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Stockholder Equity
 12 Months Ended
Dec. 31, 2024
Stockholder Equity  
Stockholder' Equity

Note 7 – Stockholder’ Equity

 

The Company is authorized to issue 50,000,000 preferred stock shares and 200,000,000 common stock shares 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.

 

As of December 31, 2024 and 2023, 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 December 31, 2024, there were 144,301,977 shares of common stock issued and outstanding.

 

Common Stock Issued for Cash

 

During the years ended December 31, 2024 and 2023, a total of 50,510 and 3,766,422 shares of common stock have been sold pursuant to the open market sale agreement resulting in a total of $0 and of $13,441,438 in proceeds, net of commission fees of  approximately $2,400 and $230,000 and approximately $63,100 and $110,000 of accounting and legal fees, respectively.  During the year ended December 31, 2024, the costs and fees exceeded the proceeds of approximately $62,400 received resulting in net issuance costs of approximately $3,100.

 

As of December 31, 2024, a total of 3,816,932 shares of common stock have been sold pursuant to the open market sale agreement.  As of December 31, 2024, approximately $86,154,000 remains available to be sold in the Company’s at-the-market offerings, subject to various limitations.

 

On November 14, 2024, we entered into a Securities Purchase Agreement with certain investors, pursuant to which the Company agreed to issue and sell (i) an aggregate of 9,783,496 shares of common stock, and (ii) one and a half warrants to purchase up to an aggregate of 14,675,244 shares of common stock in a registered direct offering (the “Offering”). The purchase price for one share and the accompanying 1.5 warrants was $1.25. The warrants are immediately exercisable for a period of five years from the date of the Offering at $1.125, subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization, or similar transactions and include anti-dilution protection provisions in the event subsequent sales or equity-linked financial instruments are issued at a price below the $1.125.

The aggregate gross proceeds to the Company from the Offering, which closed on November 18, 2024, was approximately $12,229,000 with net proceeds of approximately $11,393,000, net of placement agent fees of approximately $481,000 and legal fees of $357,000. The net proceeds were allocated between the common stock and warrants based on their relative fair values of approximately $8,118,000 and $3,275,000 with the net proceeds presented within stockholders’ equity. 

 

The Company’s Board of Directors and executive team participated in the Offering and invested a total of $696,000 and received shares of common stock totaling  556,800 and the accompanying warrants totaling 835,200.

 

The fair value of the warrants for purposes of the relative fair value allocation was estimated using a black-scholes model and the following assumptions: expected term of 5 years, volatility of 24.8%, dividend rate of 0.00%, and risk free rate of 4.28%.

 

The Offering was made pursuant to the Company’s registration statement on Form S-3 (File No. 333-268942), which was filed with the Securities and Exchange Commission (the “Commission”) on December 22, 2022 and declared effective by the Commission on December 30, 2022, and a prospectus supplement dated November 14, 2024 filed by the Company with the Commission.

 

Common Stock for Services

 

During the year ended December 31, 2024, we issued an aggregate of 301,209 of fully vested shares of restricted common stock to service providers and directors with an aggregate fair value of $383,879 based on the market price of our common stock on date of grant which is included in general and administrative expense on the statement of operation. 

 

During the year ended December 31, 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.

 

Common Stock for Stock Option Exercises

 

During the year ended December 31, 2024, we issued an aggregate of 1,499,655 shares of common stock for cash and cashless stock option exercises that resulted in cash proceeds of $60,000.

 

Stock-Based Compensation

 

Stock Options issued are part of the 2021 Equity Incentive Plan (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. 

 

Under the 2021 Plan, the Company has issued a total of 9,668,116 stock options with 14,331,884 reserved options remaining for issuance as of December 31, 2024. The Company recorded stock-based compensation of $907,225 and $925,181, respectively, related to vested options and options expected to vest granted to employees and various consultants of the Company, of which $738,147 and $796,881 was charged as general and administrative expenses and $169,078 and $128,300 as research and development expenses in the accompanying consolidated statements of operations during the years ended December 31, 2024 and 2023, respectively. During the years ended December 31, 2024 and 2023, the stock-based compensation expense recognized is net of estimated forfeitures of $0 and $50,000, respectively.

Stock Options

 

Stock option activity for the year ended December 31, 2024 and 2023 is summarized as follows:

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

Weighted

 

 

 

 

Average

 

 

 

 

 

Average

 

 

Aggregate

 

 

Remaining

 

 

 

 

 

Exercise

 

 

Intrinsic

 

 

Contractual

 

 

 

Shares

 

 

Price

 

 

Value

 

 

Life (Years)

 

Options outstanding at December 31, 2023

 

 

10,828,174

(i)

 

$0.83

 

 

$9,292,680

 

 

 

4.66

 

Granted

 

 

7,809,292

(ii)

 

 

1.26

 

 

 

-

 

 

 

-

 

Exercised

 

 

(1,946,901)

 

 

0.33

 

 

 

1,257,831

 

 

 

-

 

Expired/forfeit

 

 

(847,449)

 

 

2.76

 

 

 

-

 

 

 

-

 

Options outstanding at December 31, 2024

 

 

15,843,116(i)

 

$0.94

 

 

$3,324,000

 

 

 

5.95

 

Options exercisable at December 31, 2024

 

 

8,308,395(i)

 

$0.60

 

 

$3,324,000

 

 

 

2.93

 

 

(I) As of December 31, 2024 and 2023, the options outstanding include 5,900,000 and  6,700,000, respectively, options granted in connection with the Merger (see Note 1) and were not granted under the 2021 Plan. As of December 31, 2024, all  5,900,000  options are exercisable.

 

(ii) During the year ended December 31, 2024, 275,000 options were granted outside of our 2021 Plan in connection with a legal settlement (see Note 9).

 

During the year ended December 31, 2024, the options granted were primarily to executives, key employees and the legal settlement discussed above. The average grant-date fair value of the granted options was $0.46.

  

Of the total options granted during the year ended December 31, 2024, 3,399,646 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 performance-based options 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 options 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.

 

As of December 31, 2024, total unrecognized compensation expense for service based and performance-based options was $2,162,398 and $1,571,405, respectively. The unrecognized service-based expense will be recognized over a weighted-average period of 2.86 years. The unrecognized expense associated with the performance-based options will be expensed when it becomes probable that the performance obligations will be met.

 

During the year ended December 31, 2024, the options exercised consisted of 1,446,901 of cashless option exercises which resulted in the issuance of 999,655 shares of common stock shares and the exercise of 500,000 common stock options with an exercise price of $0.12 which resulted in gross proceeds of $60,000 and the issuance of 500,000 common stock shares.

 

During the year ended December 31, 2023, the options exercised consisted of 2,283,800 of cashless option exercises which resulted in the issuance of 2,067,902 shares of common stock shares and the exercise of 95,238 common stock options with an exercise price of $1.05 which resulted in gross proceeds of $100,000 and the issuance of 95,238 common stock shares.

 

Total unrecognized compensation associated with these unvested options is approximately $2,162,398 which will be recognized over a period of approximately three years.

 

Intrinsic value is based on the difference between the option exercise price and the quoted market price as of December 31, 2024.

 

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:

 

 

 

December 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Expected volatility

 

26.20 - 27.39%

 

 

26.25 - 35.88%

 

Expected term (years)

 

6.25 Years

 

 

5.45 - 6.53 Years

 

Risk-free rate

 

3.77 - 4.65%

 

 

3.57 - 4.66%

 

Dividend rate

 

 

0%

 

 

0%

Restricted Stock Units

 

During the year ended December 31, 2024, the Company granted an aggregate of 3,549,292 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 1,068,292 to key employees of the Company. These unvested restricted stock units consist of 1,649,646 units with time-based vesting provisions and 1,899,646 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 million 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 $1.03 to $1.30.  As of December 31, 2024, we have $2,330,508 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. As of December 31, 2024, the Company had $1,709,608 of unrecognized stock-based compensation associated with the time vesting restricted stock units which will be recognized over a weighted-average period of approximately 3.41 years. During the year ended December 31, 2024, $308,399 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 year

 

 

-

 

 

$-

 

Granted

 

 

3,549,292

 

 

 

1.23

 

Vested

 

 

-

 

 

 

-

 

Forfeited

 

 

-

 

 

 

-

 

Nonvested, end of the year

 

 

3,549,292

 

 

$1.23

 

 

 

Stock Warrants

 

During the year ended December 31, 2024, we issued 14,675,244 of common stock warrants in connection with the Offering discussed above and 1,235,000 warrants expired unexercised in December 2024.  During the year ended December 31, 2023, there were no new warrants issued and 15,000 warrants were exercised with an exercise price of $2.50 resulting in gross proceeds of $37,500 and the issuance of 15,000 shares of common stock. The intrinsic value of all outstanding warrants as of December 31, 2024 and 2023 was $0 based on the market price of our common stock of $0.68 per share.

 

 A summary of warrant activity for the year ended  December 31, 2024, is as follows:

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

Weighted

 

 

 

 

Average

 

 

 

 

 

Average

 

 

Aggregate

 

 

Remaining

 

 

 

 

 

Exercise

 

 

Intrinsic

 

 

Contractual

 

 

 

Shares

 

 

Price

 

 

Value

 

 

Life (Years)

 

Warrants outstanding at December 31, 2023

 

 

1,235,000

 

 

$2.50

 

 

$-

 

 

 

0.96

 

Granted

 

 

14,675,244

 

 

 

1.13

 

 

 

-

 

 

 

-

 

Expired/forfeit

 

 

(1,235,000)

 

 

2.50

 

 

 

-

 

 

 

-

 

Warrants outstanding at December 31, 2024

 

 

14,675,244

 

 

$1.13

 

 

$-

 

 

 

4.88

 

Warrants exercisable at December 31, 2024

 

 

14,675,244

 

 

$1.13

 

 

$-

 

 

 

4.88