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STOCKHOLDERS’ EQUITY
 6 Months Ended
Jun. 30, 2024
Equity [Abstract]  
STOCKHOLDERS’ EQUITY

NOTE 4 - STOCKHOLDERS’ EQUITY

  

Warrant Exercise and Issuance

 

On February 6, 2024, the Company entered into agreements with certain holders of its existing warrants exercisable for an aggregate of 3,351,580 shares of its Common Stock (collectively, the “Existing Warrants”), to exercise their warrants at a reduced exercise price of $2.33 per share, in exchange for the issuance of new warrants (the “New Warrants”) as described below (the “Warrant Exercise and Issuance”). The aggregate gross proceeds from the exercise of the Existing Warrants and the payment of the New Warrants, as described below, was approximately $8.1 million, before deducting cash issuance costs in the amount of $595,364. The reduction of the exercise price of the Existing Warrants and the issuance of the New Warrants was structured as an at-market transaction under Nasdaq rules. Of the 3,351,580 shares of Common Stock issuable upon the exercise of the Existing Warrants, through June 30, 2024, the Company had issued an aggregate of 2,150,000 shares of Common Stock. The remaining 1,201,580 shares of Common Stock, which are issuable to Auctus Fund, LLC (“Auctus”), are being held in abeyance due to Auctus’ maximum beneficial ownership limitation (the “Abeyance Shares”). Such Abeyance Shares have been fully paid for and are issuable upon notice from Auctus to the Company.

 

In consideration for the immediate exercise of the Existing Warrants for cash and the payment of $0.125 per share underlying the New Warrants, the exercising holders received the New Warrants to purchase shares of Common Stock in a private placement pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”). The New Warrants will be exercisable for a period of five years into an aggregate of 2,513,686 shares of Common Stock at an exercise price of $2.43 per share. The securities offered in the private placement have not been registered under the Securities Act or applicable state securities laws. Accordingly, the securities may not be offered or sold in the United States except pursuant to an effective registration statement or an applicable exemption from the registration requirements of the Securities Act and such applicable state securities laws. As part of the transaction, the Company agreed to file a resale registration statement with the SEC to register the resale of the shares of Common Stock underlying the New Warrants issued in the private placement. Such resale registration statement was filed and was declared effective by the SEC on April 18, 2024.

 

 

In connection with the transaction described above, the Company entered into a financial advisory services agreement, dated February 5, 2024, with Roth Capital Partners, LLC (“Roth”), pursuant to which the Company has paid Roth a cash fee of approximately $528,000 for its services, in addition to reimbursement for certain expense. During the six months ended June 30, 2024, the Company incurred an aggregate of $595,364 of cash issuance costs related to the Warrant Exercise and Issuance.

 

Prior to the Warrant Exercise and Issuance, the Existing Warrants were classified as derivative liabilities. Additionally, the Company analyzed the form of the New Warrants and determined that they should be classified as derivative liabilities in accordance with ASC 815-40, Derivatives and Hedging — Contracts in Entity’s Own Equity. Under the New Warrants, the Company does not control the occurrence of events, such as a tender offer or exchange, that may trigger cash settlement of the New Warrants and not result in a change of control of the Company. As a result, such New Warrants do not meet the criteria for equity treatment. Additionally, certain New Warrants contain adjustments to the settlement amount based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under ASC 815-40 and, accordingly, such New Warrants are not considered indexed to the Company’s own stock and are not eligible for an exception from derivative accounting. See Note 6 – Fair Value Measurement for details regarding the valuation of the Existing Warrants and New Warrants.

 

The Company determined the Warrant Exercise and Issuance to be an exchange by investors of Existing Warrants with an aggregate fair value of $1,115,334 along with aggregate cash consideration of $8,123,392 (consisting of $7,809,181 paid to exercise the Existing Warrants and $314,211 paid for the New Warrants) for an aggregate of 3,351,580 shares of common stock with an aggregate fair value of $4,742,244, New Warrants with an aggregate fair value of $2,189,420 and aggregate cash issuance costs of $595,364 and, accordingly, the Company recorded a gain on extinguishment of $1,711,698 during the six months ended June 30, 2024.

 

Warrants

 

See Note 6 – Fair Value of Financial Instruments for details regarding the valuation of the New Warrants.

 

A summary of the Company’s warrant activity and related information follows:

  

           Weighted 
       Weighted   Average 
       Average   Remaining 
   Number of   Exercise   Life 
   Warrants   Price   In Years 
Outstanding, January 1, 2024   4,791,019   $10.57      
Granted   2,513,686    2.43      
Exercised   (3,351,580)   2.33      
Expired   (614)   3,136.85      
Outstanding, June 30, 2024   3,952,511   $3.85    3.8 
                
Exercisable, June 30, 2024   3,952,511   $3.85    3.8 

 

 

As of June 30, 2024, the warrants exercisable and outstanding had an intrinsic value of $0.

 

Stock Options

 

On February 13, 2024, the Company granted options to purchase an aggregate 1,934,716 shares of the Company’s Common Stock at an exercise price of $1.45 per share to employees, the Company’s board of directors and a member of the Company’s Scientific Advisory Board. The options had an aggregate grant date fair value of $2,140,000 and vest as follows: (i) options to purchase an aggregate 513,663 shares of common stock vest monthly over one year, and (ii) options to purchase an aggregate of 1,421,053 shares of common stock vest to the extent of 50% immediately with the remainder vesting quarterly over two years commencing one year from the date of grant. The Company will recognize the grant date fair value of the options proportionate to the vesting period.

 

In applying the Black-Scholes option pricing model to stock options granted, the Company used the following assumptions:

  

   For the Six Months Ended 
   June 30, 
   2024   2023 
Risk free interest rate   4.14 - 4.30%    4.22%
Expected term (years)   2.77 - 5.27    3.5 
Expected volatility   101 - 102%    175%
Expected dividends   0.00%   0.00%

 

Options granted during the six months ended June 30, 2024 and 2023 had a weighted average grant date fair value per share of $1.11 and $2.77 per share, respectively. There were no stock options granted during the three months ended June 30, 2024 and 2023.

 

A summary of the stock option activity during the six months ended June 30, 2024 is presented below:

 

           Weighted     
       Weighted   Average     
       Average   Remaining     
   Number of   Exercise   Life   Intrinsic 
   Options   Price   In Years   Value 
Outstanding, January 1, 2024   1,466,892   $4.11                    
Granted   1,934,716    1.45           
Exercised   -    -           
Forfeited   -    -           
Outstanding, June 30, 2024   3,401,608   $2.60    8.0   $- 
                     
Exercisable, June 30, 2024   2,189,947   $3.12    7.6   $- 

 

Restricted Stock Units (“RSUs”)

 

Pursuant to the Company’s 2021 Stock Incentive Plan (the “2021 Plan”), the Company may grant RSUs to employees, consultants or non-employee directors (“Eligible Individuals”). The number, terms and conditions of the RSUs that are granted to Eligible Individuals are determined on an individual basis by the 2021 Plan administrator. On the distribution date, the Company shall issue to the Eligible Individual one unrestricted, fully transferable share of the Company’s common stock (or the fair market value of one such share in cash) for each vested and nonforfeitable RSU.

 

 

A summary of the Company’s unvested RSUs as of June 30, 2024 is as follows:

 

   Number of Shares 
Non-vested at January 1, 2024   97,827 
Granted   - 
Vested   (97,827)
Forfeited   - 
Non-vested at June 30, 2024   - 

 

Stock-Based Compensation Expense

 

The following table presents information related to stock-based compensation expense:

 

            Weighted Average  
  

For the Three Months Ended

June 30,

  

For the Six Months Ended

June 30,

  

Unrecognized at

June 30,

  

Remaining

Amortization Period

 
   2024   2023   2024   2023   2024   (Years) 
General and administrative  $324,322   $1,485,668   $2,352,696   $4,864,166   $1,344,375    1.86 
Total  $324,322   $1,485,668   $2,352,696   $4,864,166   $1,344,375    1.86 

 

The following table presents stock-based compensation by award type:

 

SCHEDULE OF STOCK COMPENSATION BY AWARD TYPE

   For the Three Months Ended   For the Six Months Ended 
   June 30,   June 30, 
   2024   2023   2024   2023 
Options  $324,322   $321,534   $1,367,658   $2,511,962 
RSUs   -    1,164,134    985,038    2,352,204 
Total  $324,322   $1,485,668   $2,352,696   $4,864,166