Preferred Stock |
12 Months Ended |
|---|---|
Dec. 31, 2025 | |
| Equity [Abstract] | |
| Preferred Stock | Preferred Stock Rights and Preferences of the Series A, B and C Preferred Stock
Each share of Series A, B and C Preferred Stock has a stated value of $1,000 per share and, when issued, the Preferred Stock will be fully paid and non-assessable. The Preferred Stock, with respect to the payment of dividends, distributions and payments upon the liquidation, dissolution and winding up of the Company, ranks senior to all capital stock of the Company, unless the Required Holders (as defined in the applicable Certificate of Designations) consent to the creation of other capital stock of the Company that is senior or equal in rank to the specific series of Preferred Stock. For the avoidance of doubt, the Series A, B and C Preferred Stock ranks in parity with each other.
The holders of Series B and C Preferred Stock will be entitled to a 10% per annum dividends and holders of Series A Preferred Stock will be entitled to 5% per annum dividends. The dividends are payable to each record holder of the Preferred Stock in shares of Common Stock so long as there has been no Equity Conditions Failure (as defined in the applicable Certificate of Designations), and the Company may, at its option, under certain circumstances, capitalize the dividend by increasing the stated value of each Preferred Shares or elect a combination of the capitalized dividend and a payment in dividend shares.
Management has elected to capitalize dividends on each dividend date, which is the first Trading Day of the quarter after to which the dividend relates. During the year ended December 31, 2025, dividends relating to the Series A, B and C Preferred Stock of $792,882, $49,943 and $3,065, respectively, were capitalized. The stated value of the Series A and B Preferred Stock increased to $1,037.97 and $1,015.28, respectively. At December 31, 2025, dividends payable of $71,958, $71,399 and $16,753 relating to Series A, B and C Preferred Stock, respectively, were reported under other creditors in the Consolidated Balance Sheets.
If at any time the Company grants, issues or sells any options, convertible securities, or rights to purchase stock, warrants, securities or other property pro rata to all or substantially all of the record holders of any class of Common Stock (the “Purchase Rights”), then each holder of Preferred Stock will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if such holder had held the number of shares of Common Stock acquirable upon complete conversion of all the Preferred Stock held by such holder immediately prior to the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights at the Alternate Conversion Price (as defined below); subject to certain limitations on beneficial ownership.
Conversion at Option of Holder
At any time from and after the first date of issuance of any Preferred Shares, each holder of Preferred Stock may convert all, or any part, of the outstanding Preferred Stock, at any time at such holder’s option, into shares of the Common Stock (which converted shares of Common Stock are referred to as “Conversion Shares” herein) at the fixed “Conversion Price” of $0.95 for Series C, and $0.5942 for Series A and B respectively, which is subject to proportional adjustment upon the
occurrence of any stock split, stock dividend, stock combination and/or similar transactions. The amounts to be converted include unpaid dividends and other charges for the Preferred Shares.
Subject to the rules and regulations of the Nasdaq, the Company has the right, at any time, with the written consent of the Required Holders, to lower the fixed conversion price to any amount and for any period of time deemed appropriate by the board of directors of the Company.
Alternate Conversion at the Holder’s Election
At any time after the Initial Issuance Date, a holder may elect to convert the Preferred Stock held by such holder at the “Alternate Conversion Price” equal to the lesser of:
• the Conversion Price; and
• the greater of:
◦the floor price of $0.19, $1.6524 and $2.214 for Series C, B and A Preferred Stock respectively (the “Floor price”); and
◦98% of the lowest volume weighted average price ("VWAP") of the Common Stock during the 10 consecutive trading days immediately prior to such conversion.
Alternate Conversion Upon a Triggering Event
Following the occurrence and during the continuance of a Triggering Event (as defined below), each holder may alternatively elect to convert the Preferred Stock at the “Alternate Conversion Price”.
The Certificate of Designations contains standard and customary triggering events (each, a “Triggering Event” including certain Bankruptcy Triggering Event (as defined therein)), including but not limited to: (i) the suspension from trading or the failure to list the Common Stock within certain time periods; (ii) failure to declare or pay any dividend when due; (iii) the occurrence of any default under, redemption of or acceleration prior to maturity of at least an aggregate of $500,000 of Indebtedness (as defined in the applicable exchange or purchase agreements) of the Company, (iv) the Company’s failure to cure a conversion failure of failure to deliver shares of the Common Stock upon conversion, or notice of the Company’s intention not to comply with a request for conversion of any Preferred Stock, and (v) bankruptcy or insolvency of the Company.
From and after the occurrence and during the continuance of any Triggering Event, the Dividend Rate in effect shall automatically be increased to the lesser of 18% per annum and the maximum rate permitted under applicable law.
If at the time of a conversion the Alternate Conversion Price is determined to be the Floor Price because such Floor Price is greater than 98% of the lowest VWAP of a share of Common Stock during the ten (10) trading day period ending and including the trading day immediately preceding the delivery or deemed delivery of the applicable conversion notice, then the Conversion Amount (as defined in the applicable Certificate of Designations) shall automatically increase pro rata, by the applicable Alternate Conversion Floor Amount (as defined in the applicable Certificate of Designations).
Rights Upon Issuance of Other Securities
If the Company in any manner issues or sells (or enters into any agreement to issue or sell) any Convertible Securities and the lowest price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale (or the time of execution of such agreement to issue or sell, as applicable) of such Convertible Securities for such price per share.
For the purposes of this Section, the “lowest price per share for which one share of Common Stock is at any time issuable upon the conversion, exercise or exchange thereof or otherwise pursuant to the terms thereof” shall be equal to (1) the lower of (x) the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one share of Common Stock upon the issuance or sale (or pursuant to the agreement to issue or sell, as applicable) of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security or otherwise pursuant to the terms thereof; and (y) the lowest conversion price set forth in such Convertible Security for which one share of Common Stock is issuable (or may become issuable assuming all possible market conditions) upon conversion, exercise or exchange
thereof or otherwise pursuant to the terms thereof, minus (2) the sum of all amounts paid or payable to the holder of such Convertible Security (or any other Person) with respect to any one share of Common Stock upon the issuance or sale (or the agreement to issue or sell, as applicable) of such Convertible Security plus the value of any other consideration received or receivable (including, without limitation, any consideration consisting of cash, debt forgiveness, assets or other property) by, or benefit conferred on, the holder of such Convertible Security (or any other Person).
In determining the classification of the Series A, B and C Preferred Stock, the Company considered ASC 480 - Distinguishing Liabilities from Equity and ASC 815 - Derivatives and Hedging. The Company concluded the Preferred Stock be classified as permanent equity because it is not mandatorily redeemable except upon a Bankruptcy Triggering Event, which the Company views as a liquidation-type contingency rather than a substantive redemption feature. The instrument also does not provide holders with a general put right, and any holder-controlled exchange is contingent upon a Change of Control, an event subject to the Company’s governance and approval processes. In addition, the Company may settle the Change of Control Election Price in equity-linked rights convertible into the same consideration payable to common stockholders, and management has concluded that sufficient authorized shares exist to settle conversions in shares.
Series A Convertible Preferred Stock - A total of 5,546 and 35,034 shares of Series A Convertible Preferred Stock were outstanding at December 31, 2025 and 2024, respectively.
On November 4, 2024, the Company entered into the Second Amendment and Exchange Agreement, by and among the Company and ATW I, SLS and MIF pursuant to which such investors would exchange the remaining portion of the amount outstanding under the New Convertible Debenture and certain other amounts outstanding with respect thereto, into shares of Series A preferred convertible stock (the “Series A Preferred Stock”), subject to certain adjustments, in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act.
On December 26, 2024, the Company filed with the Secretary of State of the State of Delaware the Certificate of Designation of Series A Convertible Preferred Stock of the Company and designated 40,000 shares of Series A Preferred Stock.
On August 6, 2025, the Company issued additional equity securities (see Series B Convertible Preferred Stock) at a price per share below the then-effective conversion price of its Series A Preferred Stock triggering a full-ratchet anti-dilution adjustment. The conversion price of the Series A Preferred Stock was reduced from $11.07 per share to $8.26 per share. The resulting $4,047,585 value transfer was recorded as a reclassification within equity (charged to Accumulated Deficit and credit to APIC) and treated as a deemed dividend to preferred shareholders for EPS purposes. There was no impact on total stockholders’ equity or the consolidated statement of operations.
On December 3, 2025, the Company issued additional equity securities (see Series C Convertible Preferred Stock) at a price per share below the then-effective conversion price of its Series A Preferred Stock. Under the terms of the Series A Certificate of Designation, a full-ratchet anti-dilution adjustment was triggered, reducing the conversion price of the Series A Preferred Stock from $8.26 per share to $0.5942 per share. The resulting $15,673,199 value transfer was recorded as a reclassification within equity (charged to Accumulated Deficit and credit to APIC) and treated as a deemed dividend to preferred shareholders for EPS purposes. There was no impact on total stockholders’ equity or the consolidated statement of operations.
During the year ended December 31, 2025, 29,488 Series A Convertible Preferred Stock were converted into 10,768,900 shares of Common Stock.
Series B Convertible Preferred Stock - A total of 2,813 and 0 shares of Series B Convertible Preferred Stock were outstanding at December 31, 2025 and December, 2024, respectively.
On August 6, 2025, the Company, entered into a Securities Purchase Agreement (the “Series B Purchase Agreement”), by and among the Company and ATW pursuant to which the Company agrees to issue and sell in a private offering to ATW 3,000 shares of Series B Convertible Preferred Stock of the Company, $0.0001 par value (the “Series B Preferred Stock”), at a price per share of $980 (the “Series B Preferred Offering”) for an aggregate purchase price of $2,940,000 less offering costs of $85,000. The Series B Preferred Offering also relates to the offering of the shares of the Company’s common stock issuable upon the conversion of or otherwise pursuant to the terms of the Series B Preferred Stock.
On August 7, 2025, the Company filed with the Secretary of State of the State of Delaware the Certificate of Designations of Rights and Preferences of the Series B Convertible Preferred Stock of the Company and designated 50,000 shares of Series B Preferred Stock. On August 8, 2025, the Company and ATW closed on the initial closing transactions contemplated by the Purchase Agreement, and the Company issued 3,000 shares of Series B Preferred Stock to ATW.
On December 3, 2025, the Company issued additional equity securities (see Series C Convertible Preferred Stock) at a price per share below the then-effective conversion price of its Series B Preferred Stock. Under the terms of the Series B Certificate of Designation, a full-ratchet anti-dilution adjustment was triggered, reducing the conversion price of the Series B Preferred Stock from $8.26 per share to $0.5942 per share. The resulting $8,266,572 value transfer was recorded as a reclassification within equity (charged to Accumulated Deficit and credit to APIC) and treated as a deemed dividend to preferred shareholders for EPS purposes. There was no impact on total stockholders’ equity or the consolidated statement of operations.
During the year ended December 31, 2025, 187 Series B Convertible Preferred Stock were converted into 392,490 shares of Common Stock.
Series C Convertible Preferred Stock - A total of 2,154 and 0 shares of Series C Convertible Preferred Stock were outstanding at December 31, 2025 and December, 2024, respectively.
On December 3, 2025, the Company and certain institutional investors affiliated with ATW each entered into an Amendment and Exchange Agreement (collectively, the “Series C Exchange Agreements"), pursuant to which such investors may exchange, in one or more exchanges, portions of certain secured convertible term loans of the Company and the November 2024 Debentures (collectively the “Existing Securities”), into 3,814 of Series C preferred convertible stock (the “Series C Preferred Stock”), as set forth and subject to the terms and conditions in the Exchange Agreements, in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933. In addition, by written notice from holders of the Existing Securities to the Company and subject to other terms and conditions set forth in the Series C Exchange Agreements, the Company shall exchange additional portion of the amounts outstanding under the Existing Securities as set forth in such notice into shares of Series C Preferred Stock, through one or more additional Exchanges, in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act.
On December 3, 2025, the Company filed a Certificate of Designations with respect to the Series C Preferred Stock with the Secretary of State of the State of Delaware, and three (3) institutional investors closed the Exchange. The Company issued 3,814 shares of Series C Preferred Stock to ATW. The fair value of the Series C Preferred Stock issued in this transaction was $10,185,929. The Company designated 100,000 shares of the Company’s authorized and unissued preferred stock as Series C Preferred Stock and established the rights, preferences and privileges of the Series C Preferred Stock pursuant to the Certificate of Designations of Rights and Preferences of the Series C Preferred Stock, as summarized below.
During the year ended December 31, 2025, 1,660 Series C Convertible Preferred Stock were converted into 2,740,740 shares of Common Stock.
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