Convertible Redeemable Preferred Stock and Stockholders' Equity |
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| Convertible Redeemable Preferred Stock and Stockholders' Equity | Convertible Redeemable Preferred Stock and Stockholders’ Equity A summary of the common stock and warrant activity and related information for the three months ended March 31, 2026 and 2025 is provided as follows.
February 2024 Warrants Black Scholes Value Payout
On December 31, 2024 on the closing of the EOS Asset Acquisition, a provision requiring a Black Scholes Value payout was triggered in the remaining outstanding February 2024 Warrants. This provision was triggered because the EOS Asset Acquisition met the criteria for a fundamental change as described in the warrant agreement. The Black Scholes Value payout was valued at $1.96 per share and there was an aggregate number of warrants outstanding of 328,483. In order to receive the payout, holders must elect within 30 days of the fundamental change otherwise the warrants convert to warrants in the Company. The warrants were equity classified prior to the close of the EOS Asset Acquisition and were reclassified to liability treatment as a result of the payout liability on December 31, 2024. In the three months ended March 31, 2025, 316,415 warrants received requests from the holders to receive the Black Scholes Value payout and thus were paid in cash $622,000 with the remaining unrequested warrants being reclassified to equity treatment as the January 30, 2025 deadline passed and they reverted to equity warrants. The Company recognized a gain of $8,000 as a result of reclassifying the warrants to equity.
February 2025 Registered Direct Transaction
On February 14, 2025, the Company closed an offering (the “February 2025 Offering”) pursuant to a securities purchase agreement (the “February 2025 Purchase Agreement”) with certain investors (the “February 2025 Investors”). In the February 2025 Offering, the Company issued and sold to the February 2025 Investors in a registered direct offering, (a) an aggregate of 4,757,126 shares (the “February 2025 Shares”) of common stock of the Company, and (b) common stock purchase warrants (the “February 2025 Warrants”, and together with the Shares, the “February 2025 Securities”) exercisable for an aggregate of up to 4,757,126 shares of common stock, at an exercise price of $1.14 per share (the “February 2025 Warrant Shares”) at a combined offering price of $1.14 per share and accompanying February 2025 Warrant, for aggregate gross proceeds of approximately $5.4 million.
The February 2025 Warrants are immediately exercisable upon issuance and will expire on the fifth anniversary of the issuance date of the February 2025 Warrants. The February 2025 Warrants may be exercised, in certain circumstances, on a cashless basis pursuant to the formula contained in the February 2025 Warrants.
The grant date fair value of the 4,757,126 warrants was approximately $5.3 million, which were treated as equity instruments. The fair value of such warrants was determined using the Black-Scholes Model based on the following weighted average assumption: common stock price on the date of grant of $1.22; expected yield of 0%; expected volatility of 143.4%; risk-free interest rate of 4.3% and expected life of 5 years.
Obligations Under the Purchase Agreement
Pursuant to the February 2025 Purchase Agreement, the Company agreed, subject to certain exceptions, (i) not to offer for sale, issue, sell, contract to sell, pledge or otherwise dispose of any of its shares of common stock or securities convertible into common stock until 30 days after the closing date of the February 2025 Offering, and (ii) not to issue certain securities if the issuance would constitute a variable rate transaction for a period of 4 months from the closing date of the February 2025 Offering, in each case unless the Company is required to complete a financing prior to the applicable date in order to satisfy Nasdaq’s continued listing requirements.
Placement Agency Agreement
In connection with the February 2025 Offering, on February 13, 2025, the Company entered into a placement agency agreement (the “February 2025 Placement Agency Agreement”) with Maxim Group LLC (the “February 2025 Placement Agent”), pursuant to which the February 2025 Placement Agent agreed to act as placement agent on a
“reasonable best efforts” basis in connection with the February 2025 Offering. Pursuant to the February 2025 Placement Agency Agreement, the Company agreed to pay the February 2025 Placement Agent an aggregate fee equal to 7.0% of the gross proceeds raised in the February 2025 Offering and reimburse the February 2025 Placement Agent an amount up to $75,000 for expenses in connection with the February 2025 Offering. The Company also issued the February 2025 Placement Agent a private warrant (the “February 2025 Placement Agent Warrant”) to purchase up to 5.0% of the aggregate number of February 2025 Securities sold in the February 2025 Offering, or warrants to purchase up to 475,713 shares of common stock (such shares, the “February 2025 Placement Agent Warrant Shares”), at an exercise price equal to 125.0% of the offering price per share of common stock and accompanying February 2025 Warrant, or $1.425 per share. The February 2025 Placement Agent Warrants will be exercisable 6 months after the commencement of sales in the February 2025 Offering and will expire on the five year anniversary of the initial exercise date.
During the three months ended March 31, 2025, three holders of warrants executed their right under the “alternative cashless exercise” provision to effect a cashless exercise of a total of 3,246,111 shares of common stock. No warrants were exercised in the three months ended March 31, 2026.
Securities Purchase Agreement
On September 25, 2025, the Company entered into a Securities Purchase Agreement (the “September Purchase Agreement”) with Scilex, to sell in a registered offering, (a) 15,000,000 shares (the “September Shares”) of common stock of the Company, and (b) a pre-funded warrant (the “Pre-Funded Warrant”) to purchase 263,914,094 shares (the “Pre-Funded Warrant Shares”) of common stock, for an aggregate purchase price of $150.0 million in the native currency of the Bitcoin blockchain (“BTC”) upon satisfaction of certain closing conditions applicable to the September Shares and Pre-Funded Warrant, respectively.
The BTC paid to the Company in both Closings (as defined below) is valued at the spot exchange rate for BTC as published by Coinbase.com at 8:00 p.m. (New York City time) on the trading day immediately prior to the September Initial Closing Date (as defined below).
The closing with respect to the September Shares (the “September Initial Closing”) took place on September 26, 2025 (the date of the Initial Closing, the “September Initial Closing Date”). The closing with respect to the Pre-Funded Warrant (the “Pre-Funded Warrant Additional Closing,” and together with the September Initial Closing, the “BTC Closings”), took place on November 25, 2025 (the date after the Company received the approval of its stockholders (i) as required by Nasdaq rules with respect to the transactions contemplated by the September Purchase Agreement including with respect to issuance of all of the Pre-Funded Warrant Shares and (ii) with respect to an amendment to the Company’s certificate of incorporation to increase the number of shares of common stock authorized for issuance to up to 2,000,000,000.
On the September Initial Closing, the Company received approximately 71 BTC with an aggregate fair value of $7.8 million at the date of receipt. On the Pre-Funded Warrant Additional Closing date the Company received 1,257 BTC with an aggregate fair value of $109.8 million. As of March 31, 2026, the fair value of the BTC was $57.1 million and is recorded in Crypto assets on the condensed consolidated balance sheets. See Note 5 for fair value disclosures. The loss of $16.9 million is recorded in Other expense, net on the condensed consolidated statement of operations.
The Pre-Funded Warrant issued in the Pre-Funded Warrant Additional Closing, is immediately exercisable upon issuance without any beneficial ownership limitation at an exercise price of $0.0001 per share, and will remain exercisable until exercised in full and the Company has treated the shares as though they are outstanding as in-substance common shares. The fair value of the Pre-Funded Warrants of $109.8 million based on the aggregate fair value of the BTC received was recorded to additional paid-in capital as of December 31, 2025.
As a condition to the September Initial Closing, the Company was required to obtain stockholder support agreements (the “Voting Agreements”) from stockholders holding an aggregate of 38,000,000 shares of common stock, pursuant to which each such stockholder will agree to vote their shares of common stock in favor of the proposals for the
stockholder approval at any stockholder meeting held for that purpose. Additionally, each of the directors and executive officers of the Company, pursuant to lock-up agreements, agreed not to sell or transfer any of the Company securities which they hold, subject to certain exceptions, until the Pre-Funded Warrant Additional Closing Date.
Purchaser Rights
Upon the September Initial Closing, (i) for so long as Scilex beneficially owns an aggregate of at least 10% of the issued and outstanding shares of common stock, Scilex may designate two directors to the board of directors of the Company, and (ii) for so long as Scilex beneficially owns at least 5% but no more than 10% of the issued and outstanding shares of common stock, Scilex may designate one director to the board of directors of the Company.
Maxim ATM
The Company sold 36,663,892 in shares of common stock under the Maxim ATM for net proceeds of $24.8 million for the three months ended March 31, 2026. Maxim receives a fee of 3% of gross proceeds or $0.9 million. Gross proceeds net of fees is recorded in additional paid-in capital on the statement of stockholders' equity for three months ended March 31, 2026 for $24.8 million net of non cash deferred offering costs of $5.2 million.
Consultant Equity Awards
In the three months ended March 31, 2026, the Company recognized $1.0 million of compensation expense for equity awards granted to consultants outside of the 2018 LTIP plan in the aggregate of 909,427 shares of common stock. The shares vest immediately or after six months.
Meme Coin II Dividend
On December 29, 2025, the board of directors of the Company declared a conditional dividend of Dream Bowl Meme Coin II digital collectibles (the “Meme Coins”) to eligible holders of the Company’s common stock and certain other equity securities. The Meme Coins were payable to holders of record as of January 7, 2026 and were distributed beginning on February 27, 2026.
The distribution was made on the basis of one Meme Coin for every sixty shares of common stock held, or, with respect to eligible equity securities other than common stock, for every sixty shares of common stock underlying such securities, in each case held as of the record date, with fractional entitlements rounded down. Holders with fewer than sixty shares of common stock or common stock equivalents were not be entitled to receive any Meme Coins.
The Meme Coins are digital collectibles intended solely for personal, non-commercial use in connection with the Dream Bowl XIV event and do not represent or confer any equity, voting, dividend, profit-sharing, or ownership rights in the Company or any other entity, nor do they provide any right to receive cash or other monetary consideration. The Meme Coins are not designed or intended to function as an investment, currency, or financial product.
Warrant Dividend
On December 29, 2025, the Company’s board of directors also declared a conditional dividend of warrants to purchase shares of the Company’s common stock to eligible holders of the Company’s common stock and certain other equity securities. The warrants were payable to holders of record as of January 7, 2026 and were distributed on February 27, 2026. The number of warrants distributed was 9,665,079.
The distribution was made on the basis of one warrant for every sixty shares of common stock held, or, with respect to eligible equity securities other than common stock, for every sixty shares of common stock underlying such securities, in each case held as of the record date, with fractional entitlements rounded down. Holders with fewer than sixty shares of common stock or common stock equivalents were not be entitled to receive any warrants.
Each warrant entitles the holder to purchase one share of the Company’s common stock at an exercise price of $5.00 per share (subject to adjustment for recapitalizations, stock splits, stock dividends and similar types of transactions) and will expire on the first anniversary of the distribution date. The exercise of each warrant is subject to certain conditions, including a requirement that the applicable beneficial owner possess a corresponding Meme Coin at the time of exercise.
The warrants were recorded as an in and out to additional paid in capital for their aggregate fair value of $4.0 million as of the record date of January 7, 2026. The fair value of the common stock warrants uses significant unobservable inputs (Level 3). The fair value of the common warrants was determined using the Black-Scholes Model based on the following key inputs and assumptions: stock price on January 7, 2026 of $1.16, exercise price of $5.00, term of 1 year, volatility of 179.0% and risk-free rate of 3.48%. On the distribution date of February 27, 2026 the Company adjusted the fair value to it's distribution date fair value of $1.9 million for which the adjustment was and in and out to additional paid in capital for three months ended March 31, 2026. The fair value of the common warrants was determined using the Black-Scholes Model based on the following key inputs and assumptions: stock price on January 7, 2026 of $0.71, exercise price of $5.00, term of 1 year, volatility of 183.7% and risk-free rate of 3.48%
Warrants exercisable as of March 31, 2026 exclude warrants to purchase 12,068 shares of common stock issued to investors that participated in the February 2024 Public Offering that requires shareholder approval prior to the warrants being exercisable.
Information regarding warrants for common stock outstanding and exercisable as of March 31, 2026 is as follows:
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*Weighted average
Information regarding warrants for common stock outstanding and exercisable as of December 31, 2025 is as follows:
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*Weighted average
Warrants exercisable as of December 31, 2025 exclude warrants to purchase 1 share of common stock issued to a marketing firm, which vest upon the achievement of certain milestones and warrants to purchase 12,068 shares of common stock issued to investors that participated in the February 2024 Public Offering that requires shareholder approval prior to the warrants being exercisable.
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