Note 9 - Stockholders' Equity, Stock Options and Warrants

12 Months Ended

Dec. 31, 2023

Notes to Financial Statements

Equity [Text Block]

NOTE 9 – STOCKHOLDERS’ EQUITY, STOCK OPTIONS AND WARRANTS

Series F Preferred Stock Dividend and Reverse Stock Split

On March 16, 2023, the Board of Directors of the Company authorized the issuance of 80,000 shares of Series F Preferred Stock, par value $0.01 per share.

On March 16, 2023, the Board of Directors of the Company declared a dividend of one one-thousandth of a share of Series F Preferred Stock, par value $0.01 per share, for each outstanding share of the Company’s common stock held on record as of March 27, 2023. 79,404 shares of Series F Preferred Stock were issued pursuant to the stock dividend. Each share of Series F Preferred Stock entitled the holder thereof to 1,000,000 votes per share to vote together with the outstanding shares of common stock of the Company as a single class to adopt an amendment to the Company’s Certificate of Incorporation to affect a reverse stock split.

On April 19, 2023, the Company completed a one-for-twenty reverse stock split that was effective for trading purposes on April 24, 2023. No fractional shares were issued as a result of the reverse stock split. Any fractional shares that would otherwise have resulted from the reverse stock split were rounded up to the next whole number. The number of authorized shares of common stock under the Company’s certificate of incorporation, as amended, remained unchanged at 200,000,000 shares. All numbers of shares and per-share amounts in this report have been adjusted to reflect the reverse split. Proportionate reductions were made to the number of shares of common stock reserved for future issuance under our 2012 Equity Incentive Plan and the number of shares of common stock that may be issued upon exercise or vesting of outstanding equity incentive awards and warrants, and proportionate increases were made to the exercise price or share-based performance criteria, if any, applicable to such awards and warrants.

Redemption of Series F Preferred Stock

On April 17, 2023, the Company convened a special meeting of stockholders, which was adjourned due to the lack of a quorum and reconvened on April 19, 2023 (the “Special Meeting”), at which the Company’s stockholders approved a proposal to amend the Company’s certificate of incorporation to effect a reverse stock split of the Company’s common stock at a ratio in the range of 1-for-2 to 1-for-25, with such ratio to be determined by the Company’s Board of Directors (the “Reverse Split Proposal”). All shares of Series F Preferred Stock that were not present in person or by proxy at the Special Meeting as of immediately prior to the opening of the polls (the “Initial Redemption Time”) were automatically redeemed (the “Initial Redemption”). All outstanding shares of Series F Preferred Stock that were not redeemed pursuant to the Initial Redemption were redeemed automatically upon the approval by the Company’s stockholders of the Reverse Split Proposal (the “Subsequent Redemption” and, together with the Initial Redemption, the “Redemption”). Both the Initial Redemption and the Subsequent Redemption occurred on April 19, 2023. As a result, no shares of Series F Preferred Stock remain outstanding.

May 2022 Offerings

On May 16, 2022, the Company issued and sold an aggregate of 191,864 shares of its common stock, at a purchase price of $12.00 per share to several institutional and accredited investors in a registered direct offering (the “First Offering”). Pursuant to the securities purchase agreement, the Company also agreed to issue to these purchasers unregistered warrants to purchase up to an aggregate of 191,864 shares of common stock (the “Warrants”) in a concurrent private placement. The Warrants have an exercise price equal to $14.00 per share, will become exercisable six months from the date of issuance, and will expire five and one-half years from the date of issuance.

In addition, in a concurrent registered direct offering (the “Second Offering”), on May 16, 2022, the Company issued and sold to several institutional and accredited investors an aggregate of 408,136 shares of its common stock, at a purchase price of $12.00 per share. The Company also entered into a warrant amendment agreement (the “Warrant Amendment”) with each of the purchasers in the Second Offering. Under the Warrant Amendment, the Company agreed to amend certain existing warrants to purchase up to 816,272 shares of common stock that were previously issued in 2020 and 2021 to those purchasers, with exercise prices ranging from $20.00 to $40.00 per share (the “Existing Warrants”), were amended to: (i) lower the exercise price of the Existing Warrants to $14.00 per share, (ii) provide that the Existing Warrants, as amended, will not be exercisable until six months following the closing date of the Second Offering, and (iii) extend the original expiration date of the Existing Warrants by five and one-half years following the close of the Second Offering.

In each case, the Company paid to the placement agent an aggregate fee equal to 7.5% of the aggregate gross proceeds received by the Company in the offering and a management fee equal to 1% of the aggregate gross proceeds received by the Company in the offering and provided the placement agent expense allowance of $65,000 for non-accountable and other out-of-pocket expenses. In addition, the Company granted to the placement agent or its assigns warrants to purchase 7.5% of the shares sold to investors in the offering at an exercise price equal to 125% of the price of the shares in the transaction, or $15.00 per share, with a term of five years (the “Agent Warrants”). The Agent Warrants become exercisable six months after issuance.

Equity Line

On October 24, 2019, the Company entered into an equity purchase agreement with an investor, providing for an equity financing facility. According to the terms and subject to the conditions in the purchase agreement, the investor was committed to purchase shares having an aggregate value of up to $15,000,000 of the Company’s common stock for a period of up to three years. The Company issued to the investor 5,233 commitment shares at a fair market value of $450,000 for entering into the agreement. From time to time during the three-year commitment period, provided that the closing conditions were satisfied, the Company could provide the investor with put notices to purchase a specified number of shares subject to certain limitations and conditions and at specified prices, which generally represent discounts to the market price of the common stock. During the year ended December 31, 2022, the Company issued 15,750 shares of its common stock valued at $236,009 pursuant to the equity line. In connection with the May 2022 offerings, the Company agreed not to access the remaining balance for a period of one year after the closing date, or May 18, 2022. The equity line expired on October 23, 2022.

Series B Convertible Preferred Stock

As of December 31, 2023, and December 31, 2022, there were 79,246 shares of Series B Convertible Preferred Stock outstanding. The conversion rate of Series B Convertible Preferred Stock to Common Stock is subject to appropriate adjustment in the event of stock dividends, stock splits, reorganizations, or similar events. The 79,246 shares of Series B Convertible Preferred Stock outstanding at December 31, 2023 were convertible to 16 shares of common stock. In addition, the Series B Convertible Preferred Stock will automatically convert into shares of common stock upon the occurrence of a fundamental transaction, as described in the certificate of designations for the Series B Convertible Preferred Stock including mergers, sales of the company’s assets, changes in control and similar transactions. The Series B Convertible Preferred Stock is not convertible by the holder of such preferred stock to the extent (and only to the extent) that the holder or any of its affiliates would beneficially own in excess of 4.99% of the common stock of the Company. The Series B Convertible Preferred Stock has no voting rights, except for the right to approve certain amendments to the certificate of designations or similar actions. With respect to payment of dividends and distribution of assets upon liquidation or dissolution or winding up of the Company, the Series B Convertible Preferred Stock shall rank equal to the common stock of the Company. No sinking fund has been established for the retirement or redemption of the Series B Convertible Preferred Stock.

Equity Incentive Plan

The Company’s Amended and Restated 2012 Stock Incentive Plan (the “2012 Plan”) allows for the issuance of incentive and non-qualified stock options, stock appreciation rights, stock awards, restricted stock, restricted stock units (“RSUs”) and performance awards to employees, directors, and consultants of the Company, where permitted under the plan. The exercise price for each stock option is determined by the market price on the date of issuance. Vesting requirements are determined by the Board of Directors when granted and currently range from immediate to three years. Options outstanding under this plan have a contractual life of ten years.

On December 1, 2022, during the 2022 annual meeting of stockholders (the “Annual Meeting”), the stockholders approved a proposal to increase the reserve shares of common stock authorized for issuance under the Amended and Restated 2012 Stock Incentive Plan by 162,500 to 287,500 reserve shares.

ASC 718, Compensation – Stock Compensation (“ASC 718”), requires that a company that issues equity as compensation needs to record compensation expense on its statements of net loss that corresponds to the estimated cost of those equity grants. ASC 718 requires companies to estimate the fair value of stock-based payment awards on the date of grant using an option-pricing model or other acceptable means.

During the year ended December 31, 2021, the Company issued 22,500 RSUs under the plan which had market, performance, and service vesting conditions through January 1, 2024. 16,667 RSUs became vested during the year ended December 31, 2022. At December 31, 2022, there were 4,167 RSUs outstanding under the plan. At December 31, 2023, there were no RSUs outstanding under the plan.

Valuation and Accounting for Stock Options and Warrants

The Company determines the grant date fair value of options and warrants using a Black-Scholes option valuation model based upon assumptions regarding risk-free interest rate, expected dividend rate, volatility, and estimated term. See Note 1 – Summary of Significant Accounting Policies.

The fair value of each option and warrant grant is estimated on the grant date using the Black-Scholes option valuation model with the following assumptions:

	Year Ended December 31,
	2023		2022
	Stock Options
Expected dividend yield		0.0%		0.0%
Expected stock price volatility		90.8% –98.2%		86.5% –92.2%
Risk-free interest rate		3.38% –3.95%		1.83% –4.26%
Expected life (years)	10		10
	Warrants
Expected dividend yield		0.0%		0.0%
Expected stock price volatility		0%		92.2%
Risk-free interest rate		0%		2.96% –2.97%
Expected life (years)	0		5 – 5.5

Stock Options and Warrants Granted by the Company

The following summarizes transactions for stock options and warrants for the periods indicated: 

	Stock Options					Warrants
	Number of Shares			Average Exercise Price		Number of Shares			Average Exercise Price
Outstanding at December 31, 2021		53,144		$	96.60		1,584,995		$	33.20
Issued		1,599			8.40		1,053,136			14.00
Forfeited		(2,013	)		17.60		-			-
Expired		(3,677	)		208.40		(5,422	)		329.60
Cancelled		-			-		(816,272	)		30.20
Outstanding at December 31, 2022		49,053		$	91.60		1,816,437		$	22.60
Issued		1,075			5.45		-			-
Forfeited		(49	)		6.18		-			-
Expired		(2,415	)		139.30		(9,848	)		219.60
Outstanding at December 31, 2023		47,664		$	82.23		1,806,589		$	21.52

At December 31, 2023, 46,814 stock options were fully vested and currently exercisable with a weighted average exercise price of $83.61 and a weighted average remaining term of 5.56 years. At December 31, 2023, there were 1,806,589 warrants that were fully vested and currently exercisable.

At December 31, 2022, 47,682 stock options were fully vested and exercisable with a weighted average exercise price of $93.80 and a weighted average remaining term of 6.54 years. At December 31, 2022, there were 1,816,437 warrants that were fully vested and currently exercisable.

Stock-based compensation recognized in 2023 and 2022 was $2,038 and $108,596, respectively. The Company has $1,644 of unrecognized compensation expense related to non-vested stock options that are expected to be recognized over the next 16 months.

The following summarizes the status of options and warrants outstanding at December 31, 2023:

Range of Exercise Prices		Shares		Weighted Average Remaining Life
Options
$	3.44 –14.65		12,029		6.67
$	16.28 –29.40		4,935		7.57
$	30.80 –52.20		16,049		4.13
$	101.00 –69,375.00		14,651		3.52
Total			47,664
Warrants:
$	14.00 –20.00		1,168,465		3.62
$	21.05 –30.00		368,246		2.06
$	34.38 –40.00		180,314		5.87
$	43.75 –200.00		89,564		1.83
Total			1,806,589

Stock options and warrants expire on various dates from February 2024 to July 2033.

The following table is the listing of outstanding stock options and warrants as of December 31, 2023 by year of grant:

Stock Options:

Year	Shares		Range of Exercise Prices
2014		3	$	32,500.00	–		69,375.00
2015		12		30.80	–		17,250.00
2016		296		30.80	–		850.00
2017		10,478		30.80	–		420.00
2018		2,893		30.80	–		226.00
2019		14,970		30.80	–		158.00
2020		14,883		14.65	–		32.80
2021		2,248		14.40	–		29.40
2022		846		7.70	–		14.65
2023		1,035		3.44	–		7.68
Total		47,664	$	3.44	–	$	69,375.00

Warrants:

Year	Shares		Range of Exercise Prices
2019		84,514	$	16.90	–		200.00
2020		65,586		36.00	–		59.84
2021		603,353		16.00	–		48.75
2022		1,053,136		14.00	–		15.00
Total		1,806,589	$	14.00	–	$	200.00