STOCKHOLDERS’ EQUITY

12 Months Ended

Dec. 31, 2024

Equity [Abstract]

STOCKHOLDERS’ EQUITY

(8) STOCKHOLDERS’ EQUITY

In July 2021, the Company’s shareholders voted to increase the number of authorized shares of capital stock to 62,000,000 shares, consisting of 60,000,000 shares of Common Stock and 2,000,000 shares of Preferred Stock. On October 8, 2024, the Company filed an amended and restated certificate of designation increasing it designated Series A Convertible Preferred Stock from 2,000,000 shares to 3,000,000 shares at $0.001 par value per share.

On April 17, 2023, the Company effected a 25:1 reverse stock split for each share of common stock issued and outstanding. All shares and associated amounts have been retroactively restated to reflect the stock split.

Preferred Stock and Warrants

The Company is authorized to issue 3,000,000 shares of preferred stock at $0.001 par value per share. As of December 31, 2024 and 2023, the Company had 2,305,357 and 0 shares, respectively, of preferred stock were outstanding.

The Board of Directors may determine the rights, preferences, privileges, qualifications, limitations and restrictions granted or imposed upon any series of preferred stock.

On January 23, 2024, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with David Lazar (“Lazar”), a member of our Board of Directors, whereby, at the closing of the transactions contemplated by the Purchase Agreement (the “Closing”), the Company sold and Lazar (or to any transferee of Lazar’s which acquires the Securities Purchase Rights, as defined below, hereinafter a “Lazar Transferee”) purchased two million 2,000,000 shares of the Company’s preferred stock, $0.001 par value per share (the “Preferred Stock”), at a price per share of $1.40, for an aggregate purchase price of $2,800,000, subject to the conditions described below, pursuant to the exemptions afforded by the Securities Act of 1933, as amended, and Regulation S thereunder. Under the Purchase Agreement, the Company agreed to designate 2,000,000 of the Preferred Stock as Series A Preferred Stock (the “Series A Preferred Stock”) for the sale to Lazar (or a Lazar Transferee). Each share of Series A Preferred Stock shall be convertible, at the option of the holder, into 1.4 shares of common stock of the Company, $0.01 par value per share (the “Common Stock”), and vote on an “as-if-converted” basis and shall have full ratchet protection in any subsequent offerings. Pursuant to the Purchase Agreement, the Company shall also issue Lazar (or a Lazar Transferee) warrants to purchase up to an additional 2,800,000 shares of Common Stock, with an exercise price equal to $1.00 per share, subject to adjustment therein (the “Warrants”, and together with the Series A Preferred Stock, the “Purchased Securities”).

The Company evaluated the Series A Preferred Stock and Warrants for liability or equity classification in accordance with the provisions of ASC 480, Distinguishing Liabilities from Equity, and determined that equity treatment was appropriate because neither the Series A Preferred Stock nor the Warrants met the definition of liability instruments.

The Warrants are classified as component of permanent equity because they are freestanding financial instruments that are legally detachable and separately exercisable from the shares of common stock with which they were issued, are immediately exercisable, do not embody an obligation for the Company to repurchase its shares, and permit the holder to receive a fixed number of shares of common stock upon exercise. In addition, the Warrants do not provide any guarantee of value or return. The Company valued the Warrants at issuance using the Black-Scholes option pricing model and determined the fair value of the Warrants to purchase 2,800,000 shares of the Company’s common stock at $4.7 million. The key inputs to the valuation model included a weighted average volatility of 162.0% and an expected term of 3.0 years.

The proceeds from the issuance of the Series A Preferred Stock to the Company were allocated based on the relative fair value of the Warrants as compared to the fair value of the Series A Preferred Stock. The fair value of the Warrants incorporates assumptions regarding our common stock price, dividend yield, stock price volatility, as well as assumptions regarding the risk-free interest rate. Using this model, the Warrants was valued at $1.4 million at January 23, 2024 and was included in additional paid in capital on our condensed consolidated balance sheet.

The fair value of the Series A Preferred Stock was determined based on assumptions that incorporated our common stock price and dividend rate. The Company valued the Series A Preferred Stock at $4.5 million. Based on the fair value model to allocate the Series A Preferred Stock proceeds, the Series A Preferred Stock was valued at $1.4 million at January 23, 2024 and was included in Series A Preferred Stock on our condensed consolidated balance sheet.

On February 26, 2024, the Company held a special meeting of stockholders, who voted and approved (i) the issuance of shares of our common stock, par value $0.01 per share (“Common Stock”) upon conversion of Series A Preferred Stock or exercise of the Warrants to be issued at Closing of the Purchase Agreement, which conversions or exercise would result in a “change of control” of the Company under the applicable rules of the Nasdaq and (ii) an amendment to the Company’s Amended and Restated Certificate of Incorporation to effect the increase in authorized shares of Preferred Stock to 10,000,000.

On October 22, 2024, the Company issued 305,357 shares of Series A Preferred Stock to Lazar in exchange for his services performed on behalf of the Company from January to September 2024.

Common Stock

The Company is authorized to issue 60,000,000 shares of common stock at $0.01 par value per share. As of December 31, 2024 and 2023, the Company had 3,713,792 and 2,789,020, respectively, shares of common stock outstanding.

In January 2024 and September 2024, the Company issued 156,880 and 612,892, respectively, shares of common stock to board members in exchange for services performed and recorded $378,081 in stock-based compensation expense and $465,482 in reduction to accrued expenses, respectively. The Company issued 20,000 and 135,000 shares of common stock to vendors in exchange for services performed in 2024. The Company recorded $48,200 and $5,400 in stock-based compensation expense in January 2024 and September 2024.

Equity Compensation Plans

In July 2019, the Company terminated the 2009 Stock Option Plan and the 2009 Directors Option Plan (collectively, the “Prior Plans”) and adopted the 2019 Stock Option Plan (the “2019 Stock Options Plan”) and the 2019 Directors Option Plan (the “2019 Directors Option Plan”) (collectively, the “2019 Plans”, and together with the Prior Plans, the “Plans”). The purpose of the 2019 Plans is to provide certain incentive and non-statutory stock options to employees, directors and certain non-employees. As a result, the Company may not grant any additional awards under the Prior Plans. The Prior Plans will continue to govern outstanding stock options previously granted thereunder. The Company has initially reserved 160,000 shares and 40,000 shares of common stock for issuance of awards under the 2019 Stock Option Plans and the 2019 Directors Option Plan, respectively.

The 2019 Plans authorize grants to purchase shares of authorized but unissued common stock. Stock options can be granted with an exercise price no less than or equal to the stock’s fair market value at the date of grant. All awards have 10-year terms. The 2019 Plans permit incentive stock options, or ISOs and non-qualified stock options, or NSOs. If the stock options are granted to a 10% stockholder, then the exercise price per share may not be less than 110% of the fair market value per share of the Company’s common stock on the grant date. The board of directors sets the fair value and exercise price for the underlying shares at the grant date.

On November 9, 2021, the Company’s Board of Directors approved the Omnibus Incentive Compensation Plan and Non-Employee Directors Compensation Plan (collectively, the “2021 Equity Plans”) and terminated the 2019 Plans. The purpose of the 2021 Equity Plans is to provide certain incentive and non-statutory stock options, restricted stock, restricted stock units, and stock appreciation rights to employees, directors, and certain non-employees. As a result, the Company may not grant any additional awards under the 2019 Plans. The Prior Plans and the 2019 Plans will continue to govern outstanding stock options previously granted thereunder. The Company has initially reserved 120,000 shares and 50,000 shares of common stock for issuance of awards under the Omnibus Incentive Compensation Plan and Non-Employee Directors Compensation Plan, respectively. On June 9, 2022, the 2021 Equity Plans were approved by the Company’s shareholders.

Stock Option Activity

Stock option activity under Stock Option Plans was as follows:

	Outstanding Options			Weighted average exercise price		Weighted average remaining contractual term		Aggregate Intrinsic Value
Outstanding at December 31, 2022		38,926		$	46.75		2.20	$	10.50
Granted		-			-		-		-
Exercised		-			-		-		-
Forfeited		(38,926	)		46.75		-		-
Outstanding at December 31, 2023		-		$	-		-	$	-
Outstanding at December 31, 2024		-
Exercisable at December 31, 2024		-		$	-		-	$	-

There were no options granted during 2024 and 2023 under the stock option plan. As of December 31, 2024 and 2023, there were no options vested or outstanding.

Stock-based Valuation Assumptions

During 2024 and 2023, the Company did not grant stock options and consequently had no requirement to value stock options.

Restricted Stock Units

During 2023, the Company granted 14,831 RSUs with a total fair value of $80 thousand under the 2021 Equity Plans. As of December 31, 2023, there were no RSUs vested with a fair value of $0 thousand. The Company recorded $118 thousand in stock-based compensation expense for the years ended December 31, 2023. As of December 31, 2023, the total unrecognized stock-based compensation expense was $0 thousand. During 2024 and as of December 31, 2024, there were no RSUs granted or outstanding.

A summary of plan activity for the 2021 Equity Plans is as follows:

				Weighted
				Average Grant Date
	Units			Fair value
Unvested at December 31, 2022		44,516		$	23.75
Granted		14,831			5.39
Vested		(20,498	)		(21.63	)
Forfeited		(38,849	)		(17.86	)
Unvested at December 31, 2023		-		$	-

Stock-based Compensation Expense

The following table sets forth stock-based compensation expense included in the Company’s consolidated statements of operations:

	Years ended December 31,
	2024		2023
Cost of goods sold	$	-	$	17,205
Sales and marketing		-		55,657
General and administrative		897,163		75,921
Research and development		-		130,612
Total stock-based compensation expense	$	897,163	$	279,395