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 nine months ended September 30, 2022, the Company issued 269,174 shares of common stock.

On April 4, 2022, the Company issued 121,149 shares of its Common Stock to Boustead Securities LLC. (“Boustead”), issued pursuant to the cashless warrant exercise, exercised by Boustead on September 7, 2021 with an exercise price of $6.25 with the shares were valued at $1,776,044 upon the cashless exercise option of the warrants related to the completion of the Company’s August 30, 2021 public offering in connection with its listing on Nasdaq.

On May 2, 2022, the Company issued 32,627 shares to consultants in exchange for professional services rendered. The shares were valued at $154,709 based on the closing price of the Company’s common stock on the dates that the shares were deemed earned, according to the agreements.

On August 17, 2022, the Company issued 54,898 shares to two of the board members who exercised their options. The combined 107,500 options were exercised and the shares were valued at $306,325 based on the cashless exercise calculation.

On August 22, 2022, the Company issued 60,500 shares to employee based on the Restricted Stock Award Agreements (see Employee compensation)

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

On September 2, 2021, the Company closed its underwritten initial public offering (“IPO”) under a registration statement that was declared effective on August 30, 2021, pursuant to which it issued and sold 2,000,000 shares of 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 fees and offering expenses.

As of September 30, 2022 and December 31, 2021, the Company had 43,528,915 shares and 43,259,741 shares of common stock issued and outstanding, respectively.

Treasury stock

On August 10, 2022, the Company entered a stock purchase agreement with a private shareholder to repurchase 400,000 shares of its common stock for $2,000,000 and placed it in treasury. The private shareholder transferred the shares on October 4, 2022, forming a binding agreement, and on October 6, 2022, the Company wired the first $1,000,000 of the purchase price. The remaining $1,000,000 is due on or before February 6, 2023.

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 $8,000 for the nine months ended September 30, 2022, which the Company intends to issue stock as compensation for services rendered. Prior and current expenses incurred and paid in shares as of September 30, 2022 amounted to $154,709.

On August 30, 2021, the Company entered into a Representative Common Stock Purchase Warrant agreement (“Warrant Agreement”) with its placement agent, Boustead Securities 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 were 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. 121,149 shares were issued to Boustead which amounted to $1,776,044 as of September 30, 2022.

Employee compensation

On February 11, 2022 (“Vesting Date”), the Company entered into a Restricted Stock Award Agreement (“Award Agreement”) with eight employees for 280,000 shares of the $0.001 par value voting common stock subject to the terms and to the fulfillment of the conditions set in the Company’s equity incentive plan. The first 20% of the restricted shares was granted and vested on February 11, 2022 (the “Vesting Date”). Twenty percent of the restricted shares will vest on each anniversary of the Vesting Date until fourth anniversary of the Vesting Date. There were 56,000 shares granted as of March 31, 2022. The fair value of above employee compensation was $588,560 as of September 30, 2022. 

In November 2021, the Company entered into a one-year employment agreement with VP of Finance and Head of Investor Relations of the Company, pursuant to which the Company rewards a 10,000-share bonus consisting of shares of $0.001 par value voting common stock, which will be granted in 2,500 blocks every quarter based on certain performance metrics.

During the nine months ended September 30, 2022 and 2021, the total employee compensation amount for all employees in the company, was $663,900 and $0, respectively. The Company issued 60,500 shares for employee compensation as of the nine months’ ended September 30, 2022. During the nine months ended September 30, 2022 and 2021, the Company recognized employee compensation in amount of $75,340 for the fixed salary of the VP of Finance and $21,020 for the Chief Financial Officer.

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 nine months ended September 31, 2022 and 2021, the Company’s stock option compensation expenses amounted to $652,500 and $320,512, 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 the option activity from December 31, 2021 to September 30, 2022: