v3.25.2
Stockholders’ Equity
 6 Months Ended
Jun. 30, 2025
Stockholders’ Equity [Abstract]  
STOCKHOLDERS’ EQUITY

NOTE 13. STOCKHOLDERS’ EQUITY

 

Common stock 

 

During the three months ended June 30, 2025, the Lender converted December 2023 Convertible Notes with principal amount of $250,000 and interest payable of $8,431into 1,163,145 shares of Common Stock.

 

During the three months ended June 30, 2025, 10,000 Series A Preferred Stock were converted into 1,000,000 shares of Common Stock. During the three months ended June 30, 2025, 1,450 Series C Preferred Stock were converted into 6,530,455 shares of Common Stock.

 

On February 21, 2025, pursuant to the Advisor consulting agreement, as defined below, the Company issued 236,000 shares of common stock.

 

On January 13, 2025, pursuant to the January 2025 SPA, the Company issued 500,000 shares of common stock.

Warrants

 

As part of the Company’s initial public offering (“IPO”), warrants were issued to third-party investors where each whole warrant entitles the holder to purchase one share of the Company’s common stock at an exercise price of $11.50 per share (the “Public Warrants”). Simultaneously with the closing of the IPO, a private sale of warrants was completed where each warrant allows the holder to purchase one share of the Company’s common stock at $11.50 per share.

 

As of June 30, 2025 and December 31, 2024, there were 11,500,000 Public Warrants and 257,500 Private Warrants outstanding.

 

The Public Warrants and the Private Warrants expire on December 12, 2026 or earlier upon redemption or liquidation and are currently exercisable, provided that the Company has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to them is available (or the Company permits holders to exercise their warrants on a cashless basis under the circumstances specified in the warrant agreement) and registered, qualified or exempt from registration under the securities, or blue sky, laws of the state of residence of the holder.

 

Once the Public Warrants become exercisable, the Company may redeem the outstanding Public Warrants:

 

  ● in whole and not in part;
     
  ● at a price of $0.01 per warrant;
     
  ● upon not less than 30 days’ prior written notice of redemption to each warrant holder; and
     
  ● if, and only if, the last reported sale price of the Class A ordinary shares for any 20 trading days within a 30-trading day period ending three business days before the Company sends the notice of redemption to the warrant holders (the “Reference Value”) equals or exceeds $18.00 per share.

 

The Company accounts for the 11,757,500 warrants issued in connection with the IPO in accordance with the guidance contained in ASC 815. Such guidance provides that the warrants described above are not precluded from equity classification. Equity-classified contracts are initially measured at fair value (or allocated value). Subsequent changes in fair value are not recognized as long as the contracts continue to be classified in equity.

 

In connection with the December 2023 Convertible Note the Company issued 1,091,525 common share warrants and 15,819 preferred share warrants, in connection with the August 2024 Convertible Note the Company issued 79,673 common share warrants and in connection with the January 2025 Convertible Note the Company issued 398,364 common share warrants to ATW (the “ATW warrants”). The ATW warrants expire on the seventh anniversary of the issuance date and are exercisable on any day after the initial date on which either (i) the shares of Common Stock are registered under the 1934 Act or (ii) any publicly traded common equity (or equivalent security) of any Successor Entity are issued in exchange for the Common Stock in the applicable Business Combination or other similar transaction (the “Public Company Date”). The Company accounts for the ATW warrants as a liability and the warrants are measured at fair value with subsequent changes in fair value recorded in earnings in accordance with the guidance contained in ASC 815.

 

On August 8, 2024, the Company entered into a subscription agreement with Second Investor pursuant to which the Company issued 100,000 warrants (the “Duncan Warrants”). The Duncan Warrants have a termination date of August 8, 2026, and are exercisable at any time on or after the issue date. The Company accounts for the Duncan Warrants in accordance with the guidance contained in ASC 815. Such guidance provides that the warrants are not precluded from equity classification. Equity-classified contracts are initially measured at fair value (or allocated value). Subsequent changes in fair value are not recognized as long as the contracts continue to be classified in equity.

 

Share-based Compensation

 

The Company has adopted the Equity Incentive Plan, which plan was approved by stockholders at the Special Meeting. The purposes of the Plan is to promote the interests of the Company and the stockholders of Company by providing (i) executive officers and other employees of the Company and its Subsidiaries (as defined below), (ii) certain consultants and advisors who perform services for the Company and its Subsidiaries and (iii) non-employee members of the Board with appropriate incentives and rewards to encourage them to enter into and continue in the employ and service of the Company and to acquire a proprietary interest in the long-term success of the Company, as well as to reward the performance of these individuals in fulfilling their personal responsibilities for long-range and annual achievements. Eligible individuals under the Plan may receive awards of Options, Stock Appreciation Rights, Restricted Stock or Restricted Stock Units, Performance Awards and Other Stock-Based Awards.

The maximum number of shares reserved for the grant of awards under the Plan shall be 15,000,000.

 

The authority to manage the operation of and administer the Plan shall be vested in a committee (the “Committee”), which shall have all the powers vested in it by the terms of the Plan, including exclusive authority to select the participants to the Plan; to make awards; to determine the type, size, terms and timing of the awards (which need not be uniform); to accelerate the vesting of awards granted pursuant to the Plan, including upon the occurrence of a change of control of the Company; to prescribe the form of the award agreement; to modify, amend or adjust the terms and conditions of any award; to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall, from time to time, deem advisable; to interpret the terms and provisions of the Plan and any award issued pursuant to the Plan. The Committee shall be selected by the Board of Directors and shall consist solely of non-employee directors within the meaning of Rule 16b-3 that are outside directors within the meaning of Code Section 162(m).

 

Grants may be made under the Plan through the tenth (10th) anniversary of the date it is adopted by the Board and approved by the Committee. Awards outstanding as of the date of termination of the Plan shall not be affected or impaired by the termination of the Plan. 

 

As of June 30, 2025, no awards were granted under the Equity Incentive Plan.

 

Each of its four non-employee directors received a one-time grant of stock options to purchase up to 15,000 shares of Common Stock, exercisable at a purchase price which shall be equal to 110% of the price per share of the Common Stock at the Closing Date. In addition, in the first quarter of 2024 the Company entered into a consulting agreement whereby it issued 100,000 fully paid up non-forfeitable shares of restricted common stock. The shares were issued in the three months ended June 30, 2024. All shares of Company restricted common stock will be subject to a 12-month lock-up period from the time of issuance.

 

In February 2024, the Company entered into a one-year consulting agreement (the “Agreement”) with an investor relations firm for the purposes of developing, implementing and maintaining an ongoing stock market support system for the Company with the general objective of expanding awareness in the Company. In connection with this agreement, the Company has committed to pay $14,500 per month for the first four months of service and $12,500 per month thereafter. The Company also issued 100,000 shares of restricted common stock on May 9, 2024. All shares of Company restricted Company common stock will be subject to a 12-month lock up from the time of issuance. The agreement also provides for incentive shares as follows:

 

  ● If within six (6) months of the Effective Date of the Agreement, investors hold 2.5 million or more shares of Company common stock as a result of the investor relations firm introductions, the Company will issue 25,000 shares of restricted Company common stock to the investor relation firm within ten (10) days of achieving such milestone.

 

  ● If within six (6) months of the Effective Date of the Agreement, investors hold 5.0 million or more shares of Company common stock as a result of the investor relations firm introductions, the Company will issue 25,000 shares of restricted Company common stock to the investor relation firm within ten (10) days of achieving such milestone.

 

  ● If within six (6) months of the Effective Date of the Agreement, investors hold 10.0 million or more shares of Company common stock as a result of the investor relations firm introductions, the Company will issue 25,000 shares of restricted Company common stock to the investor relation firm within ten (10) days of achieving such milestone.

 

  ● If within nine (9) months of the Effective Date of the Agreement the ten (10) day Volume Weighted Average Price (“VWAP”) of Company common stock equals or exceeds $1.90 per share, the Company will issue 50,000 shares of restricted Company common stock to the investor relations firm within ten (10) days of achieving such milestone. All VWAP calculations shall exclude a ten (10) day trading period following any publicly announced M&A transaction.

 

  ● If within twelve (12) months of the Effective Date of the Agreement the ten (10) day Volume Weighted Average Price (“VWAP”) of Company common stock equals or exceeds $3.90 per share, the Company will issue 50,000 shares of restricted Company common stock to the investor relations firm on the twelve (12) month anniversary of the Effective Date. All VWAP calculations shall exclude a ten (10) day trading period following any publicly announced M&A transaction.

 

In January 2025, pursuant to the employment agreement for the Company’s prior Chief Financial Officer the Company recognized stock-based compensation for 100,000 shares of the Company’s common stock, valued at the market price of the Company’s common stock on January 2, 2025 of $0.94 per share, or $94,000. The share-based compensation is recorded in general and administrative expenses and in additional paid-in-capital in the accompanying unaudited condensed consolidated statements of changes in stockholders’ deficit.

In February 2025, the Company entered into a thirteen month consulting agreement (the “Second Agreement”) with an advisory firm (the “Advisors”) for business advisory services. In connection with this agreement, the Company recognized stock-based compensation and issued 236,000 shares of the Company’s common stock, valued at the market price of the Company’s common stock on February 25, 2025 of $0.889 per share, or $212,164.

 

In March 2025, into a one month consulting agreement (the “Third Agreement”) with the Advisors for business advisory services. In connection with this agreement, the Company recognized stock-based compensation for 150,000 shares of the Company’s common stock, valued at the market price of the Company’s common stock on March 28, 2025 of $0.587 per share, or $88,050. The share-based compensation is recorded in general and administrative expenses and in additional paid-in-capital in the accompanying unaudited condensed consolidated statements of changes in stockholders’ deficit. These shares were issued in May 2025.

 

On March 31, 2025, the Company entered into an amended consulting agreement. Pursuant to the terms of the amendment, the Company issued 500,000 bonus shares of Company common stock to replace cash payments for the consulting fees in the aggregate of $30,000 for the months of January through March 2025 and a $250,000 cash bonus, for a total value of $293,500. The share-based compensation is recorded in general and administrative expenses and in addition paid-in-capital in the accompanying unaudited condensed consolidated statements of changes in stockholders’ deficit. These shares were issued in May 2025.

 

For the three months ended June 30, 2025 and 2024, pursuant to the compensation plan for the Company’s non-employee directors in which the non-employee directors will receive a payment of $12,500 per each quarterly meeting, the Company recognized $37,500 in each quarter of stock-based compensation. For the six months ended June 30, 2025 and 2024, the Company recognized $75,000 and $37,500, respectively, of stock-based compensation. The accrued stock issuance is presented as a share issuance liability in the accompanying unaudited condensed consolidated balance sheet. Management issued 150,000 shares of common stock related to the 2024 non-employee directors compensation in May 2025.

 

The Equity Purchase Facility Agreement

 

On June 20, 2025, the Company and an unrelated third party accredited investor (the “Investor”) entered into an equity purchase facility agreement (the “EPFA”). Pursuant to the EPFA, the Company has the right to issue and sell to the Investor, from time to time as provided therein, and the Investor must purchase from the Company, up to an aggregate of $500 million (the “Commitment Amount”) in newly issued shares (the “Advance Shares”) of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), subject to the satisfaction or waiver of certain conditions.