Note 12 - Subsequent Events

9 Months Ended

Sep. 30, 2024

Notes to Financial Statements

Subsequent Events [Text Block]

12. Subsequent Events

The Company evaluates subsequent events that have occurred after the balance sheet date but before the consolidated financial statements are issued. There are two types of subsequent events: (1) recognized, or those that provide additional evidence with respect to conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and (2) non-recognized, or those that provide evidence with respect to conditions that did not exist at the date of the balance sheet but arose subsequent to that date. 

Amended and Restated Standby Equity Purchase Agreement

On October 31, 2024 (the "Effective Date"), the Company entered into an amended and restated standby equity purchase agreement (the "A&R SEPA") that amends and restates in its entirety the Original SEPA with Yorkville. The terms of the A&R SEPA are substantially consistent with the terms of the Original SEPA, except that, pursuant to the A&R SEPA, Yorkville agreed to advance to the Company, subject to certain conditions, the principal amount of $3,000,000 (the "Prepaid Advance") which be evidenced by convertible promissory notes in two tranches. The first tranche of the Prepaid Advance was disbursed on October 31, 2024 in the principal amount of $2,000,000. Pursuant to the A&R SEPA, a discount of 5% was applied to the principal amount. The net cash amount received (less discount and fees) was approximately $1,752,000.

Maddox acquisition

On October 30, 2024, the Company entered into a membership interest purchase agreement (the “MIPA”) with  Maddox Industries, LLC (“Maddox Industries”), a provider of government contracting solutions based in Puerto Rico, and Jason Maddox, the sole member of Maddox Industries, to acquire all of the outstanding membership interests in Maddox Industries from Mr. Maddox. As consideration for the acquisition of Maddox Industries, at the closing, the Company will issue 3,100,000 shares of the Company’s common stock to Mr. Maddox (the “Stock Consideration”), provided that the number of shares of common stock constituting the Stock Consideration will be reduced by any number of whole shares of common stock exceeding 19.99% of the outstanding shares of common stock as of immediately prior to the closing. As additional consideration for the acquisition, during the six-month period following the closing (the “Earnout Period”), Mr. Maddox will be eligible to receive up to six monthly cash payments in an aggregate amount of up to $1 million (each such monthly payment, an “Earnout Payment”) in accordance with the terms of the MIPA. The Earnout Payment payable to Mr. Maddox for each calendar month during the Earnout Period, if any, will be equal to the aggregate amount of gross revenue received by Maddox Industries in respect of any accounts receivable from any existing customer outstanding as of the closing during such calendar month, provided that all Earnout Payments payable by the Company to Mr. Maddox under the MIPA may not exceed $1 million. The acquisition includes a three-year contract manufacturing agreement to be executed at the Company’s expansive 580,000 square-foot facility in Osceola, Arkansas. The Board appointed Jason Maddox the President of the Company effective as of October 16, 2024.