| Stockholders’ Equity (Deficit) | Note 10
- Stockholders’ Equity (Deficit) The total number of shares of capital stock that
the Company has the authority to issue is up to 205,000,000 shares, consisting of: (i) 200,000,000 shares of common stock, having a par
value of $0.001 per share; and (ii) 5,000,000 shares of preferred stock, having a par value of $0.001 per share. As of June 30, 2024 there
were 44,323,226 shares of common stock issued and outstanding and as of December 31, 2023, there were 44,122,091 shares of common stock
issued and outstanding, and there were 0 shares of preferred stock outstanding as of June 30, 2024
and December 31, 2023. Stock Based Compensation We issued an aggregate of 201,135 shares
of common stock during and as of the quarter ended June 30, 2024, pursuant to reAlpha Tech Corp.’s 2022 Equity Incentive Plan (the
“2022 Plan”) described below. Equity Incentive Plan We maintain the 2022 Plan, under which we may
grant awards to our employees, officers and directors and certain other service providers. The compensation committee of our board of
directors administers the 2022 Plan. The 2022 Plan permits grants of awards to eligible employees, consultants and other service providers.
The aggregate number of shares of common stock that may be issued under the 2022 Plan may not exceed 4,000,000 shares of common stock.
All of our current employees, consultants and other service providers are eligible to be granted awards under the 2022 Plan. Eligibility
for awards under the 2022 Plan is determined by the board of directors at its discretion. The 2022 Plan permits the discretionary award
of incentive stock options (“ISOs”), non-statutory stock options (“NQSOs”), stock awards (which may have varying
vesting schedules and be subject to lock-up periods at the board of directors’ discretion) and other equity awards to selected participants.
Unless sooner terminated, no ISO may be granted under the 2022 Plan on or after the 10th anniversary of the Effective Date (as defined
in the 2022 Plan). The compensation committee has the sole discretion
in setting the vesting period and, if applicable, exercise schedule of an award, determining that an award may not vest for a specified
period after it is granted and accelerating the vesting period of an award. The plan administrator determines the exercise or purchase
price of each award, to the extent applicable. The 2022 Plan does not allow for the assignment, transfer or exercise of awards other than
by will or the laws of descent and distribution. Unless otherwise provided by the participant’s
Option Award Agreement or Stock Award Agreement (as both terms are defined in the 2022 Plan) issued pursuant to the 2022 Plan, upon the
participant’s termination for any reason, including but not limited to death, Disability (as defined in the 2022 Plan), voluntary
termination nor involuntary termination with or without Cause (as defined in the 2022 Plan), all unvested equity awards in the form of
options or shares shall be forfeited. Vested options, unless otherwise provided, will remain exercisable for three (3) months following
termination of the participant if such termination is for any reason other than death, Disability or termination for Cause. In case the
participant’s separation from service is due to death or Disability, then the vested options will be exercisable for a period of
twelve (12) months thereafter. In case the participant’s termination is for Cause, the participant will immediately forfeit any
and all options issued to such participant under the 2022 Plan. The 2022 Plan also provides the Company with a
right of repurchase all or portion of the shares awarded to the participant under the 2022 Plan, which may be exercised in case a participant
separates from service for any reason, at a price equal to the fair market value, as determined by the board of directors. In the event
of a Change in Control (as defined in the 2022 Plan), the board of directors will have the sole discretion to address the treatment of
a participant’s unvested awards in connection with such Change in Control in the participant’s award agreement. The board of directors may modify, amend or terminate
the plan at any time, provided that no such modification, amendment or termination of the 2022 Plan materially affects the rights of a
participant under a previously granted award without that participant’s consent. Further, the board of directors cannot, without
the approval of the Company’s stockholders, amend this plan: (i) increase the number of common stock with respect to the ISOs that
may be granted under the 2022 Plan; (ii) make any changes in the class of employees eligible to receive the ISOs under the plan; (iii)
without stockholder approval if required by applicable law. Warrants We account for warrants as either equity-classified
or liability-classified instruments based on an assessment of the specific terms of the warrants and applicable authoritative guidance
in FASB Accounting Standards Codification (“ASC”) 480, Distinguishing Liabilities from Equity (“ASC 480”) and
ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments
pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for
equity classification under ASC 815, including whether the warrants are indexed to our own ordinary shares and whether the warrant holders
could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions
for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of the warrant’s
issuance and as of each subsequent quarterly period end date while the warrants are outstanding. For issued or modified warrants that meet all
of the criteria for equity classification, the warrants are required to be recorded as a component of equity at the time of issuance.
For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded
as liabilities at their initial fair value on the date of issuance, and each balance sheet date thereafter. Changes in the estimated fair
value of the warrants are recognized as a non-cash gain or loss on the statements of operations. The Warrants issued in connection with the follow-on
offering and in connection with the GEM Agreement meet the criteria for equity classification under ASC 480 and ASC 815, therefore, the
warrants are classified as equity. On October 23, 2023, pursuant to the terms of
the GEM Agreement (as defined below), we issued GYBL warrants to purchase up to 1,700,884 shares of the Company’s common stock (the
“GEM Warrants”). The GEM Warrants are exercisable, for cash, at an original exercise price of $406.67 per share, which exercise
price was subsequently adjusted to $371.90 after the Company’s most recent public offering and the exercise price of the GEM Warrants
is subject to further adjustments specified therein. On November 24, 2023, we conducted a follow-on
offering by issuing 1,600,000 units priced at $5.00 per unit (the “follow-on offering”), each unit consisting
of one share of common stock and one and a half warrants to purchase common stock (the “Follow-On Warrants,” and together
with the GEM Warrants, the “Warrants”). The Follow-On Warrants permit holders to exercise them over a five-year period at
an exercise price of $5.00 per share, subject to “full ratchet” anti-dilution provisions included therein. The “full
ratchet” anti-dilution provisions provide that the Follow-On Warrants’ exercise price can be adjusted downward to a floor
price of $1.44 per share as a result of subsequent offerings, and the share amount issuable pursuant to such warrants would increase such
that the aggregate exercise price payable thereunder would equal the aggregate exercise price prior to such adjustment. We believe the likelihood that any Warrant holders
will exercise their warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the trading price of
our common stock. If the trading price for our common stock is less than $371.90 per share, in the case of the GEM Warrants, and
less than $5.00 per share, in the case of the Follow-On Warrants, we believe holders of the Warrants will be unlikely to exercise them.
While current conditions influencing the exercise of the Warrants make such exercise unlikely, further adjustments to their exercise prices,
or an adjustment to the amount of shares issuable upon exercise thereof, as applicable, may make the Warrants more attractive for investors
to exercise. Our analysis is based on the trading price of our common stock as of August 13, 2024, which was $1.21 per share. Rights On March 24, 2023, in connection with the acquisition
of Roost Enterprises, Inc. (“Rhove”), we allocated rights to each seller and participating investors a right to purchase 1,263,000
additional shares of common stock (the “Rollover Stock”) at a fixed price of $10 per share within a two-year period following
the closing date of acquisition of Rhove and shall thereafter terminate if not exercised within in such two-year period with no modifications
to the exercise terms (the “Rights”). These shares were issued without any restrictions. For details on the factors used in the calculation
of the fair value of the Follow-On Warrants and Rights, refer to the audited consolidated financial statements included in the Form 10-KT.
As the Follow-On Warrants are classified as equity instruments, they are not subject to fair value remeasurement at the end of each reporting
period. Warrants and Rights activity as of June 30, 2024 were as follows: Issue date Period Contractual Warrants Weighted Average Rhove Rights Issued on March 24, 2023 03/04/2023 06/30/2024 2 1,263,000 10.00 0.67 GEM Warrants Issued on October 23, 2023 10/23/2023 06/30/2024 5 1,700,884 371.9 4.31 Follow-on Warrants Issued on November 21, 2023 11/21/2023 06/30/2024 5 2,400,000 5.00 4.39 Warrants outstanding on June 30, 2024 5,363,884 122.52 3.49 |
