NOTE 9 - STOCKHOLDERS’ EQUITY (DEFICIT)

June 2023 Registered Direct Offering and 2023 Private Placement Warrants

On July 5, 2023, the Company, closed on a Securities Purchase Agreement dated June 30, 2023 (the “Purchase Agreement”) with a single institutional investor (the “Investor”), pursuant to which the Investor agreed to purchase from the Company, in a registered direct offering (the “Registered Offering”), (i) an aggregate of 171,666 shares of the Company’s Class A Common Stock, par value $0.001 per share at a price of $16.02 per share, (ii) an aggregate of 78,021 pre-funded warrants to purchase 78,021 shares of Common Stock, at an offering price of $16.0194 per pre-funded warrant at an exercise price of $0.0006 per share, with a term of exercise of five years (collectively, the “Registered Offering Securities”). The gross proceeds to the Company from the Registered Offering and concurrent private placement described below were approximately $4,000,000 (before deducting the placement agent’s fees and other offering expenses paid by the Company approximately $365,000).

As additional consideration for the purchase of the Private Placement Securities, we agreed to issue to the Investors Series A Warrants to purchase 249,688 shares of common stock at an exercise price of $16.80 per share, and Series B Warrants to purchase 249,688 shares of common stock at an exercise price of $16.80 per share (collectively, the “Private Placement Warrants”). The exercise price of the Private Placement Warrants is $16.80 per share, however, is subject to adjustment 100% of the highest VWAP during the period beginning on the trading day immediately preceding a public announcement of an applicable fundamental transaction and ending within 30 trading days following the fundamental transaction.  In such event, the Investor shall have the right to receive, for each Private Placement Warrant Share that would have been issuable upon such exercise immediately prior to the occurrence of such fundamental transaction, at the option of the Investor, the number of Shares of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration receivable as a result of such fundamental transaction by a holder of the number of Shares for which this Private Placement Warrant is exercisable.  Further, if the Company is given any choice as to the securities, cash or property to be received in a fundamental transaction, then the Investor shall be given the same choice as to the alternate consideration it receives upon any exercise of these Private Placement Warrants following such fundamental transaction.

All the pre-funded warrants associated with the Registered Offering and the Series A and Series B warrants have been classified and accounted for under the equity method. The net proceeds of the offering, including the fair value assigned to the Private Placement Warrants were recorded as a component of stockholders’ equity within additional paid-in-capital.

Recapitalization - Reverse Stock Split

On October 26, 2023, the Company filed a certificate of amendment to its articles of incorporation with the Secretary of State of the State, of Nevada (the “Certificate of Amendment”), to (i) effectuate a reverse stock split (the “Reverse Stock Split”) of its issued and outstanding shares of common stock and treasury shares on a 1-for-6 basis and (ii) decrease the number of total authorized shares of common stock of the Company from 150,000,000 to 25,000,000 shares. 

As of the Effective Time, every 6 shares of issued and outstanding common stock were converted into one share of common stock. No fractional shares were issued in connection with the Reverse Stock Split. Instead, a holder of record of old common stock as of immediately prior to the Effective Time who would otherwise have been entitled to a fraction of a share was entitled to receive cash in lieu thereof.

The Company’s transfer agent, Issuer Direct Corporation, acted as the exchange agent for the Reverse Stock Split. The Reverse Stock Split did not alter the par value of the Company’s common stock or modify any voting rights or other terms of the common Stock. In addition, pursuant to their terms, a proportionate adjustment was made to the per share exercise price and number of shares issuable under all of the Company’s outstanding stock options and warrants to purchase shares of common Stock, and the number of shares authorized and reserved for issuance pursuant to the Company’s equity incentive plan will be reduced proportionately.

All issued and outstanding common stock and per share amounts contained in the financial statements have been retroactively adjusted to reflect this Reverse Stock Split for all periods presented. In addition, a proportionate adjustment was made to the per share exercise price and the number of shares issuable upon the exercise of all outstanding stock options, restricted stock units and warrants to purchase shares of common stock. A proportionate adjustment was also made to the number of shares reserved for issuance pursuant to the Company’s equity incentive compensation plans to reflect the Reverse Stock Split.

Board of Directors Fees

On July 28, 2022, our Board of Directors awarded options pursuant to the Non-Employee Director Compensation Policy. The Board granted to each of the three non-employee directors $50,000 in value of common stock options. The Company used the Black Scholes option pricing model to determine the number of shares that would derive a value of $50,000 for each non-employee director. The Black Scholes pricing model used the following assumptions: term of 5.31 years; volatility 120.99%; annual rate of dividends 0%; discount rate 2.69%. The model yielded an award grant of 7,896 total options, 2,632 for each of the three non-employee directors.

On December 16, 2022, our Board of Directors awarded options to each of the three non-employee directors of $10,000 in value of common stock options. The Company used the Black Scholes option pricing model to determine the number of shares that would derive a value of $10,000 for each non-employee director. The Black Scholes pricing model used the following assumptions: term of 5 years; volatility 116.42%; annual rate of dividends 0%; discount rate 3.61%. The model yielded an award grant of 2,121 total options, 707 for each of the three non-employee directors.   The options vested immediately upon issuance.

On December 19, 2022, our Board of Directors appointed Ms. Alison Cornell as lead independent director. In recognition of that appointment the Board of Directors awarded to Ms. Cornell $300,000 in value of common stock options. The Company used the Black Scholes option pricing model to determine the number of shares that would derive a value of $300,000 for the lead independent director. The Black Scholes pricing model used the following assumptions: term of 5 years; volatility 116.47%; annual rate of dividends 0%; discount rate 3.70%. The model yielded an award grant of 23,240 total options.  The options vested immediately upon issuance.

On June 12, 2023, our Board of Directors awarded options pursuant to the Non-Employee Director Compensation Policy. The Board granted to each of the three non-employee directors $50,000 in value of common stock options. The Company used the Black Scholes option pricing model to determine the number of shares that would derive a value of $50,000 for each non-employee director. The Black Scholes pricing model used the following assumptions: term of 5.31 years; volatility 112.25%; annual rate of dividends 0%; discount rate 3.88%. The model yielded an award grant of 10,878 total options, 3,626 for each of the three non-employee directors.

The Company recorded directors’ fees of $337,682 and $1,155,722 for the years ended December 31, 2023 and 2022, respectively, representing the cash fees paid or accrued and the expense associated with the common stock options described above. As of December 31, 2023 the Company had unpaid directors' fees accrued in the amount of $172,670. There were no unpaid directors' fees as of December 31, 2022.

Stock Issuances

During the month of December 2023, the Company issued 563,016 shares of common stock for proceeds of $640,000 to various investors in private placements.  Included in those amounts were issuances of 437,692 shares of common stock for proceeds of $485,000 to two related parties.

Stock Based Compensation

During 2023, options were granted to the directors of the Company, and during 2022 options were granted to the employees and directors of the Company. As a result of these and continued vesting of prior grants, the Company recorded expenses of approximately $870,000 during the year ended December 31, 2023, of which approximately $230,000 of this expense was for R&D and $640,000 was attributed to G&A. During the year ending December 31, 2022 the Company recorded expenses of approximately $2.7 million, of which approximately $500,000 of this expense was for R&D and $2.2 million was attributed to G&A.

The fair value of options was estimated on the date of grant using the Black-Scholes option-pricing model based on the following weighted average assumptions:

Year Ended December 31,

On February 22, 2022, the Board of directors granted options under its 2021 equity incentive plan (the “2021 Plan”) to purchase 28,747 shares of common stock to certain employees of the Company. The options have a term of ten years and vest over three years. The options were valued at $493,536 using the Black Scholes pricing model relying on the following assumptions: simplified term of 5.75 years; volatility 130.18%; annual rate of dividends 0%; discount rate 1.88%.

On August 29, 2022, the Board of directors granted options under its 2021 equity incentive plan (the “2021 Plan”) to purchase 28,831 shares of common stock to certain employees of the Company. The options have a term of ten years and vest over three years. The options were valued at $590,896 using the Black Scholes pricing model relying on the following assumptions: simplified term of 5.75 years; volatility 121.19%; annual rate of dividends 0%; discount rate 3.25%.

On December 16, 2022, the Board of directors granted options under its 2021 equity incentive plan (the “2021 Plan”) to purchase 31,836 shares of common stock to the Chief Executive Officer of the Company. The options have a term of ten years and vested immediately upon issuance. The options were valued at $450,000 using the Black Scholes pricing model relying on the following assumptions: simplified term of 5.0 years; volatility 116.41%; annual rate of dividends 0%; discount rate 3.6%.

Stock Warrants Exercised

During the twelve months ended December 31, 2023, the Prefunded Warrants in connection with the Securities Purchase Agreement dated June 30, 2023 were exercised on a cash basis.  The Company received $47 in exchange for the issuance of 78,021 shares of common stock.  See NOTE 9 - STOCKHOLDERS’ EQUITY (DEFICIT) - June 2023 Registered Direct Offering and 2023 Private Placement Warrants.

2021 Equity Incentive Plan

On October 12, 2021, after approval from the stockholders at the Company’s 2021 annual meeting of stockholders, the Company adopted the 2021 Plan for the purpose of enhancing the Company’s ability to attract and retain highly qualified directors, officers, key employees and other persons and to motivate such persons to improve the business results and earnings of the Company by providing an opportunity to acquire or increase a direct proprietary interest in the operations and future success of the Company. The 2021 Plan is administered by the compensation committee of the Board who will, amongst other duties, have full power and authority to take all actions and to make all determinations required or provided for under the 2021 Plan. Pursuant to the 2021 Plan, the Company may grant options, share appreciation rights, restricted shares, restricted share units, unrestricted shares and dividend equivalent rights. The 2021 Plan has a duration of 10 years.

Subject to adjustment as described in the 2021 Plan, the aggregate number of shares of common stock available for issuance under the 2021 Plan is initially set at 166,666 shares; this number is automatically increased each January 1st by an amount equal to 5% of the number of common stock shares outstanding at that date. As of December 31, 2023, 232,101 options have been issued under the 2021 Plan, and 91,559 shares remained available for issuance.

2019 Omnibus Long-Term Incentive Plan

Prior to the adoption of the 2021 Equity Incentive Plan, the Company maintained a 2019 Omnibus Long-Term Incentive Plan (the “2019 Plan”). Following the approval by the shareholders of the 2021 Equity Incentive Plan, no additional awards have been or will be made under the 2019 Plan. As of December 31, 2023, 130,203 stock options had been issued under the 2019 Plan with terms between 5 years and 10 years, of which 60,414 remained outstanding.

Common Stock Options

A summary of the status of the Company’s options issued under the Company’s equity incentive plans is presented below. As of December 31, 2023 there is no intrinsic value in any of the Company's outstanding options as the market price of the Company's common stock is in all cases lower than the exercise price of options.

Options outstanding and exercisable by price range as of December 31, 2023 were as follows:

Common Stock Warrants - Private 

A summary of the status of the Company’s private warrants is presented below.

Unregistered warrants outstanding and exercisable by price range as of December 31, 2023 were as follows:

Common Stock Warrants - Public

A summary of the status of the Company’s public warrants is presented below:

Registered warrants outstanding and exercisable by price range as of December 31, 2023, were as follows: