STOCKHOLDERS’ EQUITY

12 Months Ended

Dec. 31, 2023

Equity [Abstract]

STOCKHOLDERS’ EQUITY

NOTE 5 – STOCKHOLDERS’ EQUITY

On February 16, 2023, we sold 7,500 shares of our common stock for $150,000 in a private transaction. We did not pay a commission or finder’s fee and are using the proceeds for working capital.

On March 9, 2023, we sold 1,500 shares of our common stock for $30,000 in a private transaction. We did not pay a commission or finder’s fee and are using the proceeds for working capital.

On June 15, 2023, we sold 9,750 shares of our common stock for $195,000 in private transactions. We did not pay a commission or finder’s fee and are using the proceeds for working capital.

On June 30, 2023, we sold 10,000 shares of our common stock for $200,000 in a private transaction. We did not pay a commission or finder’s fee and are using the proceeds for working capital.

On July 6, 2023, we sold 25,000 shares of our common stock for $500,000 in a private transaction. We did not pay commissions or finder’s fees and are using the proceeds for working capital.

On August 4, 2023, we sold 16,000 shares of our common stock for $320,000 in a private transaction. We did not pay commissions or finder’s fees and are using the proceeds for working capital.

On August 28, 2023, we sold 5,000 shares of our common stock for $100,000 in a private transaction. We did not pay commissions or finder’s fees and are using the proceeds for working capital.

On September 12, 2023, we sold 1,250 shares of our common stock for $25,000 in a private transaction. We did not pay commissions or finder’s fees and are using the proceeds for working capital.

On September 15, 2023, we sold 20,000 shares of our common stock for $400,000 in two private transactions. We did not pay commissions or finder’s fees and are using the proceeds for working capital.

On October 13, 2023, we sold 5,000 shares of our common stock for $100,000 in a private transaction. We did not pay a commission or finder’s fee and are using the proceeds for working capital.

On November 27, 2023, we sold 2,750 shares of our common stock for $55,000 in a private transaction. We did not pay a commission or finder’s fee and are using the proceeds for working capital.

On November 27, 2023, we entered into a consulting engagement memorandum with an unrelated third party for the consultant’s guidance and expertise in identifying business opportunities for our technology. As compensation for the services, we issued this individual 5,175 shares of our common stock valued at $103,500.

On July 11, 2022, we sold 35,000 shares of our common stock for $350,000 to an investor in a private transaction. We did not pay a commission or finder’s fee. On July 11, 2022 we issued 10,000 shares of our common stock, valued at $100,000, to a consultant for the consultant’s guidance in identifying business opportunities, partners and other skilled consultants in both Asia and North America.

On December 16, 2022, we entered into a consulting engagement memorandum with an unrelated third party for the consultants guidance and expertise in identifying opportunities for our technology in the sleep and appetite suppressant areas. As compensation for the services, we issued this individual 5,000 shares of our common stock valued at $50,000.

As of December 31, 2023, the Company had 26,174,520 shares of common stock issued and outstanding.

Preferred Stock

There are no shares of Series A Preferred issued and outstanding in 2023 or 2022.

Stock Options

In 2023 we did not grant stock options.

On December 21, 2023, the non-qualified stock options that were granted to management on December 21, 2018, expired without exercise. The result is a reduction of 428,574 to the outstanding and exercisable options.

On April 21, 2022, we granted 60,000 options under the Company’s 2014 Equity Compensation Plan to two consultants. Each of the consultants was granted options, fully vested upon grant, to purchase 30,000 shares at an exercise price of $10.00 per share. The fair market value of the options at the grant date using the Black Sholes option pricing model was determined to be $599,293.

On June 24, 2022, we granted 20,000 options under the Company’s 2014 Equity Compensation Plan to a consultant. The options granted are fully vested upon grant and allow consultant to purchase 20,000 shares of the Company’s stock at an exercise price of $10.00 per share. The fair market value of the options at the grant date using the Black Sholes option pricing model was determined to be $199,749.

On October 21, 2022, the Company granted stock options to 39 individuals, representing up to a maximum of 555,000 shares of our common stock, exercisable at $10.00 per share. The individuals include executive officers, William Bartkowski and Daniel Markes, one of our employees, certain professional advisors, and another 29 individuals who are considered related parties in that they are employed by or otherwise associated with entities owned or controlled by our chairman and chief executive officer, Alexander Chong. The grants were made in amounts and with exercise prices and vesting conditions consistent with our corporate development objectives, including but not limited to our plans to begin commercializing our technology internationally in mid-2023. All of the awards were made for work or services provided or to be provided to CQENS. The Company made the grants under the Company’s shareholder approved 2014 Equity Compensation Plan (the “Plan”) and pursuant to the terms and conditions of the Plan and subject to vesting conditions contained in the Plan and options granted thereunder.

On October 21, 2022, the Company granted stock options under the Company’s 2014 Equity Compensation Plan to individuals who are considered related parties, in that they are employed by or otherwise associated with entities owned or controlled by our chairman and chief executive officer, Alexander Chong. Substantially all of the related party individuals are also non U.S. persons. The grants were made in amounts and with exercise prices and vesting conditions consistent with our corporate development objectives, including but not limited to our plans to begin commercializing our technology internationally in mid-2023. Each of these individuals was granted 5,000 or 10,000 or 20,000 shares at $10.00 per share. 20% of the shares (1,000 or 2,000 or 4,000 respectively) were exercisable immediately, with the balance vesting over the next 4 years in equal installments and subject to certain terms and conditions. The fair market value of the options at the grant date was determined to be $2,858,263 of which $806,864 was expensed in 2022 and $1,078,044 was expensed in 2023. The options were valued using the Black Scholes option pricing model with the following assumptions: 1) a current stock price per share of $10.00, based on the price of recent offerings; 2) expected term of 5 years; 3) computed volatility of 85.48%; and 4) the risk-free rate of return of 4.45%. The exercise period of the immediately exercisable options terminates October 21, 2027.

On October 21, 2022, the Company granted stock options under the Company’s 2014 Equity Compensation Plan to individuals who are considered related parties, in that they are employed by or otherwise associated with entities owned or controlled by our chairman and chief executive officer, Alexander Chong. Substantially all of the related party individuals are also non U.S. persons. The grants were made in amounts and with exercise prices and vesting conditions consistent with our corporate development objectives, including but not limited to our plans to begin commercializing our technology internationally in mid-2023. Each of these individuals was granted 5,000 shares at $10.00 per share. 20% of the shares or 1,000 are exercisable in 2 years from the grant date, with the balance vesting over the next 4 years in equal installments and subject to certain terms and conditions. The fair market value of the options at the grant date was determined to be $190,888 of which $10,933 was expensed in 2022 and $55,356 was expensed in 2023. The options were valued using the Black Scholes option pricing model with the following assumptions: 1) a current stock price per share of $10.00, based on the price of recent offerings; 2) expected term of 7 years; 3) computed volatility of 82.27%; and 4) the risk-free rate of return of 4.36%. The exercise period of the first exercisable options terminates October 21, 2029.

On October 21, 2022, the Company granted stock options under the Company’s 2014 Equity Compensation Plan to three attorneys involved with our Company. Each of these individuals was granted 20,000 shares at $10.00 per share. All of these shares were exercisable immediately. The fair market value of the options at the grant date was determined to be $418,282 all of which was expensed in 2022. The options were valued using the Black Scholes option pricing model with the following assumptions: 1) a current stock price per share of $10.00, based on the price of recent offerings; 2) expected term of 5 years; 3) computed volatility of 85.48%; and 4) the risk-free rate of return of 4.45%. The exercise period of the immediately exercisable options terminates October 21, 2027.

On December 13, 2022, the Company granted stock options under the Company’s 2019 Equity Compensation Plan to five consultants. The options granted were fully vested upon grant and allow the consultants to collectively purchase 20,000 shares of the Company’s stock at $10.00 per share. The fair market value of the options at the grant date using the Black Scholes pricing model was determined to be $148,000.

On February 15, 2021, we granted 400,000 options under the Company’s 2019 Equity Compensation Plan to two consulting engineers involved in our research and development. Each of the consultants was granted options to purchase 200,000 shares at $7.00 per share. 100,000 of the grants are exercisable immediately, with the balance vesting over the next four years in equal installments and subject to certain terms and conditions, including continuing in their consulting roles through the vesting periods. The fair market value of the options at the grant date was determined to be $2,798,086 of which $2,036,625 was expensed in 2021, $422,624 was expensed in 2022 and $225,884 was expensed in 2023. The options were valued using the Black Scholes option pricing model with the following assumptions: 1) a current stock price per share of $7.00, based on the price of recent offerings; 2) expected term of 5 years; 3) computed volatility of 303.59%; and 4) the risk-free rate of return of 0.27%. The exercise period of the immediately exercisable options terminates on February 15, 2026

As of December 31, 2023, the Company has outstanding and exercisable 1,983,574 options at a weighted average exercise price of $8.10 and a weighted average remaining term of 3.99 years and an intrinsic value of zero.

Warrants

On September 30, 2020, the Company entered into an Asset Purchase Agreement with Xten, a common control entity, pursuant to which it acquired a portfolio of 29 U.S. and international patents and patent applications in the areas of devices and technologies for aerosolizing certain remedies and pharmaceutical preparations, as well as the solutions and preparation for inhaled delivery.

As consideration for the acquisition, the Company issued Xten common stock purchase warrants exercisable for an aggregate of 21,000,000 shares of its common stock at an exercise price of $5.31 per share (the “Warrants”), including (i) a Series A Common Stock Purchase Warrant exercisable for 7,000,000 shares of common stock commencing on September 30, 2023 and expiring on September 30, 2026, (ii) a Series B Common Stock Purchase Warrant exercisable for 7,000,000 shares of common stock commencing on September 30, 2026 and expiring on September 30, 2029, and (iii) a Series C Common Stock Purchase Warrant exercisable for 7,000,000 shares of common stock commencing on September 30, 2029 and expiring on September 30, 2032. The Company has the right to accelerate or extend the exercise period of each series of Warrants in its discretion. In addition, the exercise period of each series of Warrants automatically accelerates in the event of a “change of control” (as defined in the Warrants) prior to such series of Warrants becoming exercisable by its respective terms. The IP Asset Purchase Agreement contained customary indemnification provisions. The warrants are valued at $191,594 based on the carrying value of the assets acquired.