Note 11 – Stockholders’ Equity

Shares authorized

Upon formation, the total number of shares of all classes of stock that the Company is authorized to issue is seventy-five million (75,000,000) shares of common stock, par value $0.001 per share.

Common stock

During the year ended December 31, 2021, the Company issued 2,300,000 shares of common stock.

On September 2, 2021, the Company closed its initial public offering (“IPO”) under a registration statement effective August 30, 2021, in which it issued and sold 2,000,000 shares of its Common Stock at a purchase price of $5.00 per share. On September 2, 2021, the Company closed on the IPO’s overallotment option, selling an additional 300,000 shares of Common Stock to the IPO’s underwriters at the public offering price of $5.00 per share. The Company received net proceeds of approximately $10.3 million from the IPO after deducting underwriting fee and offering expenses.

As of December 31, 2021 and 2020, the Company had 43,259,741 and 40,959,741 shares of common stock issued and outstanding, respectively.

Shares to be issued for compensation

The Company entered into agreements with third party consultants for financing and management consulting. The Company has incurred consulting service fees not paid in cash amounting to $48,000 for the year ended December 31, 2021, which the Company intends to issue stock as compensation for services rendered. Expenses incurred but not yet paid in shares as of December 31, 2021 and 2020 amounted to $146,709 and $98,709, respectively.

On August 30, 2021, the Company entered into a Representative Common Stock Purchase Warrant agreement (“Warrant Agreement”) with its placement agent, Boustead Securities LLC. (“Boustead”) for 161,000 shares and the exercise price is $6.25. Boustead exercised the warrants on September 7, 2021. The fair value of the warrants was $1,041,670 and $2,326,450 as of August 30 and September 7, 2021, respectively. For the year ended December 31, 2021, the Company recorded a loss from change in the fair value of warrant liability which amounted to a difference of $1,284,780.

These warrants were valued using a Black-Scholes pricing model with the following assumptions: 

This Warrant Agreement allowed for cashless exercise option, which is calculated by the percentage difference between exercise and trading price, which resulted in a reduced number of warrants being exercisable. On September 7, 2021, Boustead exercised 121,149 warrants with fair value of $1,776,044 upon cashless exercise option of warrants related to completion of the Company’s public offering. The shares will be issued six months after these warrants have been exercised. For the year ended December 31, 2021, the Company has a gain on settlement of derivative liability which amounted to $550,406. Shares to be issued as of December 31, 2021 and December 31, 2020 amounted to $1,776,044 and $0, respectively.

Stock options

On August 6, 2019, each member of the Board was granted 30,000 options to purchase shares at $5.70 per share.

On January 4, 2021, each member of the Board was granted 15,000 options to purchase shares at $3.00 per share.

On December 31, 2021, each member of the Board was granted 15,000 options to purchase shares at $8.86 per share.

As of December 31, 2021, there were 420,000 options granted, 315,288 options vested, 104,713 options unvested, and 420,000 outstanding stock options.

For the years ended December 31, 2021 and 2020, the Company’s stock option compensation expenses amounted to $429,856 and $605,150, respectively.

The fair value of the stock options listed above was determined using the Black-Scholes option pricing model with the following assumptions: 

The following is a summary of options activity from December 31, 2020 to December 31, 2021:  

As of December 31, 2021, there were 210,000 options with an exercise price of $5.70, 105,000 options with an exercise price of $3.00, and 105,000 options with an exercise price of $8.86 outstanding. As of December 31, 2021, there were 210,000 options with an exercise price of $5.70, 105,000 options with an exercise price of $3.00, and 288 options with an exercise price of $8.86 exercisable.