Note 12 – Stockholders’ Equity

Preferred Stock

As of June 30, 2023 and December 31, 2022, there were 50,000,000 authorized shares of the Company’s preferred stock, par value $0.0001.

Series A Preferred Sock

As of June 30, 2023 and December 31, 2022, 251 shares of Series A preferred stock are issued and outstanding.

Series B Preferred Stock

As of June 30, 2023 and December 31, 2022, 1,443 shares of Series B preferred stock are issued and outstanding.

Series C Preferred Stock

As of June 30, 2023 and December 31, 2022, 500,756 shares of Series C preferred stock are issued and outstanding.

Series D Preferred Stock

On July 8, 2022, the Company’s Board of Directors authorized 7,000 shares of Series D preferred stock with a par value of $0.0001 per share. Each preferred share of Series D preferred stock has a stated valued of $16.67 per share, is convertible into shares of the Company’s common stock at an initial conversion price of $78.00 per share, and is entitled to a dividend of 12% per annum. The cumulative dividends shall be paid in common stock based on the conversion price in effect on the applicable conversion date. All accrued but unpaid dividends on shares of Series D preferred stock shall increase the stated value of such shares. The Company may redeem all, but not less than all, of the Series D preferred stock for cash, at a price per share of Series D preferred stock equal to 125% of the stated value. The Series D preferred stock has no voting rights.

In July 2022, the Company issued 1,058 shares of Series D preferred stock for approximately $1.1 million. As of June 30, 2023 and December 31, 2022, zero and 1,058 shares of Series D preferred stock are issued and outstanding. 1,058 shares of Series D preferred stock were exchanged for Series F Preferred Stock and Exchange Warrants as part of the Exchange Agreements during June 2023.

In connection with the issuance of the 1,058 shares of Series D preferred stock, the Company issued 13,568 equity-classified warrants to purchase shares of the Company’s common stock with an exercise price of $78.00 per share. The proceeds from the Series D preferred stock were allocated between the warrants and the Series D preferred stock based on their relative fair values.

The Company entered into a Registration Rights Agreement (“RRA”) with the holders of the Series D preferred stock, whereby the Company was to use its best efforts to file a registration statement registering the resale of the shares of common stock issuable upon conversion of the Series D preferred stock and upon exercise of the warrants within thirty (30) calendar days following the closing of the Series D preferred stock offering. The Company was to use its best efforts to have the registration statement declared “effective” within ninety (90) calendar days from closing, or one hundred and twenty (120) from closing in the event the registration statement is reviewed by the SEC. If the Company fails to meet these requirements, the RRA states that the Company shall pay to each holder an amount in cash, as partial liquidated damages and not as a penalty, equal to the product of 1.0% multiplied by the aggregate subscription amount paid by such holder pursuant to the purchase agreement, up to an aggregate of 10% of the aggregate subscription amount paid by such holder pursuant to the purchase agreement for all such liquidated damages.

Using the guidance provided by ASC 825-20 Financial Instruments, the Company determined that the RRA should be accounted for as a separate unit of account from the Series D preferred stock. Accordingly, under ASC 825-20, a financial instrument that is both within the scope of ASC 825-20 and subject to a registration payment arrangement shall be recognized and measured in accordance with ASC 825-20 without regard to the contingent obligation to transfer consideration pursuant to the registration payment arrangement.

The RRA called for the Company to file a registration statement by August 25, 2022 and declare it effective within 90 days of July 26, 2022. The Company filed its registration statement on November 17, 2022, and the holders of the Series D preferred stock waived the related registration rights penalty of approximately $2,400.

The Series D preferred stock and warrants sold were not registered under the Securities Act of 1933, as amended (the “Securities Act”) or the securities laws of any state and were offered and sold in reliance on the exemption from registration afforded by Section 4(a)(2) under the Securities Act and Regulation D promulgated thereunder and corresponding provisions of state securities laws, which exempt transactions by an issuer not involving any public offering. The holders of Series D preferred stock are “accredited investors” as such term is defined in Regulation D promulgated under the Securities Act.

During the six months ended June 30, 2023, the Company filed the first amendment to its Series D preferred stock, which modifies the conversion price of the Series D preferred stock from $78.00 to $30.00 per share. The modification increased the fair value of the Series D preferred stock by approximately $6,000, which the Company recorded as a deemed dividend.

Series E Preferred Stock

On February 1, 2023, the Company’s Board of Directors authorized 77,000 shares of Series E preferred stock with a par value of $0.0001 per share, in connection with its 2023 Line of Credit. Each share of Series E Preferred Stock is convertible into 1,000 shares of the Company’s common stock at the option of the holders. The holders of the Series E preferred stock shall receive dividends on an as converted basis together with the holders of the Company’ common stock. The Series E preferred stock has no voting rights and does not have a preference upon any liquidation, dissolution or winding-up of the Company.

Holders of Series E preferred stock are prohibited from converting shares of Series E preferred stock into shares of common stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than a specified percentage (to be initially set at 4.99% and thereafter adjusted by the holder to a number between 4.99% and 9.99%) of the total number of shares of common stock issued and outstanding immediately after giving effect to such conversion. In addition, in the event a conversion of Series E preferred stock would result in the holder owning more than 19.99% of the Company’s outstanding shares of common stock, the number of shares of common stock that may be issued upon such conversion of Series E preferred stock, shall be limited to 19.99% of the Company’s outstanding shares of common stock on that date, unless stockholder approval is obtained by the Company to issue a number of shares of common stock exceeding the limit.

On February 2, 2023, in connection with its Line of Credit, the Company issued 5,000 shares of Series E Preferred Stock as a commitment fee with a fair value of $1.45 million. In addition, the Company agreed to issue an additional 5,000 shares of Series E preferred stock on both the first and second anniversary date of the Line of Credit, or 10,000 shares on the first anniversary, if the Company does not elect to extend the maturity date of the Line of Credit. The fair value of the additional 10,000 shares of Series E preferred stock on the issuance date totaled $2.9 million. The Company recorded the total fair value of $4.35 million as additional paid-in capital with the offsetting increase to deferred debt issuance costs. The deferred debt issuance costs will be amortized over the term of the Line of Credit.

As of June 30, 2023, following Series E conversions, zero shares of Series E preferred stock are issued and outstanding. There were no shares of Series E preferred stock issued and outstanding as of December 31, 2022.

Series F Preferred Stock

On June 4, 2023, the Company entered into Exchange Agreements: (i) with the October Investors for the exchange of October Notes in the aggregate principal amount of $2.6 million for 2,622 shares of the Company’s newly created Series F Convertible Preferred Stock (“Series F Preferred Stock”), in the aggregate; (ii) with the January Investors for the exchange of January Notes in the aggregate principal amount of $0.2 million for 206 shares of Series F Preferred Stock, in the aggregate; (iii) with the Demand Noteholders for the exchange of Demand Notes in the principal amount of $0.6 million for 576 shares of Series F Preferred Stock, in the aggregate; and (iv) with the purchasers of the Company’s Series D Preferred Stock for the exchange of 1,197 shares of Series D Preferred Stock for 1,847 shares of Series F Preferred Stock, in the aggregate.

In addition, in connection with the Exchange Agreements, the Company issued new five-year warrants to purchase an aggregate of 592,129 shares of Common Stock (the “Exchange Warrants”) to the October Investors, the January Investors, and the purchasers of the Company’s Series D Preferred Stock. The Exchange Warrants are exercisable at an exercise price of $8.868 per share of Common Stock, subject to certain adjustments as set forth in the Exchange Warrants. The holders may exercise the Exchange Warrants on a cashless basis if the shares of our Common Stock underlying the Exchange Warrants are not then registered pursuant to an effective registration statement. The Company concluded that the Exchange Warrants are liability classified.

For the October Investors, the total fair value of Series F Preferred Stock and Warrant Liability issued was $1.7 million ($1.1 million for Series F Preferred Stock and $0.6 million for Warrant Liability). For the January Investors, the total fair value of Series F Preferred Stock and Warrant Liability issued was $0.13 million ($0.1 million for Series F Preferred Stock and $0.03 million for the Warrant Liability). For the Demand Note holders, the total fair value of Series F Preferred Stock and Warrant Liability issued was $0.4 million ($0.2 million for Series F Preferred Stock and $0.2 million for the Warrant Liability). For the purchasers of the Company’s Series D Preferred Stock, the Company accounted for the exchange as an extinguishment of the Series D Preferred Stock. The Company recorded the total fair value of Series F Preferred Stock and Warrant Liability of $1.2 million ($0.7 million for Series F Preferred Stock and $0.5 million for the Warrant Liability) and the difference of $0.5 million with the $0.7 million carrying value of the Series D Preferred Stock as a deemed dividend and reduction to additional-paid-in-capital.

Series F-1 Preferred Stock

On June 13, 2023, the Company entered into the Purchase Agreement with the “Purchasers, pursuant to which, at the closing of the transactions contemplated by the Closing, the Purchasers agreed to purchase an aggregate of 3,583 shares of the Company’s newly created Series F-1 Convertible Preferred Stock (“Series F-1 Preferred Stock”) for an aggregate purchase price of approximately $2.3 million. In addition, in connection with the issuance of the Series F-1 Preferred Stock, the Purchasers will receive five-year warrants to purchase an aggregate of 398,377 shares of Common Stock (defined below) (the “Series F-1 Warrants”). The Series F-1 Warrants will be exercisable at an exercise price of $8.994 per share of the Company’s Common Stock, subject to certain adjustments as set forth in the Series F-1 Warrants. The holders may exercise the Series F-1 Warrants on a cashless basis if the shares of our Common Stock underlying the Series F-1 Warrants are not then registered pursuant to an effective registration statement. The obligations of the Company and the Purchasers to consummate the transactions contemplated by the Purchase Agreement are subject to the satisfaction on or prior to the Closing of customary closing conditions.

The Company allocated the proceeds of $2.3 million to the liability classified Warrants with a fair value of $0.9 million and the remaining proceeds of $1.4 million to the Series F-1 Preferred Stock.

Series F-2 Preferred Stock Offering

On June 14, 2023, the Company entered into a F-2 Purchase Agreement with the F-2 Purchasers pursuant to which, at the closing of the transactions contemplated by the F-2 Closing, the F-2 Purchasers agreed to purchase an aggregate of 1,153 shares of the Company’s newly created the Series F-2 Preferred Stock for an aggregate purchase price of approximately $0.7 million. In addition, in connection with the issuance of the Series F-2 Preferred Stock, the F-2 Purchasers will receive five-year warrants to purchase an aggregate of 124,946 shares of Common Stock (defined below) (the “F-2 Warrants”). The F-2 Warrants will be exercisable at an exercise price of $9.228 per share of Common Stock, subject to certain adjustments as set forth in the F-2 Warrants. The holders may exercise the F-2 Warrants on a cashless basis if the shares of our Common Stock underlying the F-2 Warrants are not then registered pursuant to an effective registration statement. The obligations of the Company and the F-2 Purchasers to consummate the transactions contemplated by the F-2 Purchase Agreement are subject to the satisfaction on or prior to the F-2 Closing of customary closing conditions.

The Company allocated the proceeds of $0.7 million to the liability classified the F-2 Warrants with a fair value of $0.3 million and the remaining proceeds of $0.4 million to the Series F-2 Preferred Stock.

Common Stock

Change in Authorized Shares

On December 22, 2022, the Company’s Board of Directors approved increasing the Company’s authorized shares of common stock from 200,000,000 to 800,000,000 shares.

Reverse Stock Split

On August 11, 2023, the Company’s Board of Directors authorized a reverse stock split (‘Reverse Stock Split”) at an exchange ratio of one (1) share of common stock for every sixty (60) shares of common stock. The Reverse Stock Split was effective on August 15, 2023, such that every sixty (60) shares of common stock have been automatically converted into one (1) share of common stock. The Company did not issue fractional certificates for post-reverse split shares in connection with the Reverse Stock Split. Rather, all shares of common stock that were held by a stockholder were aggregated and each stockholder was entitled to receive the number of whole shares resulting from the combination of the shares so aggregated. Any fractions resulting from the Reverse Stock Split computation were rounded up to the next whole share.

Warrant Exercises

During the six months ended June 30, 2023, the Company issued 106,764 shares of its common stock in connection with the exercise of 106,764 warrants, receiving net proceeds of approximately $2.06 million at a weighted average price of $19.30 per share.

During the six months ended June 30, 2023, the Company issued 2,493 shares of its common stock in connection with the exercise of 2,778 penny warrants.

ATM Offering

As of June 30, 2023, the Company has received net proceeds on sales of 211,667 shares of common stock under its ATM Offering (See Note 2) of approximately $2.1 million (after deducting $0.1 million in commissions and expenses) at a weighted average price of $10.38 per share.

Restricted Stock

During the six months ended June 30, 2023, the Company issued 500,000 shares of its common stock in connection with vested restricted stock units.