Quarterly report pursuant to Section 13 or 15(d)

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
 6 Months Ended
Jun. 30, 2023
BASIS OF PRESENTATION  
Stock Based Compensation

The Company accounts for stock-based compensation in accordance with FASB ASC 718, Compensation - Stock Compensation. Under the provisions of FASB ASC 718, stock-based compensation cost is estimated at the grant date based on the award’s fair value and is recognized as expense over the requisite service period. The Company, from time to time, issues common stock or grants common stock options to its employees, consultants and board members. At the date of grant, the Company determines the fair value of the stock option award and recognizes compensation expense over the requisite service period. Issuances of common stock are valued at the closing market price on the date of issuance and the fair value of any stock option or warrant awards is calculated using the Black Scholes option pricing model and employing the simplified term method as the Company does not have a historical basis to determine the term. The Company records forfeiture of options when they occur. 

 

During the three months ended June 30, 2023, 65,268 options were granted to directors of the Company.  During the three months ended June 30, 2022 no options were granted. The Company recorded compensation expense for issued grants during the three months ended June 30, 2023 and for previous grants in the amount of $227,808 and $497,744 for these periods, respectively. During the six months ended June 30, 2023 and 2022, 65,268 and 165,000 stock options, respectively were granted to directors and employees of the Company. As a result of these and previous grants, the Company recorded compensation expense of $469,911 and 1,068,374 for these periods, respectively.

 

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

 

 

 

Three Months Ended June 30,

 

 

 

2023

 

 

2022

 

Expected volatility

 

 

 112.28 %

 

 

 -

 

Expected dividends

 

 

 0

 

 

 

 -

 

Expected term

 

5.3 years

 

 

 

 -

 

Risk free rate

 

 

 3.88 %

 

 

 -

 

 

 

 

Six Months Ended June 30,

 

 

 

2023

 

 

2022

 

Expected volatility

 

 

 112.28 %

 

 

 130.18 %

Expected dividends

 

 

 0

 

 

 

 0

 

Expected term

 

5.3 years

 

 

5.8 years

 

Risk free rate

 

 

 3.88 %

 

 

 1.88 %

 

The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of highly subjective assumptions, including the expected stock price volatility.  In considering the expected term of the options, the Company employs the simplified method. The Company uses this method as it does not have a history of option exercises to establish a robust estimated term based on experience. The simplified term is used for the determination of expected volatility as well as the identification of the risk-free rate.
Warrants

The Company accounts for warrants in accordance with FASB ASC 815 – Derivatives and Hedging.  The fair value of the Company’s warrants is determined at the time of issuance using the Black Scholes option valuation model based on a market price and the remaining term of the warrant obligation.  The warrants are not subject to remeasurement through the term.  For the Company’s outstanding warrants, the number of shares and the exercise price shall be adjusted for standard anti-dilution events such as stock splits, combinations, reorganizations, or issue shares as part of a stock dividend. Upon a change of control, the warrant holder will have the right to receive securities, cash or other properties it would have been entitled to receive had the warrant been exercised.

 

The Warrants (as defined below) issued in conjunction with the Subscription Agreement resulted in an allocation of the pro rata share of fair value to the proceeds between the loan and the warrants (within stockholders’ equity), resulting in discount on the term loan to be amortized to interest expense over the term of the loan (see Note 5 DEBT Payne Bridge Loan). 

ASC 820, Fair Value Measurements, (“ASC 820”) provides guidance on the development and disclosure of fair value measurements. Pursuant to ASC 820, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. The accounting guidance classifies fair value measurements in one of the following three categories for disclosure purposes:

 

Level 1: Quoted prices in active markets for identical assets or liabilities.

 

Level 2: Inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.

 

Level 3: Unobservable inputs which are supported by little, or no market activity and values determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

 

The Company evaluates assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them for each reporting period. This determination requires significant judgments to be made by the Company.

 

As of June 30, 2023 and December 31, 2022, the recorded values of cash and cash equivalents, prepaid expenses, accounts payable, and accrued expenses and other liabilities approximate their fair values due to the short-term nature of these items.