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Stockholder Equity | 9 Months Ended
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Sep. 30, 2024
Stockholder Equity |
Stockholder' Equity | Note 7 – Stockholders’ Equity The Company is authorized to issue 50,000,000 shares of preferred stock and 200,000,000 shares of common stock both with a par value of $0.0001. Preferred Stock On October 30, 2020, the Company designated 1,000,000 shares of preferred stock as Series D Convertible Preferred Stock with a par value of $0.0001. At September 30, 2024, there were no shares of preferred stock issued and outstanding. Common Stock The holders of common stock are entitled to one vote per share on all matters submitted to a vote of shareholders, including the directors’ election. There is no right to cumulative voting in the election of directors. The holders of common stock are entitled to any dividends that may be declared by the board of directors out of funds legally available for payment of dividends, subject to the prior rights of holders of preferred stock and any contractual restrictions the Company has against the payment of dividends on common stock. In the event of liquidation or dissolution of the Company, holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and the liquidation preferences of any outstanding shares of preferred stock. Holders of common stock have no pre-emptive rights and have no right to convert their common stock into any other securities. At September 30, 2024, there were 133,168,049 shares of common stock issued and outstanding. Common Stock Sales In December 2022, the Company entered into an open market sale agreement with a sales agent pursuant to which the Company may offer and sell shares of its common stock from time to time through the sales agent. Sales of common stock, if any, will be made at market prices by any method permitted by law deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended. The Company has no obligation to sell any shares of common stock under the open market sale agreement and may at any time suspend offers under the open sale market agreement, in whole or in part, or terminate the open market sale agreement. During the nine months ended September 30, 2024, a total of 50,510 shares of common stock were sold pursuant to the open market sale agreement resulting in gross proceeds of approximately $62,000, and issuance costs consisting of $1,560 in commission fees and approximately $49,100 of accounting and legal fees for net proceeds of approximately $12,000. During the nine months ended September 30, 2023, a total of 3,766,422 shares of common stock were sold pursuant to the open market sale agreement resulting in net proceeds of $13,441,000 in proceeds, net of $230,000 of commission fees and $110,000 of accounting and legal fees. At September 30, 2024, a total of 3,816,932 shares of common stock have been sold pursuant to the open market sale agreement. At September 30, 2024, approximately $86,154,000 remains available to be sold in the Company’s at-the-market offerings, subject to various limitations. Common Stock for Services During the nine months ended September 30, 2024, we issued 31,672 fully vested shares of common stock to service providers with an aggregate fair value of $39,631 based on the market price of our common stock on date of grant. During the nine months ended September 30, 2024, we issued an aggregate of 240,000 fully vested shares of restricted common stock to our board of directors with a fair value of $333,600 based on the market price of our common stock on the date of grant. During the nine months ended September 30, 2024, aggregate expense associated with shares of common stock issued for services was $373,231 which has been included in general and administrative expenses on the condensed unaudited consolidated statements of operations. During the nine months ended September 30, 2023, we issued 20,000 fully vested shares of restricted common stock to two former employees with a fair value of $71,200 based on the market price of our common stock on date of grant. Stock-Based Compensation During the nine months ended September 30, 2024 and 2023, the Company recorded stock-based compensation of $878,993 and $667,950, respectively, for restricted stock units and options granted to employees and various consultants of the Company. For the nine months ended September 30, 2024, $719,786 of the stock-based compensation was charged as general and administrative expenses and $159,207 as research and development expenses in the accompanying unaudited condensed consolidated statements of operations. For the nine months ended September 30, 2023, $583,549 was charged as general and administrative expenses and $84,401 as research and development expenses in the accompanying unaudited condensed consolidated statements of operations. Stock Options Stock options issued under the Company’s 2021 Equity Incentive Plan, as amended (the “2021 Plan”), initially reserved and authorized a total of 10,000,000 shares of our common stock for issuance under the 2021 Plan. At the 2024 Annual Meeting of Stockholders held on June 13, 2024, the Company’s stockholders approved an amendment to the Company’s 2021 Plan to increase the number of shares of common stock authorized and issuable pursuant to the 2021 Plan by 14,000,000 shares for a total of 24,000,000 shares. Stock option activity for the nine months ended September 30, 2024 is summarized as follows:
|  | Shares |  |  | Weighted Average Exercise Price |  |  | Aggregate Intrinsic Value |  |  | Weighted Average Remaining Contractual Life (Years) |
Options outstanding at December 31, 2023 |  |  | 10,828,174 | * |  | $ | 0.83 |  |  | $ | 6,374,433 |  |  |  | 4.66 |
Granted |  |  | 50,000 |  |  |  | 1.40 |  |  |  | — |  |  |  | — |
Exercised |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Expired/forfeit |  |  | (137,924 | ) |  |  | 2.65 |  |  |  | — |  |  |  | — |
Options outstanding at March 31, 2024 |  |  | 10,740,250 | * |  | $ | 0.81 |  |  | $ | 4,826,248 |  |  |  | 4.35 |
Granted |  |  | 6,287,000 |  |  |  | 1.26 |  |  |  | — |  |  |  | — |
Exercised |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Expired/forfeit |  |  | (136,250 | ) |  |  | 2.88 |  |  |  | — |  |  |  | — |
Options outstanding at June 30, 2024 |  |  | 16,891,000 | * |  | $ | 0.96 |  |  | $ | 4,053,840 |  |  |  | 6.09 |
Re-issuance of previously forfeited options |  |  | 700,000 |  |  |  | 0.12 |  |  |  | — |  |  |  | — |
Granted |  |  | 276,742 |  |  |  | 1.38 |  |  |  | — |  |  |  | — |
Exercised |  |  | (446,901 | ) |  |  | 1.05 |  |  |  | — |  |  |  | — |
Expired/forfeit |  |  | (213,331 | ) |  |  | 3.02 |  |  |  | — |  |  |  | — |
Options outstanding at September 30, 2024 |  |  | 17,207,510 | * |  |  | 0.89 |  |  |  | 8,125,863 |  |  |  | 5.67 |
Options exercisable at September 30, 2024 |  |  | 9,737,166 |  |  | $ | 0.53 |  |  | $ | 4,294,227 |  |  |  | 2.94 |
*Includes 7,675,000 options granted outside of our 2021 Plan. In connection with the Merger (see Note 1) 7,400,000 were not granted under the 2021 Plan and the 275,000 options granted to settle a legal matter (see Note 9) were granted outside of the 2021 Plan. During the three months ended September 30, 2024, we made an adjustment to our stock option activity to add back 700,000 fully vested stock options reissued to a consultant that were previously granted that had been presented as forfeited in prior periods. The service agreement with this consultant was terminated on October 15, 2024. These options have an exercise price of $0.12 per share and expire July 15, 2025. During the nine months ended September 30, 2024, the option grants primarily consisted of 5,250,000 options granted to the Company’s Chief Executive Officer (“CEO”, see Note 9), 231,000 options granted to the Company’s Chief Operating Officer (“COO”, see Note 9), 481,000 options granted a key employee pursuant to an employment agreement and 376,742 granted to employees and non-employees. Further, 275,000 options were granted pursuant to a legal settlement (see Note 9). The average grant-date fair value of the granted options was $0.47. Of the total options granted during the nine months ended September 30, 2024, 3,151,871 of the options include performance conditions. The performance-based options vest as follows: 50% vest upon the achievement of Operating Profit, as defined in the employment agreements, and 50% upon the achievement of a revenue target of $100 million by the end of fiscal year 2028. The restricted stock units with the revenue target begin vesting once the Company achieves $15 million in revenue for a fiscal year. Vesting will occur on January 31 of each year through January 31, 2029. The number of restricted stock units that vest is based on the proportionate percentage of each fiscal year’s revenue to the $100 million target. For example, if our annual revenue for fiscal year 2026 is $20 million, 20% of the restricted stock units with the revenue performance condition will vest on January 31, 2027. The aggregate grant-date fair value of these performance-based options is $1,477,251. During the nine months ended September 30, 2024, the Company did not recognize any stock-based compensation associated with these options as the probability of the performance conditions being met was deemed remote. Total unrecognized compensation associated with unvested time-based options is approximately $2,417,287 which will be recognized based on the options associated vesting schedules over a period of approximately 1.67 years. During the nine months ended September 30, 2024, $696,720 of our stock-based compensation was associated with the time-based stock options. The fair value of these options granted were estimated on the date of grant, using the Black-Scholes option-pricing model with the following assumptions. This does not include options related to a settlement which were issued during the year and will be discussed in Footnote 9 - Commitments:
|  | September 30, 2024 |  |  | September 30, 2023 |
Dividend yield |  |  | 0.00 | % |  |  | 0.00 | %
Expected life |  | 6.25 Years |  |  | 5.45 – 6.53 Years |
Expected volatility |  | 26.20.-27.39 | % |  | 30.00-35.88 | %
Risk-free interest rate |  | 3.77-4.65 | % |  | 3.57-4.43 | %
Restricted Stock Units During the nine months ended September 30, 2024, the Company granted an aggregate of 3,053,742 unvested restricted stock units under the 2021 Plan as follows: 2,250,000 our Chief Executive Officer (Note 9), 231,000 to our Chief Operating Officer (Note 9), and 572,742 to key employees of the Company. These unvested restricted stock units consist of 1,401,871 units with time-based vesting provisions and 1,651,871 units with performance-based vesting provisions. The performance-based units vest as follows: 50% vest upon the achievement of Operating Profit, as defined in the employment agreements, and 50% upon the achievement of revenue targets between $15.0 and $100 million by the end of fiscal year 2028. The restricted stock units with the revenue target begin vesting once the Company achieves $15.0 million in revenue for a fiscal year. Vesting will occur on January 31 of each year through January 31, 2029. The number of restricted stock units that vest is based on the proportionate percentage of each fiscal year’s revenue to the $100 million target. For example, if our annual revenue for fiscal year 2026 is $20 million, 20% of the restricted stock units with the revenue performance condition will vest on January 31, 2027. The grant-date fair value of the restricted stock units was determined using the market price of our common stock on the date of grant which ranged from $1.09 to $1.30. At September 30, 2024, we have $2,075,299 of unrecognized stock-based compensation associated with the restricted stock units with a performance condition which will be recognized when the performance conditions are probable of being met. At September 30, 2024, the Company had $1,580,526 of unrecognized stock-based compensation associated with the time vesting restricted stock units which will be recognized over a period of approximately 3.75 years. During the nine months ended September 30, 2024, $182,273 of our stock-based compensation was associated with the time-based restricted stock units. A summary of our outstanding nonvested restricted stock units is as follows:
|  |  |  |  | Weighted-Average |
|  |  |  |  | Grant Date |
|  | Amount |  |  | Fair Value |
Nonvested, beginning of the period |  |  | - |  |  | $ | - |
Granted |  |  | 3,053,742 |  |  |  | 1.26 |
Vested |  |  | - |  |  |  | - |
Forfeited |  |  | - |  |  |  | - |
Nonvested,end of the period |  |  | 3,053,742 |  |  | $ | 1.26 |
Warrants At September 30, 2024, there were 1,235,000 warrants outstanding which relate to a private placement offering consummated in December 2021, where investors were offered a warrant for every two shares of common stock purchased in the offering at an exercise price of $2.50 per share. These warrants will expire in December of 2024. At September 30, 2024, the intrinsic value was nil based on the market price of our common stock.

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