STOCKHOLDERS’ EQUITY

9 Months Ended

Sep. 30, 2024

Equity [Abstract]

STOCKHOLDERS’ EQUITY

NOTE 12 — STOCKHOLDERS’ EQUITY

As of September 30, 2024 and December 31, 2023, the Company had two classes of authorized capital stock: common stock and preferred stock.

Common Stock

Holders of common stock generally vote as a class with the holders of the preferred stock and are entitled to one vote for each share held. Subject to the rights of the holders of the preferred stock to receive preferential dividends, the holders of common stock are entitled to receive dividends when and if declared by the Board of Directors. Following payment of the liquidation preference of the preferred stock, any remaining assets will be distributed ratably among the holders of the common stock and, on an as-if-converted basis, the holders of any preferred stock upon liquidation, dissolution or winding up of the affairs of the Company. The holders of common stock have no preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions.

At September 30, 2024, the Company has reserved 590,597 shares of authorized but unissued common stock for possible future issuance. At September 30, 2024, shares were reserved in connection with the following:

Exercise of issued and future grants of stock options	15,114
Conversion of convertible debt	246,004
Exercise of stock warrants	329,479
Total	590,597

Preferred Stock

At September 30, 2024 and December 31, 2023, there were no shares of preferred stock outstanding.

Stock Options and Warrants

Stock Options

The Company recognizes all compensatory share-based payments as compensation expense over the service period, which is generally the vesting period.

In April 2020, the Company adopted the 2020 Stock Incentive Plan (the “2020 Plan”), which provides for the granting of incentive or non-statutory common stock options and other types of awards to qualified employees, officers, directors, consultants and other service providers. At September 30, 2024 and December 31, 2023, there were 6,739 and 7,978 outstanding stock options, respectively, under the 2020 Plan and on such dates there were 8,375 and 7,136 shares reserved under the 2020 Plan, respectively, for future grant.

The following represents a summary of the options granted to employees and non-employee service providers that were outstanding at September 30, 2024, and changes during the nine-month period then ended:

	Shares			Weighted– Average Exercise Price		Range of Exercise Price		Weighted– Average Remaining Life (Years)
Total outstanding – December 31, 2023		7,978		$	1,760.26	$	256.80 — $2,565.00		7.06
Granted		—			—		—		—
Expired		—			—		—		—
Forfeited		(1,239	)	$	743.77	$	256.80 — $2,565.00		—
Total outstanding – September 30, 2024		6,739		$	1,947.06	$	256.80 — $2,565.00		6.22
Exercisable (vested)		6,153		$	2,103.52	$	256.80 — $2,565.00		6.08
Non-Exercisable (non-vested)		586		$	305.69	$	256.80 — $620.00		7.71

There was approximately $119,000 and $1.0 million of compensation cost related to outstanding stock options for the nine months ended September 30, 2024 and 2023, respectively. As of September 30, 2024, there was approximately $19,000 of total unrecognized compensation cost related to unvested stock-based compensation arrangements. This cost is expected to be recognized over a weighted average period of 0.58 years.

The exercise price for an option issued under the 2020 Plan is determined by the Board of Directors, but will be (i) in the case of an incentive stock option (A) granted to an employee who, at the time of grant of such option, is a 10% stockholder, no less than 110% of the fair market value per share on the date of grant; or (B) granted to any other employee, no less than 100% of the fair market value per share on the date of grant; and (ii) in the case of a non-statutory stock option, no less than 100% of the fair market value per share on the date of grant. The options awarded under the 2020 Plan will vest as determined by the Board of Directors but will not exceed a ten-year period. A forfeiture is recognized as incurred if the option holder does not exercise after 90 days following termination of service.

Fair Value of Equity Awards

The Company utilizes the Black-Scholes option pricing model to value awards under its equity plans. Key valuation assumptions include:

● Expected dividend yield. The expected dividend is assumed to be zero, as the Company has never paid dividends and has no current plans to pay any dividends on the Company’s common stock.

● Expected stock-price volatility. The Company’s expected volatility is derived from the average historical volatilities of publicly traded companies within the Company’s industry that the Company considers to be comparable to the Company’s business over a period approximately equal to the expected term, because the Company does not have sufficient stock price history over the expected term.

● Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the expected term.

● Expected term. The expected term represents the period that the stock-based awards are expected to be outstanding. The Company’s historical share option exercise experience does not provide a reasonable basis upon which to estimate an expected term because of a lack of sufficient data. Therefore, the Company estimates the expected term by using the simplified method provided by the SEC. The simplified method calculates the expected term as the average of the time-to-vesting and the contractual life of the options.

The Company recorded share-based compensation expense and classified it in the unaudited condensed consolidated statements of operations as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
General and administrative	$	27,208	$	73,384	$	94,264	$	881,365
Research and development		—		40,417		24,680		140,674
Total	$	27,208	$	113,801	$	118,944	$	1,022,039

Equity Classified Compensatory Warrants

As part of the May 2020 reverse recapitalization transaction, the Company issued equity classified compensatory common stock warrants to an advisor and its designees. In addition, various service providers hold equity classified compensatory common stock warrants issued in 2017 and earlier (originally exercisable to purchase Series C convertible preferred stock, and now instead exercisable to purchase common stock). These are to be differentiated from the Series C Warrants described in Note 7- Warrant Liabilities.

On February 27, 2024, as a result of a down-round provision triggered by a Securities Purchase Agreement with Alpha for the purchase of the February 2024 Debenture, 1,353 warrants were repriced from $36.50 per share exercise price to $13.50 per share exercise price. The increase in fair value of $9,737 for the modification of these warrants was charged to general and administrative expenses in the Company’s condensed consolidated statements of operations and comprehensive loss. On September 6, 2024 as a result of a down-round provision triggered by shares sold in the public offering, these 1,353 warrants were repriced again from $13.50 per share exercise price to $6.50 per share exercise price. The increase in fair value of $2,299 for the modification of these warrants was charged to general and administrative expenses in the Company’s condensed consolidated statements of operations and comprehensive loss.

No compensatory warrants were issued during the three and nine months ended September 30, 2024 and September 30, 2023.

The following table summarizes the activity in the common stock equity classified compensatory warrants for the nine months ended September 30, 2024:

	Common Stock
	Shares			Weighted– Average Exercise Price		Range of Exercise Price		Weighted– Average Remaining Life (Years)
Total outstanding – December 31, 2023		2,381		$	534.44	$	36.50—$1,270.25		1.25
Granted		—			—		—		—
Exercised		—			—		—		—
Expired		(520	)	$	1,033.15	$	1,033.15—$1,033.15		—
Forfeited		—			—		—		—
Total outstanding –September 30, 2024		1,861		$	351.88	$	6.50—$1,270.25		4.50
Exercisable		1,861		$	351.88	$	6.50—$1,270.25		0.72
Non-Exercisable		—			—		—		—

The following table summarizes the activity in the common stock equity classified compensatory warrants for the nine months ended September 30, 2023:

	Common Stock
	Shares			Weighted– Average Exercise Price		Range of Exercise Price		Weighted– Average Remaining Life (Years)
Total outstanding – December 31, 2022		3,581		$	455.88	$	66.00 — $1,270.25		1.73
Exercised		—			—		—		—
Expired		(1,200	)	$	300.00	$	300.00 — $300.00		—
Forfeited		—			—		—		—
Total outstanding – September 30, 2023		2,381		$	534.44	$	66.00 — $1,270.25		1.50
Exercisable		2,381		$	534.44	$	66.00 — $1,270.25		1.50
Non-Exercisable		—			—		—		—

There was approximately $2,000 and $12,000 in compensation cost related to outstanding equity classified compensatory warrants for the three and nine months ended September 30, 2024 respectively, and $0 for both the three and nine months ended September 30, 2023. As of September 30, 2024 and September 30, 2023, there was no unrecognized compensation cost related to nonvested warrants.

Noncompensatory Equity Classified Warrants

On May 22, 2020, as a commitment fee, the Company issued noncompensatory equity classified warrants to Alpha (a related party) for the purchase of common stock. 141 of these warrants remain outstanding and exercisable as of September 30, 2024 and may be exercised in whole or in part, at any time before May 22, 2025. On December 22, 2022, in conjunction with the issuance of a debenture to Alpha (see Note 8 – Convertible Debt), the Company issued to Alpha a warrant to purchase 50,000 shares of the Company’s common stock. The exercise price of this warrant was initially $82.50, and may be exercised in whole or in part, on or after June 22, 2023 and at any time before June 22, 2028. On December 5, 2023, the Company entered into an Amendment No. 1 with regard to the related Securities Purchase Agreement, with Alpha. This Amendment reduced the Exercise Price of the December 22, 2022 warrant from $82.50 per share to $36.50 per share. The Amendment also revised certain provisions of the warrant which resulted in reclassification of the warrant from liabilities to equity.

On February 27, 2024 the Company entered into a new Securities Purchase Agreement with Alpha for the purchase of the February 2024 Debenture (see Note 8 – Convertible Debt). This Securities Purchase Agreement resulted in the reduction of the exercise price of the December 22, 2022 warrant and the May 2020 warrant from $36.50 per share to $13.00 per share. The company recognized a deemed dividend of $60,017, which represents the incremental fair value of the outstanding warrants as a result of the down-round provision. As the Company has an accumulated deficit, the deemed dividend was recorded as a reduction in additional paid-in capital, resulting in a net impact of zero to additional paid-in capital in the condensed consolidated statements of changes in stockholders’ equity. In addition, on February 27, 2024, the Company issued to Alpha a warrant to purchase 18,001 shares of the Company’s common stock at an exercise price of $13.00 per share, which may be exercised in whole or in part, at any time before February 27, 2029.

On September 6, 2024 as a result of the down-round provision triggered by shares sold in a public offering, the above warrants were repriced from $13.00 per share exercise price to $6.50 per share exercise price. The company recognized an additional deemed dividend of $27,587, which represents the incremental fair value of the outstanding warrants as a result of the down-round provision. As the Company has an accumulated deficit, the deemed dividend was recorded as a reduction in additional paid-in capital, resulting in a net impact of zero to additional paid-in capital in the condensed consolidated statements of changes in stockholders’ equity.

On September 6, 2024, upon the closing of a public offering, the Company issued pre-funded warrants to purchase 239,456 shares at a price of $6.45 per share with an exercise price of $0.05 per share (the “pre-funded warrants”). The pre-funded warrants are exercisable upon issuance and will remain exercisable until all the pre-funded warrants are exercised in full. No pre-funded warrants were exercised during the three or nine months ending September 30, 2024.

On September 6, 2024, upon the closing of a public offering, 16,019 warrants were issued to the placement agent. These warrants are not exercisable until March 5, 2025 and expire on September 6, 2029.

As a result of a partial voluntary conversion of the 2024 Alpha Debenture on September 9, 2024, as of September 30, 2024 the Company no longer had sufficient shares to settle the 2024 Alpha Warrant in full until shareholder approval was obtained, and a portion (2,314 warrant shares) was reclassified to liabilities (see Note 7 - Warrant Liabilities).

The following table summarizes the non compensatory equity classified warrant activity for the nine months ended September 30, 2024:

	Common Stock
	Shares			Weighted– Average Exercise Price		Range of Exercise Price		Weighted– Average Remaining Life (Years)
Total outstanding – December 31, 2023		50,141		$	36.50	$	36.50 — $36.50		4.47
Granted		70,021		$	6.81	$	6.50 — $7.80		4.54
Pre-funded investor warrants issued		239,456		$	0.05	$	0.05 — $0.05		n/a
Exercised		(31,998	)	$	13.00	$	13.00 — $13.00		—
Reclassified to liabilities		(2,314	)	$	6.50	$	6.50 — $6.50		4.41
Expired		—			—		—		—
Forfeited		—			—		—		—
Total outstanding – September 30, 2024		325,306		$	6.50	$	0.00 — $6.50		n/a
Exercisable		309,287		$	6.50	$	0.00 — $6.50		n/a
Non-Exercisable		16,019		$	7.80	$	7.80 — $7.80		4.94

The following table summarizes the non compensatory equity classified warrant activity for the nine months ended September 30, 2023:

	Common Stock
	Shares			Weighted– Average Exercise Price		Range of Exercise Price		Weighted– Average Remaining Life (Years)
Total outstanding – December 31, 2022		10,941		$	987.97	$	66.00 — $1,000.00		0.33
Granted		—			—		—		—
Exercised		—			—		—		—
Expired		(9,114	)	$	1,000.00	$	1,000.00 — $1,000.00		—
Forfeited		—			—		—		—
Total outstanding – September 30, 2023		1,827		$	927.91	$	66.00—$1,000.00		0.33
Exercisable		1,827		$	927.91	$	66.00—$1,000.00		0.33
Non-Exercisable		—			—		—		—