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STOCKHOLDERS’ EQUITY
 9 Months Ended 12 Months Ended
Jul. 31, 2024
Oct. 31, 2023
Equity [Abstract]    
STOCKHOLDERS’ EQUITY

NOTE 10 – STOCKHOLDERS’ EQUITY

 

Common Shares

 

On November 11, 2023, the Company entered into an agreement with a vendor to provide marketing and distribution services for a period of six months, with compensation in the form of 10,000 shares. The Company issued the vendor 10,000 common shares at a fair market value price of $9.60 per share for a total amount of $95,200; this amount was recognized as marketing fees in the first and second quarters of 2024.

 

On December 18, 2023, December 29, 2023 and January 12, 2024, the Company issued conversion shares which numbered 18,393, 18,393 and 18,393, respectively, at fair values per share of $6.80, $6.20 and $5.80, respectively, for total amounts of $125,072, $114,036 and $105,575, with cash payments of $36,698, $35,837 and $49,935 made to the investor for the difference between the monthly conversion price and the floor price listed in the most recent amendment to the agreement (see Note 9). Additionally, losses in the amounts of $36,770, $24,873 and $30,510, respectively, were recognized for the difference between the value of the shares issued and the principal payment amounts.

 

On February 1, 2024, February 16, 2024, March 22, 2024 and April 2, 2024, the Company issued conversion shares numbering 91,965, 42,917, 42,917 and 257,500, respectively, at fair values per share of $4.80, $2.60, $2.00 and $3.40, respectively, for total amounts of $441,428, $113,300, $84,117 and $881,165, with a cash payment of $32,247 made to the investor for the difference between the monthly conversion price and the floor price listed in the most recent amendment to the agreement for the February 16, 2024 conversion (see Note 9). Additional shares of 119,796 and 17,576, respectively, were issued on February 1, 2024 and April 15, 2024, respectively, at fair values of $4.80 and $12.60, respectively, for total amounts of $574,779 and $221,449, respectively; these share issuances were made in lieu of additional cash payments related to the February 1, 2024 and March 22, 2024 principal payment conversions. Additionally, losses in the amounts of $391,447, $20,547, $180,566 and $131,165, respectively, were recognized for the difference between the value of the shares issued and the principal payment amounts.

 

On February 2, 2024 and February 5, 2024, the Company made principal payments towards the second tranche in the amounts of $275,000 and $275,000, respectively, which it converted into shares at 103% for conversion amounts of $283,250 and $283,250, respectively. Conversion shares were issued numbering 94,417 and 94,417, respectively, at fair values per share of $3.40 and $3.60, respectively, for total amounts of $323,094 and $339,334, respectively. Additionally, losses in the amounts of $48,094 and $64,334, respectively, were recognized for the difference between the value of the shares issued and the principal payment amounts.

 

On March 20, 2024, the Company issued 5,000 shares of common stock to a consultant as a settlement for non-performed marketing services per an agreement dated November 2021; such shares were issued at a fair value of $2.20 per share for a total value of $10,500.

 

 

On March 26, 2024, the Company entered into an agreement with consultants to provide marketing services; the agreement has an effective date of April 26, 2024 and a term from April 1, 2024 through June 30, 2024. The terms provide for a one-time cash payment of $100,000 or, in lieu of a cash payment, the Company may elect to complete a one-time equity issuance in the form of 50,000 shares of common stock, as well as three monthly cash payments totaling $30,000 to be paid in the first fiscal half of 2024. The Company issued 50,000 shares of common stock at a fair value of $7.40 per share for a total amount of $368,000.

 

On April 16, 2024 and April 24, 2024, the Company issued 37,500 shares of common stock and 37,500 shares of common stock respectively, to the April 2024 Investors as and for a commitment fee in connection with the April 2024 Financings. The commitment shares were issued at fair values of $9.80 per share and $8.00 per share, respectively, for values totaling $366,000 and $301,500, respectively.

 

On April 29, 2024, the Company entered an agreement with consultants to provide marketing services; the agreement has a term from April 29, 2024 through October 29, 2024. The terms provide for a $30,000 cash payment and the issuance of 30,000 shares of common stock. The Company issued 30,000 shares of common stock at a fair value of $7.40 per share for a total amount of $220,800.

 

Warrants

 

October 2023 SPA with Warrants

 

On October 4, 2023 and December 29, 2023, the Company entered into placement agent agreements with Spartan (see Note 8 for further information) for their role in connection with the two tranche fundings related to the October 2023 SPA; among other things, the agreements provide the agent with equity-classified warrants to purchase a number of common shares equal to 5% of the number of common shares initially issuable upon conversion of each note tranche. For the first tranche, the Company issued to Spartan warrants to purchase 4,167 shares of common stock with a fair value of $38,029; the factors used to determine fair value were a share price of $11.00, an exercise price of $26.40, an expected term of 5 years, annualized volatility of 137.10%, a dividend rate of zero percent and a discount rate of 4.72%. For the second tranche, the Company issued to Spartan warrants to purchase 2,750 common shares of common stock with a fair value of $14,753; the factors used to determine fair value were a share price of $6.40, an exercise price of $11.00, an expected term of 5 years, annualized volatility of 137.10%, a dividend rate of zero percent and a discount rate of 3.93%.

 

On January 2, 2024, the second tranche of the October 2023 SPA was funded (see Note 9 for further information); in connection with this funding, the Company issued to the investor equity warrants to purchase up to 22,279 shares of common stock with an aggregate relative fair value of $98,708; the factors used to determine fair value were a share price of $6.40, an exercise price of $10.00, an expected term of 5 years, annualized volatility of 137.10%, a dividend rate of zero percent and a discount rate of 3.93%.

 

June 2024 SPA with Warrants

 

On June 27, 2024, the Company entered into the June 2024 SPA with the June 2024 Investors (see Note 9 above); pursuant to the terms and conditions of the agreement, in consideration for providing financing, the Company issued to each June 2024 Investor a warrant to purchase 37,231 shares of the Company’s common stock, at an initial exercise price of $7.90500 per share. The June 2024 Warrants (which are for the purchase of an aggregate 74,461 common shares) were recorded as equity warrants with an aggregate relative fair value of $257,701; the factors used to determine fair value were a share price of $6.00, an exercise price of $7.90500, an expected term of 5 years, annualized volatility of 132.52%, a dividend rate of zero percent and a discount rate of 4.29%.

 

 

A summary of the warrant activity during the nine months ended July 31, 2024 is presented below:

 

           Weighted     
       Weighted   Average     
   Number of   Average Exercise   Remaining Life     
   Warrants   Price   in Years   Intrinsic Value 
Outstanding November 1, 2023   88,336   $22.40    7.3   $- 
Issued   103,657    9.20    4.8    - 
Outstanding, July 31, 2024   191,993   $15.20    4.0   $98,800 
                     
Exercisable, July 31, 2024   191,993   $15.20    4.0   $98,800 

 

A summary of outstanding and exercisable warrants as of July 31, 2024 is presented below:

 

Warrants Outstanding   Warrants Exercisable 
        Weighted     
        Average     
Exercise   Number of   Remaining   Number of 
Price   Shares   Life in Years   Shares 
$0.20    20,000    3.7    20,000 
$30.00    20,000    0.4    20,000 
$66.00    5,000    3.7    5,000 
$24.00    43,336    4.2    43,336 
$1.32    4,167    4.2    4,167 
$10.00    22,279    4.4    22,279 
$11.00    2,750    4.4    2,750 
$8.00    74,461    4.9    74,461 
      191,993    4.0    191,993 

 

Stock Options

 

A summary of the option activity during the nine months ended July 31, 2024 is presented below:

 

       Weighted   Weighted Average     
   Number of   Average   Remaining Life     
   Options   Exercise Price   in Years   Intrinsic Value 
                 
Outstanding, November 1, 2021   6,000   $10.40    4.0   $- 
Issued   -    -    -    - 
Outstanding July 31, 2024   6,000   $10.40    4.0   $- 
                     
Exercisable, July 31, 2024   5,250   $10.40    4.0   $- 

 

 

A summary of outstanding and exercisable options as of July 31, 2024 is presented below:

 

 Options Outstanding    Options Exercisable 
           Weighted Average      
 Exercise Price    Number of Shares    Remaining Life in Years    Number of Shares 
$10.40    6,000    4.0    6,000 
      6,000         6,000 

 

On August 15, 2023, the Company issued five-year options to purchase 6,000 shares of the Company’s common stock to a consultant of the Company, pursuant to the Plan. The options have an exercise price of $10.40 per share and vest monthly over a period of 24 months, beginning on the vesting commencement date, which is May 1, 2022 per the option agreement. The options have a grant date fair value of $55,711, which will be recognized over the vesting term.

 

The assumptions used in the Black-Scholes valuation method for these options issued in 2023 were as follows:

 

Risk free interest rate   4.36%
Expected term (years)   5.0 
Expected volatility   137.1%
Expected dividends rate   0%

 

NOTE 10 – STOCKHOLDERS’ EQUITY

 

Common Shares

 

The Company is authorized to issue an aggregate of 25,000,000 shares. The authorized capital stock is divided into: (i) 24,500,000 shares of common stock having a par value of $0.0001 per share and (ii) 500,000 shares of preferred stock having a par value of $0.0001 per share.

 

In January 2022, the Company entered into the January 2022 SPA with GPL, which has warrants attached that are exercisable into up to 50% of the number of shares of common stock issued upon full conversion of the Notes. The Company determined the warrants are equity classified and used a third party to perform a valuation to estimate their fair market value at January 28, 2022, which was $994,091.

 

On April 28, 2022, the Company issued 225,000 shares of its $0.0001 par common stock at a price of $5.80 per share for a total aggregate fair value of $1,322,933 to GPL as default shares in connection with the January 2022 SPA (see Note 3, Note 6 and Note 9).

 

On July 11, 2022, the Company issued 3,000 shares of its $0.0001 par common stock to each of its five outside Directors for a total aggregate amount of 15,000 shares. The shares, or RSUs, vest in full upon the six-month anniversary of the IPO, subject to the directors’ continued service on the vesting date; upon issuance, the shares will be fully paid and non-assessable. The RSUs were recorded at a fair value of $5.80 per share for a total value of $88,200. Upon consummation of the IPO, the vesting period for these shares began and for the years ended October 31, 2023 and 2022, the Company recognized stock-based compensation in the amount of $88,200 and $0, respectively, within stock-based compensation expenses on the income statement, with unrecognized expense of $0 as of the period ended October 31, 2023.

 

On October 17, 2022, the Company issued 55,000 restricted shares to two of its executives pursuant to the Plan. As the Plan was not adopted until October 17, 2022, these shares were recorded as of that date at a fair value of $5.80 per share; such value was calculated via a third-party valuation performed using income and market methods, as well as a discounted cash flow method, with the terminal value using a market multiples method, adjusted for a lack of marketability. As of October 31, 2022, the Company recorded 55,000 restricted shares at a fair value of $323,400 and for the years ended October 31, 2023 and 2022, the Company recognized stock-based compensation of $161,700 and $6,202, respectively, within stock-based compensation expenses on the income statement, with unrecognized expense of $155,498 as of October 31, 2023.

 

In December 2022, the Company entered into subscription agreements with two accredited investors for the aggregate issuance of 20,000 common shares for aggregate gross cash proceeds of $400,000. The common shares are $0.0001 par value and have a purchase price of $20.00 per share.

 

In April 2023, the Company consummated its IPO and sold 100,000 shares of common stock at a public offering price of $60.00 per share for gross proceeds of $6,000,000.

 

In April 2023, upon consummation of its IPO, the Company also issued 18,750 commitment shares, the number of which was calculated by taking 25% of the outstanding principal balance of the January 2022 Notes of $4,500,000 and dividing it by the IPO price of $60.00 per share

 

On April 20, 2023, the Company issued 625 shares of common stock at a fair value of $40.00 per share to consultants in exchange for services rendered; the aggregate amount of $25,000 was recorded as fees for professional services as of the end of the period.

 

On May 1, 2023, the Company issued 35,000 restricted shares to six of its employees pursuant to the Plan (see Note 6); the shares were recorded at a fair value of $43.00 per share for an aggregate grant date fair value of $1,505,000, and for the years ended October 31, 2023 and 2022, the Company recognized stock-based compensation of $440,219 and $0, respectively, within stock-based compensation expenses on the income statement, with unrecognized expense of $1,064,781 as of the period ended October 31, 2023.

 

 

On May 2, 2023, June 23, 2023 and July 11, 2023, the Company issued 1,250, 5,000 and 5,000 shares of common stock, par value of $0.0001, respectively, at a fair value of $42.00, $17.60 and $24.20, respectively, to consultants in exchange for services rendered; the aggregate amounts of $52,500, $88,000 and $121,000, respectively, were recorded as fees for professional services as of the end of the period.

 

On June 30, 2023, the Company issued 2,400 shares of common stock, par value of $0.0001, at a fair value of $33.40 to Marcum, LLP for an aggregate amount of $80,159 for partial satisfaction of an account payable.

 

On June 30, 2023, the Company issued a Form S-1/A, which registered for resale (i) up to 157,466 shares of common stock, par value $0.0001 per share which the selling stockholders may acquire upon the exercise of outstanding common warrants and (ii) up to 25,000 shares of common stock, which the selling stockholders may acquire upon the exercise of outstanding pre-funded warrants. Such warrants were issued to the selling stockholders in connection with securities purchase agreements entered into on January 28, 2022 and September 20, 2022. The Company recorded 34,993 shares of common stock that are not exercised but registered in accordance with their common warrant agreements and 25,000 shares of common stock that are not exercised but registered in accordance with their pre-funded warrant agreements upon the filing of this Form S-1/A.

 

On July 20, 2023, the Company issued 10,000 restricted shares pursuant to the Plan to Mr. Ingriselli (see Note 6) at a fair value of $21.40 per share for an aggregate fair value of $213,000. The shares vested fully on July 24, 2023 and the Company recognized stock-based compensation for the full value of the shares as of the end of the period.

 

On September 2, 2023, the Company issued 21,250 shares of its $0.0001 par common stock to four outside Directors with a fair value of $12.80 per share for a grant date value of $273,275. The shares, or RSUs, vest in full upon the six-month anniversary of the vesting commencement date (or August 28,2023), subject to the directors’ continued service on the vesting date. For the years ended October 31, 2023 and 2022, the Company recognized stock-based compensation in the amount of $96,016 and $0, respectively, within stock-based compensation expenses on the income statement, with unrecognized expense of $177,259 as of the period ended October 31, 2023.

 

On October 16, 2023, pursuant to the Peterson Employment Agreement, the Company issued Mr. Peterson is a grant of 50,000 shares of restricted stock pursuant to the Plan at a fair value of $5.40 per share for a grant date fair value of $271,000. The restricted stock grant vests over a period of two years, with 25% of the shares of restricted stock vesting six months after the Peterson Employment Agreement Effective Date, and the remainder vesting in equal tranches on each of the 12-, 18-, and 24-month anniversary dates of the Peterson Employment Agreement. As of October 31, 2023, the Company recognized stock-based compensation of $3,341 within stock-based compensation expenses on the income statement, with unrecognized expense of $267,659.

 

Warrants

 

January 2022 SPA with GPL Warrants

 

In January 2022, the Company entered into the January 2022 SPA with GPL, which had warrants attached that were exercisable into up to 50% of the number of shares of common stock issued upon full conversion of the Notes. The Company determined the warrants were equity classified and used a third party to perform a valuation to estimate their fair market value at January 28, 2022, which was $994,091. The factors used to determine their fair value were a term of 3 years, volatility of 92%, a share price based on comparable companies and an exercise price of 50% of the stock price upon the Company’s IPO.

 

Upon consummation of the IPO, the Company issued an aggregate of 125,973 warrants to the GPL investors at an exercise price of $20.60 and an expiration date of 3 years from the date of the IPO; on July 10, 2023, the Company entered into amendments to the warrant agreements with five of the six investors, whereby i) the exercise price was reduced from $20.60 to $16.00 and ii) the number of warrants was increased by a factor of 1.25 or 24,495 warrants in order to induce full, immediate exercise. Accordingly, 122,474 warrants (original number of warrants was 97,979) were exercised at an exercise price of $16.00 per share for aggregate proceeds (net of equity issuance costs of $146,938) of $1,812,635. The shares issued for the exercise of these warrants were registered for resale as part of the Form S-1/A filed on June 30, 2023. The Company accounted for the amendments as warrant modifications, whereby the effect of the modifications is measured as the difference in relative fair value immediately before the modification and after the modification; and any increase to the relative fair value is recognized as equity issuance costs.

 

 

To assess for the change in relative fair value, the Company performed a Black Scholes Option Model calculation to quantify the fair value of 97,979 common warrants under their original terms as of the modification date using the following assumptions: a share price of $28.60, an exercise price of $20.60, an expected term of 3.0 years, volatility of 136%, a dividend rate of 0% and a discount rate of 4.54%. The Company then performed a Black Scholes Option Model calculation to quantify the fair value of 122,474 common warrants with their new modified terms as of the modification date using the following assumptions: a share price of $30.60, an exercise price of $16.00, an expected term of 3.0 years, volatility of 136%, a dividend rate of 0% and a discount rate of 4.54%. The aggregate difference of approximately $0.3 million between the two calculated amounts was recorded as an equity issuance cost within equity during the period to account for the change in relative fair value.

 

On September 20, 2023, the Company and the sixth GPL investor entered into an amendment to their particular warrant agreement, pursuant to which the Company agreed to amend the warrant held by the holder in order to (i) reduce the exercise price of the warrant from an exercise price of $20.60 per share to $2.20 per share and (ii) add a customary cashless exercise provision to the warrant. On September 21, 2023, the holder delivered a notice of exercise to the Company exercising the Warrant, in full, on a “cashless basis,” pursuant to which an aggregate of 22,592 shares of common stock were issued to the holder on or before September 25, 2023.

 

The Company accounted for the amendments as warrant modifications, whereby the effect of the modifications is measured as the difference in relative fair value immediately before the modification and after the modification; and any increase to the relative fair value is recognized as equity issuance costs.

 

To assess for the change in relative fair value, the Company performed a Black Scholes Option Model calculation to quantify the fair value of 27,994 common warrants under their original terms as of the modification date using the following assumptions: a share price of $11.40, an exercise price of $20.60, an expected term of 3.0 years, volatility of 148%, a dividend rate of 0% and a discount rate of 4.82%. The Company then performed a Black Scholes Option Model calculation to quantify the fair value of 22,592 common warrants with their new modified terms as of the modification date using the following assumptions: a share price of $11.40, an exercise price of $2.20, an expected term of 3.0 years, volatility of 148%, a dividend rate of 0% and a discount rate of 4.82%. The aggregate difference of less than $1,000 between the two calculated amounts was recorded as an equity issuance cost within equity during the period to account for the change in relative fair value.

 

Other Warrants

 

In December 2022, the Company entered into subscription agreements with two accredited investors for the aggregate issuance of 20,000 common shares, as well as warrants to purchase additional shares up to the initial subscription amount; the warrants are exercisable for two years and have an exercise price equal to fifty percent of the price per share the Company sells its common shares in its IPO. The warrants were determined to be equity classified and were recorded at fair value in additional paid-in capital on the balance sheet for the period. Their fair value was based on the price the third-party investors paid for the original subscription agreements described above.

 

The Company also issued warrants to purchase 5,000 shares of common stock to the underwriters at an exercise price of $66.00 per share (110% of public offering price).

 

 

A summary of the warrant activity during the years ended October 31, 2023 and 2022 is presented below:

  

  

Number of

Warrants

  

Weighted

Average

Exercise

Price

  

Weighted

Average

Remaining

Life in

Years

  

Intrinsic

Value

 
                 
Outstanding, November 1, 2021   -   $-    -   $- 
Issued   -    -    -    - 
Outstanding, November 1, 2022   -    -    -    - 
Issued   238,803   $20.80    3.1    - 
Exercised   (145,065)  $20.60    -    - 
Cancelled   -    -    -    - 
Expired   (5,402)   -    -    - 
Outstanding, October 31, 2023   88,336   $22.40    3.9   $211,200 
                     
Exercisable, October 31, 2023   88,336   $22.40    3.9   $211,200 

 

A summary of outstanding and exercisable warrants as of October 31, 2023 is presented below:

 

 Warrants Outstanding    Warrants Exercisable 
           Weighted      
           Average      
 Exercise    Number of    Remaining    Number of 
 Price    Shares    Life in Years    Shares 
$0.20    20,000    4.5    20,000 
$30.00    20,000    1.1    20,000 
$66.00    5,000    4.5    5,000 
$24.00    43,336    4.9    43,336 
      88,336    3.9    88,336 

 

 

Stock Options

 

A summary of the option activity during the years ended October 31, 2023 and 2022 is presented below:

 

  

Number of

Options

  

Weighted

Average

Exercise

Price

  

Weighted

Average

Remaining

Life in

Years

  

Intrinsic

Value

 
                 
Outstanding, November 1, 2021   -   $-    -   $- 
Issued   -    -    -    - 
Outstanding, November 1, 2022   -    -    -    - 
Issued   6,000   $10.40    4.8    1,800 
Exercised   -    -    -    - 
Cancelled   -    -    -    - 
Expired   -    -    -    - 
Outstanding, October 31, 2023   6,000   $10.40    4.8   $1,800 
                     
Exercisable, October 31, 2023   4,500   $10.40    4.8   $1,350 

 

A summary of outstanding and exercisable options as of October 31, 2023 and 2022 is presented below:

 

 Options Outstanding    Options Exercisable 
           Weighted      
           Average      
 Exercise    Number of    Remaining    Number of 
 Price    Shares    Life in Years    Shares 
$10.40    6,000    4.8    4,500 
      6,000    4.8    4,500 

 

On August 15, 2023, the Company issued five-year options to purchase 6,000 shares of the Company’s common stock to a consultant of the Company, pursuant to the Plan. The options have an exercise price of $10.40 per share and vest monthly over a period of 24 months, beginning on the vesting commencement date. The options have a grant date fair value of $55,711, which will be recognized over the vesting term.

 

The assumptions used in the Black-Scholes valuation method for these options issued in 2023 were as follows:

 

Risk free interest rate   4.36%
Expected term (years)   5.0
Expected volatility   137.1%
Expected dividends   0%