Note 9. STOCKHOLDERS’ EQUITY

Reverse Stock Split

On May 26, 2026, the Company effected a 1-for-50 reverse stock split for its common stock (the “Reverse Stock Split”), as described in Note 2. All shares and per share amounts in these condensed consolidated financial statements and notes thereto have been retroactively restated for all periods presented to reflect Reverse Stock Split.

2026 Transactions

Consulting Agreement

On January 13, 2026, the Company issued 24,490 shares of its common stock to Hudson Global Ventures, LLC as consideration for consulting services rendered to the Company. The fair value of the shares, determined based on the closing market price of $21 per share on the date of issuance, was $514,285, which was recognized as consulting expense within general and administrative expenses in the condensed consolidated statements of operations for the three and six months ended June 30, 2026.

On March 4, 2026, the Company entered into a Marketing Services Agreement with Outside The Box Capital Inc. (“OTB”), pursuant to which OTB agreed to provide marketing and distribution services to the Company for an initial term from March 5, 2026 through September 5, 2026. On May 20, 2026, the Company issued 14,085 shares of common stock to OTB in satisfaction of this obligation. The fair value of the shares, based on the closing market price of $10.63 per share on the date of issuance, was $149,718. The Company is recognizing the fair value of the shares as expense within sales and marketing expenses in the condensed consolidated statements of operations over the remaining term of the agreement. For the three and six months ended June 30, 2026, the Company recognized $93,990 of expense related to this agreement, with the remaining unamortized balance of $55,728 recorded as a prepaid and other current assets in the condensed consolidated balance sheets as of June 30, 2026.

Settlement Agreement

On January 28, 2026, the Company entered into a Settlement Agreement and Stipulation with Silverback Capital Corporation (“Silverback”), which was approved by the Circuit Court of the Twelfth Judicial Circuit in and for Desoto County, Florida on February 4, 2026, pursuant to Section 3(a)(10) of the Securities Act of 1933. Under the terms of the settlement, the Company agreed to issue shares of its common stock to Silverback, the proceeds from the resale of which were applied to satisfy certain outstanding obligations of the Company, including vendor payables and notes payable.

Pursuant to the settlement, the Company issued shares to Silverback in three tranches. On February 12, 2026, the Company issued 46,800 shares at an agreed settlement price of $12.50 per share, for a total settlement value of $585,000. The fair value of the shares on the date of issuance, based on the closing market price of $14 per share, was $655,200. On March 9, 2026, the Company issued an additional 82,520 shares at an agreed settlement price of $12.50 per share, for a total settlement value of $1,031,500. The fair value of the shares on the date of issuance, based on the closing market price of $8.50 per share, was $701,420. The aggregate carrying amount of the obligations settled through these two tranches exceeded the aggregate fair value of the shares issued, resulting in a net gain on debt extinguishment of $259,880, which is included in other income in the condensed consolidated statements of operations for the three months ended March 31, 2026.

On March 23, 2026, the Company issued an aggregate of 8,000 shares of its common stock to Silverback in two components — 2,000 shares as consideration for settlement fees and 6,000 shares as consideration for legal fees incurred in connection with the settlement arrangement. The fair value of the shares was determined based on the closing market price of $6.50 per share on the date of issuance, resulting in settlement fees of $13,000 recognized within other expenses and legal fees of $39,000 recognized within general and administrative expenses in the condensed consolidated statements of operations for the three months ended March 31, 2026.

On April 3, 2026, the Company delivered a termination letter to Silverback purporting to terminate the Settlement Agreement. In connection with the purported termination, the Company issued an aggregate of 125,465 shares of common stock to Silverback during the three months ended June 30, 2026 — 40,000 shares on April 8, 2026 and 85,465 shares on April 10, 2026 — with an aggregate fair value of $766,392, based on closing market prices of $6.34 and $6.00 per share, respectively, on the applicable dates of issuance. The aggregate fair value of these shares was recognized as a loss on contract termination fee within the condensed consolidated statements of operations for the three and six months ended June 30, 2026.

On May 18, 2026, the Company and Silverback entered into an Agreement Rescinding Termination and Reinstating Settlement Agreement, pursuant to which the parties rescinded the April 3, 2026 termination letter and reinstated the Settlement Agreement in its entirety, effective as of that date. Following reinstatement, on May 20, 2026, the Company issued 100,000 shares of common stock to Silverback at an agreed settlement price of $3.25 per share, in satisfaction of $325,000 of outstanding creditor claims under the Settlement Agreement. The fair value of the shares issued, based on the closing market price of $6.45 per share, was $645,000, which exceeded the carrying amount of the obligations settled, resulting in a loss on extinguishment of vendor obligation $320,000, which is included in other expense in the condensed consolidated statements of operations for the three and six months ended June 30, 2026.

Accrued Compensation Settlement

On March 18, 2026, the Board of Directors approved the settlement of accrued compensation obligations owed to our Chairman of the Board and our President and Interim Chief Executive Officer through the issuance of equity securities. Pursuant to the settlement, the Company issued 100,000 shares of common stock to each individual, for an aggregate of 200,000 shares, together with 5five-year warrants to purchase 100,000 shares of common stock issued to each individual, for an aggregate of 200,000 warrants, originally exercisable at $0.50 per share. The shares were issued on March 31, 2026 pursuant to Section 4(a)(2) of the Securities Act of 1933.

The fair value of the shares on the date of issuance, based on the closing market price of $6.50 per share, was $1,300,000 in aggregate. The fair value of the warrants on the date of issuance was $1,289,580 in aggregate, determined using the Black-Scholes option pricing model with the following assumptions: stock price of $6.50, exercise price of $0.50, expected term of 5 years, annualized volatility of 186.0%, risk-free interest rate of 3.87%, and no expected dividends.

The aggregate fair value of the equity consideration issued of $2,589,580 was applied to settle accrued payroll expenses and accrued bonus of $2,000,000. The excess of the fair value of equity issued over the carrying amount of the obligations settled of $589,580 was recognized as stock-based compensation expense within general and administrative expenses in the condensed consolidated statements of operations for the three months ended March 31, 2026. The transaction was entirely non-cash.

During the three months ended June 30, 2026, the exercise price of the warrants was reduced from $0.50 to $0.005 per share. The Company accounted for the change as a modification in accordance with ASC 718-20, and recognized the incremental fair value of $10,031, determined using the Black-Scholes option pricing model with the same assumptions as the original grant other than the revised exercise price, as stock-based compensation expense within general and administrative expenses in the condensed consolidated statements of operations for the three and six months ended June 30, 2026. Subsequent to the modification, each individual exercised their warrants in full, and the Company issued an aggregate of 200,000 shares of common stock for total cash proceeds of $1,000.

2023 Equity Incentive Plan

The Company adopted the 2023 Equity Incentive Plan (the “Plan”), which provides the issuance of up to 870,121 shares of the Company’s common stock (the “Initial Limit”). Beginning on January 1, 2025, and on each January 1 thereafter, the number of shares reserved for issuance under the Plan will automatically increase by an amount equal to three percent (3%) of the number of shares of the Company’s common stock outstanding on the immediately preceding December 31, or such lesser amount as may be determined by the Plan’s administrator (the “Annual Increase”). Shares issued under the Plan may be newly issued shares or reacquired shares.

The Plan permits the grant of various types of stock-based awards, including incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units, and other stock-based awards. The number of shares available for issuance as incentive stock options may not exceed the Initial Limit, as adjusted for any Annual Increases, subject to adjustment as provided under the terms of the Plan.

Shares subject to awards that expire, are canceled, or otherwise terminate without having been exercised or settled in full will again become available for future grant under the Plan. However, shares repurchased by the Company on the open market will not be added back to the share reserve. Awards that may be settled solely in cash do not count against the share reserve.

The Plan also includes a limitation on annual compensation to non-employee directors. The aggregate value of all equity awards granted to any non-employee director under the Plan, together with any cash compensation paid for service as a non-employee director, may not exceed (i) $1,000,000 in the first calendar year of service and (ii) $750,000 in any subsequent calendar year. The fair value of such awards is determined based on grant date fair value in accordance with ASC Topic 718, excluding the impact of estimated forfeitures related to service-based vesting conditions.

Restricted Common Stock

A summary of restricted common stock activity for the six months ended June 30, 2026 is as follows:

SCHEDULE OF RESTRICTED COMMON STOCKS 

For the three and six months ended June 30, 2026, the Company recognized stock-based compensation expense of $1,096,794 and $1,291,878, respectively, related to restricted common stock awards, included within general and administrative expenses in the condensed consolidated statements of operations.

For the three and six months ended June 30, 2025, the Company recognized $935,222 and $28,708,643, respectively, in stock-based compensation expense in accordance with ASC 718, Compensation — Stock Compensation, based on the grant-date fair value of restricted stock awards. Stock-based compensation expense for the three and six months ended June 30, 2025 included within sales and marketing expenses was $65,217 and $400,000, respectively, and stock-based compensation expense included within general and administrative expenses was $870,005 and $28,308,643, respectively. The six months ended June 30, 2025 included $27,154,489 attributable to the immediate vesting of 187,272 shares granted on March 14, 2025.

As of June 30, 2026, total unrecognized compensation expense related to unvested restricted stock awards was $1,299,049, which is expected to be recognized over a weighted-average remaining period of 2.32 years.

Unissued Director Equity Awards

Pursuant to the Company’s non-employee director compensation policy, upon appointment to the Board of Directors, each non-employee director is entitled to a grant of 4,000 shares of restricted common stock, vesting in equal installments over a 3three-year period. These awards are accounted for as restricted stock units under ASC 718; the underlying shares are issued upon vesting rather than at grant, and accordingly are not reflected in the table above.

On February 4, 2026, the Company granted 4,000 shares under this policy to a newly appointed independent director, vesting in equal annual installments over a 3three-year period. The grant date fair value of the award was $68,000, determined based on the closing market price of $17.00 per share on the date of grant. In addition, the director an annual equity award of 1,200 shares of common stock under the Plan, issuable in arrears following the end of each calendar year. As of June 30, 2026, no shares had been issued in connection with this annual equity award.

On March 19, 2026, the Company granted 4,000 shares under this policy to a second newly appointed independent director, vesting in equal annual installments over a 4four-year period pursuant to the terms of that director’s engagement letter. The grant date fair value of the award was $23,960, determined based on the closing market price of $5.99 per share on the date of grant.

For the three and six months ended June 30, 2026, the Company recognized stock-based compensation expense of $7,335 and $10,748, respectively, related to the unissued director equity awards described above, included within general and administrative expenses in the condensed consolidated statements of operations.

As of June 30, 2026, total unrecognized compensation expense related to unissued director equity awards was $81,212, which is expected to be recognized over a weighted-average remaining period of 3.16 years.

Warrants

A summary of warrant activity for the six months ended June 30, 2026 is as follows:

SCHEDULE OF WARRANT ACTIVITY 

On January 20, 2026, the Company issued 21,953 warrants to the placement agent and its designees in connection with the convertible note offering at an exercise price of $0.41 per share, expiring January 20, 2031. The fair value of these warrants, determined using the Black-Scholes option pricing model, was $416,965 in aggregate, based on a stock price of $19.50 per share, exercise price of $20.50, expected term of 5.00 years, expected volatility of 196.9%, risk-free interest rate of 3.86%, and no expected dividends.

On March 18, 2026, the Company issued an aggregate of 200,000 warrants to our Chairman of the Board and our President and Interim Chief Executive Officer in connection with the settlement of accrued compensation obligations, exercisable at $0.50 per share and expiring March 18, 2031. The fair value of the warrants, determined using the Black-Scholes option pricing model, was $1,289,580 in aggregate, $6.45 per warrant, based on a stock price of $6.50 per share, exercise price of $0.50, expected term of 5.00 years, expected volatility of 186.0%, risk-free interest rate of 3.87%, and no expected dividends.

During the three months ended June 30, 2026, the exercise price of these warrants was reduced to $0.005 per share. The Company accounted for the change as a modification in accordance with ASC 718-20, and recognized incremental fair value of $10,031 as stock-based compensation expense within general and administrative expenses in the condensed consolidated statements of operations. Subsequent to the modification, each holder exercised their warrants in full, and the Company issued an aggregate of 200,000 shares of common stock for total cash proceeds of $1,000.

On May 27, 2026, in connection with the Note Purchase Agreement described in Note 8, the Company issued warrants to purchase an aggregate of 7,914,758 shares of common stock to participating investors, exercisable at $7.50 per share, and warrants to purchase an aggregate of 1,418,444 shares of common stock to the placement agent and its designees, exercisable at $4.275 per share, in each case expiring five years from the date of issuance.

The following table presents the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of warrants issued during the three months ended June 30, 2026:

SCHEDULE OF FAIR VALUE OF WARRANTS