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Note 7 - Stockholders' Equity
 3 Months Ended
Mar. 31, 2026
Notes to Financial Statements  
Equity [Text Block]

Note 7 – Stockholders’ Equity

 

Preferred Series F Convertible Stock

 

Purchase History

 

On June 26, 2022, the Company entered into the Series F Agreement with Alpha Capital Anstalt ("Alpha"). Pursuant to the terms of the Series F Agreement, the Board of Directors of the Company (the “Board”) designated a new series of Preferred Stock, the Series F, and authorized the sale and issuance of up to 35,000 shares of Series F with a stated value of $1,000 per share. Pursuant to the Series F Agreement, sales of Series F are accompanied by warrants equal to the number of issuable shares upon conversion of the Series F to Common Stock (the “Series F Warrants”).

 

Additional Investment Right

 

The Series F Agreement provides Alpha the right to purchase up to an additional $25,000,000 stated value of Series F, after their initial 10,000 Series F purchased on June 26, 2022, and accompanying warrants (the “Additional Investment Right” or “AIR”). Under the AIR, the Series F and Series F Warrants are initially convertible and exercisable at a conversion and exercise price equal to the volume-weighted average price of the Company’s Common Stock for three trading days prior to the date Alpha gives notice to the Company that it will exercise its AIR. Under the terms of the AIR, conversion and exercise prices are subject to downward adjustment for any equity instrument or equity-linked instrument sold or granted at an effective price per share that is lower than the initial conversion and exercise price (“Down Round Provision”). See Note 8 for warrant related disclosures.

 

On February 7, 2025, Alpha and the Company executed a funding agreement in which Alpha agreed to exercise its AIR quarterly to provide financing to the Company for the next twelve months, with such amounts and timing of funding to be agreed to by the parties.

 

As consideration for Alpha’s commitment to provide additional funding, the Company agreed to (i) extend the period in which Alpha can exercise its AIR by extending the termination date of December 31, 2025 to June 1, 2026 and (ii) granting Alpha certain registration rights related to the Series F Alpha currently holds and will receive upon further exercises of its AIR. The Company filed the required registration statement to register 6,500,000 shares of Common Stock which was declared effective by the SEC on April 25, 2025.

 

During the three months ended March 31, 2026, we issued the following Series F pursuant to the exercise of the AIR by Alpha:

 

 

●

On January 2, 2026, we issued 500 Series F to Alpha upon the exercise of their AIR and received $500,000 of gross proceeds. The Series F are initially convertible into 586,441 shares of Common Stock at an initial conversion price of $0.8526 and Series F Warrants to purchase up to 586,441 shares of Common Stock at an initial exercise price of $0.8526. The Series F Warrants are immediately exercisable upon issuance and have a three-year term. This issuance triggered down round provisions embedded in certain outstanding equity-linked instruments (the "January 2026 Down Round Trigger"). The impacts of this trigger event have been disclosed below. 

  

 

 

 

 

 

 

During the three months ended March 31, 2025, we issued the following Series F pursuant to the exercise of the AIR by Alpha:

 

●  On February 7, 2025, we issued 1,000 Series F to Alpha upon the exercise of their AIR and received $1,000,000 of gross proceeds. The Series F are initially convertible into 450,390 shares of Common Stock at an initial conversion price of $2.2203 and Series F Warrants to purchase up to 450,390 shares of Common Stock at an initial exercise price of $2.2203. The Series F Warrants are immediately exercisable upon issuance for a period of three years. As of March 31, 2026, this issuance of Series F had been fully converted to shares of Common Stock.  

 

●  On March 17, 2025, we issued 500 Series F to Alpha upon the exercise of their AIR and received $500,000 of gross proceeds. The Series F are initially convertible into 415,420 shares of Common Stock at an initial conversion price of $1.2036 and Series F Warrants to purchase up to 415,420 shares of Common Stock at an initial exercise price of $1.2036. The Series F Warrants are immediately exercisable upon issuance and have a three-year term. This issuance resulted in down round provisions embedded within previously issued Series F and Series F Warrants being triggered (the “March 2025 Down Round Trigger”), including the Series F and Series F Warrants issued on February 7, 2025. See Down Round Triggers and Deemed Dividends resulting from such triggers in Note 7 below. As of March 31, 2026, this issuance of Series F had been fully converted to shares of Common Stock.  

 

Since the execution of the Series F Agreement, the Company has sold and issued Series F and Series F Warrants to Alpha or investors that Alpha has assigned the AIR for cash proceeds through the exercise of the AIR. As of March 31, 2026, a total of 500 Series F shares remain available for issuance. 

 

A summary of the Series F activity for the three months ended March 31, 2026, is as follows:

 

              

Original

  

Shares

          

Shares

  

Conversion

  

Shares

 
  

Shares

  

Gross

  

Net

  

Conversion

  

Outstanding

  

Series F

  

Series F

  

Outstanding

  

Price at

  

Issuable at

 

Date of Purchase

 

Purchased

  

Proceeds

  

Proceeds

  

Price

  

December 31, 2025

  

Issued

  

Converted

  

March 31, 2026

  

March 31, 2026

  

March 31, 2026

 

November 15, 2023

  1,850  $1,850,000  $1,850,000  $124.7000   150   —   —   150  $0.8294   180,854 

March 6, 2024

  1,000   1,000,000   950,000   60.2900   100   —   —   100   0.8294   120,569 

May 31, 2024

  1,050   1,050,000   1,025,000   32.1500   135   —   —   135   0.8294   162,768 

July 18, 2025

  1,000   1,000,000   1,000,000   1.4000   422   —   (422)  —   0.8526

(i)

  — 

July 21, 2025

  500   500,000   500,000   1.4000   500   —   (500)  —   0.8526

(i)

  — 

July 24, 2025

  1,000   1,000,000   1,000,000   2.1900   1,000   —   (1,000)  —   0.8526

(i)

  — 

October 6, 2025

  1,000   1,000,000   1,000,000   2.3427   815   —   (640)  175   0.8526

(i)

  205,255 

November 24, 2025

  500   500,000   500,000   1.1347   500   —   (197)  303   0.8526

(i)

  355,384 

December 22, 2025

  500   500,000   500,000   0.9615   500   —   —   500   0.8526

(i)

  586,441 

January 2, 2026

  500   500,000   500,000   0.8526   —   500   —   500   0.8526   586,441 

Total March 31, 2026

  8,900  $8,900,000  $8,825,000  $—   4,122   500   (2,759)  1,863  $—   2,197,712 
                                         

(i) - Reflects the conversion price after the January 2026 Down Round Trigger that was triggered with the sale of Series F on January 2, 2026.

 

 

 

 

A summary of the Series F activity for the three months ended March 31, 2025, is as follows:

 

              

Original

  

Shares

          

Shares

  

Conversion

  

Shares

 
  

Shares

  

Gross

  

Net

  

Conversion

  

Outstanding

  

Series F

  

Series F

  

Outstanding

  

Price at

  

Issuable at

 

Date of Purchase

 

Purchased

  

Proceeds

  

Proceeds

  

Price

  

December 31, 2024

  

Issued

  

Converted

  

March 31, 2025

  

March 31, 2025

  

March 31, 2025

 

November 15, 2023

  1,850  $1,850,000  $1,850,000  $124.7000   150   —   —   150  $1.1000   136,364 

March 6, 2024

  1,000   1,000,000   950,000   60.2900   435   —   (335)  100   1.1000   90,909 

April 12, 2024

  1,050   1,050,000   1,050,000   37.0000   1,050   —   (1,050)  —   1.1000   — 

May 31, 2024

  1,050   1,050,000   1,025,000   32.1500   1,050   —   (525)  525   1.1000   477,273 

July 25, 2024

  500   500,000   500,000   23.1500   500   —   (500)  —   1.1000   — 

August 27, 2024

  500   500,000   500,000   20.1900   500   —   —   500   1.1000   454,545 

October 1, 2024 (i)

  1,500   —   —   12.0000   1,500   —   —   1,500   1.1000   1,363,636 

December 18, 2024

  750   750,000   750,000   5.2500   750   —   —   750   1.2036

(ii)

  623,131 

February 7, 2025

  1,000   1,000,000   1,000,000   2.2200   —   1,000   —   1,000   1.2036

(ii)

  830,841 

March 17, 2025

  500   500,000   500,000   1.2000   —   500   —   500   1.2036   415,420 

Total March 31, 2025

  9,700  $8,200,000  $8,125,000  $—   5,935   1,500   (2,410)  5,025  $—   4,392,119 
                                         

(ii) - Reflects the conversion price after the March 2025 Down Round Trigger that was triggered with the sale of Series F on March 17, 2025.

 
                                         

 

During the three months ended March 31, 2026 and 2025, the dividends accrued on the Series F were $30,997 and $67,651, respectively. As of  March 31, 2026 and  December 31, 2025, accrued dividends on the Series F total $125,850 and $948,532 which are included in accrued expenses on the unaudited consolidated balance sheets, at the rate per share (as a percentage of the $1,000 stated par value per share of Series F) of 5% per annum, beginning on the purchase date.   On January 9, 2026, the Company made a cash dividend payment of $853,679.

 

Series G Convertible Preferred Stock

 

On  November 5, 2025, the Company executed a certificate of designation (the "Series G Certificate of Designation") of preferences, rights and limitations of the Series G Convertible Preferred Stock, designating 100,000 shares of Series G Convertible Preferred Stock ("Series G"), with a par value of $0.001 and a stated value of $1,000. The shares of Series G have no voting rights except as provided in the Series G Certificate of Designation or as otherwise required by law and only receive dividends when declared by the Board of Directors. Series G have liquidation preferences over common stockholders and are pari passu to Series F.  On  November 5, 2025, the Company entered into a Securities Purchase Agreement with certain existing investors, one of which is Alpha (the "Purchasers"), pursuant to which, subject to the terms and conditions set forth therein, the Company agreed to issue and sell to the Purchasers in a registered direct offering an aggregate of up to 100,000 shares of the Series G. Subject to the terms and conditions of the Series G Certificate of Designation, the Series G were convertible immediately upon issuance, at an initial conversion price equal to $1.2300 per share. The conversion price is subject to customary adjustments for stock dividends, stock splits, reclassifications and the like, and subject to price-based adjustments in the event of any issuances of Common Stock or securities convertible, exercisable or exchangeable for Common Stock, at a price below the then-applicable conversion price (subject to certain exceptions) ("Down Round Provision"). The Company agreed to sell, and the Purchasers, severally and not jointly, agreed to purchase an aggregate of 12,000 shares of Series G on the initial closing date.

 

On  November 10, 2025, the Company sold 12,000 shares of Series G and received net cash proceeds of $11,507,338.  After issuance of the Series G, the Company sold Series F and Series F Warrants on  November 24, and  December 22, 2025 with conversion and exercise prices of $1.1347 and $$0.9615, respectively. This triggered the Down Round Provision embedded within the Series G and reduced the initial conversion price of $1.2300 to $1.1347 and further to $0.9615 on December 2025.  During the three months ended March 31, 2026, the conversion price was further reduced from $0.9615 to $0.8526 for the 6,190 Series G outstanding upon the January 2026 Down Round Trigger. The impacts of this trigger event are described below.  

 

On March 4 and 5, 2026, the Company sold 250 and 2,000 shares of Series G, respectively, and received aggregate net proceeds of $2,250,000. The Series G are convertible immediately upon issuance, at an initial conversion price equal to $1.00 per share. As of March 31, 2026, the Company has issued a total of 14,250 Series G shares and 85,750 Series G shares remain available for issuance. 

 

A summary of the Series G activity for the three months ended March 31, 2026, is as follows:

 

              

Original

  

Shares

          

Shares

  

Conversion

  

Shares

 
  

Shares

  

Gross

  

Net

  

Conversion

  

Outstanding

  

Series G

  

Series G

  

Outstanding

  

Price at

  

Issuable at

 

Date of Purchase

 

Purchased

  

Proceeds

  

Proceeds

  

Price

  

December 31, 2025

  

Issued

  

Converted

  

March 31, 2026

  

March 31, 2026

  

March 31, 2026

 

November 10, 2025

  12,000  $12,000,000  $—  $1.2300   6,190   —   (6,190)  —  $0.9615   — 

March 4, 2026

  250   250,000   —   1.0000   —   250   (250)  —   1.0000   — 

March 5, 2026

  2,000   2,000,000   —   1.0000   —   2,000   (1,500)  500   1.0000   500,000 

Total March 31, 2026

  14,250  $14,250,000  $—  $—   6,190   2,250   (7,940)  500  $—   500,000 
                                         

 

Common Stock Issuances

 

Conversions

 

During the three months ended March 31, 2026 and 2025, a total of 0 and 700,000 shares of Common Stock were issued for the conversion of $0 and $770,000 of principal outstanding on a convertible note at a conversion ratio of $0 and $1.10, respectively (see Note 5).

 

During the three months ended March 31, 2026 and 2025, a total of 2,759 and 2,410 Series F were converted into a total of 3,235,983 and 2,190,908 shares of Common Stock, respectively, at a conversion price of $0.8526 and $1.10, respectively.  During the three months ended March 31, 2026 and 2025, a total of 7,940 and 0 Series G were converted into a total of 9,010,144 and 0 shares of Common Stock, respectively.  During the three months ended March 31, 2026, the Series G conversion prices upon conversion were $0.8526 and $1.000.

 

Warrant Exercises

 

During the three months ended  March 31, 2026, we issued 1,128,050 shares of Common Stock for the exercise of Series F Warrants with an exercise price of $0.8526 and received aggregate cash proceeds of $961,775. Further, during the three months ended  March 31, 2026 we issued 358,806 shares of Common Stock for the cashless exercise of 671,797 Series F Warrants with an exercise price of $0.8526.

 

During the three months ended March 31, 2025, we issued 267,849 shares of Common Stock for the exercise of Series B Warrants with an exercise price of $1.9445 and an aggregate exercise price of $520,833. The Company agreed to credit $350,000 of the aggregate exercise price pursuant to a settlement reached with the Series B Warrant holder over a dispute and received approximately $171,000 of cash proceeds.

 

 

 

Down Round Triggers and Deemed Dividends

 

       We have several outstanding equity classified and equity-linked instruments that include down round provisions in which the conversion or exercise price is adjusted down upon the Company’s issuance of its Common Stock or common stock equivalents at a price per share that is less than the conversion or exercise price of the equity-linked instruments. As of March 31, 2026, these equity-linked instruments include the Series F, Series F Warrants, Series G and Series B Warrants. 

 

      Upon a down round provision being triggered in an equity classified instrument, we compute the incremental value provided to the holder for the reduction in conversion or exercise price using a Black-Scholes model to determine the fair value of the equity-linked instruments prior to and after the down round provision trigger. The incremental value is recorded within stockholders’ equity as a deemed dividend.  Specifically, deemed dividends increase additional paid in capital and increase accumulated deficit and increase total net loss or decrease to total net income attributable to common stockholders in computing earnings per share on the condensed consolidated statements of operations and comprehensive income.

 

       During the periods ended March 31, 2026 and 2025, we used the following assumptions in the Black-Scholes model used to compute the incremental value for the conversion price reductions in the Series F and Series G and Series F Warrants and Series B Warrants:

 

  

For the Three Months Ended

  

March 31,

  

2026

 

2025

Expected term (years)

 

0.50 - 2.75

 

2.00 - 3.00

Volatility

 

144.52 - 158.40%

 

140.71 - 161.65%

Risk-free rate

 

3.51 - 3.58%

 

4.03 - 4.06%

Dividend yield

 

0.00%

 

0.00%

      

Below is a summary of the deemed dividends resulting from the January 2026 Down Round Trigger that reduced the conversion and exercise price of outstanding Series F and Series G, and Series F Warrants, as applicable, during the three months ended March 31, 2026.

 

Deemed Dividend on Series F and G Preferred Stock

 
  

Description of

 

Series F and G Shares

  

Conversion Price

  

Conversion Price

  

Incremental Value

 

Date of Trigger Event

 

Trigger Event

 

Triggered

  

Prior to Trigger

  

After Trigger

  

Deemed Dividend

 

January 2, 2026

 

January 2026 Down Round Trigger

  10,324,493  $0.9615  $0.8526  $1,291,691 
  

Deemed Dividends on Series F and G Preferred Stock

             $1,291,691 
                   

Deemed Dividend on Series F Warrants

 

January 2, 2026

 

January 2026 Down Round Trigger

  4,752,651  $0.9615  $0.8526   57,792 
  

Deemed Dividends on Series F Warrants

             $57,792 
                   
  

Total Deemed Dividends Series F and G Preferred Stock and Series F Warrants

             $1,349,483 
                   
                   

 

Below is a summary of the deemed dividends resulting from the March 2025 Down Round Trigger that reduced the conversion and exercise price of outstanding Series F Preferred Stock and Series F Warrants during the three months ended  March 31, 2025.

 

Deemed Dividends on Series F Preferred Stock

 
 

Description of

 

Series F

  

Conversion Prices

  

Conversion Price

  

Incremental Value

 

Date of Trigger Event

Trigger Event

 

Triggered

  

Prior to Trigger

  

After Trigger

  

Deemed Dividend

 

March 17, 2025

March 2025 Down Round Trigger

  5,025  $2.22 - 5.25  $1.2000  $976,637 
 

Deemed Dividends on Series F Preferred Stock

             $976,637 
                  

Deemed Dividends on Series F Warrants

 

March 17, 2025

March 2025 Down Round Trigger

  593,247  $2.22 - 5.25  $1.2000   79,695 
 

Deemed Dividends on Series F Warrants

             $79,695 
                  
 

Total Deemed Dividends Series F PS and Series F Warrants

             $1,056,332 
                  

Series F and Series F Warrants issued prior to December 2024 have conversion and exercise prices equal to $1.10 and were not impacted by the March 2025 Down Round Trigger.

 

 

 

 

 

 Stock-based Compensation

 

The Company determines the fair value of awards granted under the 2017 Omnibus Equity Incentive Plan (the “Equity Plan”) based on the fair value of its Common Stock on the date of grant. Stock-based compensation expenses related to grants under the Equity Plan are included in general and administrative expenses on the condensed consolidated statements of operations and comprehensive income. 

 

Restricted Stock Units (“RSUs”)

 

For the three months ended March 31, 2026, a summary of RSU activity is as follows:

 

      

Weighted Average

 
      

Grant Date

 
  

Shares

  

Fair Value

 

Outstanding as of December 31, 2025

  52,040  $34.26 

Granted

  858,997   0.95 

Cancelled

  —   — 

Vested and released

  (25,000)  1.06 

Outstanding as of March 31, 2026

  886,037   2.90 

Vested as of March 31, 2026

  12,437   137.44 

Unvested as of March 31, 2026

  873,600  $0.98 

 

For the three months ended March 31, 2026, the aggregate fair value of RSU awards at the time of grant was $812,642 based on the market price of our Common Stock on the date of grant.

 

For the three months ended March 31, 2026, the Company recognized $74,609 of stock-based compensation expense and had approximately $744,000 of unrecognized stock-based compensation expense related to RSUs, which will be amortized over approximately thirty six months. 

 

For the three months ended March 31, 2025, a summary of RSU activity is as follows:

 

      

Weighted Average

 
      

Grant Date

 
  

Shares

  

Fair Value

 

Outstanding as of December 31, 2024

  7,293  $324.64 

Granted

  72,194   2.10 

Cancelled

  (1,072)  264.60 

Vested and released

  —   — 

Outstanding as of March 31, 2025

  78,415   28.57 

Vested as of March 31, 2025

  8,015   255.33 

Unvested as of March 31, 2025

  70,400  $2.75 

 

 

For the three months ended March 31, 2025, the aggregate fair value of RSU awards at the time of vesting was $151,640.

 

For the three months ended  March 31, 2025, the Company recognized $49,880 of stock-based compensation expense and had approximately $137,886 of unrecognized stock-based compensation expense related to RSUs, which will be amortized over approximately fifteen months.