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Stockholders' Equity
 12 Months Ended
Dec. 31, 2023
Stockholders' Equity [Abstract]  
STOCKHOLDERS' EQUITY

NOTE 7 – STOCKHOLDERS’ EQUITY

 

Shares Authorized

 

On September 19, 2023, the Company filed a Certificate of Change (the “Certificate of Change”) with the Secretary of State of the State of Nevada to effectuate a 1-for-10 reverse stock split (the “Reverse Stock Split”) of the Company’s issued and outstanding and authorized shares of common stock, par value $0.0001 per share (“Common Stock”). The Reverse Stock Split became effective on September 19, 2023. Proportional adjustments for the Reverse Stock Split were made to the Company’s outstanding stock options, warrants and equity incentive plans, and authorized shares.

 

On November 9, 2023, the Company filed a Certificate of Correction with the Secretary of State of the State of Nevada to correct a typographical error contained in the Certificate of Change that was filed with the Secretary of State of the State of Nevada on September 19, 2023 in order to effectuate the Reverse Stock Split. The Certificate of Change incorrectly stated that the authorized shares of preferred stock, par value $0.0001 per share following the change was 1,000,000. The Reverse Stock Split had no impact on the number of authorized shares of preferred, par value $0.0001, which remains unchanged at 20,000,000 shares.

 

On December 27, 2023, the Company filed a Certificate of Change (the “Certificate of Change”) with the Secretary of State of the State of Nevada to increase the number of authorized common stock from 18,000,000 shares to 180,000,000 shares.

 

All share and per-share data and amounts have been retroactively adjusted as of the earliest period presented in the consolidated financial statements to reflect the Reverse Stock Split.

 

The authorized capital stock consists of 200,000,000 shares, of which 180,000,000 are shares of common stock and 20,000,000 are shares of preferred stock.

 

2021 Omnibus Equity Incentive Plan

 

On July 26, 2021, the Company adopted the 2021 Omnibus Equity Incentive Plan, and authorized the reservation of 200,000 shares of common stock for future issuances under the plan. The Plan provides that the Company may grant options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards or any combination of the foregoing. On December 19, 2022, Company held its 2022 annual meeting of stockholders, and the shareholders approved to amend the Company’s 2021 Omnibus Equity Incentive Plan to increase the number of shares reserved for issuance thereunder to 300,000 shares from 200,000. On November 10, 2023, the board of directors of the Company approved the adoption of the Amended and Restated 2021 Omnibus Equity Incentive Plan, the sole purpose of which was to remove any inadvertent references to the Company being a Delaware corporation or the 2021 Omnibus Equity Incentive Plan being governed under Delaware law and to properly state that the Company is a Nevada corporation and that the 2021 Omnibus Equity Incentive Plan is governed by Nevada law.

 

Preferred Stock

 

Series A Preferred Stock

 

In August 2016, the Company designated one share of Series A Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”), which has a stated value equal to $1.00 as may be adjusted for any stock dividends, combinations or splits. Each one (1) share of the Series A Preferred Stock shall have voting rights equal to (x) the total issued and outstanding Common Stock eligible to vote at the time of the respective vote divided by (y) forty-nine one hundredths (0.49) minus (z) the total issued and outstanding Common Stock eligible to vote at the time of the respective vote. The Series A Preferred Stock does not convert into securities of the Company. The Series A Preferred Stock does not contain any redemption provision. In the event of liquidation of the Company, the holder of Series A Preferred shall not have any priority or preferences with respect to any distribution of any assets of the Company and shall be entitled to receive equally with the holders of the Company’s common stock. As of December 31, 2023 and 2022, there were no Series A Preferred Stock outstanding.

 

Series B Preferred Stock

 

On August 4, 2023, the Board filed the Certificate of Designation of Preferences (“COD”), Rights and Limitations of Series B Preferred Stock (the “Series B COD”) with the Secretary of State of the State of Nevada designating 2,000,000 shares of preferred stock as Series B (the “Series B Preferred”). The outstanding shares of Series B Preferred Stock shall have 10 votes per share and shall vote together with the outstanding shares of the Company’s common stock as a single class exclusively with respect to the Authorized Stock Increase (as defined in the Series B COD) and shall not be entitled to vote on any other matter. The shares of Series B Preferred Stock shall be voted, without action by the holder, on the Authorized Stock Increase in the same proportion as shares of Common Stock are voted (excluding any shares of Common Stock that are not voted) on the Authorized Stock Increase. The Series B Preferred shall not have the right to vote and/or consent on any matter other than an Authorized Stock Increase Proposal. The Series B Preferred Stock shall not be entitled to participate in any distribution of assets or rights upon any liquidation, dissolution or winding up of the Company, shall not be convertible into Common Stock or any other security of the Company, and shall not be entitled to any dividends or distributions.

 

The outstanding shares of Series B preferred shall be redeemed in whole, but not in part (i) if such redemption is ordered by the board of directors, or (ii) automatically and effective immediately after the effectiveness of an anticipated Authorized Stock increase. The aggregate consideration payable for the outstanding Series B Preferred redeemed in the redemption shall be $10 in cash (the “Redemption Price”).

 

From and after the time at which the shares of Series B Preferred Stock is called for Redemption (whether automatically or otherwise) in accordance with Series B COD, such shares of Series B Preferred Stock shall cease to be outstanding, and the only right of the former holder of such shares of Series B Preferred Stock, as such, will be to receive the applicable Redemption Price. The shares of Series B Preferred Stock redeemed by the Company pursuant to the Series B COD shall be automatically retired and restored to the status of an authorized but unissued share of Preferred Stock, effective immediately after such Redemption.

 

On August 4, 2023, the Company issued 2,000,000 of Series B preferred for aggregate cash of $1,000.

 

Common Stock

 

Common Stock Issued for Acquisition

 

Pursuant to the Merger Agreement, in 2022, the Company acquired all the issued and outstanding shares of Avila in consideration of the issuance of an aggregate of 100,000 shares of the Company’s common stock. These shares were value at $1,090,000, or $10.90 per share, based on the quoted closing price of the Company’s common stock on the measurement date (See Note 3).

 

2023 Stock Repurchase Plan

 

On January 6, 2023, the Board of Directors of the Company approved a stock repurchase program authorizing the purchase of up to $2 million of the Company’s common stock (the “2023 Stock Repurchase Program”). In connection with the 2023 Stock Repurchase Program, during the year ended December 31, 2023, the Company purchased 66,945 shares of its common stock for $397,969, or at an average price of $5.94 per share, which has been reflected as treasury stock on the accompanying consolidated balance sheet on December 31, 2023.

 

Common Stock Issued for Professional Services

 

In February 2021, the Company entered into a one-year Advisory Board Agreement with an individual who will act as an advisor to the Company’s Board. In accordance with this agreement the Company issued 10,000 shares of its common stock as consideration for the services provided. The Company valued these common shares at a fair value of $400,000 or $40.00 per common share based on sales of common stock in the recent private placement. During the year ended December 31, 2022, the Company recorded stock-based consulting fees of $50,000, which was included in professional and consulting expenses in the accompanying statements of operations.

 

On March 6, 2023, the Company entered into a six-month consulting agreement with an entity for investor relations services. In connection with this consulting agreement, the Company issued 14,300 restricted common shares of the Company to the consultant. These shares vest immediately. These shares were valued at $100,000, or $6.99 per common share, based on the quoted closing price of the Company’s common stock on the measurement date. In connection with this consulting agreement, during the year ended December 31, 2023, the Company recorded stock-based professional fees of $100,000.

 

On July 25, 2023, the Company issued 19,802 of its common shares pursuant to a one-year consulting agreement. These shares were valued at $100,000, or a per share price of $5.05, based on the quoted closing price of the Company’s common stock on the measurement date. In connection with these shares, during the year ended December 31, 2023, the Company recorded stock-based professional fees of $43,280 with the remaining $56,720 recorded as a prepaid asset as of December 31, 2023, which will be amortized into stock-based professional fees over the remaining term.

 

Stock Options

 

2022

 

On December 26, 2021 and effective January 10, 2022, the Company approved the grant of 15,000 options to purchase the Company’s common stock to a newly hired employee of the Company. The options have a term of 5 years from the date of grant and are exercisable at an exercise price of $40.00 per share. The options vest 25% every six months from date of grant for two years. The employee service date shall start on January 10, 2022 or the grant date which is when the Company started recognizing stock-based compensation expenses.

 

On January 19, 2022, the Company granted an aggregate of 8,500 options to purchase the Company’s common stock to four newly hired employees of the Company. The options have a term of 5 years from the date of grant and are exercisable at an exercise price of $40.00 per share. The options vest 25% every six months from date of grant for two years. The employee service date started on January 19, 2022 or the grant date which is when the Company started recognizing stock-based compensation expenses.

 

On July 22, 2022, the Company granted an aggregate of 32,500 options to purchase the Company’s common stock to employees and consultants of the Company. The options have a term of 5 years from the date of grant and are exercisable at an exercise price of $40.00 per share. The options vest 25% every six months from date of grant for two years. The stock options were valued at the grant date using a Black-Scholes option pricing model which will be recognized as stock-based compensation expense over the vesting period.

 

The 2022 stock option grants were valued at the respective grant dates using a Black-Scholes option pricing model using the assumptions discussed below. In connection with the stock option grants, the Company valued these stock options at a fair value of $751,681 and records stock-based compensation expense over the vesting period. Upon cancellation of unvested stock options, the fair value of these cancelled options will be reversed.

 

2023

 

On February 3, 2023, the Company granted an aggregate of 7,500 options to purchase the Company’s common stock to the Company’s board of directors. The options each have a term of 5 years from the date of grant and are exercisable at an exercise price of $12.50 per share. The options vest six months from date of grant. The stock options were valued at the grant date using a Black-Scholes option pricing model which will be recognized as stock-based compensation expense over the vesting period.

 

On February 3, 2023, the Company granted an aggregate of 21,500 options to purchase the Company’s common stock to an officers, employees and consultants of the Company. The options each have a term of 5 years from the date of grant and are exercisable at an exercise price of $12.50 per share. The options vest 25% every six months from date of grant for 2 years. The stock options were valued at the grant date using a Black-Scholes option pricing model which will be recognized as stock-based compensation expense over the vesting period.

 

On September 6, 2023, the Company granted an aggregate of 10,000 options to purchase the Company’s common stock to the Company’s chief financial officer (5,000 options) and to an employee of the Company (5,000 options). The options each have a term of 5 years from the date of grant and are exercisable at an exercise price of $15.00 per share. The options vest immediately. The stock options were valued at the grant date using a Black-Scholes option pricing model which will be recognized as stock-based compensation expense over the vesting period.

 

The 2023 stock option grants were valued at the respective grant dates using a Black-Scholes option pricing model using the assumptions discussed below. In connection with the stock option grants, the Company valued these stock options at a fair value of $185,628, or an average of $4.76 per option. and records stock-based compensation expense over the vesting period. Upon cancellation of unvested stock options, the fair value of these cancelled options will be reversed.

 

During the year ended December 31, 2023, certain employees and consultants were terminated. Accordingly, 33,775 unvested options were forfeited and $133,190 of previously recognized stock-based compensation and $26,144 of previously recognized stock-based professional fees was reversed.

 

During the year ended December 31, 2023, accretion of stock-based expense related to stock options, which is net of the reversal of previously recognized stock-based expense due to forfeiture, amounted to $2,110,799 of which $2,002,777 was recorded in compensation and related expenses and $108,022 was recorded in professional and consulting expenses as reflected in the consolidated statements of operations. During the year ended December 31, 2022, the Company recognized total stock-based expenses related to stock options of $3,471,134 of which $3,173,401 was recorded in compensation and related expenses and $297,733 was recorded in professional and consulting expenses as reflected in the statements of operations. As of December 31, 2023, a balance of $94,606 remains to be expensed over future vesting periods related to unvested stock options issued for services to be expensed over a weighted average period of 0.68 years.

 

During the years ended December 31, 2023 and 2022, the stock options were valued at the grant date using a Black-Scholes option pricing model with the following assumptions. The simplified method was used for the expected option term and expected volatility was based on historical volatility:

 

   2023   2022 
Dividend rate  —%  —%
Term (in years)  3 years   2 to 3 years 
Volatility  137.0% to 168.0%  155.8% to 160.0%
Risk—free interest rate  3.96% - 4.73%  1.53% to 2.93%

 

The following is a summary of the Company’s stock option activity for the years ended December 31, 2023 and 2022 as presented below:

 

   Number of
Options		   Weighted
Average
Exercise
Price		   Weighted
Average
Remaining
Contractual
Life (Years)		 
Balance on December 31, 2021   105,420   $146.60    4.64 
Granted   56,000    40.00    - 
Cancelled   (1,000)   (62.50)   - 
Balance on December 31, 2022   160,420    109.90    3.91 
Granted   39,000    13.14    - 
Cancelled   (40,750)   35.35    - 
Balance on December 31, 2023   158,670   $105.30    3.12 
Options exercisable on December 31, 2023   136,795   $116.87    3.03 
Weighted average fair value of options granted during the 2023 period       $4.76      

 

On December 31, 2023, the aggregate intrinsic value of options outstanding was $0.

 

Common Stock Warrants

 

During the year ended December 31, 2022, 6,250 warrants expired and were cancelled pursuant to its terms.

 

A summary of the Company’s outstanding stock warrants, including 44,252 Series A public warrants, is presented below:

 

   Number of
Warrants		   Weighted
Average
Exercise
Price		   Weighted
Average
Remaining
Contractual
Life (Years)		 
Balance on December 31, 2021   73,635   $45.90    4.30 
Cancelled   (6,250)          
Balance on December 31, 2022   67,385    49.80    3.65 
Granted   
-
    
-
    - 
Balance on December 31, 2023   67,385    49.80    2.65 
Warrants exercisable on December 31, 2023   67,385   $49.80    2.65 

 

On December 31, 2023, the aggregate intrinsic value of warrants outstanding was $0.