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Stockholders’ Equity
 3 Months Ended
Mar. 31, 2025
Equity [Abstract]  
Stockholders’ Equity

Note 6 – Stockholders’ Equity

 

Common Stock

 

As of March 31, 2025, the Company had 975,000,000 shares of common stock, $0.001 par value, authorized, of which 20,206,880 shares were issued and outstanding.

 

At-The-Market Offering Agreement

 

On September 14, 2021, the Company entered into an At-The-Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC, as agent (“H.C. Wainwright”), pursuant to which the Company may offer and sell, from time-to-time, shares of the Company’s Common Stock through H.C. Wainwright, as agent. Initially, the aggregate offering price of shares issuable under the ATM Agreement was $98,767,500 (the “Shares”).

 

On October 4, 2024, the Company’s new Form S-3 registration statement became effective, increasing the total amount of securities that may be offered and sold under the prospectus to $250,000,000.

 

The Company shall pay H.C. Wainwright a commission equal to 3.0% of the aggregate gross proceeds from each sale of Shares under the ATM Agreement.

 

During the three months ended March 31, 2025, the Company sold a total of 127,249 shares of Common Stock under the ATM Agreement for aggregate total gross proceeds of approximately $238,000 at an average selling price of $1.87 per share, resulting in net proceeds of approximately $229,000 after deducting commissions and other transaction costs.

 

Share Based Payments

 

Board Compensation

 

The Company issues $12,500 of common stock to each independent director at the end of each calendar quarter, subject to continued service. The number of shares is determined based on the closing price of the Company’s common stock on the last trading day of the applicable quarter. For the three months ended March 31, 2025, the Company issued 25,002 shares of common stock with a grant date fair value of approximately $38,000 to independent directors.

 

Performance Bonus Payments

 

For the three months ended March 31, 2025, the Company issued 329,110 shares of common stock to officers and employees as part of the payment of accrued bonus compensation for the year ended December 31, 2024. The total fair value of the shares issued was approximately $813,000 based on the Company’s closing stock price on the issuance date. Of the shares issued, 33,731 were returned to net settle the issuance and pay related taxes, resulting in a net share issuance of 295,379 shares of common stock.

 

Preferred Stock

 

Series V Preferred Stock

 

The Company previously designated and issued 14,542,803 shares of Series V Preferred Stock (“Series V”) on June 2, 2023 to shareholders of record as of May 12, 2023. The Series V: (i) is non-convertible (subject to potential conversion rights, as described below), (ii) has a 20% liquidation preference over the shares of common stock, (iii) is non-voting, and (iv) has certain rights to dividends and distributions (at the discretion of the Board of Directors).

 

On September 6, 2024, at the Company’s 2024 Annual Meeting, stockholders approved an amendment to the Series V Certificate of Designation granting the Board the discretion to convert each share of Series V into one share of common stock. As of March 31, 2025, the Board has not filed the amendment or elected to convert any Series V shares. 

 

For the three months ended March 31, 2025, the Company issued 1,020,834 restricted shares of Series V in connection with the vesting of employee restricted stock units (“RSUs”). These restricted shares remain subject to forfeiture if specified market capitalization thresholds are not achieved within the applicable performance measurement period. Of this amount, 166,668 shares are also subject to time-based vesting conditions requiring continued service over the vesting period.

 

On February 3, 2025, 49,327 restricted shares of Series V were forfeited following the resignation of the Company’s Chief Technology Officer. These shares were returned to the Company and are no longer outstanding.

 

As of March 31, 2025, a total of 971,507 restricted shares of Series V Preferred Stock were issued and outstanding. Of these, 48,967 shares remain subject solely to time-based vesting conditions, which extend over a one- to three-year period, with full vesting expected by December 31, 2027. 

 

 

2021 Equity Incentive Plan

 

The Company’s 2021 Equity Incentive Plan (the “2021 Plan”) was effective on January 1, 2021 and approved by shareholders on March 31, 2021 and amended on June 13, 2022. The Company received shareholder approval on July 11, 2023 to increase the authorized amount under the 2021 Plan from 7,000,000 shares to 12,000,000 shares.

 

Options

 

A summary of stock option activity under the Company’s 2021 Equity Incentive Plan for the three months ended March 31, 2025 and 2024 is presented below:

 

   Number of Shares  

Weighted Average Exercise

Price

  

Total

Intrinsic Value

  

Weighted Average Remaining Contractual Life (in

years)

 
Options outstanding as of December 31, 2024   1,302,500   $1.96   $804,300    1.7 
Employee options granted   1,427,068    2.47    -    6.6 
Options outstanding as of March 31, 2025   2,729,568   $2.22   $6,750    4.1 
Options vested and exercisable as of March 31, 2025   2,453,318   $2.26   $1,688    4.1 

 

   Number of Shares  

Weighted Average Exercise

Price

  

Total

Intrinsic Value

  

Weighted Average Remaining Contractual Life (in

years)

 
Outstanding as of December 31, 2023   1,200,000   $2.12   $8,700    2.4 
Employee options granted   -    -    -    - 
Employee options forfeited   -    -    -    - 
Outstanding as of March 31 ,2024   1,200,000   $2.12   $17,150    2.1 
Options vested and exercisable as of March 31, 2024   1,145,000   $2.15   $1,300    2.0 

 

The following weighted-average assumptions were used to estimate the fair value of options granted during the three months ended March 31, 2025 and 2024, using the Black-Scholes option pricing model:

 

   For the Three Months Ended March 31, 
   2025   2024 
Exercise price  $2.47   $- 
Term (years)   5.00    - 
Expected stock price volatility   113.66%   0.00%
Risk-free rate of interest   4.16%   0.00%

 

These assumptions are consistent with the methods described in Note 3 – Summary of Significant Accounting Policies.

 

 

Restricted Stock Units (RSUs)

 

Long-Term Incentive Plan (LTI) RSUs

 

On January 1, 2025, the Board approved the grant of 150,000 RSUs under the Company’s Long-Term Incentive Plan (“LTI”) to a non-officer employee. These RSUs are subject to both market capitalization and time-based vesting conditions.

 

The RSUs vest in three equal tranches of 50,000 RSUs each, based on the Company achieving and sustaining specific market capitalization thresholds for 30 consecutive days on or before December 31, 2026, as follows:

 

Market Cap Vesting Thresholds

$ 100

million

 

$ 150

million

  

$ 300

million

 
50,000   50,000    50,000 

 

Any RSUs for which the market capitalization condition is not met by December 31, 2026, will be forfeited and automatically terminate without consideration.

 

For any tranche in which the market capitalization condition is achieved, the RSUs remain subject to a time-based vesting schedule, with 20% of eligible RSUs vesting annually over five years, beginning on each December 31, 2025 through 2029, provided the grantee remains in continuous service through each vesting date.

 

The fair value of these market-based RSUs was determined using a Monte Carlo simulation and totaled approximately $181,000 as of the grant date. The following assumptions were used to determine fair value as of the grant date, January 1, 2025:

 

   January 1, 2025 
Vesting Hurdle Price   $ 5.26 - $15.79 
Term (years)   2.00 
Expected stock price volatility   92.70%
Risk-free rate of interest   4.25%

 

The Company will recognize compensation expense for these RSUs over the requisite service period, subject to acceleration upon meeting the market capitalization criteria.

 

Accelerated Vesting of RSUs and Conversion to Restricted Common Stock

 

On January 13, 2025, the Company accelerated the vesting of all previously outstanding long-term incentive (“LTI”) restricted stock units (“RSUs”), totaling 1,170,834 RSUs granted to executive officers and employees. These RSUs were settled through the issuance of restricted shares of common stock. Because a portion of these RSUs were entitled to the previously declared Series V preferred stock dividend, 1,020,834 restricted shares of Series V were also issued.

 

The restricted shares of common stock and Series V preferred stock issued upon acceleration remain subject to the original market capitalization-based performance conditions and applicable time-based vesting schedules, which range from one to five years.

 

Forfeitures of LTI RSUs and Restricted Shares of Common Stock

 

On February 3, 2025, upon the voluntary resignation of the Company’s Chief Technology Officer, 120,137 unvested LTI RSUs and 129,327 restricted shares of common stock were forfeited in accordance with the terms of the applicable award agreements. In accordance with ASC 718, Compensation—Stock Compensation, the Company reversed approximately $262,000 of previously recognized stock-based compensation expense during the three months ended March 31, 2025. No further expense will be recognized for these forfeited awards.

 

 

 

RSU Activity Summary

 

The following table summarizes RSU activity under the 2021 Plan for the three months ended March 31, 2025:

 

   Number of
Restricted
Stock Units		   Weighted
Average Grant
Date Fair Value		 
Nonvested as of December 31, 2024   1,140,971   $3.27 
Granted   150,000    2.47 
Vested   -    - 
Vested and converted to restricted common shares   (1,170,834)   3.05 
Forfeited   (120,137)   4.37 
Nonvested as of March 31, 2025   -   $- 

 

Restricted Shares of Common Stock Activity Summary

 

The following table summarizes restricted Common Stock activity under the 2021 Plan for the three months ended March 31, 2025:

 

  

Number of

Restricted Shares

of Common Stock

 
Outstanding and nonvested as of December 31, 2024   270,794 
Converted from restricted stock units   1,170,834 
Forfeited   (129,327)
Outstanding and nonvested as of March 31, 2025   1,312,301 

 

Stock Based Compensation

 

Stock-based compensation expenses are allocated among general and administrative expenses, compensation expenses and cost of revenues. Stock-based compensation expense for the three months ended March 31, 2025 and 2024 was as follows:

 

   2025   2024 
   For the Three Months Ended
March 31,		 
   2025   2024 
Employee stock option awards  $55,212   $9,280 
Employee restricted stock unit awards   151,958    239,146 
Forfeiture of employee restricted stock unit and share awards   (262,058)   - 
Non-employee restricted stock awards   37,503    25,003 
Stock-based compensation  $(17,385)  $273,429 

 

Stock Purchase Warrants

 

The following is a summary of warrant activity for the three months ended March 31, 2025:

 

  

Number of

Warrants

 
Outstanding as of December 31, 2024   712,500 
Expiration of warrants   - 
Outstanding as of March 31, 2025   712,500