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Shareholders’ Equity
 3 Months Ended
Mar. 31, 2025
Equity [Abstract]  
Shareholders’ Equity

Note 4 - Shareholders’ Equity

 

Series E Convertible Preferred Stock

 

In March 2024, the Company amended its Articles of Incorporation to authorize the issuance of 130,000 shares of Series E Convertible Preferred Stock (“Series E Preferred”) resulting in gross proceeds of $1.3 million from an unrelated third party. In aggregate, between Series E Preferred and Series F Convertible Preferred Stock (“Series F Preferred”) financings, $1.5 million of the total Series E and F proceeds were received as an advance prior to December 31, 2023. These funds advanced were initially classified as a current liability until the agreement was finalized and shares were issued, at which time it was reclassified as equity, similar to the prior Convertible Preferred issuances. The issuance of the Series E Preferred Stock resulted in an allocation of $0.8 million to the convertible preferred stock and $0.5 million to the warrants described below and classified as Additional Paid-In Capital. Holders of the Series E Preferred will be entitled to receive quarterly dividends at the annual rate of 8.5% of the stated value ($10 per share) and have a liquidation preference over common stock. Such dividends may be paid in cash or otherwise based on the terms of the agreement. In addition, warrants to purchase 361,400 shares of the Company’s common stock were issued with respect to this transaction. These warrants are exercisable until March 2027, at the lower of $1.52 per share or 90% of the variable price based on the ten-day volume weighted average price (“VWAP”) of the Company’s common stock prior to exercise. Accrued dividends of $121,000   and $93,000 were recorded as of March 31, 2025 and December 31, 2024, respectively.

 

Series F Convertible Preferred Stock

 

In March 2024, the Company amended its Articles of Incorporation to authorize the issuance of 70,000 shares of Series F Preferred resulting in gross proceeds of $0.7 million from an unrelated third party. As disclosed above certain of these proceeds were received as an advance prior to December 31, 2023. This investment was initially classified as a current liability until the agreement was finalized and shares were issued, at which time it was classified as equity, similar to the prior Convertible Preferred issuances. The issuance of the Series F Preferred Stock resulted in an allocation of $0.4 million to the convertible preferred stock and $0.3 million to the warrants described below and classified as Additional Paid-In Capital. Holders of the Series F Preferred will be entitled to receive quarterly dividends at the annual rate of 8.5% of the stated value ($10 per share) and have a liquidation preference over common stock. Such dividends may be paid in cash or stock, at the Company’s discretion, based on the terms of the agreement. In addition, warrants to purchase 194,600 shares of the Company’s common stock were issued with respect to this transaction. These warrants are exercisable until March 2027, at the lower of $1.52 per share or 90% of the variable price based on the ten-day volume weighted average price (“VWAP”) of the Company’s common stock prior to exercise. Accrued dividends of $65,000   and $50,000 were recorded as of March 31, 2025 and December 31, 2024, respectively.

 

Warrants

 

As described above, in connection with the Series E and F convertible preferred equity issuances, a total of 556,000 warrants were issued, convertible in the Company’s common stock at the lower of $1.52 per share or 90% of the 10 day VWAP prior to exercise.

 

The Company has applied the Black-Scholes model to value stock-based awards. That model incorporates various assumptions in the valuation of stock-based awards relating to the risk-free rate of interest to be applied, the estimated dividend yield and expected volatility of the Company’s Common Stock. The risk-free rate of interest is the U.S. Treasury yield curve for periods within the expected term of the option at the time of grant. The expected volatility is based on historical volatility of the Company’s Common Stock.

 

The valuation assumptions we have applied to determine the value of warrants granted in 2025 were as follows:

 

  - Historical stock price volatility: The Company used the weekly closing price to calculate historical annual volatility which was a range from 68% - 241%.
     
  - Risk-free interest rate: The Company used the U.S. Treasury yield curve in effect at the time of grant for securities with maturities matching the expected term of the warrants. As of Q1 2025, the applicable yield was approximately 4.37%, based on the 10-year Treasury rate.
     
  - Expected life: The expected life of the warrants represents the period of time warrants were expected to be outstanding. The Company used an expected life of 5 years.
     
  - Dividend yield: The estimate for dividend yield is 0%, as the Company did not issue dividends during 2020 through 2025 and does not expect to do so in the foreseeable future.
     
  - Estimated forfeitures: When estimating forfeitures, the Company considers historical terminations as well as anticipated retirements.

 

 

A summary of the Company’s stock warrant activity is as follows:

 

   Shares under
Option (warrant)		   Weighted Average
Exercise Price		 
Balance at December 31, 2024   556,000   $1.52 
Granted   -    - 
Cancelled/Expired   -    - 
Exercised/Issued   -    - 
Outstanding at March 31, 2025   556,000    1.52 
           
Exercisable at March 31, 2025   556,000   $1.52 

 

As of March 31, 2025 the Company reserved the following shares of its common stock for the exercise of warrants, and preferred stock:

 

2024 Warrants   556,000 
Shares reserved as of March 31, 2025   556,000 

 

Restricted Stock Awards

 

Restricted Stock Units, Performance-Based Restricted Stock Units and Restricted Stock Awards:

 

Aggregated information regarding RSUs, PSUs and RSAs granted under the Plan is summarized below:

 

   RSUs, PSUs & RSAs   Weighted Average
Grant-Date Fair Value		 
Outstanding, unvested at December 31, 2024   242,750    0.64 
Granted   -      
Vested   (10,500)   0.77 
Forfeited   -      
Outstanding, unvested at March 31, 2025   232,250    0.64 

 

The Compensation Committee (as defined in the Plan) shall be responsible for determining when the conditions above have been satisfied. The Company records compensation expense with each vesting, and records a likelihood of vesting weighted analysis to the extent it has visibility to do so with a related grant date market value when such visibility is present. Without such visibility, it considers such probability as de minimis until additional information is available.