5. Stockholders’ Equity

Preferred Stock

The Company is authorized to issue a total of 10,000,000 shares of preferred stock, par value $0.0001 per share. On March 17, 2015, the Company filed a Certificate of Designations, Preferences, Rights and Limitations of its Series A Convertible Preferred Stock with the Delaware Secretary of State to amend the Company’s certificate of incorporation. The Company has designated a total of 350,000 shares as Series A Convertible Preferred Stock, which are non-voting and are not subject to increase without the written consent of a majority of the holders of the Series A Convertible Preferred Stock or as otherwise set forth in the Preferences, Rights and Limitations. The holders of each tranche of 175,000 shares of the Series A Convertible Preferred Stock are entitled to receive a per share dividend equal to 1% of the annual net revenue of the Company divided by 175,000, until converted or redeemed. As of June 30, 2023 and December 31, 2022, the Company had 9,650,000 shares of undesignated preferred stock which may be issued with such rights and powers as the Board of Directors may designate.

Each share of Series A Convertible Preferred Stock may be converted, at the option of the holder, into 0.20833 shares of common stock (subject to customary anti-dilution provisions) and the Series A Convertible Preferred Stock is subject to mandatory conversion at the conversion rate in the event of a merger or sale transaction resulting in gross proceeds to the Company of at least $21,875,000. The Series A Convertible Preferred Stock has a liquidation preference based on its assumed conversion into shares of common stock. The Series A Convertible Preferred Stock does not have any cash liquidation preference rights or any registration rights. If fully converted, the 350,000 outstanding shares of Series A Convertible Preferred Stock would convert into 72,917 shares of common stock at June 30, 2023 and December 31, 2022.

Based on the attributes of the Series A Convertible Preferred Stock as previously described, the Company has accounted for the Series A Convertible Preferred Stock as a permanent component of stockholders’ equity.

Common Stock

The Company is authorized to issue a total of 100,000,000 shares of common stock, par value $0.0001 per share. As of June 30, 2023 and December 31, 2022, the Company had 1,665,956 shares and 1,664,706 shares, respectively, of common stock issued and outstanding.

On June 2, 2023, the Company effected a 1-for-10 reverse split of its outstanding shares of common stock. No fractional shares were issued in connection with the reverse split, with any fractional shares resulting from the reverse split being rounded up to the nearest whole share. All share and per share amounts and information presented herein have been retroactively adjusted to reflect the reverse stock split for all periods presented.

Effective April 12, 2022, the Company completed the sale of 290,000 shares of common stock at a price of $20.00 per share in a registered direct offering, generating gross proceeds of $5,800,000. The total cash costs of this offering were $658,616, resulting in net proceeds of $5,141,384. Pursuant to the placement agents’ agreement, the Company granted warrants to the placement agents to purchase 29,000 shares of common stock at an exercise price of $20.00 per share exercisable through April 14, 2027.

Effective March 10, 2023, the Company issued 1,250 shares of common stock upon the exercise of a stock option in the form of a warrant held by a consultant to the Company for 1,250 shares exercisable at $5.025 per share for total cash proceeds of $6,281.

Common Stock Warrants

A summary of common stock warrant activity during the six months ended June 30, 2023 is presented below.

Schedule of Warrants Outstanding

At June 30, 2023, the outstanding warrants are exercisable at the following prices per common share:

Schedule of Warrants Outstanding and Exercisable

The warrants exercisable at $57.00 per share at June 30, 2023 include publicly-traded warrants that were issued as part of the Company’s November 2020 public offering of units and are exercisable for a period of five years thereafter. As a result of the 1-for-10 reverse split of the Company’s common stock effective June 2, 2023, each such publicly-traded warrant currently represents the right to purchase 1/10th of a share of common stock at the original exercise price of $5.70 per share. Accordingly, upon exercise, a warrant holder will be required to present ten warrants, each exercisable at $5.70, to acquire one share of post-split common stock, which is equivalent to a purchase price of $57.00.

Based on a fair market value of $5.88 per share on June 30, 2023, there was no intrinsic value attributed to exercisable but unexercised common stock warrants at June 30, 2023.

Information with respect to the issuance of common stock in connection with various stock-based compensation arrangements is provided at Note 7.