What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-26 compared with 2025-03-20 · 107 added, 143 removed, 131 unchanged (66% of the section changed)

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and its direct and indirect subsidiaries for the periods described herein.

On December 17, 2024, we implemented a 1-for-135 reverse stock split, on March 28, 2024, we implemented a 1-for-16 reverse stock split, and on July 5, 2023, we implemented a 1-for-15 reverse stock split of our common stock.

All historical share and per-share amounts reflected throughout this section have been adjusted to reflect the reverse stock splits.

All historical share and per-share amounts reflected throughout this section have been adjusted to reflect prior reverse stock splits.

The par value per share of our common stock was not affected.

($ in thousands, except per share data or unless otherwise specified)

Executive Overview

● On December 23, 2021, the FDA issued modified risk orders for our reduced nicotine cigarettes, VLN ® King and VLN ® Menthol King, authorizing the Company to market VLN ® cigarettes with the claim, “95% less nicotine”, to clarify the purpose of the brand, the FDA also required the use of the claim, “Helps You Smoke Less.”

● Subsequently commenced pilot market sales of VLN® King and VLN® Menthol King 95% reduced nicotine content cigarettes in Chicago during the first quarter of 2022, then expanded sales and distribution channels from 2022 - 2024 to more than 5,100 stores across 26 states.

● Executed on restructuring plans that commenced in the fourth quarter of 2023 for a turnaround in the business, including cost reductions and efforts to reposition the company’s business to focus on its VLN assets and CMO business, inclusive of:

o In December 2023, the Company completed the sale of substantially all of the GVB hemp/cannabis business (referred to as the “GVB Divestiture”) to Specialty Acquisition Corporation, exiting the hemp/cannabis market and focusing fully on the Company’s tobacco operations.

o Decreased consolidated liabilities from December 31, 2023 to December 31,2024 by $18,251 through payment, equity exchange and other means, including $8,124 reduction in long-term debt.

Tobacco Business Highlights

All figures reported below reflect continuing operations, excluding discontinued operations related to the sale and exit of the Company’s hemp/cannabis business in late 2023, except as noted.

Dollars are in thousands, except per share data or unless otherwise specified.

The Company remains dedicated to being the leader of the tobacco harm reduction movement through science-based innovation, regulatory alignment, and responsible commercialization of reduced nicotine content combustibles.

Our mission is to provide adult smokers with alternatives in the form factor that they are comfortable with, cigarettes, that significantly reduce nicotine exposure, supporting the potential for reduced dependence while preserving consumer choice.

Tobacco Operations Highlights

● Poised to benefit from the January 2025 proposed FDA rule mandating reduced nicotine content in all combustible cigarette products, if advanced.

The Company has the only FDA-authorized combustible cigarette able to meet the proposed stringent reduced nicotine content product standard.

● Continued agreements with national-scale C-store distribution partners to support state-wide or multi-state availability of VLN ® at hundreds of stores within our target markets.

● Announced plans for new VLN product branding and marketing initiatives designed to drive greater customer engagement, as well as the development of partner VLN brands to be sold alongside proprietary VLN products.

● Announced the first VLN partner brand with Smoker Friendly, to begin shipments in the second quarter 2025.

● The Company filed its submission of public comment in support of the FDA proposed “Tobacco Product Standard for Nicotine Yield of Cigarettes and Certain Other Combusted Tobacco Products,” in September 2025.

● Continued agreements with national-scale C-store distribution partners to support state-wide or multi-state availability of VLN ® and partner VLN ® at hundreds of stores within our target markets.

● Began shipments of its new VLN ® product branding and launched marketing initiatives designed to drive greater customer engagement, as well as the development of partner VLN ® brands to be sold alongside proprietary VLN ® products.

● Restructured contract manufacturing business operations to deliver improved efficiency and exited or renegotiated underpriced contracts in favor of improved customer agreements.

● Signed a new license and manufacturing agreement with Smoker Friendly, one of the largest independent cigarette retailers in the United States, covering 11 brands currently sold in the Smoker Friendly network of retail stores and dealers in the U.S., plus another eight new premium brands to be launched and establishing a framework for other planned future products to be added.

● Expanded the Pinnacle private label brand to add distribution of cigarillo products to its existing Pinnacle cigarette products currently sold as a private label brand in a top-5 U.S.

● Expanded the Pinnacle private label brand to add distribution of moist snuff other tobacco products to its existing Pinnacle cigarette products currently sold as a private label brand in a top-5 U.S.

gas station convenience store chain.

● Executed two significant new export customer contracts to drive additional revenue and improve our margin profile, including an expected substantial increase in our overall CMO production unit volumes.

Those contracts and production setup commenced in April 2024, with initial shipments during the fourth quarter.

● Exited 2025 with a significantly strengthened balance sheet, including the elimination of debt and improved liquidity, providing flexibility to execute our strategy.

Financial Overview – Fourth Quarter and Full Year 2025 Results

● Net revenues for the fourth quarter of 2024 were $4,020, a decrease of 45.4% from $7,357 in 2023, primarily driven by a decrease in volumes of filtered cigars.

o Fourth quarter 2024 cartons sold of 338 compared to 823 in the comparable prior year period.

● Net revenues for the fourth quarter of 2025 were $3,537, a decrease of 12.0% from $4,020 in 2024, primarily driven by a decrease in cigarettes and filtered cigars sales offset by an increase other tobacco products.

o Fourth quarter 2025 total cartons sold of 248 compared to 338 in the comparable prior year period.

● Net revenues for the full year 2025 were $17,587, a decrease of 27.9% from $24,382 in 2024.

● Gross profit (loss) for the fourth quarter of 2024 was a loss of $1,254 compared to loss of $7,829 in the prior year period.

● Gross profit (loss) for the full year 2024 was a loss of $2,400, compared to a loss of $8,696 in 2023.

● Gross loss for the fourth quarter of 2025 improved to a loss of $834 compared to loss of $1,254 in the prior year period.

● Gross loss for the full year 2025 was a loss of $3,137, compared to a loss of $2,400 in 2024.

● Total operating expenses for the fourth quarter 2025 decreased 30.6% to $1,969 compared to $2,837 in the prior year quarter driven by:

o Sales, general and administrative expenses decreased to $2,471, driven primarily by a decrease in strategic consulting, insurance expenses, and other public company expenses due to our cost savings initiatives.

o Sales, general and administrative expenses decreased to $1,825, driven primarily by decreases in strategic consulting, legal, and other public company expenses.

o Research and development expenses decreased to $105, driven by a decrease in contract and IP related costs.

o Other operating expense, net was $147 compared to $1,905 in the prior year period, primarily reflecting restructuring costs of $1,871, including impairment and legal charges that occurred in 2023.

o Other operating expense, net was $39 compared to $147 in the prior year period, driven by an increase in non-recurring charges in 2024.

● Operating loss for the fourth quarter 2025 was $2,803, compared to a loss of $4,091 in the prior year period.

Operating loss for the full year 2024 was $13,950, compared to a loss of $44,931 in the prior year.

Operating loss for the full year 2025 was $11,566, compared to a loss of $13,950 in 2024.

● Net loss in the fourth quarter of 2025 was $2,783 representing a net loss per share of $5.89 compared with net loss in the fourth quarter of 2024 of $4,246, representing a net loss per share of $3,257.47.

Net loss for the full

year 2024 was $15,495, representing a net loss per share of $105.85 compared with net loss for the full year 2023 of $54,686, representing a net loss per share of $5,776.63.

Net loss for the full year 2025 was $13,117, representing a net loss per share of $71.26 compared with net loss for the full year 2024 of $15,495, representing a net loss per share of $27,812.56.

● As of December 31, 2025, we had $7,149 in cash and cash equivalents.

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Excise taxes and fees on products

Gross (loss) profit

Gross (loss) profit as a % of revenues, net

Gross loss as a % of revenues, net

Operating expenses:

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Other income (expense):

Loss on transfer of promissory note

Other income (expense), net

Interest income, net

Interest income

Interest expense

Total other income (expense), net

Loss before income taxes

Provision for income taxes

Loss from continuing operations before income taxes

(Benefit) provision for income taxes

Net loss from continuing operations

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2025 Compared with 2024

Revenue - Sale of products, net

Revenues, net

Tobacco revenue was $24,382, a decrease of 24.3% from $32,204 in the prior year, primarily driven by a decrease in volumes of filtered cigars and export cigarettes, offset by increases in cigarettes and new sales in 2024 for cigarillos.

Gross (loss) profit

Product line revenue, net

Contract manufacturing

Filtered cigars

Other tobacco products

Total contract manufacturing

Total product line revenues

For the year ended December 31, 2025, total product line revenue was $17,587, a decrease of 27.9% from $24,382 in the prior year.

● Cigarette volume increased to 1,525 cartons in 2025, including products sold for export, as compared to the prior year.

Cigarette sales net revenues decreased from 2024 due to pricing arrangements recorded as consideration payable to the customer recognized within revenue, which in 2024 was recorded within cost of goods sold.

During April 2024, the Company also benefitted from a one-time Spectrum ® research cigarette order which provided a $889 benefit in 2024.

● Filtered cigars net revenues decreased $5,317 reflecting lower volumes as the Company implemented repricing of customer contracts and shifts in its product mix into higher margin branded cigarettes, including natural styles, and VLN ® cigarettes.

● Other tobacco products include new moist snuff sales of $387 in 2025 compared to none in the prior year.

A decrease in cigarillo sales of $661 occurred in 2025 due to initial stocking orders in 2024.

● VLN ® cigarette net revenues reflect VLN ® and partner VLN ® shipments for initial stocking orders offset by return accruals for product previously sold that will be returned or exchanged.

Percent of Revenues, net

The decrease in gross loss and gross loss as a percent of revenues, net for the year ended December 31, 2024, compared to the year ended December 31, 2023, was primarily driven by implementation of cost cut initiatives, efficiency, and the shift in product mix offset by lower sales volume.

Additionally, the improvement in gross loss and gross loss as a percent of revenues, net is due to the prior year period reserve for excess, obsolete or expired leaf inventory of $7,720 recorded during the fourth quarter of 2023.

The increase in gross loss and gross loss as a percent of revenues, net for the year ended December 31, 2025, compared to the year ended December 31, 2024, was primarily driven by the shift in product mix during 2025, with cigarettes inclusive of products sold for export representing higher volume as compared to filtered cigars in the prior year comparable period.

Domestic cigarette excise taxes included amounts payable under the Master Settlement Agreement (“MSA), whereas filtered cigar volume has no comparable excise tax.

Gross margin improvements in cigarettes began in the fourth quarter 2025, which demonstrates the steady shift in product mix to higher margin cigarette products.

Sales, general and administrative expense

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Compensation and benefits (a)

Sales and marketing (b)

Strategic consulting (b)

Other expenses (c)

Insurance (d)

Other expenses (e)

Net decrease in SG&A expenses

(a) Compensation and benefits and equity compensation expense decreased for the year ended December 31, 2024 compared to the prior year due to a reduction of headcount as part of our cost cut initiatives.

(b) Decreases of strategic consulting, sales and marketing and travel and entertainment for the year ended December 31, 2024 compared to the prior year were due to reduced spending as part of our cost cut initiatives.

(c) Other expenses decreased for the year ended December 31, 2024 compared to the prior year ended December 31, 2023 mainly due to decreases in insurance of $1,483, public company expenses of $1,407, legal expenses of $617, travel and entertainment of $615, technology expenses $329 and depreciation expense of $78 which were partially offset by an allocation to our hemp cannabis business that occurred in the prior year.

(a) Compensation and benefits decreased for the year ended December 31, 2025 compared to the prior year due to a reduction of headcount as part of our cost cutting initiatives.

(b) Decreases of strategic consulting for the year ended December 31, 2025 compared to the prior year were due to reduced spending of $482 for investor and public relations and $391 in other consulting related to MRTP post-market studies.

(c) Legal expenses decreased for the year ended December 31, 2025 compared to the prior year period due to decreased regulatory and corporate legal expense.

(d) Insurance expense decreased for the year ended December 31, 2025 compared to the prior year period due to lower insurance premiums.

(e) Other expenses decreased for the year ended December 31, 2025 compared to the prior year ended December 31, 2024 mainly due to decreases in public company expenses of $149, sales and marketing expenses of $134, supplies, repairs and maintenance expenses of $121, technology expenses of $55, depreciation expense of $75, offset by increased travel and entertainment of $60, facilities expense of $25 and other expenses mainly related to state registration fees of $100.

Research and development expense

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(a) Decreased compensation and benefits primarily relate to the decrease in headcount in 2025 compared to the prior year.

(b) Contract, IP and other expenses decreased for the year ended December 31, 2024 compared to the prior year primarily due to a decrease in contract costs of $500 and IP related consulting and expenses of $503 due to our cost cutting initiatives.

Other operating expenses (income), net

Restructuring costs:

Impairment of intangible assets

Impairment of fixed assets

Professional services

Total Restructuring costs (a)

Acquisition and transaction costs (b)

(b) Contract, IP and other expenses decreased for the year ended December 31, 2025 compared to the prior year primarily due to a decrease in contract and royalty costs of $276 and IP related consulting and expenses of $84 due to our cost cutting initiatives.

Other operating expenses, net

Impairment of intangible assets

Loss (gain) on sale or disposal of property, plant and equipment

Loss on sale or disposal of property, plant and equipment

Total other operating expense, net

(a) During the second half of 2023, the Company undertook various restructuring activities in an effort to better align its internal organizational structure and costs with its strategy, as well as preserve liquidity.

As a result, the Company incurred $2,415 in restructuring costs for the year ended December 31, 2023, which included costs related to employee termination, professional services and consulting, and long-lived asset impairment.

(b) Acquisition and transaction costs primarily relate to professional fees incurred in connection with potential capital markets transactions in the prior year.

Refer to Note 18, “Other operating expenses (income), net,” of the Notes to Consolidated Financial Statements contained in Item 15 of this report for additional information regarding these charges.

Other operating expenses, net increased $20 due to increased impairment charges of $82 for patents and disposal of trademarks that we are no longer pursuing for the year ended December 31, 2025 compared to the prior year period, offset by a loss of $62 in 2024 for the sale of property, plant and equipment.

Other income (expense), net

Loss on transfer of promissory note (a)

Other income (expense), net (b)

Interest income, net

Interest expense (c)

Net decrease in other expense

(a) During 2023 and in connection with the Senior Secured Credit Facility October 2023 Amendment, the Company assigned $3,800 PLSH promissory note less unamortized discount of $305, and corresponding pay down of indebtedness on outstanding principal of $600 and redemption of the related warrant liability of $2,000 resulting in loss on sale of financial asset of $895.

(b) Other income (expense), net primarily reflects the change in fair value of warrant liability.

(c) Interest expense decreased for 2024, as compared to the prior year 2023 as a result of ongoing repayment and elimination of debt obligations on our balance sheet.

Cash interest decreased $454 and non-cash interest amortization decreased $723 recognized from the Senior Secured Credit Facility (of these totals, interest that was allocated to discontinued operations decreased by $82), and additional decreases of $1,113 as a result of change in fair value of conversion option derivative liability and other interest charges of $28.

Additionally, these amounts are offset by $5,158 for extinguishment of debt in the prior year period.

Additionally, interest expense decreased $278 from the Subordinated Note, which was extinguished prior to maturity in April 2024 and resulted in a loss on extinguishment of $400.

Changes From Prior Year

Other income (expense), net (a)

Interest income

Interest expense (b)

Net (decrease) increase in other expense

(a) Other income (expense), net decreased for the year ended December 31, 2025, compared to the prior year, due to a loss resulting from change in fair value of the Omnia warrant liabilities that did not occur in 2024.

(b) For the year ended December 31, 2025 compared to the prior year period, cash interest decreased $443, non-cash interest amortization increased $842 due to $1,091 of extinguishment charges recognized from the Senior Secured Credit Facility (of these totals, interest that was allocated to discontinued operations increased by $88), and other interest charges decreased by $76, offset by a gain that occurred in the prior year period of $556 as a result of change in fair value of conversion option derivative liability.

Additionally, interest expense decreased $1,430 from the Subordinated Note, which was due to a $400 loss on extinguishment prior to maturity in April 2024.

Liquidity and Capital Resources

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We had negative cash flow from operations of $7,723 for the year ended December 31, 2025 and an accumulated deficit of $398,925 as of December 31, 2025.

As of December 31, 2024, we had cash and cash equivalents of $4,422, indebtedness under the Convertible Senior Secured Credit Facility of $7,690 and working capital from continuing operations of $1,790 (compared to working capital deficit from continuing operations of ($6,826) at December 31, 2023).

Given our projected operating requirements and existing cash and cash equivalents, there is substantial doubt about our ability to continue as a going concern through one year following the date that the Consolidated Financial Statements herein are issued.

As of December 31, 2025, we had cash and cash equivalents of $7,149 and working capital from continuing operations of $10,359 (compared to working capital from continuing operations of $1,790 at December 31, 2024).

In response to these conditions, management is currently evaluating different strategies for reducing expenses, as well as pursuing financing strategies which include raising additional funds through the issuance of securities, asset sales, and through arrangements with strategic partners.

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Working Capital

As of December 31, 2024, we had working capital, excluding assets and liabilities held for sale, of approximately $1,790 compared to working capital deficit of approximately ($6,826) as of December 31, 2023, an improvement of $8,616.

This increase in working capital was primarily due to a decrease in current liabilities of $13,168 offset by a decrease of $4,552 in current assets.

Cash and cash equivalents increased by $2,364 and the remaining net current assets decreased by $6,916.

As a result of the working capital balance, management has taken a number of steps to improve liquidity.

Refer below to “Cash demands on operations.”

As of December 31, 2025, we had working capital from continuing operations, excluding assets and liabilities held for sale, of approximately $10,359 compared to working capital of approximately $1,790 as of December 31, 2024, an improvement of $8,569.

This increase in working capital was primarily due to an increase in net current assets of $7,160 and a decrease in current liabilities of $1,409.

Cash and cash equivalents increased by $2,727 and the remaining net current assets increased by $4,381.

Summary of Cash Flow

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Cash used in operations decreased $6,622 from $14,345 in 2024 to $7,723 in 2025.

The primary driver for this decrease was lower consolidated net loss of $125,611 due to our cost savings initiatives implemented in 2024, a decrease of $89,876 related to net adjustments to reconcile net loss to cash primarily due to a loss on disposal of the hemp cannabis business that occurred in the prior year of $58,521, and a decrease in cash used for working capital components related to operations in the amount of $4,907 for the year ended December 31, 2024, as compared to the year ended December 31, 2023.

Net cash (used in) provided by investing activities

Cash used in investing activities amounted to $139 in 2024 as compared to cash provided by investing activities of $16,816 in 2023.

The decrease in cash provided by investing activities of $16,955 was primarily the result of (i) a decrease in net proceeds from short-term investments of $18,239;

(ii) $3,500 of property, plant, and equipment casualty loss insurance proceeds collected in the prior year;

(iii) $665 from proceeds from the sale of discontinued operations in the prior year and (iv) a decrease in the proceeds from the sale of property, plant and equipment of $261.

These decreased cash inflows were partially offset by a decrease in cash outflows of $5,456 related to the acquisitions of patents, trademarks and property, plant and equipment and (ii) $254 from the acquisition of RXP in the prior year.

The primary driver for this decrease was lower consolidated net loss of $10,110, an increase of $6,257 related to net adjustments to reconcile net loss to cash, and an increase in cash used for working capital components related to operations in the amount of $9,745 for the year ended December 31, 2025, as compared to the year ended December 31, 2024.

Net cash used in investing activities

Cash used in investing activities amounted to $505 in 2025 as compared to $139 in 2024.

The increase in cash used in investing activities of $366 was primarily the result decreases of cash outflows of $714 related to the acquisitions of patents, trademarks and property, plant and equipment and $500 from the issuance of the 2025 GVB promissory note.

These cash outflows were offset by cash inflows of $748 of proceeds from the sale of property, plant and equipment primarily from the sale of Needlerock farms in 2025 and $100 payments received from the 2025 GVB promissory note.

Net cash provided by financing activities

During the year ended December 31, 2024, cash provided by financing activities decreased by $20,361, from $37,209 in the prior year, to $16,848, resulting from decreases in (i) net proceeds of $16,048 from issuance of long-term debt, (ii) proceeds of $6,016 from issuance of detachable warrants, (iii) net proceeds of $10,335 from the issuance of common stock (iv) proceeds from issuance of notes payable of $1,104 offset by an increase in net proceeds from warrant exercise of $309.

These cash inflows were offset by decreases in cash outflows of note payable payments of $4,035, payments of long-term debt of $8,398, and taxes paid related to net share settlement of RSUs of $419.

During the year ended December 31, 2025, cash provided by financing activities decreased by $5,893, from $16,848 in 2024, to $10,955 in 2025, resulting from decreases in net proceeds from common stock issuances of $15,087, increases in payments of long-term debt of $3,034 and payments of deferred offering costs of $130 offset by increases in cash inflows from net proceeds from Series A convertible preferred stock of $9,893, warrant exercises of $1,721, issuance of notes payable of $399 and decreases of cash outflows from taxes paid related to net share settlement of RSUs of $1 and in payments on notes payable of $344.

Cash demands on operations

We have financed our operations to date primarily through the issuance of equity securities, proceeds from the exercise of warrants to purchase common stock and sale of debt instruments with various institutions, accredited investors, high net worth individuals and creditors.

In January and February 2024, we received net proceeds of $2,245 from the inducement and exercise of 6,081 warrants for shares of common stock and issuance of 12,160 warrants to purchase common stock.

In April 2024, we received net proceeds of $3,913 from the issuance of 13,741 shares of common stock, 926 pre-funded warrants and 14,667 warrants to purchase common stock in a registered direct offering.

In August and September 2024, we received net proceeds of $5,208 from the issuance of 72,000 shares of common stock pursuant to a Regulation A offering, and in separate private placements, issued 109,600 warrant to purchase common stock.

In September 2024 we received net proceeds of $1,054 from the issuance of 38,041 shares of common stock and 76,348 warrants to purchase common stock in a registered direct offering.

Also, in September 2024 we received net proceeds of $1,073 from the inducement and exercise of 37,624 warrants for shares of common stock and issuance of 75,248 warrants to purchase common stock.

In October 2024 we received net proceeds of $2,002 from the issuance of 105,679 shares of common stock and 211,358 warrants to purchase common stock in a registered direct offering.

Also, in October 2024 we received net proceeds of $2,909 from the issuance of 210,036 prefunded warrants to purchase shares of common stock and 315,055 warrants to purchase common stock in a private placement offering.

Convertible Senior Secured Credit Facility

As of December 31, 2024, the remaining principal balance under our Senior Secured Credit Facility is $7,690 of which $1,500 remains current with corresponding non-operating pledged assets.

The Debentures under the Senior Secured Credit Facility allow the Holders to voluntarily convert the Debentures, in whole or in part, into shares of the Company’s common stock and the conversion option price in effect as of January 13, 2025 is $6.04.

The Holders exercised conversion notices in the amount of $3,132 in January 2025 and the Company issued 518,600 shares of common stock.

The remaining principal balance of the Debentures is $4,558, as of March 17, 2025 following the conversion of which the Company and Holders have $1,500 of non-operating assets pledged for repayment.

We have financed our operations to date primarily through the issuance of equity securities, proceeds from the exercise of warrants to purchase common stock and sale of debt instruments.

In April 2025, we received net proceeds of $5,075 from the inducement and exercise of 5,074 existing warrants for shares of common stock and issuance of an additional 5,074 warrants to purchase common stock.

In August 2025, we received net proceeds of $9,893 from the issuance of new shares of Series A convertible preferred stock and issuance of 668,554 warrants to purchase common stock.

The proceeds were used to fully repay the remaining principal balance of the Senior Secured Credit Facility.

Additionally, in September 2025, the Company settled its outstanding litigation with its insurer related to the November 2022 fire at the Company’s Grass Valley manufacturing facility in Oregon.

Under the terms of the settlement, the insurer paid the Company an aggregate amount of $9,500 in cash.

We entered into a sales agreement (the “Sales Agreement”) with Needham & Company, LLC (the “Sales Agent”) which permits us to sell up to $25,000 of our common stock from time to time at prevailing market prices.

During the three months ended December 31, 2025, we sold no shares under the Sales Agreement.

Subsequent to December 31, 2025, the Company sold 44,381 shares of common stock under the ATM Program for gross proceeds of $200 at a weighted average price of $4.51.

March 2026 Series B Convertible Preferred Stock Offering

On March 20, 2026, we and certain investors entered into a securities purchase agreement with respect to the offer and sale of $20,000 of shares of Series B Convertible Preferred Stock, stated value $1,000 per share (the “Series B Preferred Stock”), initially convertible into shares of common stock at an initial conversion price of $3.57 (subject to adjustment in certain circumstances with a floor price of $0.714) and, alternatively, at a 15% discount to the lowest daily volume-weighted average price (“VWAP”) during the prior 20 trading days (the “Alternative Conversion Price”) and warrants to purchase shares of Common Stock pursuant to a registered direct offering.

The Company has the ability to reset the fixed conversion price (lower), subject to board approval and the floor price.

Stockholder approval for the offering was obtained at the February 20, 2026 Special Meeting of the Stockholders.

At the initial closing, the investors purchased $16,000 of shares of Series B convertible preferred stock and warrants.

The remaining $4,000 of shares of Series B Preferred Stock and warrants are expected to be purchased at a second closing.

The investors may request the second closing at any time until the one-year anniversary of the initial closing date and we may require the second closing at any time until the one-year anniversary of the initial closing date by individual investor once less than 50% of such Investor’s Series B Preferred Stock purchased at the initial closing remains outstanding and certain equity conditions have been satisfied for at least 7 of the prior 10 trading days, including:

(1) the Common Stock closes above 2.5 times the floor price and (2) the daily dollar trading volume of the Common Stock exceeds $500.

The warrants are immediately exercisable at an exercise price of $3.57 per share of common stock and expire on the date that is five years after issuance.

In addition, the Company issued placement agent warrants to purchase an aggregate of 187,816 shares of common stock with substantially the same terms as the Warrants, except that the exercise price of the Placement Agent Warrants is $3.927.

We used the net proceeds from the offering to repurchase at par all of the shares of outstanding Series A Convertible Preferred Stock issued in August 2025 in the amount of $9.65 million.

The balance of the net proceeds from the offering was approximately $5,680, after deducting placement agent case fees but before any other offering expenses.

Following the offering, 130 shares of Series B Preferred Stock were converted into 33,929 shares of common stock, with 15,870 Series B Preferred Stock shares remaining outstanding.

Outstanding Warrants

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# of warrants outstanding

Issue date exercise price

Current exercise price (1)

Expiration date

July 2022 RDO warrants

July 25, 2027

Senior Secured Credit Facility - JGB

September 3, 2028

July 19, 2023 RDO warrants (3)

Weighted average exercise price

Weighted average expiration date

Amended October 2024 PIPE warrants (1)

July 15, 2030

October 2023 CMPO warrants (3)

October 19, 2028

2023 Inducement warrants (3)

February 15, 2029

April 2024 RDO Placement Agent warrants (3)

April 8, 2029

September 2024 Reg A+ warrants (3)

December 6, 2029

September 2024 RDO warrants (3)

December 6, 2029

September 2024 RDO Placement Agent warrants (3)

December 6, 2029

September 2024 Inducement warrants (3)

December 6, 2029

September 2024 Inducement Placement Agent warrants (3)

December 6, 2029

Omnia Pre-Funded Warrants

Not applicable

Omnia warrants

October 2024 RDO (3)

December 6, 2029

October 2024 RDO Placement Agent Warrants (3)

December 6, 2029

October 2024 PIPE Warrants (3)

October 2024 PIPE Placement Agent Warrants (3)

(1) Warrant price adjusted as a result of anti-dilution or ratchet provisions.

(2) Expiration date is 5-years following shareholder approval date.

(3) The exercise prices of the warrants are subject to appropriate adjustment as a result of anti-dilution or ratchet protection provisions relating to subsequent equity sales of shares of the Company’s common stock or common stock equivalents at an effective price per share lower than the then effective exercise price of such warrants.

Additionally, the warrant contains cashless and/or alternative cashless exercise features.

(4) Reflects the number of warrants and exercise price assuming stockholder approval is obtained.

August 2025 warrants (2)

August 27, 2030

August 2025 Placement Agent warrants (2)

August 27, 2030

March 2026 warrants (2)

March 24, 2031

March 2026 Placement Agent warrants (2)

March 24, 2031

(1) The warrants contain anti-dilution protection provisions relating to subsequent equity sales of shares of the Company’s common stock or common stock equivalents at an effective price per share lower than the then effective exercise price of such warrants.

Additionally, the warrants allow the holder of such warrants to also effect an alternative form of cashless exercise on or after the initial exercise date whereby the aggregate number of shares of common stock issuable in such alternative form of cashless exercise pursuant to any given notice of exercise shall equal the product of (x) the aggregate number of shares of common stock that would be issuable upon exercise of the warrant in accordance with the terms of the warrant if such exercise were by means of a cash exercise rather than a cashless exercise and (y) 2.0 (a “Zero Exercise Price Exercise”).

Accordingly, a Zero Exercise Price Exercise for the warrants will result in the issuance of two (2) shares for no additional consideration.

(2) The warrants contain anti-dilution protection provisions relating to subsequent equity sales of shares of the Company’s common stock or common stock equivalents at an effective price per share lower than the then effective exercise price of such warrants.

Impact of Recently Issued Accounting Standards

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The key assumptions used in the model are the expected future volatility in the price of the Company’s shares and the expected life of the warrants.

Embedded Derivatives – Conversion Option

Our December Amendment to the Senior Secured Credit Facility contained an embedded derivative conversion option.

The Company evaluates each debt agreement to determine whether any embedded features require bifurcation from the debt host in accordance with ASC 815, Derivatives and Hedging ("ASC 815").

If the embedded feature requires bifurcation from its debt host, the Company will account for it as either a derivative liability or as a derivative in equity.

The Company uses valuation models to estimate the fair value of the embedded derivatives.

For the valuation to record the debt and embedded derivative related to the conversion option at fair value, the Company uses a binomial lattice model at inception and on subsequent valuation dates.

This model incorporates inputs such as the stock price of the Company, risk-free interest rate, the effective debt yield and expected volatility.

Certain inputs involve unobservable inputs and are classified as level 3 of the fair value hierarchy (see Note 8, Fair Value Measurement to our Consolidated Financial Statements included elsewhere in Item 15 of this Annual Report).

The sensitivity of the fair value calculation to these methods, assumptions, and estimates included could create materially different results under different conditions or using different assumptions.

Off-Balance Sheet Arrangement

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis