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Stockholders’ Equity
 9 Months Ended
Sep. 30, 2025
Equity [Abstract]  
Stockholders’ Equity

5. Stockholders’ Equity

 

Preferred Stock

 

The Company is authorized to issue a total of 10,000,000 shares of preferred stock, par value $0.0001 per share.

 

On March 17, 2015, the Company filed a Certificate of Designations, Preferences, Rights and Limitations of its Series A Convertible Preferred Stock with the Delaware Secretary of State to amend the Company’s certificate of incorporation. The Company has designated a total of 350,000 shares as Series A Convertible Preferred Stock, which are non-voting and are not subject to increase without the written consent of a majority of the holders of the Series A Convertible Preferred Stock or as otherwise set forth in the Preferences, Rights and Limitations. The holders of each tranche of 175,000 shares of the Series A Convertible Preferred Stock are entitled to receive a per share dividend equal to 1% of the annual net revenue of the Company divided by 175,000, until converted or redeemed. Each share of Series A Convertible Preferred Stock was convertible, at the option of the holder, into 0.20833 shares of common stock (subject to customary anti-dilution provisions) and the Series A Convertible Preferred Stock is subject to mandatory conversion at the conversion rate in the event of a merger or sale transaction resulting in gross proceeds to the Company of at least $21,875,000. The Series A Convertible Preferred Stock had a liquidation preference based on its assumed conversion into shares of common stock. The Series A Convertible Preferred Stock did not have any cash liquidation preference rights or any registration rights. Based on the attributes of the Series A Convertible Preferred Stock as previously described, the Company accounted for the Series A Convertible Preferred Stock as a permanent component of stockholders’ equity. The 350,000 outstanding shares of Series A Convertible Preferred Stock were converted into a total of 72,917 shares of common stock pursuant to a notice of conversion dated May 16, 2025.

 

 

On July 1, 2025, the Company filed a Certificate of Designations, Preferences, Rights and Limitations of its Series B Convertible Preferred Stock with the Delaware Secretary of State to amend the Company’s certificate of incorporation. The Company has designated a total of 3,573,130 shares as Series B Convertible Preferred Stock with a stated value of $0.7146 per share. Each Preferred Share is convertible into one share of Common Stock, subject to standard adjustments such as stock splits and stock dividends. The Preferred Shares are non-voting, except that certain actions of the Company may not be taken except upon approval of holders who own a majority in stated value of the Preferred Shares. The Preferred Shares bear an 8% per annum cumulative dividend non-compounding and payable at conversion either in cash or, at the holder’s election, in shares of Common Stock valued at the then effective conversion rate. The holders of the Preferred Shares have the right to designate two members to the Company’s Board of Directors.

 

As of September 30, 2025 and December 31, 2024, the Company had 6,076,870 shares and 9,650,000 shares, respectively, of undesignated preferred stock, which may be issued with such rights and powers as the Board of Directors may designate. On October 21, 2025, the Company filed a Certificate of Elimination of Certificate of Designations of Series A Convertible Preferred Stock with the Delaware Secretary of State to amend the Company’s certificate of incorporation to eliminate the 350,000 shares of Preferred Stock associated with the Series A Convertible Preferred Stock classification.

 

Common Stock

 

The Company is authorized to issue a total of 100,000,000 shares of common stock, par value $0.0001 per share. As of September 30, 2025 and December 31, 2024, the Company had 5,704,200 shares and 2,249,290 shares, respectively, of common stock issued and outstanding.

 

July 20, 2023 equity offering

 

Effective July 20, 2023, the Company completed a registered direct offering of 180,000 shares of common stock at $6.00 per share and pre-funded warrants to purchase 403,334 shares of common stock at $5.9999 per warrant. The pre-funded warrants had an exercise price of $0.0001 per share, were immediately exercisable, and were fully exercised between July 24 and August 7, 2023 for total cash proceeds of $41. The pre-funded warrants were deemed to be common stock equivalents.

 

In a concurrent private placement, the Company issued to the same institutional investor common stock purchase warrants to acquire 583,334 shares at an exercise price of $6.00 per share. These warrants became exercisable immediately and expire on July 20, 2028. The warrants and underlying shares were issued pursuant to Section 4(a)(2) and Rule 506(b) of the Securities Act and were subsequently registered for resale under a Form S-3 declared effective on May 2, 2024.

 

The Company received gross proceeds of $3,499,964 from the combined transactions and net proceeds of $3,137,039 after deducting offering expenses of $362,925. As compensation, the placement agent received warrants to purchase 35,000 shares of common stock at an exercise price of $6.60, expiring July 20, 2028.

 

The investor warrants include standard anti-dilution adjustments and a fundamental transaction provision entitling the holder, upon a qualifying transaction, to elect cash settlement based on a defined Black-Scholes valuation formula. If such a transaction is outside the Company’s control (e.g., not board-approved), the holder is entitled to receive the same form of consideration received by common shareholders. These warrants are classified in permanent equity. Any cash payments upon settlement will be recorded as equity distributions when and if such obligations arise.

 

February 13, 2025 equity offering

 

Effective February 13, 2025, the Company completed a registered direct offering of 434,784 shares of common stock at $2.415 per share and, in a concurrent private placement, issued warrants to purchase 434,784 shares of common stock at an exercise price of $2.29 per share. The warrants are immediately exercisable and expire five years from the date of issuance.

 

 

The warrants and underlying shares were issued pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act and were subsequently registered for resale on a Form S-1 declared effective on April 10, 2025.

 

Gross proceeds from the offering were $1,050,003, with net proceeds of $914,228 after deducting $135,775 in placement agent fees and other offering costs. The Company granted the placement agent warrants to purchase 32,609 shares of common stock at $3.0188 per share, expiring February 11, 2030. Net proceeds are being used for general working capital purposes.

 

All warrants include customary anti-dilution adjustments and a “fundamental transaction” provision. If a qualifying transaction within the Company’s control is consummated, holders may elect cash settlement equal to the Black-Scholes value. For transactions outside the Company’s control, holders are entitled to receive the same consideration as common shareholders. The warrants are classified in permanent equity. Any future cash settlements will be accounted for as equity distributions upon occurrence of the related fundamental transaction.

 

July 2, 2025 equity offering

 

On June 30, 2025, the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain purchasers named therein (the “Purchasers”), pursuant to which the Company agreed to issue and sell, in a private placement (the “Offering”) 3,573,130 shares of the Company’s Series B Convertible Preferred Stock (the “Preferred Shares”); 59,552 shares of the Company’s Common Stock, par value $0.0001 per share (the “Common Shares”, the “Common Stock”); common stock warrants (the “Common Stock Warrants”) to purchase 6,355,214 shares of Common Stock; and Pre-Funded Warrants to purchase 2,322,532 shares of Common Stock.

 

The Common Shares, the Common Stock Warrants, Pre-Funded Warrants, the Preferred Shares, and the shares of Common Stock underlying the Common Stock Warrants, Pre-Funded Warrants and Preferred Shares have been registered under the Securities Act of 1933, as amended (the “Securities Act”) and were issued in reliance on an exemption from the registration requirements of the Securities Act afforded by Section 4(a)(2) thereof. The Company filed a registration statement on Form S-1 (the “Resale Registration Statement”) to cover the resale of the Common Shares and any shares of Common Stock underlying the Pre-Funded Warrants, the Common Stock Warrants, the Placement Agent Warrants and the Preferred Shares, which was declared effective by the Securities and Exchange Commission on July 15, 2025.

 

The Offering was priced at-the-market under Nasdaq rules at $0.8396 per common stock unit, with each unit consisting of one share of common stock at a price of $0.7146 and one common stock warrant at a price of $0.125 to acquire one share of common stock at an exercise price of $1.00 per share. The Offering resulted in gross proceeds of $5,050,000 before deducting the placement agent’s fees and related offering expenses of $871,838. The initial Offering closed on July 2, 2025 with the Company receiving gross proceeds of approximately $4,050,000. The remaining $1,000,000 of gross proceeds were paid on July 18, 2025 upon the Resale Registration Statement having been declared effective.

 

Pursuant to a Placement Agent Agreement dated as of June 30, 2025, the Company engaged Spartan Capital Securities, LLC (the “Placement Agent”) to act as the Company’s exclusive placement agent in connection with the Offering. The Company paid the Placement Agent a cash fee equal to 8% of the aggregate gross proceeds raised in the Offering, a non-accountable expense allowance of 1.0% of the aggregate gross proceeds raised in the Offering, and $125,000 for its expenses including legal fees.

 

On the Closing Date, the Company issued to the Placement Agent warrants (the “Placement Agent’s Warrants”) to purchase up to 315,626 shares of Common Stock, which represented 5% of the Shares and Pre-Funded Warrants sold in the Offering. The Placement Agent’s Warrants had an exercise price of 125% of the offering price and otherwise had the same terms as the Common Stock Warrants. On July 15, 2025, the Placement Agent’s warrants were exercised on a cashless basis, resulting in the Placement Agent being issued 221,690 shares of the Company’s Common Stock.

 

During the period from July 2, 2025 through September 30, 2025, 1,662,760 pre-funded warrants exercisable at $0.00001 per share that were sold in the private placement were exercised, resulting in the issuance of 1,662,760 shares of Common Stock. During the period from October 1, 2025 through October 31, 2025, an additional 475,521 pre-funded warrants exercisable at $0.00001 per share and sold in the private placement, were exercised, resulting in the issuance of 475,521 shares of Common Stock. As of October 31, 2025, 184,251 pre-funded warrants remained unexercised.

 

 

The exercise prices of the warrants issued to the purchasers and to the placement agent are subject to customary adjustments for stock splits, stock dividends, stock combinations, reclassifications, reorganizations, or similar events affecting the Company’s common stock. In addition, the warrants issued contain a “fundamental transaction” provision whereby in the event of a fundamental transaction (including a sale or transfer of assets or ownership of the Company as defined in the warrant agreement) within the Company’s control, the holders of the unexercised common stock warrants would be entitled to receive, in exchange for extinguishment of the warrants, cash consideration equal to a Black-Scholes valuation, as defined in the warrant agreement. If such fundamental transaction is not within the Company’s control, the warrant holders would only be entitled to receive the same form of consideration (and in the same proportion) as the holders of the Company’s common stock.

 

Accordingly, in the event of a change in control of the Company or a sale or transfer of all or substantially all of the Company’s assets, as defined in the July 2, 2025 warrants, to the extent that the warrants are outstanding at the effective date that such a transaction is closed, this “fundamental transaction” provision would entitle the holders to substantial cash consideration, thus reducing the amounts to be retained by the Company or potentially distributable to the Company’s stockholders.

 

July 8, 2025 equity offering

 

On July 3, 2025, the Company, entered into a Securities Purchase Agreement (the “Purchase Agreement”) with certain purchasers named therein (the “Purchasers”), pursuant to which the Company agreed to issue and sell, in a registered direct offering (the “Offering”) 210,675 shares (the “Common Shares”) of the Company’s Common Stock, par value $0.0001 per share (the “Common Stock”) and Pre-Funded Warrants (“Pre-Funded Warrants”) to purchase 763,351 shares of Common Stock, at an offering price of $1.54 per share.

 

The Offering resulted in gross proceeds of $1,500,000 before deducting placement agent’s fees and related offering expenses of $169,188. The Offering closed on July 8, 2025.

 

Pursuant to a Placement Agent Agreement dated as of July 3, 2025 (the “Placement Agent Agreement”), the Company engaged Spartan Capital Securities, LLC (the “Placement Agent”) to act as the Company’s exclusive placement agent in connection with the Offering. The Company paid the Placement Agent a cash fee equal to 8.0% of the aggregate gross proceeds raised in the Offering, and agreed to reimburse the Placement Agent $40,000 for its legal fees.

 

During the period from July 8, 2025 through August 18, 2025, all 763,351 pre-funded warrants exercisable at $0.00001 per share that were sold in the direct registered offering were exercised, resulting in the issuance of 763,351 shares of Common Stock.

 

Shares Issued for Services

 

In connection with the Market Awareness Agreement with MicroCap Advisory, LLC entered into during August 2025 and terminated in September 2025, the Company issued 9,181 shares of its common stock, valued at $44,711, as settlement of the original 48,000 common share obligation.

 

 

Common Stock Warrants

 

A summary of common stock warrant activity, including warrants to purchase common stock that were issued in conjunction with the Company’s public offerings, but excluding pre-funded warrants, is presented below.

  

   Number of Shares  

Weighted Average

Exercise Price

  

Weighted Average

Remaining

Contractual

Life (in Years)

 
             
Warrants outstanding at December 31, 2024   808,365   $16.407      
Issued   7,138,233    1,096      
Exercised   (335,626)   1.31      
Expired   —    —      
Warrants outstanding at September 30, 2025   7,610,972   $2.715    4.47 
                
Warrants exercisable at December 31, 2024   808,365   $16.407      
Warrants exercisable at September 30, 2025   7,610,972   $2.715    4.47 

 

At September 30, 2025, the outstanding warrants are exercisable at the following prices per common share:

  

Exercise Prices  

Warrants

Outstanding (Shares)

 
      
$1.0000    6,355,214 
$2.2900    414,784 
$3.0188    32,609 
$6.0000    583,334 
$6.6000    35,000 
$20.0000    29,000 
$37.0000    11,331 
$57.0000    149,700 
      7,610,972 

 

The warrants exercisable at $57.00 per share at September 30, 2025 consist of 1,497,000 publicly-traded warrants, described herein on a pre-split 1-for-10 basis, that were issued as part of the Company’s November 2020 public offering of units, and are exercisable for a period of five years thereafter. As a result of the 1-for-10 reverse split of the Company’s common stock effective June 2, 2023, each such publicly-traded warrant currently now represents the right to purchase 1/10th of a share of common stock at the original exercise price of $5.70 per share. Accordingly, the exercise of 10 warrants, each exercisable at $5.70, are required to acquire one share of post-split common stock, which is equivalent to a purchase price of $57.00 per share.

 

Based on the closing fair market value of $5.030 per common share on September 30, 2025, the intrinsic value attributed to exercisable but unexercised common stock warrants at September 30, 2025 was approximately $20,113,000.

 

Information with respect to the issuance of common stock in connection with various stock-based compensation arrangements is provided at Note 7.