XML 24 R13.htm IDEA: XBRL DOCUMENT v3.24.2.u1
Stockholders’ Equity
 6 Months Ended
Jun. 30, 2024
Equity [Abstract]  
Stockholders’ Equity

4. Stockholders’ Equity

 

Preferred Stock

 

The Company is authorized to issue a total of 10,000,000 shares of preferred stock, par value $0.0001 per share. On March 17, 2015, the Company filed a Certificate of Designations, Preferences, Rights and Limitations of its Series A Convertible Preferred Stock with the Delaware Secretary of State to amend the Company’s certificate of incorporation. The Company has designated a total of 350,000 shares as Series A Convertible Preferred Stock, which are non-voting and are not subject to increase without the written consent of a majority of the holders of the Series A Convertible Preferred Stock or as otherwise set forth in the Preferences, Rights and Limitations. The holders of each tranche of 175,000 shares of the Series A Convertible Preferred Stock are entitled to receive a per share dividend equal to 1% of the annual net revenue of the Company divided by 175,000, until converted or redeemed. As of June 30, 2024 and December 31, 2023, the Company had 9,650,000 shares of undesignated preferred stock, which may be issued with such rights and powers as the Board of Directors may designate.

 

Each share of Series A Convertible Preferred Stock may be converted, at the option of the holder, into 0.20833 shares of common stock (subject to customary anti-dilution provisions) and the Series A Convertible Preferred Stock is subject to mandatory conversion at the conversion rate in the event of a merger or sale transaction resulting in gross proceeds to the Company of at least $21,875,000. The Series A Convertible Preferred Stock has a liquidation preference based on its assumed conversion into shares of common stock. The Series A Convertible Preferred Stock does not have any cash liquidation preference rights or any registration rights. The 350,000 outstanding shares of Series A Convertible Preferred Stock were convertible into a total of 72,917 shares of common stock at June 30, 2024 and December 31, 2023.

 

Based on the attributes of the Series A Convertible Preferred Stock as previously described, the Company has accounted for the Series A Convertible Preferred Stock as a permanent component of stockholders’ equity.

 

 

Common Stock

 

The Company is authorized to issue a total of 100,000,000 shares of common stock, par value $0.0001 per share. As of June 30, 2024 and December 31, 2023, the Company had 2,249,290 shares of common stock issued and outstanding.

 

On June 2, 2023, the Company effected a 1-for-10 reverse split of its outstanding shares of common stock.

 

The authorized number of shares of common stock and the par value per share were not affected by the reverse stock split. No fractional shares were issued in connection with the reverse stock split, with all fractional shares being rounded up to the next whole share.

 

All share and per share amounts and information presented herein have been retroactively adjusted to reflect the reverse stock split for all periods presented.

 

Effective March 10, 2023, the Company issued 1,250 shares of common stock upon the exercise of a stock option in the form of a warrant held by a consultant to the Company for 1,250 shares exercisable at $5.025 per share for total cash proceeds of $6,281.

 

Effective July 20, 2023, the Company sold 180,000 shares of common stock at a price of $6.00 per share and pre-funded warrants to purchase 403,334 shares of common stock at a price of $5.9999 per pre-funded warrant to an institutional investor in a registered direct offering. The pre-funded warrants had an exercise price of $0.0001 per share, were immediately exercisable upon issuance, and were valid and exercisable until all pre-funded warrants were exercised in full.

 

During the period from July 24, 2023 through August 7, 2023, the 403,334 pre-funded warrants, exercisable at $0.0001 per common share, were exercised for total cash proceeds of $41, resulting in the issuance of 403,334 shares of common stock. The pre-funded warrants were determined to be common stock equivalents.

 

In a concurrent private placement to the institutional investor, the Company also sold warrants to purchase 583,334 shares of common stock. Each common warrant had an initial exercise price of $6.00 per share, was immediately exercisable upon issuance, and expires five years thereafter on July 20, 2028. The common warrants and the shares of common stock issuable upon exercise of the common warrants were not registered under the Securities Act of 1933, as amended (the “Securities Act”) and were offered pursuant to the exemption provided in Section 4(a)(2) under the Securities Act and Rule 506(b) promulgated thereunder. The shares of common stock issuable upon exercise of the warrants were registered for resale on a registration statement on Form S-3 declared effective by the SEC on May 2, 2024.

 

The registered direct offering and the concurrent private placement generated gross proceeds of $3,499,964. The total cash costs of the registered direct offering and the private placement were $362,925, resulting in net proceeds of $3,137,039. Pursuant to the placement agent agreement, the Company granted the placement agent warrants to purchase 35,000 shares of common stock at an exercise price of $6.60 per share and expiring on July 20, 2028.

 

The exercise prices of the warrants issued to the institutional investor (exercisable at $6.00 per share) and to the placement agent (exercisable at $6.60 per share) are subject to customary adjustments for stock splits, stock dividends, stock combinations, reclassifications, reorganizations, or similar events affecting the Company’s common stock. In addition, the warrants issued to the institutional investor contain a “fundamental transaction” provision which provides that if any defined transactions are within the Company’s control and are consummated, the holder of the unexercised common stock warrants would be entitled to receive, at its option, in exchange for extinguishment of such warrants, cash consideration equal to a Black-Scholes valuation amount, as defined in the warrant agreement. The fundamental transaction provision includes (i) a sale, lease, assignment, transfer, conveyance or other disposition of all or substantially all of the assets of the Company in one or a series of related transactions, or (ii) a change in control of the Company by which it, directly or indirectly, in one or more related transactions, consummates a stock or share purchase agreement or other business combination with another person or group, whereby such other person or group acquires more than 50% of the voting power of the common equity of the Company.

 

 

If such fundamental transaction is not within the Company’s control, including not being approved by the Company’s Board of Directors, the warrant holder would only be entitled to receive the same type or form of consideration (and in the same proportion) equal to the Black-Scholes valuation amount of the remaining unexercised portion of the warrant on the date of consummation of such fundamental transaction as the holders of the Company’s common stock receive. Accordingly, these warrants are classified as a component of permanent stockholders’ equity. The Company will account for any cash payment for a warrant redemption as a distribution from stockholders’ equity, as and when a fundamental transaction is consummated and such cash payment is required to be made.

 

Common Stock Warrants

 

A summary of common stock warrant activity, including warrants to purchase common stock that were issued in conjunction with the Company’s public offering, during the six months ended June 30, 2024 is presented below.

 

Schedule of Warrants Outstanding 

   Number of Shares  

Weighted Average

Exercise Price

  

Weighted Average

Remaining

Contractual

Life (in Years)

 
             
Warrants outstanding at December 31, 2023   808,365   $16.407      
Issued   —    —      
Exercised   —    —      
Expired   —    —      
Warrants outstanding at June 30, 2024   808,365   $16.407    3.49 
                
Warrants exercisable at December 31, 2023   808,365   $16.407      
Warrants exercisable at June 30, 2024   808,365   $16.407    3.49 

 

At June 30, 2024, the outstanding warrants are exercisable at the following prices per common share:

 

Schedule of Warrants Outstanding and Exercisable 

Exercise Prices   Warrants
Outstanding (Shares)		 
      
$6.000    583,334 
$6.600    35,000 
$20.000    29,000 
$37.000    11,331 
$57.000    149,700 
      808,365 

 

The warrants exercisable at $57.00 per share at June 30, 2024 consist of 1,497,000 publicly-traded warrants, described herein on a pre-split 1-for-10 basis, that were issued as part of the Company’s November 2020 public offering of units, and are exercisable for a period of five years thereafter. As a result of the 1-for-10 reverse split of the Company’s common stock effective June 2, 2023, each such publicly-traded warrant currently now represents the right to purchase 1/10th of a share of common stock at the original exercise price of $5.70 per share. Accordingly, the exercise of 10 warrants, each exercisable at $5.70, are required to acquire one share of post-split common stock, which is equivalent to a purchase price of $57.00 per share.

 

Based on the closing fair market value of $2.37 per share on June 30, 2024, there was no intrinsic value attributed to exercisable but unexercised common stock warrants at June 30, 2024.

 

Information with respect to the issuance of common stock in connection with various stock-based compensation arrangements is provided at Note 6.