| STOCKHOLDERS’ EQUITY | NOTE
6 – STOCKHOLDERS’ EQUITY All
references to Common Stock, share and per share amounts have been retroactively restated to reflect the reverse recapitalization as if
the transaction had taken place as of the beginning of the earliest period presented. Common
Stock On December 28, 2023, the Company’s stockholders approved the
adoption of the Company’s Amended and Restated Certificate of Incorporation (the “Restated Charter”) and an amendment
to the Restated Charter to increase the number of authorized shares of the Company’s Common Stock from 500,000,000 to 3,254,475,740
(“Authorized Share Increase Amendment”) and to make a corresponding change to the number of authorized shares of capital stock
of the Company. On January 4, 2024, the Company filed the Restated Charter with the Secretary of State of the State of Delaware. All issued
shares of Common Stock are entitled to vote on a 1 share/1 vote basis. Series
A Preferred Stock The Company is
authorized to issue up to 12,500,000 shares of $0.0001 par value non-redeemable preferred stock. As of September 30, 2024, 5,847,937
shares of Series A Preferred Stock were outstanding. Each share of Series A Preferred Stock is convertible into Common Stock at any
time at a conversion price of $0.011, or 100 shares of Common Stock for each share of Series A Preferred Stock, subject to
adjustment for certain anti-dilution provisions set forth in the Series A Certificate of Designations. The stockholders of Series A
Preferred Stock are entitled to vote with holders of the Company’s Common Stock, on all matters that such holders of Common
Stock are entitled to vote upon, in the same manner and with the same effect as the holders of Common Stock, voting together with
the holders of Common Stock as a single class. Each share of Preferred Stock shall entitle the stockholder to cast that number of
votes per share of Preferred Stock equal to the number of shares of Common Stock into which such share of Preferred Stock is
convertible (after giving effect to certain limitations on conversion, as applicable). During the three months ended September 30,
2024, holders of the Series A Preferred Stock converted 4,615,426 of Series A Preferred Stock into 461,542,570 shares of Common
Stock. Warrants Prior
to the Share Exchange, there were 510,794,865 warrants to purchase Common Stock held by Private Dror shareholders (“Private Dror
Shareholders”). Pursuant to the warrant terms, 20,960,439 warrants expired as a result of the Share Exchange. On August 14,
2023, the Company issued warrants to purchase up to 489,834,426 shares of Common Stock to Private Dror Shareholders in exchange for their
outstanding warrants, and warrants to purchase up to 456,818,176 shares of Common Stock to the private placement investors in respect
of their investment, in addition to warrants to purchase up to 18,181,817 shares of Common Stock issued to private placement investors
in a subsequent closing on September 13, 2023. The warrants expire five years from the initial exercise date and are exercisable
at an exercise price of $0.033 per share. The initial exercise date was dependent on the authorization of additional shares of Common
Stock which occurred on December 28, 2023. The warrants contain provisions that protect their holders against dilution by adjustment
of the purchase price in certain events such as stock dividends, stock splits and other similar events. On
April 17, 2024, the Board of Directors approved the issuance of 10,454,500 warrants to purchase shares of Common Stock to Oriole Avenue
Inc. (“Oriole”) with the same terms as the warrants issued to the Private Dror Shareholders (see Note 7). The warrants were
issued to an investor in respect of services to be performed pursuant to the Oriole Consulting Agreement (as defined herein) concluding
July 15, 2024. The fair value of the warrants on the date of issuance was $35,814, which was recognized as general and administrative
expense in the Statement of Operations. The aggregate fair value of $35,814 was calculated using the Black-Scholes pricing model with
the following assumptions: (i) expected life of 5 years, (ii) volatility of 77.10%, (iii) risk free rate of 4.62% (iv) dividend rate
of zero, (v) stock price of $0.01, and (vi) exercise price of $0.033. If
at the time of the warrant’s exercise there is no effective registration statement registering, or no current prospectus available
for, the resale of the shares of Common Stock underlying the warrant, then the holder will have the right to exercise warrant by means
of a cashless exercise. In addition, if (i) the volume-weighted average price of the Company’s Common Stock for 20 consecutive
trading days is at least 300% of the exercise price of the warrants, (ii) the dollar trading volume of the Company’s Common
Stock for each trading day within such 20-day trading period equals or exceeds $500,000, (iii) a registration statement providing
for the resale of the private placement shares is effective and such registration statement has been effective for six (6) months, (iv) the
holder of the warrant is not in possession of any information provided by the Company that constitutes material nonpublic information
and (v) the Company has not breached any of the terms of the investment documents (regardless of if such breach has been cured),
then the warrants may be redeemed at a price of $0.001 per warrant up to one-half, in the aggregate, of the warrants upon not less than
20 days’ prior written notice of redemption to each holder, subject to certain customary restrictions. Equity
Incentive Plan Prior
to the Share Exchange, there were 163,142,084 Private Dror employee stock options that had been granted to two executives and a director.
As part of the Share Exchange, the outstanding employee stock options were exchanged and the Company is required to issue new employee
stock options under the Company’s 2023 Long-Term Incentive Plan (the “2023 Plan”) with the same terms as the previously
issued options. As the Company did not yet formalize the actual options exchange agreements, had not yet filed a new Equity Incentive
Plan with the Israeli tax authorities and did not have enough available authorized shares underlying the options to be issued at the
time of the merger, the new employee stock options were not issued. In December 2023 the Company authorized additional shares to cover
the employee stock options and in 2024 prepared all the legal filings for the establishment of the 2023 Plan. The
Company treated the exchange of the original options for the new options as a modification in accordance with ASC 718. The Company calculated
the fair value of the original options prior to the Share Exchange and the fair value of the new options at the time of the Share Exchange.
The increase in value due to the modification was $4,261,809 and is to be recorded as additional share-based compensation expense. As
one third of the options had fully vested prior to the Share Exchange, the Company recognized one third of the total amount of the increased
value, amounting to $1,420,603 at the time of the Share Exchange. The remaining two thirds of the incremental value relating to the unvested
options are going to be recorded over the remaining vesting period. On
June 17, 2024, the Company issued 21,122,239 options to purchase Common Stock to Chaim Hurvitz, a director of the Company. The options
have an exercise price of $0.0037 per share, which vested immediately upon grant and terminate 10 years from the grant date. The fair
value of the options on the date of issuance was $170,920, which was recognized as general and administrative expenses in the Statement
of Operations. Stock-based
compensation expense for the three months ended September 30, 2024 and 2023 amounted to $543,101 and $2,516, respectively. Stock-based
compensation expense for the nine months ended September 30, 2024 and 2023 amounted to $1,854,726 and $12,636, respectively. Share-based
compensation relating to general and administrative expenses amounted to $386,273 and $1,806 for the three months ended September 30,
2024 and 2023, respectively, and $1,379,041 and $9,068 for the nine months ended September 30, 2024 and 2023, respectively. Share-based
compensation relating to research and development expenses amounted to $156,828 and $710 for the three months ended September 30, 2024
and 2023, respectively, and $475,685 and $3,568 for the nine months ended September 30, 2024 and 2023, respectively. |
