Quarterly report pursuant to Section 13 or 15(d)

STOCKHOLDERS??? EQUITY

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STOCKHOLDERS’ EQUITY
 6 Months Ended
Jun. 30, 2023
Equity [Abstract]  
STOCKHOLDERS’ EQUITY

 
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 6,666,667 shares of its common stock in a public offering at $3.00 per share. The Company received net proceeds of $18,089,184 after underwriter commissions and expenses of $1,910,883. The underwriter was also issued a warrant to purchase 333,334 shares of the Company’s common stock at an exercise price of $3.75 per share that expires five years from the date of issuance.

 

On May 24, 2023, the Company sold 6,000,000 shares of its common stock in a public offering at $0.75 per share. The Company received net proceeds of $3,998,700 after underwriter commissions and expenses of $501,300. 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 108,115,942 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 603,864 shares for the exercise of the placement agent warrants. The placement agent agreement provided the placement agent with the right of first refusal for any additional securities offerings within twelve months of this offering.  

 

Warrants

  

As discussed in Note 6, the Company issued the Note Warrants, which were fully vested, to purchase 9,057,971 shares of the Company’s common stock at an exercise price of $2.85. The Note Warrants expire five years from the issuance date. Also, the Company issued to the placement agent of the Convertible Notes, fully vested warrants to purchase 603,864 shares of the Company’s common stock at an exercise price of $3.5625. 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 $2.44, 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 9,057,971 shares of the Company’s common stock were exchanged for Exchange Warrants to purchase 17,057,971 shares of the Company’s common stock with an initial exercise price of $1.09 per share (which was adjusted to $0.75 per share upon stockholder approval, see Note 13). 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 5,434,783 shares of common stock at an initial exercise price of $1.09 (which was adjusted to $0.75 per share upon stockholder approval, see Note 13).

 

During the three and six months ended June 30, 2023, the Company recognized no expense and during the three and six months ended June 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 June 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. Additional gains or losses will be recognized in the future for the change in the fair value of the May 2023 warrants due to the potential adjustment to the exercise price based on stockholder approval. No expense will be recognized for any other warrants outstanding as of June 30, 2023.

 

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

                               
    Common Stock Warrants  
    Shares     Weighted
Average
Exercise
Price		     Weighted
Average
Remaining
Life in years		     Intrinsic Value  
                         
Outstanding at January 1, 2023     15,085,618     $ 2.33                  
Granted     22,492,754     $ 1.09                  
Canceled     –     $ –                  
Exchanged     (9,057,971 )   $ 2.85                  
Expired     –     $ –                  
Exercised     –     $ –                  
Outstanding at June 30, 2023     28,520,401     $ 1.19       4.76     $ 38,386  
Exercisable at June 30, 2023     28,520,401     $ 1.19       4.76     $ 38,386