NOTE 6 – STOCKHOLDERS’ EQUITY

The Company is authorized to issue an aggregate of 105,000,000 shares. The authorized capital stock is divided into: (i) 100,000,000 shares of Common Stock having a par value of $0.0001 per share and (ii) 5,000,000 shares of preferred stock having a par value of $0.0001 per share.

Common Stock

The Company had 1,044,914 and 1,041,582 shares of its Common Stock issued and outstanding at September 30, 2024 and December 31, 2023, respectively.

Each holder of Common Stock is entitled to one vote for each share of Common Stock held on all matters submitted to a vote of the stockholders. Our Second Amended and Restated Certificate of Incorporation and Second Amended and Restated Bylaws do not provide for cumulative voting rights.

In addition, the holders of our Common Stock are entitled to receive ratably such dividends, if any, as may be declared by the Board out of legally available funds; however, the current policy of our Board is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders of our Common Stock will be entitled to share ratably in all assets that are legally available for distribution.

Holders of our Common Stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to the Common Stock. The rights, preferences and privileges of the holders of Common Stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that we may designate and issue in the future.

Effective January 2, 2024, the Company amended its Second Amended and Restated Certificate of Incorporation to effect a one-for-twenty (1:20) reverse stock split of our outstanding shares of Common Stock. No fractional shares were issued as a result of the reverse stock split. Any fractional shares resulting from the reverse stock split were paid in cash. The reverse stock split did not otherwise affect any of the rights currently accruing to holders of our Common Stock.

2023 Stock Incentive Plan

The Board and stockholders have adopted and approved the Company’s 2023 Stock Incentive Plan (the “2023 Plan”) which took effect on December 19, 2023. The 2023 Plan allows for the issuance of securities, including stock options, restricted stock, and restricted stock units (“RSUs”) to employees, Board members and consultants. The initial number of shares of Common Stock available for issuance under the 2023 Plan was 125,000 shares plus 28,389 unused shares reserved under the Company’s 2021 Stock Incentive Plan, which will, on January 1 of each calendar year, beginning on January 1, 2024 and ending on and including January 1, 2033, unless the Board decides otherwise, automatically increase to equal to the lessor of (A) three percent (3%) of the number of shares of Common Stock outstanding on the final day of the immediately preceding calendar year or (B) such smaller number of Shares as is determined by the Board.

On January 1, 2024, the number of shares of Common Stock available for issuance under the 2023 Plan automatically increased by 31,254 shares. As of September 30, 2024, a total of 197,393 shares of Common Stock were available under the 2023 Plan, of which 99,534 shares were issued and outstanding and 97,859 shares were available for potential issuances.

Common Stock Issuances for the Three and Nine Months Ended September 30, 2024

During the three and nine months ended September 30, 2024, the Company issued 833 and 3,332 shares of Common Stock, respectively, due to the vesting of restricted stock units (“RSUs”) and recognized approximately $24,000 and $96,000 of stock-based compensation expense, respectively, related to its outstanding RSUs. Stock-based compensation expense related to the Company’s RSUs is recognized within general and administrative expense on the condensed consolidated statements of operations and comprehensive loss.

As of September 30, 2024, the remaining unamortized RSU stock-based compensation expense was approximately $21,000 with remaining three months of amortization.

September 2024 Offering

On September 26, 2024, the Company entered into a securities purchase agreement (the “September 2024 Offering”) with an institutional investor, pursuant to which the Company agreed to sell pre-funded warrants (“Pre-Funded Warrants”) to purchase up to an aggregate of 1,219,513 shares of common stock at an exercise price of $0.001 per share, Series A warrants to purchase up to an aggregate of 1,219,513 shares of common stock at an exercise price of $3.85 per share, and Series B warrants (together with the Series A Warrants, the “September 2024 PIPE Warrants”) to purchase up to an aggregate of 1,219,513 shares of common Stock with an exercise price of $3.85 per share. The combined purchase price per Pre-Funded Warrant and accompanying September 2024 PIPE Warrants was $4.099. Aggregate gross proceeds from the September 2024 Offering were approximately $4.5 million and the September 2024 Offering closed on September 30, 2024.

The Pre-Funded Warrants are exercisable immediately upon issuance and expire when exercised in full. The Series A Warrants are exercisable immediately upon issuance and have a term of exercise equal to five (5) years from the date of issuance. The Series B Warrants are exercisable immediately upon issuance and have a term of exercise equal to eighteen (18) months from the date of issuance.

A holder of the Pre-Funded Warrants and the September 2024 PIPE Warrants may not exercise any portion of such holder’s Pre-Funded Warrants or September 2024 PIPE Warrants to the extent that the holder, together with its affiliates, would beneficially own more than 4.99% (or, at the election of the holder, 9.99%) of the Company’s outstanding shares of Common Stock immediately after exercise, except that upon at least 61 days’ prior notice from the holder to the Company, the holder may increase the beneficial ownership limitation to up to 9.99% of the number of shares of Common Stock outstanding immediately after giving effect to the exercise. In the event of certain fundamental transactions, holders of the September 2024 PIPE Warrants will have the right to receive the Black Scholes Value of their Warrant calculated pursuant to a formula set forth in the Warrant, payable either in cash or in the same type or form of consideration that is being offered and being paid to the holders of Common Stock.

In connection with the September 2024 Private Placement, the Company entered into a registration rights agreement (the “Registration Rights Agreement”), dated as of September 26, 2024, with the investor, pursuant to which the Company agreed to prepare and file a registration statement with the Securities and Exchange Commission (the “SEC”) registering the resale of the shares of Common Stock underlying the Pre-Funded Warrants and the September 2024 PIPE Warrants no later than fifteen (15) days after the date of the Registration Rights Agreement (the “Registration Statement”), and to use its best efforts to have the registration statement declared effective as promptly as practical thereafter, and in any event no later than forty-five (45) days following the date of the Registration Rights Agreement (or ninety (90) days following the date of the Registration Rights Agreement in the event of a “full review” by the SEC). The Registration Statement was declared effective by the SEC on October 11, 2024.

The net proceeds to the Company from the September 2024 Private Placement were approximately $4.5 million, after deducting placement agent fees and offering expenses payable by the Company. In addition, the Company issued to the placement agent or its designees warrants (the “Placement Agent Warrants”) to purchase up to an aggregate of 85,366 shares of Common Stock at an exercise price equal to $5.125 per share. The Placement Agent Warrants have substantially the same terms as the September 2024 PIPE Warrants, are exercisable immediately upon issuance and have a term of exercise equal to five (5) years from the date of issuance. The Company intends to use the net proceeds received from the September 2024 Private Placement for working capital and general corporate purposes.

The September 2024 PIPE warrants met the requirement for equity classification. The Company computes the fair value of warrants and options using a Black-Scholes model. The expected term used for warrants is the contractual life. The Company is utilizing an expected volatility figure based on a review of the historical volatilities, over a period of time, equivalent to the expected life of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.

As of September 30, 2024, all 1,219,153 of the Pre-Funded Warrants are paid and issued but unexercised. In addition, the September 2024 PIPE Warrants have not been exercised as of September 30, 2024.

Common Stock Issuances for the Three and Nine Months Ended September 30, 2023

During the three and nine months ended September 30, 2023, the Company issued 833 and 5,832 shares of common stock, respectively, due to the vesting of restricted stock units (“RSUs”), and recognized approximately $24,175 and $71,736, respectively, of stock-based compensation expense related to its outstanding restricted stock units. Stock-based compensation expense related to the Company’s restricted stock units is recognized within selling, general and administrative expense.

As of September 30, 2023, the remaining unamortized RSU stock-based compensation expense was approximately $117,000.

The Company did not grant any RSUs or restricted stock awards during the three and nine months ended September 30, 2023.

Tender Offer (Common Stock Repurchase)

On July 20, 2023, the Company announced that its Board of Directors authorized the repurchase, through a $4.0 million tender offer of up to approximately 5.7 million shares of the Company’s outstanding common stock at a cash purchase price of $0.70 per share (the “Tender Offer”). The Company launched the Tender Offer on August 9, 2023 and it expired on September 8, 2023.

On September 14, 2023, the Company disclosed the results of the Tender Offer. A total of 266,171 shares of the Company’s common stock (the “Tender Offer Shares”) were validly tendered and not properly withdrawn at a purchase price of $0.70 per for an aggregate purchase price of $3,726,416, including fees and expenses relating to the Tender Offer. The Company had 1,040,998 shares of common stock outstanding following payment for the shares of common stock purchased in the Tender Offer. The Tender Offer Shares were retired and cancelled following the closing of the Tender Offer.

Warrants modification

On November 29, 2021, the Company issued warrants to purchase up to 434,000 shares of Common Stock with an exercise price of $70.00 per share (the “2021 PIPE Warrants”) in a private placement. Due to a certain anti-dilution provision, the exercise price of each 2021 PIPE Warrant was reduced to $20.00 per share (the “Warrant Modification”) as a result of the September 2024 Offering. The Company recognized the effect of the Warrant Modification as a dividend of $359,656.