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Note 11 - Stockholders' Equity (Deficit)
 9 Months Ended
Sep. 30, 2025
Notes to Financial Statements  
Equity [Text Block]

NOTE 11. STOCKHOLDERS’ EQUITY (DEFICIT)

 

Authorized Share Capital

 

Under the Company’s Amended and Restated Certificate of Incorporation, as amended, the Company is authorized to issue up to 150,000,000 shares of common stock and up to 5,000,000 shares of preferred stock with rights and preferences as may be approved by the Company’s Board.

 

Subsequent to September 30, 2025, on October 16, 2025, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, which became effective upon filing. The amendment was approved by the Board and subsequently approved by the Company’s stockholders at the Annual Meeting of Stockholders held on October 16, 2025. The Certificate of Amendment provides that the Company is then authorized to issue an increased total of 1,500,000,000 shares of common stock. All other provisions of the Amended and Restated Certificate of Incorporation remain in full force and effect. Additional information about matters submitted to a vote of security holders and related results of the meeting can be found in the Company’s 8-K filed on October 20, 2025.

 

Preferred Stock

 

There were two series of preferred stock of the Company outstanding during the nine months ended September 30, 2025 – the Series B Non-Voting Convertible Preferred Stock (“Series B Preferred Stock”) and the Series D Non-Voting Convertible Preferred Stock (“Series D Preferred Stock”). The rights and preferences of each are described below.

 

Series B Preferred Stock

 

The Company issued 15,000 shares of Series B Preferred Stock in November 2021 in connection with a private placement transaction. For both periods ending September 30, 2025 and September 30, 2024, 131 shares of Series B Preferred Stock remained outstanding. As of September 30, 2025, outstanding shares of Series B Preferred Stock were convertible into 15,065 shares of common stock at a conversion price of $8.75.

 

The Series B Preferred Stock does not have any preemptive rights or a preference upon any liquidation, dissolution or winding-up of the Company. Each share of Series B Preferred Stock is convertible into $1,000 of common stock at a conversion price per share of $8.75.

 

Series C Preferred Stock

 

The Company issued 3,250 shares of Series C Preferred Stock in November 2022 in connection with a private placement transaction. As of September 30, 2025, no shares of Series C Preferred Stock remained outstanding.

 

Series D Preferred Stock

 

The Company issued 481,250 shares of Series D Preferred Stock on August 19, 2025 in connection with the 2025 Preferred Stock Purchase Agreement (see Note 8, “Financing Activities”). As of September 30, 2025, 481,250 shares of Series D Preferred Stock were outstanding and convertible into an aggregate of 77.0 million shares of Common Stock. The Series D Preferred Stock is non‑voting, except for certain protective provisions, and is entitled to dividends and liquidation rights on an as‑converted‑to‑common basis. There are no redemption or repurchase rights that require cash settlement for the Series D Preferred Stock. The Company is not obligated to redeem or repurchase any shares of the Series D Preferred Stock.

 

Subsequent to September 30, 2025, on October 21, 2025, three business days after the Stockholder Approval, each share of Series D Preferred Stock automatically converted into 160 shares of Common Stock (see Note 19, “Subsequent Events”).

 

Series E Preferred Stock

 

On August 19, 2025, in connection with the 2025 Preferred Stock Purchase Agreement (see Note 8, “Financing Activities”), an investor committed to purchase shares of Series E Preferred Stock convertible into an aggregate of 43.0 million shares of Common Stock. The rights and preferences of the Series E Preferred Stock are identical to those of the Series D Preferred Stock described above except that conversion is at the option of the holder.

 

Subsequent to September 30, 2025, on October 16, 2025, the Company issued 268,750 shares of Series E Preferred Stock and, on October 21, 2025, each share of Series E Preferred Stock converted into 160 shares of Common Stock at the option of the holders (see Note 19, “Subsequent Events”).

 

Series F Preferred Stock

 

The Company issued 1,986,565 shares of Series F Voting Retractable Preferred Stock (the “Series F Preferred Stock”) on August 19, 2025 in connection with the Series F Agreements (see Note 8, “Financing Activities”).

 

The Series F Preferred Stock is not convertible into Common Stock or any other equity instrument and has no dividend rights. The Series F Preferred Stock has voting rights similar to Common Stock with each share of Series F Preferred Stock representing the voting equivalent of approximately 0.424 shares of Common Stock and a liquidation preference equivalent to common stock up to its redemption amount. The Series F Preferred Stock has a total aggregate fixed redemption value of $525,000 in cash. The redemption terms provide that, after the earlier of (i) Conversion Approval (see Note 8, “Financing Activities”) or (ii) December 31, 2025, holders may redeem the Series F Preferred Stock in exchange for $525,000 total in cash at any time. Conversion Approval was obtained by the Company subsequent to September 30, 2025 on October 16, 2025 and 639,933 shares of Series F Preferred Stock were subsequently redeemed for a $175,000 cash payment (see Note 19, “Subsequent Events”). The Company may also force redemption of outstanding shares at any time after December 31, 2025. Once redeemed, the shares are cancelled and extinguished; and they revert to authorized but unissued status.

 

Upon issuance, the Series F Preferred Stock was not mandatorily redeemable because redemption was subject to Conversion Approval, and eventual redemption is at the option of the holders upon the occurrence of certain events that are not solely within the control of the Company. In accordance with ASC 480-10-S99-3A, although the Series F Preferred Stock is legally designated as equity and is not mandatorily redeemable, it does not meet the requirements for permanent equity classification upon issuance. Accordingly, the Series F Preferred Stock has been presented as mezzanine equity (temporary equity) on the Company’s condensed consolidated balance sheet, between liabilities and stockholders’ equity, at its initial carrying amount of $525,000 which is equivalent to its redemption value. The Company will not accrete the carrying value of the Series F Preferred Stock to its redemption amount since they are equivalent. Upon Conversion Approval (which was obtained subsequent to September 30, 2025 – see Note 19, “Subsequent Events”), the Company will reclassify the Series F Preferred Stock to liability in accordance with ASC 480-10-25-4 as it becomes redeemable at the holder’s option at that time.

 

Common Stock

 

See Notes 8, “Financing Activities” and 10, “Common Stock Warrants” for a description of common stock and common stock warrant-related transactions during the three and nine months ended September 30, 2025 and 2024.

 

Dividends

 

On August 26, 2025, the Special Transaction Committee of the Board of Director and the Company’s Board of Directors declared a special cash dividend of $0.80 per share for the Company’s common stock (the “Special Dividend”). The dividend totaling $4.8 million was paid on September 29, 2025 to stockholders of record of Common Stock at the close of business on September 15, 2025.