NOTE 9 – STOCKHOLDERS’ EQUITY

On June 14, 2023, the Company’s stockholders approved an increase in the Company’s authorized shares of common stock from 100,000,000 to 250,000,000. The Company’s common stock has a par value of $0.00001. In addition, the Company is authorized to issue 5,000,000 shares of preferred stock with a par value of $0.00001. The specific rights of the preferred stock, when so designated, shall be determined by the board of directors.

Common Stock

On February 1, 2022, the Company sold 1,333,334 shares of its common stock in a public offering at $15.00 per share. The Company received net proceeds of $18,089,184 after underwriter commissions and expenses of $1,910,816. The underwriter was also issued a warrant to purchase 66,667 shares of the Company’s common stock at an exercise price of $18.75 per share that expires 5.5 years from the date of issuance.

On May 24, 2023, the Company sold 1,200,000 shares of its common stock in a public offering at $3.75 per share. The Company received net proceeds of $3,998,700 after underwriter commissions and expenses of $501,300.

On September 18, 2023, the Company sold 280,000 shares of its common stock in a public offering at $2.50 per share. The Company received net proceeds of $571,400 after underwriter commissions and expenses of $128,600. The underwriter was also issued a warrant to purchase 56,000 shares of the Company’s common stock at an exercise price of $3.13 per share that expires 5.5 years from the date of issuance. The underwriter agreement provided the underwriter with a right of first refusal for any additional securities offerings within twelve months of this offering.

As discussed in Note 6 above, on May 24, 2023, the Company issued the May 2023 Notes and May 2023 Warrants, along with the warrants to the placement agent in August 2022 with the issuance of the Convertible Notes. The Company received consent from the underwriter to issue such securities. In addition, the Company was required to reserve 21,623,189 shares of common stock for future issuance of shares for the conversion of the May 2023 Notes and exercise of the May 2023 Warrants and 120,773 shares for the exercise of the placement agent warrants.  

Warrants

As discussed in Note 6, the Company issued the Note Warrants, which were fully vested, to purchase 1,811,595 shares of the Company’s common stock at an initial exercise price of $14.25. The Note Warrants expire August 24, 2027. Also, the Company issued to the placement agent of the Convertible Notes, fully vested warrants to purchase 120,773 shares of the Company’s common stock at an exercise price of $17.8125. The warrants were not exercisable until February 24, 2023 and expire on February 24, 2028. The Company valued all of these warrants using the closing price of the Company’s common stock on August 24, 2022 of $12.20, volatility of 79.81% based on peer companies, risk free interest rate of 3.03%, no dividends and an estimated life of 2.5 years.

In May 2023, all of the Note Warrants to purchase 1,811,595 shares of the Company’s common stock were exchanged for Exchange Warrants to purchase 3,411,595 shares of the Company’s common stock with an initial exercise price of $5.45 per share (which was adjusted to $3.75 per share upon stockholder approval). The Exchange Warrants expire August 24, 2027. Also in May 2023, in connection with the issuance of the New Notes, the Company also issued New Warrants to purchase 1,086,957 shares of common stock at an initial exercise price of $5.45 (which was adjusted to $3.75 per share upon stockholder approval which was received on August 3, 2023). As discussed in Note 14, as of October 20, 2023, the exercise price of the Exchange Warrants and New Warrants were adjusted to $1.369 per share.

As noted above, 307,001 of the Exchange Warrants were exercised at a price of $1.75 per share and 307,001 Reload Warrants were issued with an exercise price of $2.50 per share. The Reload warrants expire August 24, 2027.

During the three and nine months ended September 30, 2023, the Company recognized no expense from warrants and during the three and nine months ended September 30, 2022, the Company recognized expense of $0 and $7,302, respectively, related to common stock warrants as all warrants are fully vested as of September 30, 2023. As noted in Note 7 above, the Company has determined that the Exchange Warrants and New Warrants are derivative liabilities and is recording them at fair value with changes being recorded in earnings through August 3, 2023, the date of stockholder approval to fix the exercise price of these warrants.

The following is the activity related to common stock warrants during the nine months ended September 30, 2023: