Preferred Stock |
3 Months Ended |
|---|---|
Mar. 31, 2026 | |
| 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 three months ended March 31, 2026, dividends relating to the Series A, B and C Preferred Stock of $71,958, $71,399 and $16,753, respectively, were capitalized. The stated value of the Series A, B and C Preferred Stock increased to $1,050.95, $1,040.66 and $1,007.78, respectively. At March 31, 2026, dividends payable of $72,857, $58,875 and $46,456 relating to Series A, B and C Preferred Stock, respectively, were reported under other creditors in the Condensed Consolidated Balance Sheets. 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 liabilities in the Condensed 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 $7.60 for Series C, and $4.7520 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 $1.52, $13.22 and $17.71 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 shares of Series A Convertible Preferred Stock were outstanding as of March 31, 2026 of which 5,342 and 204 were held by related parties MIF and SLS Family Irrevocable Trust ("SLS"), respectively.
During the three months ended March 31, 2025, ATW I and SLS converted 13,188 and 2,000 shares of Series A Preferred Shares into 188,676 and 33,800 shares of Common Stock, respectively.
Series B Convertible Preferred Stock - A total of 2,263 shares of Series B Convertible Preferred Stock were outstanding at March 31, 2026, held by related party ATW II.
During the three months ended March 31, 2026, ATW II converted 550 Series B Convertible Preferred Stock into 146,781 shares of Common Stock.
Series C Convertible Preferred Stock - A total of 3,777 shares of Series C Convertible Preferred Stock were outstanding at March 31, 2026, held by related party ATW I.
During the three months ended March 31, 2026, November 2024 Debentures with a principal value of $2,000,000 and fair value of $2,729,994, were exchanged into 2,023 shares of Series C Preferred Stock. The fair value of the Series C Preferred Stock was $3,659,502 and a loss on extinguishment of debt of $929,508 was reported in the condensed consolidated statements of operations for the three months ended March 31, 2026.
During the three months ended March 31, 2026, 400 Series C Convertible Preferred Stock were converted into 67,320 shares of Common Stock.
Series D Convertible Preferred Stock
On February 6, 2026, the Company entered into a Securities Purchase Agreement and a registration rights agreement with Master Investment Group ("Investor"), pursuant to which the Company agreed to issue and sell in a private offering to Investor, (1) certain shares of Series D Convertible Preferred Stock of the Company, $0.0001 par value (the “Series D Preferred Stock”) for an aggregate purchase price of up to $3,000,000 and may issue additional shares of Series D Preferred Stock valued at up to $47,000,000 and (2) certain common stock purchase warrants (the “Warrants”) to purchase up to a number of shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), equal to 30% of the aggregate purchase price (the “Preferred Offering”). The Preferred Offering also relates to the offering of the shares of the Common Stock issuable upon the conversion of or otherwise pursuant to the terms of the Series D Preferred Stock (“Conversion Shares”) and the shares of the Common Stock issuable upon the exercise of the Warrants.
Pursuant to the Purchase Agreement, the Company agreed to issue the Initial Preferred Shares for an aggregate purchase price of $3,000,000 in two closings, in each case following the demonstration that Investor has made expenditures agreed by, and on behalf of, the Company in an aggregate amount equal to the applicable milestone aggregate investment amount specified in the Purchase Agreement. At each such milestone closing, the Company will issue to Investor a number of shares of Series D Preferred Stock equal to the applicable milestone aggregate investment amount invested by Investor, at a price of $1,000 per share. The Company and Investor agree that the proceeds of the Preferred Offering will be deployed to exclusively as UAE related working capital to fund and support, directly or indirectly, the establishment and operation of the Company’s business in the United Arab Emirates.
In addition, for a period of up to 3 years from the date of the Purchase Agreement (or such later date as mutually agreed to by the Company and Investor), by written notice from the Company to Investor and subject to other terms and conditions set forth in the Purchase Agreement, the Company may require the Investor to participate in one or more additional milestone closings and issue additional shares of Series D Preferred Stock to Investor up to an aggregate maximum purchase price of $47,000,000 in one or more tranches, and additional Warrants exercisable for an amount of shares of
Common Stock with an aggregate initial value equal to 30% of the value of the Series D Preferred Stock to be issued at each such additional closings, subject to mutually agreed milestones, assignments, and definitive documentation, and in each case, consent of certain existing holders of securities of the Company.
The Purchase Agreement further provides for a two-year lock-up period, during which Investor shall not, without the prior written consent of the Company and certain existing holders of securities of the Company, sell, transfer, pledge or otherwise dispose of any shares of Common Stock upon conversion of the Series D Preferred Stock, nor enter into any swap or other arrangement that transfers the economic consequence of ownership of such shares.
Pursuant to the Registration Rights Agreement, the Company agreed that in the event that the Company files a registration statement with the Securities and Exchange Commission, registering the offer and sale of any shares of its Common Shares under the Securities Act, the Investor shall have the option to require the Company to include registration under the Securities Act of 1933, as amended (the “Securities Act”), of the resale by Investor of shares of Common Stock issuable upon conversion of the Series D Preferred Stock and upon the exercise of the Warrants.
The Purchase Agreement and the Registration Rights Agreement contain customary representations, warranties, conditions and indemnification obligations of the parties.
On or prior to the first milestone closing, the Company will designate 50,000 shares of the Company’s authorized and unissued preferred stock as Series D Preferred Stock and establish the rights, preferences and privileges of the Series D Preferred Stock pursuant to the Certificate of Designations of Series D Preferred Stock (the “Certificate of Designations”), to be filed with the Secretary of State of the State of Delaware.
As of March 31, 2026 no Series D Preferred Shares have been issued as no services have been provided or exchanges made under the agreement as of the date of the issuance of these financial statements.
Warrants
The Warrants, when issued pursuant to the Purchase Agreement, are immediately exercisable upon issuance and will expire on the fifth anniversary of the original issuance date. The Warrants have an initial exercise price equal to $8.90, subject to certain adjustments as described in the Warrant.
A Warrant holder will not have the right to exercise any portion of the Warrants to the extent that, after giving effect to such conversion, the holder would beneficially own in excess of 4.99% (the “Maximum Percentage”) of the number of shares of the Common Stock outstanding immediately after giving effect to such conversion.
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