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Note 13 - Stockholders' Equity
 12 Months Ended
Dec. 31, 2025
Notes to Financial Statements  
Equity [Text Block]

NOTE 13 – STOCKHOLDERS’ EQUITY

 

Authorized Common Stock

 

Effective March 18, 2020, the Company adopted and approved an amendment to increase the number of authorized shares of common stock from 30,000,000 to 100,000,000, $0.0001 par value. On  April 22, 2024, following approval by the Company's stockholders, the Company amended its charter to increase the number of authorized shares of common stock from 100,000,000 to 300,000,000. The number of authorized shares of the Company’s preferred stock was not affected by this amendment and remained unchanged at 2,000,000 shares. 

 

The rights and privileges terms of the additional authorized shares of common stock are identical to those of the currently outstanding shares of common stock. However, because the holders of common stock do not have preemptive rights to purchase or subscribe for any new issuances of common stock, the subsequent potential issuance of additional shares of common stock will reduce the current stockholders’ percentage ownership interest in the total outstanding shares of common stock. The Amendment and the creation of additional shares of authorized common stock will not alter current stockholders’ relative rights and limitations.

 

At Market Issuance Sales Agreement

 

On February 10, 2025, the Company entered into an At Market Issuance Sales Agreement (the "Sales Agreement") with Northland Securities, Inc. (the "Agent"), pursuant to which the Company could, from time to time, offer and sell shares of the Company's common stock, par value $0.0001 per share ("Common Stock"), having an aggregate offering price of up to $25,000,000. The Agent was entitled to receive from the Company a commission in an amount equal to (i) 3.0% of the gross sales prices per share sold through it as agent in agency transactions and (ii) 6.0% of the purchase price per share sold to the Agent, as principal in principal transactions. The Company incurred issuance costs of approximately $245,000 related to legal, accounting, and other fees in connection with the Sales Agreement. These costs were charged against the gross proceeds of the Sales Agreement and presented as a reduction to additional paid-in-capital on the accompanying consolidated balance sheets.

 

On August 12, 2025, the Company elected to voluntarily terminate its Sales Agreement.

 

As of December 31, 2025, the Company issued 18,888,832 shares of its common stock at a weighted average selling price of $1.23 per share in accordance with the Sales Agreement. Net cash provided from the Sales Agreement was $22,350,000 after paying $245,000 in issuance costs, as well as 3.0%, or $699,000 related to cash commissions provided to the Agent.

 

ATD Acquisition

 

In connection with the acquisition as described in Note 2, the Company issued 2,832,135 shares of the Company’s common stock as part of the consideration. Additionally, 664,329 shares were issued and delivered to the Seller on the twelve-month anniversary of the Closing Date. The ATD Holdback Shares were deemed to be liability based and are measured at fair value each reporting period. The shares issued and issuable in connection with the ATD Acquisition have been registered on a resale registration statement on Form S-3, declared effective by the SEC on  June 17, 2024. On January 2, 2025, all of the ATD Holdback Shares were issued to the Seller.

 

2025 Underwriting Agreement

 

On December 13, 2025, the Company entered into an underwriting agreement with William Blair & Company, L.L.C., as representative of the several underwriters, relating to an underwritten registered direct offering of 8,571,428 units at a public offering price of $1.75 per unit (the “2025 Underwriting Agreement”). Each unit consisted of one share of the Company's common stock and one warrant to purchase one share of the Company's common stock at an exercise price of $2.40 per share. The warrants are immediately exercisable and expire on December 16, 2032. The offering closed on December 16, 2025.

 

Gross proceeds from the offering were approximately $15.0 million. After deducting underwriting discounts and commissions and estimated offering expenses, the net proceeds to the Company were approximately $13.9 million. In connection with the offering, the Company entered into a Side Letter Agreement with Anson Advisors Inc. that, among other things, restricts the Company from entering into Variable Rate Transactions (as defined therein) while any December 2025 warrants remain outstanding.

 

2024 Public Offering

 

On  February 9, 2024, the Company issued and sold 10,000,000 shares of its common stock, at an offering price of $2.50 per share of common stock (the “2024 Public Offering Price”) in a registered public offering by the Company (the “ 2024 Public Offering”), pursuant to an underwriting agreement with William Blair & Company, L.L.C., as representative of the several underwriters named therein (collectively, the “Underwriters”).

 

On  February 9, 2024, the Underwriters exercised in-full their option to purchase up to 1,500,000 additional shares of common stock at the 2024 Public Offering Price (the “Underwriters’ Option”). The exercise closed on  February 13, 2024. The net proceeds to the Company for the exercise of the Underwriters’ Option, after deducting the underwriting discounts and commissions and offering expenses payable by the Company of $2,388,000 was approximately $26,362,000 in aggregate for the 2024 Public Offering including the exercise of the Underwriters’ Option.

 

Prepaid Advance

 

On  August 14, 2024, the Company entered into a Prepaid Advance Agreement (the “Prepaid Advance”) with YA II PN, Ltd., a Cayman Islands exempt limited company (the “Investor”), an affiliate of Yorkville Advisors Global, LP. In accordance with the terms of the Prepaid Advance, the Investor advanced $15,000,000 to the Company. After giving effect to the purchase price discount of 6% provided for in the Prepaid Advance, net proceeds to the Company were $14,100,000.

 

Pursuant to the terms of the Prepaid Advance, within one year the Company could have received an additional $20,000,000 on the same terms as the initial Prepaid Advance, subject to satisfaction of certain conditions. On  October 22, 2024, the Company and the Investor entered into Amendment No.1 to the Prepaid Advance Agreement (the “Amendment”) to eliminate the option for additional advances. 

 

The Investor, at its sole discretion, could elect to purchase the Company’s common stock, $0.0001 par value per share, in exchange for any amount up to the total principal and interest of the balance due under the Prepaid Advance, provided that none of the following limitations existed: (i) the conversion did not cause the aggregate number of common shares beneficially owned by the Investor and its affiliates to exceed 4.99% of the then-outstanding voting power or number of common shares, (ii) the issuance of common stock did not exceed a certain cap (unless the Company obtained stockholder consent or obtained a written legal opinion that stockholder approval is not required), and (iii) the amount of the advances converted  may not exceed $2,625,000 in any month. However, the Investor was permitted to convert principal advances in excess of $2,625,000 each month upon an Event of Default, if the Purchase Price exceeds $2.50 per share, or upon the Company’s consent. If and when requested by the Investor, amounts outstanding under the Prepaid Advance could be correspondingly reduced upon the issuance by the Company of its common stock, par value $0.0001 per share, to the Investor at a price per share equal to the lower of: (a) $2.50 (the “Fixed Price”) or (b) 93% of the lowest daily volume weighted average price (as reported during regular trading hours by Bloomberg) (“VWAP”) of the shares during the five trading days immediately prior to each purchase notice, subject a floor price of $0.28 per share (the “Floor Price”). There was no interest related to the Prepaid Advance, however, interest would accrue at 18% upon events of default. The Prepaid Advance had a final maturity date of  August 28, 2025.

 

The Company incurred issuance costs and original issuance discounts totaling approximately $888,000 associated with the issuance of the Prepaid Advance, which were expensed as incurred as a component of other income (expense) in the consolidated statements of operations for the year ended December 31, 2024. Due to the various embedded derivatives that would otherwise require separate valuation and bifurcation as derivative liabilities, the Company elected to account for the Prepaid Advance under the fair value option as prescribed by ASC 825. See Note 1 for further discussion of the key inputs to determine the fair value of the Prepaid Advance.

 

As of December 31, 2024, the Company has terminated and fully satisfied the outstanding balance of $15,000,000 under the Prepaid Advance. During the year ended  December 31, 2024, the Company recorded $900,000 in charges related to the settlement of the Prepaid Advance liability.

 

Redemption of 2023 Promissory Notes

 

On  March 4, 2024, the Company elected to prepay the outstanding 2023 Promissory Notes. The 2023 Promissory Notes were redeemed at the redemption price of 115% of the $12,500,000 aggregate principal amount of the 2023 Promissory Notes, or approximately $14,375,000, plus accrued and unpaid interest to the redemption date of approximately $263,000 (the “Redemption Payment”). The noteholders elected to accept $1,875,000 of the Redemption Payment in the form of 750,000 unregistered shares of the Company’s common stock, par value $0.0001 per share, having a value of $2.50 per share, with the remainder of the Redemption Payment to be paid in cash. As a result of the Redemption Payment, the Company recognized a loss on extinguishment of debt of $4,693,000, which included $1,875,000 related to the early termination payment and $2,818,000 related to unamortized issuance costs. The shares of common stock issued in connection with the Redemption payment have been registered on a resale registration statement on Form S-3, declared effective by the SEC on  July 30, 2024.

 

2023 Warrants

 

In connection with the initial closing of the 2023 Promissory Notes on  January 18, 2023, the Company issued warrants to purchase 6,250,000 shares of common stock. The warrants issued in connection with the initial closing have an exercise price of $2.00 per share, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions, are immediately exercisable, have a term of five years from the date of issuance and are exercisable on a cash or cashless basis at the election of the holder. The 2023 Warrants were valued at $5,125,000, based on the relative fair value basis, compared to the total proceeds received. 

 

On  June 20, 2024, the Company entered into various Warrant Exercise Agreements (the “Agreements”) with certain holders of the 2023 Warrants (each an “Exercising Holder” and collectively, the “Exercising Holders”), pursuant to which the Company reduced the strike price of the 2023 Warrants from $2.00 per warrant to $1.40 per warrant to induce their exercise. In  June 2024, all but one of the Exercising Holders exercised 1,400,000 warrants for common stock in exchange for $1,960,000. In  July 2024, the remaining Exercising Holder exercised 2,275,000 warrants for common stock in exchange for $3,185,000.

 

In consideration for the Company’s agreement to reduce the exercise price, the Exercising Holders agreed to a concomitant reduction in the number of shares into which the 2023 Warrants are exercisable, from 5,250,000 to 3,675,000. This modification resulted in a decrease in the overall fair value of the equity classified warrants and since no incremental value was given to the Exercising Holders, nothing was recorded in the consolidated financial statements related to the modification. The shares issued in connection with the Warrant Exercise Agreements have been registered on a resale registration statement on Form S-3, declared effective by the SEC on  July 30, 2024.

 

The Company estimated the fair value of the warrants using the Black-Scholes pricing model. The use of the Black-Scholes pricing model requires the use of subjective assumptions, including the fair value and projected volatility of the underlying common stock and the expected term of the award. The fair value of each warrant granted has been estimated as of the date of the grant using the Black-Scholes pricing model with the following assumptions:

 

Risk-free interest rate

  3.42%

Expected term (in years)

  5 

Volatility

  113%

Dividend yield

  0%

Estimated annual forfeiture rate at the time of grant

  0%

 

 

Preferred Stock

 

The Company is authorized to issue up to 2,000,000 shares of preferred stock, $0.0001 par value. The Company’s preferred stock may be entitled to preference over the common stock with respect to the distribution of assets of the Company in the event of liquidation, dissolution or winding-up of the Company, whether voluntarily or involuntarily, or in the event of any other distribution of assets of the Company among its shareholders for the purpose of the winding-up of its affairs. The authorized but unissued shares of the preferred stock may be divided into, and issued in, designated series from time to time by one or more resolutions adopted by the Board of Directors of the Company. The Board of Directors of the Company, in its sole discretion, has the power to determine the relative powers, preferences and rights of each series of preferred stock.

 

Series A Cumulative Convertible Redeemable Preferred Stock

 

Of the 2,000,000 authorized shares of preferred stock, 505,000 shares were designated as $0.0001 par value Series A Cumulative Convertible Redeemable Preferred Stock (the “Series A Preferred Stock”). The holders of Series A Preferred Stock were entitled to quarterly dividends of 7.0% per annum per share. As of December 31, 2025 and 2024, there are no outstanding shares of the Company's Series A Preferred Stock.

 

Based on the terms of the Series A Preferred Stock, the Company concluded that the Series A Preferred Stock should be classified as temporary equity.

 

Warrants

 

A summary of the warrant activity for the Company for the period ended December 31, 2025 and  December 31, 2024 is as follows:

 

  2023 Promissory Notes (1)  

2023 Registered Direct Offering (2)

  2023 Private Warrants (3)  2025 Underwriting Agreement (4)  

Total

 

Active warrants January 1, 2024

  6,250,000   481,100   2,850,000   -   9,581,100 

Issued warrants

  -   -   -   -   - 

Exercised warrants

  (3,675,000)  -   -   -   (3,675,000)

Expired warrants

  -   -   -   -   - 

Cancelled warrants

  (1,575,000)  -   -   -   (1,575,000)

Outstanding warrants December 31, 2024

  1,000,000   481,100   2,850,000   -   4,331,100 

Weighted average strike price of outstanding warrants as of December 31, 2024

 $2.00  $1.82  $3.25  $-  $2.80 

Intrinsic value of outstanding warrants as of December 31, 2024

 $-  $-  $-  $-  $- 

Shares of common stock issued for warrant exercises during the year ended December 31, 2024

  3,675,000   -   -   -   3,675,000 

Active warrants January 1, 2025

  1,000,000   481,100   2,850,000   -   4,331,100 

Issued warrants

  -   -   -   8,571,428   8,571,428 

Exercised warrants

  -   -   -   -   - 

Expired warrants

  -   -   -   -   - 

Cancelled warrants

  -   -   -   -   - 

Outstanding warrants December 31, 2025

  1,000,000   481,100   2,850,000   8,571,428   12,902,528 

Weighted average strike price of outstanding warrants as of December 31, 2025

 $2.00  $1.82  $3.25  $2.40  $2.54 

Intrinsic value of outstanding warrants as of December 31, 2025

 $-  $-  $-  $-  $- 

Shares of common stock issued for warrant exercises during the year ended December 31, 2025

  -   -   -   -   - 

 

 

(1)

On  January 18, 2023, in connection with the 2023 Promissory Notes, the Company issued the investors warrants to purchase 6,250,000 shares of its common stock, exercisable over a period of five years, at an exercise price of $2.00 per share. These warrants were exercisable commencing  January 18, 2023 and expire on  January 18, 2028.
 

(2)

On  March 23, 2023, in connection with the 2023 Registered Direct Offering the Company issued (i) pre-funded warrants exercisable for up to an aggregate of 772,853 shares of common stock, (ii) warrants to purchase up to 6,872,853 shares of common stock, and (iii) warrants to the placement agent to purchase up to 481,100 shares of common stock. The exercise price per share of the warrants was $1.455 and each pre-funded warrant is exercisable for one share of common stock at an exercise price of $0.001 per share and will expire when exercised in full. Each warrant for the placement agent is exercisable for one share of common stock at an exercise price of $1.8188 per share. These warrants were exercisable commencing  March 27, 2023 and expire on  March 27, 2028.
 

(3)

On  July 25, 2023, in connection with the 2023 Letter Agreement, the Company issued warrants to purchase 2,850,000 shares of its common stock, exercisable over a period of five and half years, at an exercise price of $3.25 per share. These warrants were exercisable commencing  July 25, 2023 and expire on  January 25, 2029.
 

(4)

On December 16, 2025, in connection with the 2025 Underwriting Agreement, the Company issued warrants to purchase 8,571,428 shares of its common stock. The warrants have an exercise price of $2.40 per share, are immediately exercisable and have a term of seven years from the date of issuance. These warrants expire on December 16, 2032.