Stockholders’ Equity

9 Months Ended

Sep. 30, 2024

Equity [Abstract]

Stockholders’ Equity

Note 9 – Stockholders’ Equity

Stock Dividend

On March 23, 2023, the Company issued a fifty percent (50%) stock dividend of the Company’s common stock to its shareholders for a stock dividend of one share of common stock for every two shares of common stock held.

The Company followed paragraph ASC 505-20-25 in treating its stock dividend as a stock split due to the stock dividend being greater than 25% of the shares then outstanding. As such, on March 23, 2023 and April 3, 2023, the Company issued 21,592,164 stock dividends to its shareholders for a stock dividend of one share of common stock for every two shares of common stock issued and outstanding. The Company adhered to paragraph ASC 260-10-55-12, wherein it retroactively adjusted its statement of stockholders’ equity for all presented periods to incorporate the alteration in capital structure.

Common stock

In prior years, the Company entered into several employment agreements that require the issuance of common shares for services that vest on a quarterly basis. During the period ended September 30, 2024, an aggregate of 75,466 shares with a fair value of $54,828 vested during the period and were recognized as compensation costs. As of December 31, 2023, 41,463 shares with a fair value of $74,476 vested under these agreements. These shares were not issued. During the period ending September 30, 2024, 74,943 shares with a fair value of $108,856 that previously vested were issued. As of September 30, 2024, 42,167 shares of common stock with a fair value of $20,448 remain vested but not issued.

On September 15, 2024, the Company entered into a placement agency agreement (the “Placement Agency Agreement”), with Univest Securities, LLC (the “Placement Agent”). Pursuant to the Placement Agency Agreement, the Placement Agent agrees to use its reasonable best efforts to sell the Company’s common stock, par value $0.001 per share (the “Common Stock”) in a registered direct offering (the “Offering”). In the Offering, an aggregate of 3,750,000 shares of Common Stock (the “Common Shares”) of the Company will be sold to a certain institutional purchaser, pursuant to a securities purchase agreement, dated September 15, 2024 (the “Securities Purchase Agreement”). The purchase price of each Common Share was $0.32. The net proceeds from the Offering, after deducting placement agent discounts, commissions, and estimated offering expenses payable by the Company, are approximately $1,086,000.

On September 18, 2024, the Company completed the sale of 4,300,000 shares of Common Stock (the “Shares”) in a private placement to certain eligible investors for an aggregate purchase price of $1,290,000, or $0.30 per share (the “Private Placement”). As part of the offering, Dr. Desheng Wang, Chief Executive Officer, Secretary, and Director of the Company, and Dr. Edward Lee, Chairman of the Board of the Company entered into a Subscription Agreements pursuant to which the Company agreed to issue and sell 1,000,000 shares of the Company’s Common Stock for $300,00 in cash to each of these individuals (for an aggregate sale of 2,000,000 shares for proceeds of $600,000 in cash.) The Subscription Agreements contain customary representations and warranties and was exempt from registration under Section 4(a)(2) of the Securities Act. The Company determined that the officer and director were granted an inherent compensation/benefit since the trading price at the issuance date was $0.47. As such, the Company recorded stock compensation cost of $340,000.

Treasury stock

On August 10, 2022, the Company entered a stock purchase agreement (the “Stock Purchase Agreement”) with a private shareholder to repurchase 600,000 shares of its common stock for $2,000,000. The private shareholder transferred the shares on October 4, 2022, forming a binding agreement, which the Company placed in treasury; and on October 6, 2022, the Company wired the first $1,000,000 of the purchase price. Subsequently, on July 14, 2023, the Company entered into an amendment to the Stock Purchase Agreement that increased the number of shares of its common stock the Company would purchase to 1,300,000 shares and revised the total purchase price of the shares to $1,965,000 resulting in a $35,000 change in our obligation to purchase Treasury stock. The remaining $965,000 was paid on July 14, 2023. Upon receipt of the additional 900,000 shares, the Company also placed them in treasury. As of January 17, 2023, the Company retired the initial 600,000 shares and restored them to the status of authorized and unissued shares.

On June 11, 2024, the Company retired 30,000 shares with a cost of $48,362 and restored them to the status of authorized and unissued shares. As of September 30, 2024, all of the previously repurchased shares have been restored to the status of authorized and unissued and 1,133,040 shares remain as treasury shares.

Employee compensation

On February 11, 2022 (the “Vesting Date”), the Company entered into a restricted stock award agreements (the “Award Agreement”) with eight employees for 280,000 shares of the Company’s common stock subject to the terms and to the fulfillment of the conditions set forth in the Company’s equity incentive plan. The first 20% of the restricted shares were granted and vested on February 11, 2022. An additional 20% of the restricted shares will vest on each anniversary of the Vesting Date until the fourth anniversary of the Vesting Date. The initial fair value of the awards on the date of grant was determined to be $2,942,800 which is being amortized over the 5 year vesting period. As of December 31, 2023 the unamortized amount of the award was $1,072,020. During the nine months ended September 30, 2024 the Company amortized $268,005 of this amount leaving an unamortized balance of $804,015 at September 30, 2024. As of September 30, 2024, 186,000 of the shares had been vested and 102,000 of the shares had been forfeited.

Stock options

On January 2, 2024, each member of the Board was granted 22,500 options to purchase shares at $1.50 per share with a fair value of $29,595. The options vest monthly over 1 year, and may be exercised during a 10-year term. In the aggregate, 112,500 options were granted with a fair value of $147,975. During the nine months ended September 30, 2024, the Company recognized $110,985 of compensation cost relating to the vesting of these options and $36,990 remained unvested which will be amortized over the remainder of 2024.

For the nine months ended September 30, 2024 and 2023, the Company’s stock option compensation expenses amounted to $110,985 and $400,208, respectively.

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

	September 30, 2024
Risk-free interest rate		3.94%
Expected life of the options		5.5 years
Expected volatility		126.73%
Expected dividend yield		0%

The following is a summary of the option activity from December 31, 2023 to September 30, 2024:

	Number of Options		Weighted average exercise price		Weighted Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at December 31, 2023		513,874	$	4.05		7.25		–
Granted		112,500	$	1.50		–		–
Exercised		–		–		–		–
Cancelled or forfeited		–		–		–		–
Outstanding at September 30, 2024		626,374	$	3.60		7.25		–
Vested as of September 30, 2024		598,249	$	3.69		7.14		–
Exercisable as of September 30, 2024		598,249	$	3.69		7.14		–