Stockholders' Equity

12 Months Ended

Dec. 31, 2022

Stockholders' Equity Note [Abstract]

STOCKHOLDERS' EQUITY

NOTE 7 – STOCKHOLDERS’ EQUITY

Shares Authorized

The authorized capital stock consists of 200,000,000 shares, of which 180,000,000 are shares of common stock and 20,000,000 are shares of preferred stock.

Reverse Stock Split

On July 28, 2021, the Company filed a certificate of change to the Company’s amended and restated certificate of incorporation, with the Secretary of State of the State of Nevada, to effectuate a one-for-two (1:2) reverse stock split of the Company’s common stock. Proportional adjustments for the Reverse Stock Split were made to the Company’s outstanding stock options, warrants and equity incentive plans. All share and per-share data and amounts have been retroactively adjusted as of the earliest period presented in the consolidated financial statements to reflect the Reverse Stock Split.

2021 Omnibus Equity Incentive Plan

On July 26, 2021, the Company adopted the 2021 Omnibus Equity Incentive Plan, and authorized the reservation of 2,000,000 shares of common stock for future issuances under the plan. On December 19, 2022, Company held its 2022 annual meeting of stockholders, and the shareholders approved to amend the Company’s 2021 Omnibus Equity Incentive Plan to increase the number of shares reserved for issuance thereunder to 3,000,000 shares from 2,000,000.

Preferred Stock

In August 2016, the Company designated 1 share of Series A Preferred Stock, par value $0.0001 per share (the “Series A Preferred Stock”) and has a stated value equal to $1.00 as may be adjusted for any stock dividends, combinations or splits. Each one (1) share of the Series A Preferred Stock shall have voting rights equal to (x) the total issued and outstanding Common Stock eligible to vote at the time of the respective vote divided by (y) forty-nine one hundredths (0.49) minus (z) the total issued and outstanding Common Stock eligible to vote at the time of the respective vote. The Series A Preferred Stock does not convert into securities of the Company. The Series A Preferred Stock does not contain any redemption provision. In the event of liquidation of the Company, the holder of Series A Preferred shall not have any priority or preferences with respect to any distribution of any assets of the Company and shall be entitled to receive equally with the holders of the Company’s common stock. As of December 31, 2022 and 2021, there were no Series A Preferred Stock outstanding.

Common Stock

Sale of Common Stock

During the year ended December 31, 2021, the Company sold an aggregate of 405,224 shares of its common stock at $4.00 per common share for gross proceeds of $1,620,896 and net proceeds of $1,589,237 after escrow fees related to private placement sale.

As of December 31, 2022 and 2021, there were a total of 1,389 shares of common stock to be issued.

Initial Public Offering

On August 12, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with EF Hutton, division of Benchmark Investments, LLC, in connection with the initial public offering (the “Offering”) of 3,325,301 shares of the its common stock and Series A warrants (the “Series A Warrants”) to purchase up to 3,325,301 shares of the its common stock for gross proceeds of $13,800,000, before deducting underwriting discounts, commissions, and other offering expenses, including legal expenses related to the Offering of approximately $1,718,000 which are offset against the proceeds in additional paid in capital resulting in net proceeds to the Company of $12,081,837. The Offering closed on August 17, 2021, and the underwriter subsequently exercised its over-allotment option, which closed on August 23, 2021.

The Series A Warrants are exercisable for a period of five years from the date of issuance at an exercise price of $4.98 per share, subject to adjustment as provided therein. The Series A Warrants contain a provision for cashless exercise.

In addition, pursuant to the terms of the Offering, the Company agreed to issue warrants to EF Hutton (the “Representative’s Warrants”) to purchase up to an aggregate of 231,325 shares of common stock, or 8% of the shares of common stock sold in the offering. The Representative’s Warrants are exercisable for a period of five years at any time on or after the six-month anniversary of the date of the Offering at an exercise price of $4.98 per share, subject to adjustment. The Representative’s Warrants contain a provision for cashless exercise.

Common Stock for Services

In March 2021, the Company issued an aggregate of 105,000 shares of common stock for consulting and professional services rendered. The Company valued these common shares at the fair value of $420,000 or $4.00 per common share based on sales of common stock in the recent private placement. The Company recorded stock-based consulting of $420,000 which is included in professional and consulting expenses in the accompanying statements of operations for the year ended December 31, 2021.

In February 2021, the Company entered into a one-year Advisory Board Agreement with an individual who will act as an advisor to the Company’s Board. In accordance with this agreement the Company issued 100,000 shares of its common stock as consideration for the services provided. The Company valued these common shares at a fair value of $400,000 or $4.00 per common share based on sales of common stock in the recent private placement. The Company recorded stock-based consulting of $350,000 which was included in professional and consulting expenses in the accompanying statements of operations for the year ended December 31, 2021 and the remaining balance of $50,000 as of December 31, 2021 was deferred and included as a contra-equity account within additional paid in capital and was amortized into professional and consulting expenses during the year ended December 31, 2022. 

Common Stock Issued for Acquisition

Pursuant to the Merger Agreement, the Company acquired all the issued and outstanding shares of Avila in consideration of the issuance of an aggregate of 1,000,000 shares (the “Acquisition Shares”) of the Company’s common stock. These shares were value at $1,090,000, or $1.09 per share, based on the quoted closing price of the Company’s common stock on the measurement date (See Note 3).

Common Stock Issued Upon Exercise of Series A Warrants

Between August 27, 2021 and October 5, 2021, the Company received aggregate gross proceeds of $14,356,272 from the exercise of 2,882,785 Series A Warrants, resulting in an aggregate issuance of 2,882,785 shares of common stock.

Common Stock Warrants

A summary of the Company’s outstanding stock warrants is presented below: 

	Number of Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Balance on December 31, 2020		62,500		$	0.40		1.59
Granted		3,556,626			4.98		4.65
Exercised		(2,882,785	)		4.98		4.65
Balance on December 31, 2021		736,341			4.59		4.30
Cancelled		(62,500	)		0.40		-
Balance on December 31, 2022		673,841			4.98		3.65
Warrants exercisable on December 31, 2022		673,841		$	4.98		3.65

On December 31, 2022, the aggregate intrinsic value of warrants outstanding was $0.

Stock Options

2021

On August 13, 2021, the Company granted an aggregate of 285,700 options to purchase the Company’s common stock to an officer, directors and consultants of the Company. The options each have a term of 5 years from the date of grant and are exercisable at an exercise price of $4.15 per share. The options vest six months from date of grant.

On August 24, 2021, the Company granted an aggregate of 530,000 options to purchase the Company’s common stock to officers, employees and consultants of the Company. The options have a term of 5 years from the date of grant and are exercisable at an exercise price of $6.25 per share. The options vest 25% every six months from date of grant for two years. On December 24, 2021, pursuant to a separation agreement, 115,000 unvested option were cancelled due to termination of an employee.

On September 28, 2021, the Company granted an aggregate of 18,500 options to purchase the Company’s common stock to an employee and consultants of the Company. The options have a term of 5 years from the date of grant and are exercisable at an exercise price of $14.25 per share. The options vest 25% every six months from date of grant for two years.

On September 28, 2021, the Company granted an aggregate of 350,000 options to purchase the Company’s common stock to officers and directors of the Company. The options have a term of 5 years from the date of grant and are exercisable at an exercise price of $35 per share. The options vest 25% every six months from date of grant for two years. On December 24, 2021, pursuant to a separation agreement, 25,000 unvested options were cancelled due to termination of an employee (see below).

On December 24, 2021, the Company entered into a Separation and General Release Agreement (the “Separation Agreement”) with the Company’s former Chief Operating Officer. Pursuant to the Separation Agreement the Company paid a severance fee of $35,000 on December 30, 2021. Additionally, 10,000 stock options previously granted in August 2021 vested immediately and shall be exercisable until one year from the initial grant date. The total remaining 140,000 options (115,000 options was granted in August 2021 and 25,000 option was granted in September 2021) which have not vested was forfeited and cancelled.

On December 26, 2021, the Company granted 10,000 options to purchase the Company’s common stock to an employee of the Company. The options have a term of 5 years from the date of grant and are exercisable at an exercise price of $4 per share. The options vest 25% every six months from date of grant for two years.

The 2021 stock option grants were valued at the respective grant dates using a Black-Scholes option pricing model using the assumptions discussed below. In connection with the stock option grants, the Company valued these stock options at a fair value of $7,139,392 and will record stock-based compensation expense over the vesting period. Upon cancellation of unvested stock options, the fair value of these cancelled option will be reversed.

2022

On December 26, 2021 and effective January 10, 2022, the Company approved the grant of 150,000 options to purchase the Company’s common stock to a newly hired employee of the Company. The options have a term of 5 years from the date of grant and are exercisable at an exercise price of $4 per share. The options vest 25% every six months from date of grant for two years. The employee service date shall start on January 10, 2022 or the grant date which is when the Company started recognizing stock-based compensation expenses.

On January 19, 2022, the Company granted an aggregate of 85,000 options to purchase the Company’s common stock to four newly hired employees of the Company. The options have a term of 5 years from the date of grant and are exercisable at an exercise price of $4.00 per share. The options vest 25% every six months from date of grant for two years. The employee service date shall start on January 19, 2022 or the grant date which is when the Company started recognizing stock-based compensation expenses.

On July 22, 2022, the Company granted an aggregate of 325,000 options to purchase the Company’s common stock to employees and consultants of the Company. The options have a term of 5 years from the date of grant and are exercisable at an exercise price of $4.00 per share. The options vest 25% every six months from date of grant for two years. The stock options were valued at the grant date using a Black-Scholes option pricing model which will be recognized as stock-based compensation expense over the vesting period.

The 2022 stock option grants were valued at the respective grant dates using a Black-Scholes option pricing model using the assumptions discussed below. In connection with the stock option grants, the Company valued these stock options at a fair value of $751,681 and will record stock-based compensation expense over the vesting period. Upon cancellation of unvested stock options, the fair value of these cancelled option will be reversed.

During the year ended December 31, 2021, accretion of stock-based expense related to stock options amounted to $1,533,377 of which $1,090,027 was recorded in compensation and related expenses and $443,350 was recorded in professional and consulting expenses as reflected in the consolidated statements of operations. During the year ended December 31, 2022, accretion of stock-based expense related to stock options amounted to $3,471,134 of which $3,173,401 was recorded in compensation and related expenses and $297,733 was recorded in professional and consulting expenses as reflected in the consolidated statements of operations. As of December 31, 2022, a balance of $2,532,367 remains to be expensed over future vesting periods related to unvested stock options issued for services to be expensed over a weighted average period of 1.05 years.

The stock options were valued at the grant date using a Black-Scholes option pricing model with the following assumptions. The simplified method was used for the expected option term and expected volatility was based on comparable and calculated volatility:

	2022	2021
Dividend rate	—%	—%
Term (in years)	2 to 3 years	3 years
Volatility	155.8% to 160.0%	159.0% to 163.0%
Risk—free interest rate	1.53% to 2.93%	0.44% to 0.98%

The following is a summary of the Company’s stock option activity for the years ended December 31, 2022 and 2021 as presented below: 

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)
Balance on December 31, 2020		—		$	—		—
Granted		1,194,200			14.28		4.58
Cancelled		(140,000	)		11.38		4.75
Balance on December 31, 2021		1,054,200			14.66		4.64
Granted		560,000			4.00		5.0
Cancelled		(10,000	)		6.25		-
Balance on December 31, 2022		1,604,200		$	10.99		3.91
Options exercisable on December 31, 2022		723,700		$	11.78		3.69
Options expected to vest		880,500		$	3.64
Weighted average fair value of options granted during the year				$	1.34

On December 31, 2022, the aggregate intrinsic value of options outstanding was $0.