Note 18. Settlement of Vendor Payables through Issuance of Common Stock

During the three and nine months ended September 30, 2026, the Company entered into mutual written agreements with certain vendors to settle outstanding payables through the issuance of its common stock. Pursuant to these agreements, the Company issued 2,138,935 shares of common stock to the vendors at an agreed price of approximately $0.61 per share, in settlement of vendor payables (included in accounts payable and accrued expenses) aggregating $1,397 thousand.

Consistent with ASC 405-20, the corresponding vendor payables have been derecognized, as the Company was legally released from those obligations through mutual written agreement with the vendors. The Company recorded the issuance as an increase in common stock (at par) and additional paid-in capital of $1,298 thousand in aggregate, with a corresponding reduction in the vendor payables. For the majority of vendors included in the above arrangements, the fair value of the shares issued approximated the carrying amount of the payables settled and, accordingly, no gain or loss was recognized upon extinguishment. However, as described in Note 12 – Commitment and Contingencies, the Company settled obligations with its external legal counsel through issuance of common stock; as the fair value of shares issued was less than the aggregate carrying value of the liabilities settled, a gain on extinguishment of approximately $99 thousand was recognized in the condensed consolidated statements of operations.

As no cash was received, the transaction is excluded from financing activities and is presented as a supplemental non-cash financing activity in the condensed consolidated statements of cash flows, representing the issuance of common stock in settlement of vendor payables