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STOCK OPTIONS AND WARRANTS | 9 Months Ended
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Sep. 30, 2024
STOCK OPTIONS AND WARRANTS |
STOCK OPTIONS AND WARRANTS | NOTE 9 - STOCK OPTIONS AND WARRANTS 2021 Equity Incentive Plan In July 2021, our Board and shareholders authorized the 2021 Equity Incentive Plan (the “2021 Plan”), covering 180,000 shares of common stock. In January 2022, the number of shares authorized under the 2021 Plan was automatically increased to 228,530 shares pursuant to an escalation provision in the plan. The purpose of the 2021 Plan is to advance the interests of the Company and our related corporations by enhancing the ability of the Company to attract and retain qualified employees, consultants, officers, and directors, by creating incentives and rewards for their contributions to the success of the Company and its related corporations. The 2021 Plan is administered by our Board or by the Compensation Committee. The following awards may be granted under the 2021 Plan:
| ● | incentive stock options (“ISOs”)
| ● | non-qualified options (“NSOs”)
| ● | awards of our restricted common stock
| ● | stock appreciation rights (“SARs”)
| ● | restricted stock units (“RSUs”)
Any option granted under the 2021 Plan must provide for an exercise price of not less than 100% of the fair market value of the underlying shares on the date of grant and not less than $4.00 per share, but the exercise price of any ISO granted to an eligible employee owning more than 10% of our outstanding common stock must not be less than 110% of fair market value on the date of the grant. The plans further provide that with respect to ISOs the aggregate fair market value of the common stock underlying the options which are exercisable by any option holder during any calendar year cannot exceed $100,000. The exercise price of any NSO granted under the 2021 Plan is determined by the Board at the time of grant but must be at least equal to fair market value on the date of grant. The term of each plan option and the manner in which it may be exercised is determined by the Board or the Compensation Committee, provided that no option may be exercisable more than 10 years after the date of its grant and, in the case of an incentive option granted to an eligible employee owning more than 10% of the common stock, no more than five years after the date of the grant. The terms of any other type of award under the 2021 Plan are determined by the Board at the time of grant. Subject to the limitation on the aggregate number of shares issuable under the plans, there is no maximum or minimum number of shares as to which a stock grant or plan option may be granted to any person. 2024 Equity Incentive Plan On July 11, 2024, our Board and Majority Shareholders approved and ratified the 2024 Equity Incentive Plan (the “2024 Plan”), covering a minimum of 2,000,000 shares of common stock and up to 2,500,000 of common stock, if all shares of shares of common stock issuable by the Company in the 2024 Exempt Offering, as described herein, are issued on or about the Effective Date. The purpose of the 2024 Plan is to advance the interests of the Company and our related corporations by enhancing the ability of the Company to attract and retain qualified employees, consultants, officers, and directors, by creating incentives and rewards for their contributions to the success of the Company and its related corporations. The 2024 Plan is administered by our Board or by the Compensation Committee. The following awards may be granted under the 2024 Plan:
| ● | incentive stock options (“ISOs”)
| ● | non-qualified options (“NSOs”)
| ● | awards of our restricted common stock
| ● | stock appreciation rights (“SARs”)
| ● | restricted stock units (“RSUs”)
Any option granted under the 2024 Plan must provide for an exercise price of not less than 100% of the fair market value of the underlying shares on the date of grant and not less than $4.00 per share, but the exercise price of any ISO granted to an eligible employee owning more than 10% of our outstanding common stock must not be less than 110% of fair market value on the date of the grant. The plans further provide that with respect to ISOs the aggregate fair market value of the common stock underlying the options which are exercisable by any option holder during any calendar year cannot exceed $100,000. The exercise price of any NSO granted under the 2021 Plan is determined by the Board at the time of grant but must be at least equal to fair market value on the date of grant. The term of each plan option and the manner in which it may be exercised is determined by the Board or the Compensation Committee, provided that no option may be exercisable more than 10 years after the date of its grant and, in the case of an incentive option granted to an eligible employee owning more than 10% of the common stock, no more than five years after the date of the grant. The terms of any other type of award under the 2024 Plan are determined by the Board at the time of grant. Subject to the limitation on the aggregate number of shares issuable under the plans, there is no maximum or minimum number of shares as to which a stock grant or plan option may be granted to any person. Stock Options There were no stock options granted during the nine months ended September 30, 2024. During the three months ended September 30, 2024, and 2023, we recorded $27,954 and $343,951 of compensation expense, respectively, related to stock options, and during the nine months ended September 30, 2024, and 2023, we recorded $100,168 and $954,317 of compensation expense, respectively related to stock options. A summary of the status of the Company’s stock options as of September 30, 2024, and changes during the period are presented below:
|  | Options Outstanding |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Life (In Years) |  |  | Aggregate Intrinsic Value |
Outstanding at December 31, 2023 |  |  | 240,188 |  |  | $ | 46.96 |  |  |  | 0.78 |  |  | $ | - |
Granted |  |  | - |  |  |  | - |  |  |  |  |  |  |  |  |
Exercised |  |  | - |  |  |  | - |  |  |  |  |  |  |  |  |
Expired or cancelled |  |  | (194,343 | ) |  |  | 48.79 |  |  |  |  |  |  |  |  |
Outstanding at September 30, 2024 |  |  | 45,844 |  |  | $ | 37.27 |  |  |  | 1.76 |  |  | $ | - |
Exercisable at September 30, 2024 |  |  | 32,896 |  |  | $ | 43.71 |  |  |  | 1.52 |  |  | $ | - |
As of September 30, 2024, there was approximately $131,27326053 of total unrecognized compensation cost related to non-vested stock options which vest over time and is expected to be recognized over a period of four years, as follows: 2024, $26,053; 2025, $89,018; 2026, $14,683; 2027, $1,223; and thereafter $296. The intrinsic value of options outstanding is $0 at September 30, 2024 and the intrinsic value of options exercisable is $0 at September 30, 2024. Warrants 2024 Warrant Grants Warrants issued for intangible purchase On March 28, 2024, the Company and GOLQ entered into an Amendment to Technology License and Commercialization Agreement (the “Amendment”). Under the Amendment, the Company and GOLQ agreed to and added Section 3.3 to further detail technical assistance from GOLQ to the Company. In addition, Section 5.1 was amended such that the royalty was lowered from eight percent (8%) to five percent (5%) for which the Company granted to GOLQ a warrant to purchase two hundred ninety-two thousand (292,000) shares of Company Common Stock (the “Warrant”) for a price equal to $0.01 per share (the “Exercise Price”). The Warrant may be exercised at any time commencing upon the date that is six (6) months from the Effective Date and terminating at 5:00 P.M., New York time, on the three (3) year anniversary of the Effective Date, unless the closing sale price for the common stock of the Company has closed at or above $5.00 for ten consecutive trading days. Further, the Amendment contains a blocker provision that limits shares issuable under the Warrant such that the shares beneficially owned by GOLQ does not exceed 9.99% of the total number of issued and outstanding shares of the Company’s Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise). These GOLQ Warrants were valued at $480,358 and together with the common shares issued to GOLQ, discussed in Note 8, were treated as consideration for the licenses purchased from GOLQ. Warrants exercised On February 9, 2024, the 8/30/2022 noteholders entered into an agreement with the new noteholders (Note 7) whereas the assignees will purchase 108,912 Warrants from the previous holders. On February 12, 2024, the noteholders elected to exercise such warrants and paid the exercise price thereof through the cancellation of debt. The Parties agreed that the Exercise Price of the Warrants shall be paid by and through reduction and cancellation of aggregate amounts due under the notes previously assigned to them on February 9, 2024. A total of $302,175 of exercise proceeds were received, and 108,912 common shares issued in conjunction with the exercise. On February 9, 2024, Calvary Fund I L.P entered into an agreement with the new noteholder (Note 7) whereas the assignees will purchase 104,274 Warrants from Calvary. On February 12, 2024, the noteholders elected to exercise such warrants and paid the exercise price thereof through the cancellation of debt. The Parties agree that the Exercise Price of the Warrants shall be paid by and through reduction and cancellation of aggregate amounts due under the notes previously assigned to them on February 9, 2024. A total of $289,882 of exercise proceeds were received, and 104,274 common shares issued in conjunction with the exercise. Warrant activity for the nine months ended September 30, 2024, is as follows:
|  |  |  |  | Weighted |
|  |  |  |  | Average |
|  |  |  |  | Exercise |
|  | Warrants |  |  | Price per |
|  | Outstanding |  |  | Share |
Outstanding at December 31, 2023 |  |  | 979,853 |  |  | $ | 2.37 |
Issued |  |  | 292,000 |  |  |  | 0.10 |
Exercised |  |  | (213,186 | ) |  |  | 0.19 |
Expired or cancelled |  |  | (147,608 | ) |  |  | 0.00 |
Outstanding at September 30, 2024 |  |  | 911,059 |  |  | $ | 1.97 |
All warrants are exercisable at September 30, 2024. The weighted average remaining life of the warrants is 2.70 years at September 30, 2024. The fair values of warrants granted were estimated using Black-Sholes option-pricing model with the following assumptions:
|  | September 30, 2024 |
Risk-free interest rates |  |  | 4.28 | %
Expected life (in years) |  |  | 3.00 |
Expected volatility |  |  | 194.4 | %
Dividend yield |  |  | 0.00 | %

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