Company. The Company utilized the net proceeds of the May I Offering for working capital and general corporate purposes, as well as to repay a portion of the Company’s indebtedness.

Yield Point Equity Line of Credit

On July 10, 2025 (the “YP Execution Date”), the Company, entered into an equity purchase agreement (the “YP Equity Purchase Agreement) with Yield Point. Under the YP Equity Purchase Agreement, the Company has the right, but not the obligation, to direct Yield Point to purchase up to $20,000,000 (the “Maximum Commitment Amount”) in shares of common stock of the Company upon satisfaction of certain terms and conditions contained in the YP Equity Purchase Agreement, including, without limitation, an effective registration statement filed with SEC registering the resale of the shares of Put Stock (defined below) and the shares of Commitment Stock (defined below) and additional shares to be sold to Yield Point from time to time under the YP Equity Purchase Agreement. The original term of the YP Equity Purchase Agreement began on the YP Execution Date and ended on the earlier of (i) the date on which Yield Point shall have purchased shares of common stock issued, or that the Company shall be entitled to issue, per any applicable Put Notice in accordance with the terms and conditions of the YP Equity Purchase Agreement (the “Put Stock”) equal to the Maximum Commitment Amount (as defined in the YP Equity Purchase Agreement), (ii) the date that is thirty-six (36) months from the date the registration statement is declared effective, (iii) written notice of termination by the Company to Yield Point (which shall not occur at any time that Yield Point holds any of the shares of Put Stock, or within 30 days of the sale to Yield Point of Put Stock), or (iv) written notice of termination by Yield Point to the Company (the “Commitment Period”).

In consideration for Yield Point’s execution and delivery of, and performance under the YP Equity Purchase Agreement, on the Execution Date, the Company issued pre-funded warrants to purchase common stock ( to Yield Point in a form acceptable to Yield Point in its sole discretion and having an exercise price per share of $0.001 (the “Commitment Stock”) having a value of $600,000 based on closing price of the common stock on July 9, 2025. All of the shares of Commitment Stock were fully earned as of the Execution Date, and the issuance of the shares of Commitment Stock is not contingent upon any other event or condition, including, without limitation, the effectiveness of the Initial Registration Statement (defined below) or the Company’s submission of a Put Notice to Yield Point and irrespective of any termination of the YP Equity Purchase Agreement. The fair value of the Commitment Stock was recorded in Deferred Financing costs included in prepaids and other assets in the company balance sheet as of December 31, 2025.

On June 3, 2026, the Company entered into the Series C Redemption Agreement with the Series C Holder pursuant to which the Company and the Series C Holder, among other items, agreed to the termination of a certain equity purchase agreement between the Series C Holder and the Company, dated July 10, 2025 (the “Series C Purchase Agreement”), including, without limitation, the termination of any and all agreements, instruments and documents entered into in connection therewith, so that neither the Company nor the Series C Holder shall have any further rights, obligations, or liabilities under the Series C Purchase Agreement (“Series C Redemption”). In connection with the termination of the equity purchase agreement, the Company expensed $825,000 of deferred financing costs which is reflected in other income (expense) in the statement of comprehensive income (loss) for the three and six months ended June 30, 2026. Of the total deferred financing costs expensed, $600,000 related to the Commitment Stock issued to Yield Point, as described above, and therefore represented noncash financing costs.

Hudson Equity Line of Credit

On February 14, 2025, the Company entered into an equity purchase agreement (the “Hudson Equity Purchase Agreement”) with Hudson Global Ventures, LLC, a Nevada limited liability company (“Hudson”). Pursuant to the Hudson Equity Purchase Agreement, the Company had the right, but not the obligation, to sell to Hudson, and Hudson is obligated to purchase, up to $2.9 million of newly issued shares of the Company’s common stock, from time to time during the term of the Hudson Equity Purchase Agreement, subject to certain limitations and conditions (the “Hudson Offering” or “Hudson ELOC”). As consideration for Hudson’s commitment to purchase shares of common stock under the Hudson Equity Purchase Agreement, the Company issued to Hudson 625 shares of common stock, valued at $159,000, following the execution of the Hudson Equity Purchase Agreement (the “Hudson Commitment Shares”).

During the six months ended June 30, 2025, the Company sold 1,494 shares of common stock, respectively, under the Hudson ELOC at an average per share price of $163.20, raising net proceeds totaling $231,000. The Hudson Equity Purchase Agreement was terminated effective May 8, 2025. The Company utilized the net proceeds from the Hudson Offering for working capital and general corporate purposes, including sales and marketing activities, product development and capital expenditures.

Preferred Stock

Series C Preferred Stock. On October 22, 2025, the Company filed the COD of the Series C Senior Convertible Preferred Stock (the “Series C COD”), designating 4,700 shares of Series C Senior Convertible Preferred Stock, par value $0.001 per share (“Series C Preferred”). At December 31, 2025, there were 1,153 shares of Series C Preferred issued and outstanding. Pursuant to the Series C COD, the Series C Preferred Stock, among other terms: (i) ranks, with respect to dividend rights and rights upon liquidation, dissolution or winding up of the Company, senior to all classes of common stock and each other class or series of equity security of the Company which is not expressly senior or on parity with the Series C Preferred Stock ; (ii) the Series C Preferred Stock shall remain outstanding until the Series C Preferred Stock is converted into common stock either optionally by the holder or automatically pursuant to its terms described below, and will automatically be converted into common stock on the eighteen-month anniversary of effectiveness of the registration statement relating to the shares of common stock issuable upon conversion of the Series C Preferred Stock ; (iii) the shares of Series C Preferred Stock when converted, subject to certain beneficial ownership limitations, into shares of the Company’s common stock, will have a conversion price of $12.00, with a stated value of $1,000; and (iv) subject to certain limitations set forth in the Series C COD, the holders of Series C Preferred Stock are entitled to vote on all matters submitted to the stockholders for a vote together with the holders of the common stock as a single class, on an as-converted basis.

On June 3, 2026, the Company entered into a Redemption Agreement (the “Series C Redemption Agreement”) with the sole holder (the “Series C Holder”) of the Company’s Series C Preferred, pursuant to which the Company agreed to pay the Series C Holder a one-time cash payment of $922,400 (the “Series C Agreement Consideration”) in exchange for the Series C Holder agreeing to (i) the Company’s redemption and cancellation of all 1,153 outstanding shares of Series C Preferred, and (ii) the termination of a certain equity purchase agreement between the Series C Holder and the Company, dated July 10, 2025 (the “Series C Purchase Agreement”), including, without limitation, the termination of any and all agreements, instruments and documents entered into in connection therewith, so that neither the Company nor the Series C Holder shall have any further rights, obligations, or liabilities under the Series C Purchase Agreement (“Series C Redemption”). The Series C Redemption Agreement further contains a release by each of the Company and the Series C Holder releasing the other party from any and all claims, demands, actions, causes of action, liabilities, damages, costs, and expenses of any kind or nature whatsoever, whether known or unknown, arising out of or relating to the Series C Preferred or the Series C Purchase Agreement. On June 8, 2026, the Company paid the Series C Agreement Consideration to the Series C Holder in full satisfaction of its obligations under the Series C Redemption Agreement.

Upon redemption of preferred stock, the difference between (1) the fair value of the consideration transferred to the holders of the preferred stock and (2) the carrying amount of the preferred stock in the registrant’s balance sheet (net of issuance costs) is subtracted from (or added to) net income (loss) to arrive at income available to common stockholders in the calculation of earnings (loss) per share. If the fair value of the consideration transferred is greater than the carrying amount of the shares surrendered, (1) retained earnings is reduced by the difference (or additional paid-in capital in the absence of retained earnings), and (2) earnings available to common shareholders is reduced by the difference. If the fair value of the consideration transferred is less than the carrying amount of the shares surrendered, the difference is credited to retained earnings and added to earnings available to common shareholders. As a result of the Series C Redemption the Company recorded a deemed dividend totaling ($427,000), crediting accumulated deficit and debiting additional paid in capital for the three and six months ended June 30, 2026.

Preferred Stock Dividends

The Company paid or accrued common stock dividends on outstanding preferred stock for the periods presented as follows:

For The Three and Six Months Ended June 30, 2026: 

Three and Six Months Ended June 30, 2025: 

Change in Fair Value of Warrant Liability

Series AAA Junior -3 and Series AAA Junior – 4 Warrants

The Series AAA Junior-3 and Series AAA Junior-4 subscription agreements entered into in September 2024, included the sale of an aggregate of 1,096 units (the “Units”), each Unit consisting of (i) one share of newly designated Series AAA-3 Junior Convertible Preferred Stock or Series AAA-4 Junior Convertible Preferred Stock, as reflected in the table above, and (ii) a warrant to purchase 3 shares of the Company’s common stock (the “September 2024 Series AAA Junior Investor Warrants”), at a purchase price of $1,000 per Unit, for aggregate gross proceeds to the Company of approximately $1,096,000.

The September 2024 Series AAA Junior Investor Warrants do not meet the requirements for equity classification, and therefore, the fair value of the September 2024 Series AAA Junior Investor Warrants are recorded as a liability on the balance sheets and re-valued at each reporting date, with changes in the fair value reported in the statements of comprehensive income (loss). There was no change in fair value for the September 2024 Series AAA Junior Investor Warrants for the three and six months ended June 30, 2026, respectively. The change in fair value for the September 2024 Series AAA Junior Investor Warrants for the three and six months ended June 30, 2025 totaled ($58,000) and ($328,000), respectively.

Placement Agent Warrants

The Placement Agent Warrants issued in connection with the Series A Preferred Stock, Series AA Preferred Stock and Series AAA Preferred Stock are not eligible for the scope exception under ASC 815, and therefore, the fair value of the Placement Agent Warrants are recorded as a liability on the balance sheet and re-valued at each reporting date, with changes in the fair value reported in the statements of comprehensive income (loss). The change in fair value for the Placement Agent Warrants for the three and six months ended June 30, 2026 totaled $0 and $(4,000), respectively. The change in fair value for the Placement Agent Warrants for the three and six months ended June 30, 2025 totaled $(86,000) and $(533,000), respectively.

Common Stock Purchase Warrant - Price Adjustment

In connection with the closing of the Misfits Transaction, pursuant to the terms of the applicable underlying common stock warrant agreements, the exercise price for certain of the common stock purchase warrants issued in connection with the October 2025 PIPE, representing the right to purchase an aggregate 2.7 million shares of common stock, was reset to the floor price, as defined in the underlying common stock purchase agreements, ranging from $4.99 to $6.84 per share, from $12.00 per share.

The Company determined that the triggering of the down-round feature represented a transfer of value to the warrant holders. The Company measured the incremental fair value attributable to the exercise price adjustment using a Black-Scholes option-pricing model as of the trigger date, utilizing the following assumptions: stock prices ranging from $4.99 to $12.00, expected volatility range of 103% to 105%, expected terms of 4.46 to 4.51, and a risk-free interest rate of 3.97%, based on the specific warrants being remeasured at the measurement date. The incremental fair value transferred to the applicable warrant holders was estimated to be $1,002,000. The applicable warrants continue to qualify for equity classification under ASC 815-40, and therefore, the Company did not recognize a gain or loss in the consolidated statements of operations in connection with the triggering of the down round feature. Instead, the incremental fair value was recognized as a deemed dividend within stockholders' equity and reduced income available to common shareholders for purposes of calculating earnings (loss) per share.