| Stockholders’ Equity | Note 8 — Stockholders’ Equity Authorized Capital On February 23, 2022, in connection with the closing
of the IPO, the Company filed with the Secretary of State of the State of Delaware its second amended and restated certificate of incorporation
(the “A&R COI”), which became effective immediately. There was no change to the Company’s authorized shares of common
stock and preferred stock of 250,000,000 shares and 10,000,000 shares, respectively, or the par value, which is $0.00001 for both common
and preferred stock. Preferred Stock On September 29, 2023, the Company filed a Certificate of Designations
of Rights and Preferences of Series A Convertible Preferred Stock of the Company (the “Certificate of Designations”) with
the State of Delaware to designate and authorize the issuance of up to 10,000 shares of Series A Preferred Stock. Pursuant to the Certificate
of Designations, each share of Series A Preferred Stock is convertible into that number of shares of the Company’s common stock
determined by dividing the Stated Value (as defined in the Certificate of Designations) of $1,000 per share by the Conversion Price (as
defined in the Certificate of Designations) of $0.5254 per share, subject to adjustment as provided in the Certificate of Designations,
subject to certain shareholder approval limitations. The Series A Preferred Stock is entitled to share ratably in any dividends paid on
the Company’s common stock (on an as-if-converted-to-common-stock basis), has no voting rights except as to certain significant
matters specified in the Certificate of Designations, and has a liquidation preference equal to the Stated Value of $1,000 per share plus
any accrued but unpaid dividends thereon. The Series A Preferred Stock is redeemable in whole or in part at the Company’s option
at any time. The Certificate of Designations authorized the issuance of up to 10,000 shares of Series A Preferred Stock. As of September
30, 2023, there were no shares of Series A Convertible Preferred Stock outstanding (see Notes 5 and 14). Common Stock As of September 30, 2023, and December 31, 2022,
there were 18,336,597 and 15,724,957 shares of common stock issued, respectively, and 17,819,198 and 15,265,228 shares of common stock
outstanding, respectively. Holders of the Company’s common stock are
entitled to one vote for each share held of record and are entitled upon liquidation of the Company to share ratably in the net assets
of the Company available for distribution after payment of all obligations of the Company and after provision has been made with respect
to each class of stock, if any, having preference over the common stock. The shares of common stock are not redeemable and have no preemptive
or similar rights. On February 17, 2022, the Company entered
into an underwriting agreement (the “Underwriting Agreement”) with Boustead Securities, LLC, acting as representative of the
underwriters (“Boustead”), in relation to the Company’s IPO, pursuant to which the Company agreed to sell to the underwriters
an aggregate of 2,222,222 shares of the Company’s common stock, at a price of $9.00 per share. The IPO closed on February 23,
2022 and resulted in net proceeds to the Company, after deducting the 8% underwriting discount, and other offering costs, of approximately
$17.1 million. Treasury Stock On November 10, 2022, the Board approved a stock
repurchase program (the “Repurchase Program”) to allow the Company to repurchase up to 5.0 million shares of common stock
with a maximum price of $1.00 per share, with discretion to management to make purchases subject to market conditions. On November 18,
2022, the Board approved an increase to the maximum price to $2.00 per share. There is no expiration date for this program. During the nine months ended September 30, 2023, the Company repurchased
57,670 shares of common stock, for an aggregate of approximately $59,000, at an average price of $1.02 per share. There were no repurchases
of common stock during the three months ended September 30, 2023. Shares that are repurchased are classified as treasury stock pending
future use and reduce the number of shares outstanding used in calculating earnings per share. As of September 30, 2023, there are approximately
4.5 million shares remaining, that can be repurchased under the Repurchase Program. Private Investments in Public Equity April 2022 Private Placement On April 19, 2022, the Company consummated the
closing of a private placement (the “April 2022 Private Placement”), pursuant to the terms and conditions of a securities
purchase agreement, dated as of April 13, 2022. At the closing of the April 2022 Private Placement, the Company issued 590,406 shares
of common stock, pre-funded warrants to purchase an aggregate of 590,406 shares of common stock and preferred investment options to purchase
up to an aggregate of 1,180,812 shares of common stock. The purchase price of each share of common stock together with the associated
preferred investment option was $6.775, and the purchase price of each pre-funded warrant together with the associated preferred investment
option was $6.774. The aggregate net cash proceeds to the Company from the April 2022 Private Placement were approximately $6.9 million,
after deducting placement agent fees and other offering expenses. The pre-funded warrants had an exercise price of $0.001 per share and
were exercised in full on May 24, 2022. The preferred investment options, which had an exercise price of $6.65 per share, were exchanged
in connection with the August 2022 Private Placement, as discussed below. H.C. Wainwright & Co., LLC (“Wainwright”)
acted as the exclusive placement agent for the April 2022 Private Placement. The Company agreed to pay Wainwright a placement agent fee
and management fee equal to 7.5% and 1.0%, respectively, of the aggregate gross proceeds from the April 2022 Private Placement and reimburse
certain out-of-pocket expenses up to an aggregate of $85,000. In addition, the Company issued warrants to Wainwright (the “April
Wainwright Warrants”) to purchase up to 70,849 shares of common stock. The Wainwright Warrants are in substantially the same form
as the preferred investment options, except that the exercise price is $8.46875. The form of the preferred investment options is a warrant,
and as such the preferred investment options, the pre-funded warrants, and the Wainwright Warrants are collectively referred to as the
“April 2022 Private Placement Warrants”. Further, upon any exercise for cash of any preferred investment options, the Company
agreed to issue to Wainwright additional warrants to purchase the number of shares of common stock equal to 6.0% of the aggregate number
of shares of common stock underlying the preferred investment options that have been exercised, also with an exercise price of $8.46875
(the “April Contingent Warrants”). The maximum number of April Contingent Warrants issuable under this provision of 70,849
were exchanged in connection with the August 2022 Private Placement, as discussed below. The Company evaluated the terms of the April 2022
Private Placement Warrants and determined that they should be classified as equity instruments based upon accounting guidance provided
in ASC 480, Distinguishing Liabilities from Equity Derivatives and Hedging – Contracts
in Entity’s Own Equity The Company evaluated the terms of
the April Contingent Warrants and determined that they should be classified as a liability based upon accounting guidance provided in
ASC 815-40. Since the April Contingent Warrants are a form of compensation to Wainwright, the Company recorded the value of the liability
as a reduction of additional paid in capital, with subsequent changes in the value of the liability recorded in other income (expense)
in the accompanying condensed statements of operations. August 2022 Private Placement On August 11, 2022, the Company consummated the
closing of a private placement (the “August 2022 Private Placement”), pursuant to the terms and conditions of a securities
purchase agreement, dated as of August 9, 2022. At the closing of the August 2022 Private Placement, the Company issued 1,350,000 shares
of common stock, pre-funded warrants to purchase an aggregate of 2,333,280 shares of common stock and preferred investment options to
purchase up to an aggregate of 4,972,428 shares of common stock. The purchase price of each share of common stock together with the associated
preferred investment option was $2.715, and the purchase price of each pre-funded warrant together with the associated preferred investment
option was $2.714. The aggregate net cash proceeds to the Company from the August 2022 Private Placement were approximately $8.7 million,
after deducting placement agent fees and other offering expenses. In addition, the investors in the August 2022 Private Placement, who
are the same investors from the April 2022 Private Placement, agreed to cancel preferred investment options to purchase up to an aggregate
of 1,180,812 shares of the Company’s common stock issued in April 2022. The pre-funded warrants had an exercise price of $0.001
per share. During 2022, an aggregate of 1,686,640 of the pre-funded warrants were exercised. The remaining 646,640 of pre-funded warrants
were exercised during the nine months ended September 30, 2023. The preferred investment options are exercisable at any time on or after
August 11, 2022 through August 12, 2027, at an exercise price of $2.546 per share, subject to certain adjustments as defined in the agreement.
During the three and nine months ended September 30, 2023, 2,486,214 of these preferred investment options were exercised at a reduced
exercise price of $1.09, in connection with the warrant inducement transaction discussed below. As of September 30, 2023, 2,486,214 preferred
investment options are outstanding. Wainwright acted as the exclusive placement agent
for the August 2022 Private Placement. The Company agreed to pay Wainwright a placement agent fee and management fee equal to 7.5% and
1.0%, respectively, of the aggregate gross proceeds from the August 2022 Private Placement and reimburse certain out-of-pocket expenses
up to an aggregate of $85,000. In addition, the Company issued warrants to Wainwright (the “August Wainwright Warrants”)
to purchase up to 220,997 shares of common stock. The August Wainwright Warrants are in substantially the same form as the preferred
investment options, except that the exercise price is $3.3938. The form of the preferred investment options is a warrant, and as such
the preferred investment options, the pre-funded warrants, and the August Wainwright Warrants are collectively referred to as the “August
2022 Private Placement Warrants”. Further, upon any exercise for cash of any preferred investment options, the Company agreed to
issue to Wainwright additional warrants to purchase the number of shares of common stock equal to 6.0% of the aggregate number of shares
of common stock underlying the preferred investment options that have been exercised, also with an exercise price of $3.3938 (the “August
Contingent Warrants”). The maximum number of August Contingent Warrants issuable under this provision is 298,346, which includes
70,849 of April Contingent Warrants that were modified in connection with the August 2022 Private Placement. The Company evaluated the terms of the August
2022 Private Placement Warrants and determined that they should be classified as equity instruments based upon accounting guidance provided
in ASC 480 and ASC 815-40. Since the Company determined that the August 2022 Private Placement Warrants were equity-classified, the Company
recorded the proceeds from the August 2022 Private Placement, net of issuance costs, within common stock at par value and the balance
of the net proceeds to additional paid in capital. The investors in the April 2022 Private Placement
agreed to cancel the aggregate of 1,180,812 preferred investment options issued in the April 2022 Private Placement, as part of their
participation in the August 2022 Private Placement. The preferred investment options that were cancelled were effectively exchanged for
1,289,148 new preferred investment options in the August 2022 Private Placement, and accordingly have been accounted for as a modification
or exchange of equity-linked instruments. In accordance with ASC 815-40, as the preferred investment options were classified as equity
instruments before and after the exchange, and as the exchange is directly attributable to an equity offering, the Company recognized
the effect of the exchange as an equity issuance cost. The Company evaluated the terms of the August
Contingent Warrants and determined that they should be classified as a liability based upon accounting guidance provided in ASC 815-40.
As a result of the exchange of the preferred investment options issued in the April 2022 Private Placement, the underlying equity-linked
instruments that would trigger issuance of the April Contingent Warrants was replaced, and therefore the 70,849 of April Contingent Warrants
were exchanged for 70,849 of the August Contingent Warrants. The value of the April Contingent Warrant liability was adjusted to fair
value on the date of modification, using a Monte Carlo simulation, with the change in fair value recognized in the accompanying condensed
statements of operations. The remaining 227,497 August Contingent Warrants were measured as a liability upon the close of the August 2022
Private Placement. Since the Contingent Warrants are a form of compensation to the placement agent, the Company recorded the value of
the liability as a reduction of additional paid in capital. During the three and nine months ended September 30, 2023, in connection
with the warrant inducement transaction, the Company issued to Wainwright as settlement of the contingent warrant liability associated
with 149,173 of the August Contingent Warrants, which was triggered upon exercise of the underlying preferred investment options. See
Warrant Inducement At the Market Offering Agreement On March 29, 2023, the Company entered into an
At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC, as sales agent (the “Agent”),
to create an at-the-market equity program under which it may sell up to $3,900,000 of shares of the Company’s common stock (the
“Shares”) from time to time through the Agent (the “ATM Offering”). Under the ATM Agreement, the Agent will be
entitled to a commission at a fixed rate of 3.0% of the gross proceeds from each sale of Shares under the ATM Agreement. The Company has
no obligation to sell, and the Agent is not obligated to buy or sell, any of the Shares under the Agreement and may at any time suspend
offers under the Agreement or terminate the Agreement. The ATM Offering will terminate upon the termination of the ATM Agreement
as permitted therein. Deferred offering costs associated with the ATM
Agreement are reclassified to additional paid in capital on a pro-rata basis when the Company completes offerings under the ATM Agreement.
Any remaining deferred costs will be expensed to the statements of operations should the planned offering be abandoned. As of September 30, 2023, no shares have been
sold under the ATM Offering. Warrant Inducement On July 31, 2023, the Company entered into a common
stock preferred investment options exercise inducement offer letter (the “Inducement Letter”) with a certain holder (the “Holder”)
of existing preferred investment options (“PIOs”) to purchase shares of the Company’s common stock at the original exercise
price of $2.546 per share, issued on August 11, 2022 (the “Existing PIOs”). Pursuant to the Inducement Letter, the Holder
agreed to exercise for cash its Existing PIOs to purchase an aggregate of 2,486,214 shares of the Company’s common stock (the “Inducement
PIO Shares”), at a reduced exercised price of $1.09 per share, in exchange for the Company’s agreement to issue new preferred
investment options (the “Inducement PIOs”) to purchase up to 4,972,428 shares of the Company’s common stock. The Inducement
PIOs have substantially the same terms as the Existing PIOs. On August 2, 2023, the Company consummated the
transactions contemplated by the Inducement Letter (the “Warrant Inducement”). The Company received aggregate net proceeds
of approximately $2.3 million from the Warrant Inducement, after deducting placement agent fees and other offering expenses payable by
the Company. Upon the close of the transaction,
the Company issued the Holder 1,575,000 of the 2,486,214 shares of common stock that were issuable upon exercise of the Existing PIOs.
Due to the beneficial ownership limitation provisions in the Inducement Letter, the remaining 911,214 shares were initially unissued,
and held in abeyance for the benefit of the Holder until notice from the Holder that the shares may be issued in compliance with such
limitation is received. These shares were issued to the Holder in October 2023. The Company agreed to file a registration statement covering the resale
of the Inducement PIO Shares issued or issuable upon the exercise of the Inducement PIOs (the “Resale Registration Statement”),
as soon as practicable, and to use commercially reasonable efforts to have such Resale Registration Statement declared effective by the
SEC within 90 days following the date of the Inducement Letter, and to keep the Resale Registration Statement effective at all times until
there are no Inducement PIO Shares. The provision to register the underlying shares in the Warrant Inducement does not require payment
related to the registration rights provided. As such, while the shares were not registered within 90 days of the date of the Inducement
Letter, there is no accounting impact for this provision. The Company engaged Wainwright to act as its placement
agent in connection with the Warrant Inducement and paid Wainwright a cash fee equal to 7.5% of the gross proceeds received from the exercise
of the Existing PIOs as well as a management fee equal to 1.0% of the gross proceeds from the exercise of the Existing PIOs. The Company
also agreed to reimburse Wainwright for its expenses in connection with the exercise of the Existing PIOs and the issuance of the Inducement
PIOs, up to $50,000 for fees and expenses of legal counsel and other out-of-pocket expenses and agreed to pay Wainwright for non-accountable
expenses in the amount of $35,000. In addition, the exercise for cash of the Existing PIOs triggered the issuance to Wainwright or its
designees, warrants to purchase 149,173 shares of common stock (“Wainwright Inducement Warrants”), which were issuable in
accordance with the terms of the August Contingent Warrants, and have the same terms as the Inducement PIOs except for an exercise price
equal to $1.3625 per share. The Company also agreed to issue warrants to Wainwright upon any exercise for cash of the Inducement PIOs,
that number of shares of common stock equal to 6.0% of the aggregate number of such shares of common stock underlying the Inducement PIOs
that have been exercised, also with an exercise price of $1.3625 (the “Inducement Contingent Warrants”). The maximum number
of Inducement Contingent Warrants issuable under this provision is 298,346. The Company evaluated the terms of the
Inducement PIOs and the Wainwright Inducement Warrants (collectively, the “August 2023 Inducement Warrants”), and
determined that they should be classified as equity instruments based upon accounting guidance provided in ASC 480 and ASC 815-40.
The Company also evaluated the unissued shares held in abeyance, which represent a prepaid forward contract, and determined that it
is an equity instrument based on the guidance provided in ASC 480 and ASC 815-40. The Warrant Inducement, which resulted in the
lowering of the exercise price of the Existing PIOs and the issuance of the Inducement PIOs, is considered a modification of the Existing
PIOs under the guidance of Accounting Standards Update (“ASU”) No. 2021-04, Issuer’s Accounting for Certain Modifications
or Exchanges of Equity Classified Written Call Options In addition, the change in fair value
of the contingent warrant liability associated with 149,173 of the August Contingent Warrants that were settled through issuance of the
Wainwright Inducement Warrants, of approximately $122,000, was recognized in other income (expense) in the accompanying condensed statements
of operations, and the fair value of the contingent warrant liability of approximately $129,000 was derecognized as of the settlement
date. The corresponding amount, representing the fair value of the Wainwright Inducement Warrants, was recognized as additional paid in
capital. The Company evaluated the terms of
the Inducement Contingent Warrants and determined that they should be classified as a liability based upon accounting guidance provided
in ASC 815-40. Since the Inducement Contingent Warrants are a form of compensation to Wainwright, the Company recorded the value of the
liability of approximately $26,000 as a reduction of additional paid in capital, with subsequent changes in the value of the liability
recorded in other income (expense) in the accompanying condensed statements of operations. Warrants The following summarizes activity related to the
Company’s outstanding warrants, excluding contingent warrants issuable upon exercise of the preferred investment options, for the
nine months ended September 30, 2023:
Weighted
Average
Weighted Remaining
Average Contractual
Number of Exercise Life
Shares Price (in years)
Outstanding as of December 31, 2022 5,910,914 $ 2.37 4.7
Granted 5,121,601 1.10
Exercised (3,132,854 ) 0.865
Cancelled — —
Outstanding as of September 30, 2023 7,899,661 1.68 4.6
Warrants vested and exercisable as of September 30, 2023 7,899,661 $ 1.68 4.6 As of September 30, 2023, the outstanding warrants
include 70,849 April 2022 Private Placement Warrants, 2,707,211 August 2022 Private Placement Warrants, and 5,121,601 August 2023 Inducement
Warrants, which are exercisable into 7,899,661 shares of common stock which had a fair value of $0.51 per share, based on the closing
trading price on that day. Additionally, as of September 30, 2023, and December
31, 2022, the value of the August Contingent Warrants and the Inducement Contingent Warrants (collectively the “Contingent Warrants”)
was approximately $10,000 and $14,000
Equity Incentive Plans The
Company’s 2019 Equity Incentive Plan (the “2019 Plan”) was adopted by the Board and by its stockholders on July 1,
2019. The Company has reserved 1,400,000 shares of common stock for issuance pursuant to the 2019 Plan. On February 23, 2022, and in connection with the
closing of the IPO, the Board adopted the Company’s 2022 Equity Incentive Plan (the “2022 Plan”), which is the successor
and continuation of the Company’s 2019 Plan. Under the 2022 Plan, the Company may grant stock options, restricted stock, restricted
stock units, stock appreciation rights, and other forms of awards to employees, directors and consultants of the Company. Upon its effectiveness,
a total of 1,600,000 shares of common stock were reserved for issuance under the 2022 Plan. In August 2022, the number of shares of common
stock reserved for issuance under the 2022 Plan was increased to 2,600,000 and in May 2023, the number of shares of common stock reserved
for issuance under the 2022 Plan was increased to 3,150,000. The stock options and restricted stock granted during the nine months ended
September 30, 2023 were all granted under the 2022 Plan. As of September 30, 2023, there are 1,146,878 shares available for issuance under
the 2022 Plan. Stock Options The following summarizes activity related to the
Company’s stock options under the 2019 Plan and the 2022 Plan for the nine months ended September 30, 2023:
Weighted
Average
Weighted Remaining
Average Total Contractual
Number of Exercise Intrinsic Life
Shares Price Value (in years)
Outstanding as of December 31, 2022 1,392,654 $ 3.30 $ 670,161 8.2
Granted 102,386 1.19 — —
Forfeited / cancelled (70,265 ) 3.35 — —
Exercised (45,920 ) 0.01 45,920 —
Outstanding as of September 30, 2023 1,378,855 3.25 274,299 7.8
Options vested and exercisable as of September 30, 2023 1,094,563 $ 2.95 $ 269,994 7.5 The fair value of options granted in 2023 was estimated using the following
assumptions:
For the
2023
Exercise price $ 1.05 – 1.29
Term (years) 5.00 – 10.00
Expected stock price volatility 113.1% – 119.5 %
Risk-free rate of interest 3.5% – 3.6 % The weighted average grant date fair value of
stock options granted during the nine months ended September 30, 2023 was $1.08. The aggregate fair value of stock options that vested
during the three and nine months ended September 30, 2023 was approximately $137,000 and $616,000, respectively. Restricted Stock On May 9, 2023, the Board’s Compensation
Committee approved the issuance of restricted stock, granted under the Company’s 2022 Plan, to the Company’s executive officers,
employees, and certain of the Company’s consultants. The restricted shares granted totaled 487,500, of which 150,000, 75,000, and
150,000 were granted to the Company’s Chief Executive Officer (“CEO”), Chief Financial Officer, and Chief Business Officer,
respectively. All of the restricted shares granted vest as follows: 50% in January 2024, 25% in August 2024, and 25% in August 2025. In
addition, on May 31, 2023, the Board’s Compensation Committee approved the issuance of 25,440 shares of restricted stock, granted
to the Company’s non-executive Board members, with full vesting on May 31, 2024. On August 16, 2023, upon his resignation, the
Company’s former Chief Executive Officer forfeited 150,000 shares of unvested restricted stock.
Weighted
Average
Weighted
Average
Number of Grant Date
Shares Fair Value
Nonvested as of December 31, 2022 — $ —
Granted 512,940 1.01
Forfeited / cancelled (168,860 ) 1.02
Vested — —
Nonvested as of September 30, 2023 344,080 $ 1.01 Stock-Based Compensation Stock-based compensation expense related to stock
options and restricted stock, for the three and nine months ended September 30, 2023, and 2022 was as follows:
For the Three Months Ended For the Nine Months Ended
2023 2022 2023 2022
Selling, general and administrative $ 89,832 $ 255,115 $ 362,191 $ 1,193,743
Research and development 15,570 74,694 201,570 602,525
Total $ 105,402 $ 329,809 $ 563,761 $ 1,796,268 As of September 30, 2023, unrecognized
stock-based compensation expense relating to outstanding stock options and unvested restricted stock is approximately $394,000 and $143,000,
respectively, which is expected to be recognized over a weighted-average period of 1.67 years and 1.49 years, respectively. |
