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Preferred and Common Stock | 12 Months Ended
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Dec. 31, 2024
Preferred and Common Stock |
Preferred and Common Stock | 7.Preferred and Common Stock Initial Public Offering On May 16, 2023, the Company completed an offering pursuant to Tier 2 of Regulation A, in which it raised $15.3 million, net of issuance costs of $2.0 million, from the sale of 2,374,641 shares of Common Stock at a price of $7.25 per share. Subsequently, on May 17, 2023, the Company filed a Form 8-A in connection with the listing of its Common Stock on Nasdaq, which was declared effective on the same date. At that time, each outstanding share of Series A, Series B, and Series C Preferred Stock was converted into two shares of Common Stock of the Company. Common Stock Issued for Services During May 2023, the Company entered into a consulting arrangement with a vendor under which the Company issued 20,689 shares of restricted Common Stock that vest on a monthly basis over a term of 12 months. The estimated fair value of these shares was $150,000 on the date of grant and was being recognized as a component of general and administrative expenses on a straight-line basis over the 12-month vesting term. In August 2023, the Company issued 4,137 shares of Common Stock with a value of $30,000 to a vendor in exchange for legal services. Common Stock Purchase Agreement On July 19, 2023, the Company entered into a Common Stock Purchase Agreement (the “Common Stock Purchase Agreement”) and a Registration Rights Agreement with B. Riley Principal Capital, II LLC (the “BRPC II”), pursuant to which the Company has the right to sell to BRPC II up to $20.0 million in shares of Common Stock (the “Committed Equity Shares”), subject to certain limitations and the satisfaction of specified conditions in the Common Stock Purchase Agreement, from time to time over the 24-month period commencing upon the initial satisfaction of the conditions to the BRPC II’s purchase obligations set forth in the Common Stock Purchase Agreement. Sales of Common Stock pursuant to the Common Stock Purchase Agreement, and the timing of any sales, are solely at the Company’s option, and it is under no obligation to sell any securities to BRPC II. As of December 31, 2024, the Company had raised gross proceeds of $961,245 from the sale of 292,726 shares under the Common Stock Purchase Agreement. As consideration for BRPC II’s commitment to purchase shares of Common Stock at the Company’s direction upon the terms and subject to the conditions set forth in the Purchase Agreement, upon execution of the Purchase Agreement, the Company issued 45,252 shares of Common Stock to BRPC II (the “Commitment Shares”). Under the terms of the Common Stock Purchase Agreement, if the aggregate proceeds received by BPRC II from its resale of the Commitment Shares was less than $200,000, the Company would pay the difference between $200,000 and the aggregate proceeds received by BPRC II from its resale of the Commitment Shares (the “make-whole obligation”). In December 2024, the Company purchased the Commitment Shares from BPRC II for $200,000. During 2024 and 2023, the Company recognized losses of $45,000 and $44,000, respectively, from changes in the fair value of the make-whole provision that were classified as a component of interest income and other, net, in the accompanying statement of operations. At December 31, 2023, the Company’s make-whole obligation was $44,000 and was recorded as a component of accrued expenses in the accompanying balance sheet. Series A, Series B, Series C and Series D Preferred Stock On May 17, 2023, the Company filed a Form 8-A in connection with the listing of its Common Stock on Nasdaq, which was declared effective on the same date. At that time, each outstanding share of Series A, Series B, and Series C Preferred Stock was converted into two shares of Common Stock of the Company. At December 31, 2024 and 2023, the Company had no shares of Series A, Series B, or Series C Preferred Stock outstanding. Offering of Series D Preferred Stock On July 9, 2024, the Company commenced a best efforts offering of up to 5,790,479 units at a price per unit of $2.25. Each unit consists of one share of Series D Preferred Stock and a warrant to purchase one share of Common Stock at an exercise price of $3.375 per share. The warrants are exercisable at any time during the period beginning 180 days after July 9, 2024 through and including July 8, 2025, unless redeemed earlier by the Company. At December 31, 2024, warrants exercisable into 5,773,979 shares of Common Stock issued in connection with this offering were outstanding. Holders of Series D Preferred Stock are entitled to receive cumulative quarterly dividends, when and as declared by the Company’s Board of Directors, at a rate of 8.0% of the $2.25 liquidation preference per share. Dividends, at the Company’s discretion, may be paid in cash or in kind in the form of Common Stock. In October 2024, the Company’s Board of Directors declared a quarterly dividend of $151,000 to holders of record that was settled through the issuance of 57,030 shares of Common Stock. Upon a liquidation, dissolution, or winding up of the Company, holders of Series D Preferred Stock will be entitled to receive a per share liquidation preference of $2.25 plus an amount equal to any accrued but unpaid dividends (whether or not declared). Each share of Series D Preferred Stock is optionally convertible, at any time, into one share of Common Stock. Each share of Series D Preferred Stock will be mandatorily convertible into one share of Common Stock upon the occurrence of a change in control of the Company, 10 consecutive trading days of the Company’s Common Stock closing pricing being at or above $2.8125 per share, or the Company’s consummation of a firm commitment public offering of Common Stock for gross proceeds of at least $15 million at an offering price per share equal to or greater than $3.375. The Company has the option (but is not required) to redeem the Series D Preferred Stock, in whole or in part, by paying a specified redemption price plus any accrued and unpaid dividends through the date of redemption. The redemption price is $4.50 per share up to and including the 180th day from the original issuance date, $3.9375 per share beginning on the 181st day after the original issuance date and until the third anniversary of the original issuance date, and $3.375 per share from and after the third anniversary of the original issuance date. Holders of the Series D Preferred Stock generally will have no voting rights. However, if the Company does not pay dividends on any outstanding shares of Series D Preferred Stock for six or more quarterly dividend periods (whether or not declared or consecutive), holders of the Series D Preferred Stock (voting separately as a class with all other outstanding series of preferred stock upon which like voting rights have been conferred and are exercisable) will be entitled to elect two additional directors to the Board of Directors to serve until all unpaid dividends have been fully paid or declared and set apart for payment. In addition, certain material and adverse changes to the terms of the Series D Preferred Stock cannot be made without the affirmative vote of holders of at least a majority of the outstanding shares of Series D Preferred Stock, voting as a separate class. At the Market Common Stock Offering On July 22, 2024, the Company entered into an agreement with B. Riley Securities, Inc. (the “Agent”) under which the Company may, from time to time, offer and sell shares of Common Stock through or to the Agent having an aggregate gross proceeds of up to $25 million. Each time the Company wishes to issue and sell common stock under the agreement, the Company will notify the Agent of the number or dollar value of shares to be issued, the time period during which such sales are requested to be made, any limitation on the number of shares that may be sold in one day, any minimum price below which sales may not be made and other sales parameters deemed appropriate. Once the Company has so instructed the Agent, unless the Agent declines to accept the terms of the notice, the Agent has agreed to use its commercially reasonable efforts consistent with its normal trading and sales practices to sell such shares up to the amount specified on such terms. The Agent is entitled to compensation at a fixed commission rate of up to 3.0% of the gross sales price per share sold. As of December 31, 2024, the Company had sold 2,072,790 shares of Common Stock for total gross proceeds of $5.3 million in connection with this offering. Anti-Dilution Right of CEO Benjamin Sexson, the Company’s Chief Executive Officer (“CEO”), is entitled to pre-emptive rights that permit him to preserve his vested equity position in the Company in the event of any additional issuances of Common Stock (or securities convertible into Common Stock), at a per-share price equal to the then current fair value, as reasonably determined by the Board.

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