UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 10-Q

          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended March 31, 2024

OR

          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 001-40146

FORIAN INC.
(Exact name of registrant as specified in its charter)

Delaware
 
85-3467693
(State of Other Jurisdiction of incorporation or Organization)
 
(I.R.S. Employer Identification No.)

41 University Drive, Suite 400, Newtown, PA
 
18940
(Address of principal executive offices)
 
(Zip code)

Registrant’s telephone number, including area code: (267) 225-6263

Securities registered pursuant to Section 12(b) of the Act:

Title of each class
 
Trading Symbol(s)
 
Name of each exchange on which registered
Common Stock, $0.001 par value per share
 
FORA
 
The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒   No ☐

Indicate by check mark whether the registrant has submitted electronically; every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.0405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes ☒   No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b 2 of the Exchange Act.

Large accelerated filer ☐
Accelerated filer ☐
Non-accelerated filer
Smaller reporting company
       
     
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b 2 of the Act). Yes No ☒

As of May 10, 2024, there were 31,139,684 shares outstanding of the registrant’s common stock, including shares of unvested restricted stock.



TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION
 
     
Item 1.
1
   
  1
   
  2
   
  3
   
  4
   
  5
   
Item 2.
24
   
Item 3.
33
   
Item 4.
33
   
PART II
34
   
Item 1.
34
   
Item 1A.
36
   
Item 2.
36
   
Item 3.
36
   
Item 4.
36
   
Item 5.
36
   
Item 6.
37
   
38

FORIAN INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 2024 AND DECEMBER 31, 2023

Item 1.
Financial Statements and Supplementary Unaudited Data

   
March 31,
   
December 31,
 
   
2024
   
2023
 
   
Unaudited
       
ASSETS
           
Current assets:
           
Cash and cash equivalents
 
$
1,029,128
   
$
6,042,986
 
Marketable securities
   
46,405,857
     
42,296,589
 
Accounts receivable
   
4,267,782
     
2,572,931
 
Proceeds receivable from sale of discontinued operations, net
          1,645,954  
Contract assets
   
1,023,413
     
1,126,713
 
Prepaid expenses
   
868,525
     
1,077,233
 
Other current assets
   
2,437,222
     
2,515,509
 
Total current assets
   
56,031,927
     
57,277,915
 
                 
Property and equipment, net
   
67,198
     
76,085
 
Right of use assets, net
    5,395       10,664  
Deposits and other assets
   
1,390,589
     
1,523,948
 
Total assets
 
$
57,495,109
   
$
58,888,612
 

 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
                 
Current liabilities:
               
Accounts payable
   
374,735
     
161,590
 
Accrued expenses and other current liabilities
   
3,235,544
     
4,252,257
 
Short-term operating lease liabilities
    5,395       10,664  
Warrant liability
   
450
     
563
 
Deferred revenues
   
2,852,454
     
2,413,551
 
Total current liabilities
   
6,468,578
     
6,838,625
 
                 
Long-term liabilities:
               
Other long-term liabilities
    500,000       1,000,000  
Convertible notes payable, net of debt issuance costs (Note 11) ($6,000,000 in principal is held by a related party. Refer to Note 14)
    23,981,788
      24,870,181
 
Total long-term liabilities
   
24,481,788
     
25,870,181
 
Total liabilities
   
30,950,366
     
32,708,806
 
Commitments and contingencies (Note 16)

 
     


   
     
 
Stockholders’ equity:
               
Preferred Stock; par value $0.001; 5,000,000 Shares authorized; 0 issued and outstanding as of March 31, 2024 and December 31, 2023
   
     
 
Common Stock; par value $0.001; 95,000,000 Shares authorized; 31,093,172 issued and outstanding as of March 31, 2024 and 30,920,450 issued and outstanding as of December 31, 2023
   
31,093
     
30,920
 
Additional paid-in capital
   
75,411,679
     
73,834,300
 
Accumulated deficit
   
(48,898,029
)
   
(47,685,414
)
Total stockholders’ equity
   
26,544,743
     
26,179,806
 
Total liabilities and stockholders’ equity
 
$
57,495,109
   
$
58,888,612
 

The accompanying notes are an integral part of these condensed consolidated financial statements.

FORIAN INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(UNAUDITED)

   
For the Three Months Ended March 31,
 
   
2024
   
2023
 
Revenue
  $ 4,877,378     $
4,870,387  
                 
Costs and Expenses:
               
Cost of revenues
   
1,703,357
     
1,252,215
 
Research and development
   
389,889
     
531,689
 
Sales and marketing
   
1,055,141
     
1,196,192
 
General and administrative
   
3,492,454
     
3,639,826
 
Separation expenses           599,832  
Depreciation and amortization
   
8,887
     
38,430
 
Total costs and expenses
   
6,649,728
     
7,258,184
 
                 
Operating Loss From Continuing Operations
   
(1,772,350
)
   
(2,387,797
)
                 
Other Income (Expense):
               
Change in fair value of warrant liability
   
113
     
(5,559
)
Interest and investment income
   
675,157
     
382,922
 
Gain on sale of investment
    48,612        
Interest expense     (198,963 )     (208,456 )
Gain on debt redemption
    137,356        
Total other income, net
   
662,275
     
168,907
 
                 
Loss from continuing operations before income taxes
   
(1,110,075
)
   
(2,218,890
)
Income tax expense
   
(102,540
)
   
(29,909
)
Loss from continuing operations, net of tax
    (1,212,615 )     (2,248,799 )
                 
Loss from discontinued operations
          (94,427 )
Gain on sale of discontinued operations
          11,531,849  
Income tax effect on discontinued operations
          (2,690,144 )
Income from discontinued operations, net of tax
          8,747,278  
                 
Net (Loss) Income
 
$
(1,212,615
)
 
$
6,498,479
 
                 
Net (loss) income per share:                
Basic and diluted                
 Continuing operations   $ (0.04 )   $ (0.08 )
 Discontinued operations   $
    $
0.27  
Net (loss) income per share - basic and diluted   $ (0.04 )   $ 0.19  
                 
Weighted-average shares outstanding
   
30,999,433
     
32,300,237
 

The accompanying notes are an integral part of these condensed consolidated financial statements.

FORIAN INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(UNAUDITED)

 
 
Preferred Stock
   
Common Stock
                   
 
 
Shares
   
Par Value @ $0.001 per share
   
Shares
   
Par Value @ $0.001 per share
   
Additional Paid In Capital
   
Accumulated Deficit
   
Stockholders’ Equity
 
Balance at January 1, 2024
   
   
$
     
30,920,450
   
$
30,920
   
$
73,834,300
   
$
(47,685,414
)
 
$
26,179,806
 
Vesting of Restricted Stock and Stock Awards, net of shares surrendered for taxes
   
     
     
170,260
     
170
     
(81,533
)
   
     
(81,363
)
Issuance of Forian common stock upon exercise of stock options
   
     
     
2,462
     
3
     
(3
)
   
     
 
Stock-based compensation expense
   
     
     
     
     
1,658,915
     
     
1,658,915
 
Net loss
   
     
     
     
     
     
(1,212,615
)
   
(1,212,615
)
Balance at March 31, 2024
   
   
$
     
31,093,172
   
$
31,093
   
$
75,411,679
   
$
(48,898,029
)
 
$
26,544,743
 

 
 
Preferred Stock
   
Common Stock
                   
 
 
Shares
   
Par Value @ $0.001 per share
   
Shares
   
Par Value @ $0.001 per share
   
Additional Paid In Capital
   
Accumulated Deficit
   
Stockholders’ Equity
 
Balance at January 1, 2023
   
   
$
     
32,251,326
   
$
32,251
   
$
71,182,326
   
$
(58,792,101
)
 
$
12,422,476
 
Vesting of Restricted Stock and Stock Awards, net of shares surrendered for taxes
                166,615       167       (94,766 )           (94,599 )
Issuance of Forian common stock upon exercise of stock options
                901       1       (1 )            
Stock-based compensation expense
   
     
     
     
     
1,580,925
     
     
1,580,925
 
Net income
   
     
     
     
     
     
6,498,479
     
6,498,479
 
Balance at March 31, 2023
   
   
$
     
32,418,842
   
$
32,419
   
$
72,668,484
   
$
(52,293,622
)
 
$
20,407,281
 

The accompanying notes are an integral part of these condensed consolidated financial statements.
FORIAN INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

   
For the Three Months Ended March 31,
 
   
2024
   
2023
 
CASH FLOWS FROM OPERATING ACTIVITIES:
           
Net (loss) income
 
$
(1,212,615
)
 
$
6,498,479
 
Less: Income from discontinued operations
          8,747,278  
Loss from continuing operations
    (1,212,615 )     (2,248,799 )
Adjustments to reconcile net (loss) income to net cash used in operating activities:
               
Depreciation and amortization
   
8,887
     
38,430
 
Amortization on right of use asset
    5,269       5,214
 
Amortization of debt issuance costs
    1,333       1,333
 
Amortization of discount - proceeds from sale of discontinued operations
    (20,712 )     (55,041 )
Accrued interest on convertible notes
    197,630       208,456
 
Accretion of discounts on marketable securities
    (619,565 )     (320,530 )
Gain on sale of investment
    (48,612 )      
Gain on debt redemption
    (137,356 )      
Stock-based compensation expense
   
1,658,915
     
1,828,233
 
Change in fair value of warrant liability
   
(113
)
   
5,559
 
Change in operating assets and liabilities:
               
Accounts receivable
   
(1,694,851
)
   
(1,986,256
)
Contract assets
   
103,300
     
412,244
 
Prepaid expenses
   
208,708
     
409,800
 
Changes in lease liabilities during the year
    (16,229 )     (5,214 )
Deposits and other assets
   
211,646
     
11,841
 
Accounts payable
   
213,145
     
33,346
 
Accrued expenses
    (1,016,713 )     (59,788 )
Deferred revenues
   
438,903
     
519,395
 
Other liabilities
    (489,040 )      
Net cash used in operating activities - continuing operations
    (2,208,070 )     (1,201,777 )
Net cash used in operating activities - discontinued operations
          (26,649 )
Net cash used in operating activities
   
(2,208,070
)
   
(1,228,426
)
                 
CASH FLOWS FROM INVESTING ACTIVITIES:
               
Additions to property and equipment
   
     
(75,493
)
Purchase of marketable securities
   
(48,848,811
)
   
(39,704,579
)
Sale and maturity of marketable securities
    45,359,108       18,256,876  
Proceeds from sale of investment
    48,612        
Net cash from sale of discontinued operations
   
1,666,666
     
20,890,193
 
Net cash used in investing activities - continuing operations
    (1,774,425 )     (633,003 )
Net cash used in investing activities
   
(1,774,425
)
   
(633,003
)
                 
CASH FLOWS FROM FINANCING ACTIVITIES:
               
Tax payments related to shares withheld for vested restricted stock units
    (81,363 )     (94,599 )
Cash used to redeem convertible notes
    (950,000 )      
Net cash used in financing activities - continuing operations
    (1,031,363 )     (94,599 )
Net cash used in financing activities
   
(1,031,363
)
   
(94,599
)
                 
Net change in cash
   
(5,013,858
)
   
(1,956,028
)
Cash and cash equivalents, beginning of period
   
6,042,986
     
2,795,743
 
Cash and cash equivalents, end of period
 
$
1,029,128
   
$
839,715
 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

FORIAN INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1
BUSINESS ORGANIZATION AND NATURE OF OPERATIONS


Forian Inc. (the “Company” or “Forian”) was incorporated in Delaware on October 15, 2020 as a wholly owned subsidiary of Medical Outcomes Research Analytics, LLC (“MOR”) for the purpose of effecting the business combination with Helix Technologies, Inc. (“Helix”). Forian provides a unique suite of data management capabilities and proprietary information and analytics solutions to optimize and measure operational, clinical and financial performance for customers within the healthcare and life sciences industries.


The business combination with Helix in March 2021 was accounted for as a reverse acquisition using the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”), with the Company deemed the accounting acquirer for financial reporting purposes. Helix provided software and analytics solutions to state governments and licensed operators in the cannabis industry, primarily through its subsidiary, Bio-Tech Medical Software, Inc. (“BioTrack”), until its sale of BioTrack in 2023.


On February 10, 2023, Helix completed the sale of 100% of the outstanding capital stock of BioTrack; on March 3, 2022, Helix completed the sale of the assets of its security monitoring business; and on October 31, 2022, Helix completed the sale of 100% of the outstanding membership interest of its Engeni LLC subsidiary (these businesses are collectively referred to as the “Helix Businesses”). As a result of these transactions, Helix has no remaining active operations and the Company no longer provides products or services to the cannabis industry. The results of the Helix Businesses are presented as discontinued operations in the Condensed Consolidated Statements of Operations and, as such, have been excluded from continuing operations. The Company will continue to provide analytics solutions to customers within the healthcare and life sciences industries. For further discussion on the discontinued operations, refer to Note 4.

Note 2
BASIS OF PRESENTATION


The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). Certain footnotes and other financial information normally required by U.S. GAAP have been condensed or omitted in accordance with instructions to Form 10-Q and Article 8 of Regulation S-X. In the opinion of management, such statements include all adjustments which are considered necessary for a fair presentation of the condensed consolidated financial statements of the Company as of March 31, 2024. The operating results presented herein are not necessarily an indication of the results that may be expected for the year. The condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission (“SEC”) on March 29, 2024.

Note 3
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation


The consolidated financial statements of the Company include the accounts of (i) Medical Outcomes Research Analytics, LLC and (ii) Helix Technologies, Inc. and its wholly owned subsidiaries including Helix Legacy, Inc. (f/k/a Security Grade Protective Services, Ltd.), Green Tree International, Inc. and Bio-Tech Medical Software, Inc. (through February 10, 2023, on which date 100% of the outstanding capital stock of Bio-Tech Medical Software, Inc. was sold). All intercompany transactions have been eliminated in consolidation.

Discontinued Operations


On February 10, 2023, Helix completed the sale of 100% of the outstanding capital stock of its wholly owned subsidiary, BioTrack.


    As the sale of BioTrack, the security monitoring business and Engeni, LLC, together, represented a strategic shift that will have a major effect on the Company’s operations and financial results, they have been presented in discontinued operations separate from continuing operations for the three months ended March 31, 2023, as applicable. The results from operations and gain (loss) on sale of the security monitoring business and Engeni LLC, net, was previously classified as part of continuing operations as their disposition individually did not have a major impact on the business prior to the sale of BioTrack. For further discussion, refer to Note 4.

Use of Estimates


Preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, judgements and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses together with amounts disclosed in the related notes to the financial statements. The significant areas of estimation include but are not limited to accounting for the allowance for credit losses, income taxes, contingencies, discontinued operations and stock-based compensation. Certain of the Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is possible that the external factors could have an effect on the Company’s estimates and could cause actual results to differ from those estimates.

Fair Value of Financial Instruments



The Company measures the fair value of financial assets and liabilities based on the guidance of ASC 820, Fair Value Measurements and Disclosures (“ASC 820”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements.



ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an ordinary transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:



Level 1 — quoted prices in active markets for identical assets or liabilities;



Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable; and


Level 3 — inputs that are unobservable.



The carrying value of the Company’s financial instruments, such as cash, marketable securities, accounts receivable and accrued liabilities and other liabilities approximate fair values due to the short-term nature of these instruments. The estimated fair value of the Company’s warrant liabilities as of March 31, 2024 and December 31, 2023 was $450 and $563, respectively, based on Level 3 inputs. Refer to Note 10.

Cash and Cash Equivalents and Credit Risk


The Company considers all cash accounts that are not subject to withdrawal restrictions and highly liquid investments with a maturity of three months or less, when purchased, as cash and cash equivalents.


The Company maintains cash with major financial institutions. Cash held at U.S. bank institutions is currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 at each institution, as the coverage is based on individually titled accounts. The portion of deposits in excess of FDIC coverage is not protected by such insurance and represents a credit risk to the Company. At times, the Company’s deposits exceed this coverage.

Accounts Receivable and Allowance for Credit Losses


Accounts receivable are recorded at the invoiced amount, net of an allowance for credit losses. The Company determines the allowance for credit losses based on historical write-off experience, customer specific facts and economic conditions.



Outstanding account balances are reviewed individually for collectability. The allowance for credit losses is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Allowance for credit losses was $0 at March 31, 2024 and December 31, 2023.



Management charges account balances against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

Proceeds Receivable From Sale of Discontinued Operations, Net


In February 2023, the Company received a note for $10,000,000 payable in twelve equal monthly installments as partial consideration for the sale of BioTrack (see Note 4 – Discontinued Operations). As of March 31, 2024, the note has been fully paid. The Company recognized $20,712 and $55,041 of amortization of the $410,000 original discount recorded on the note interest as investment income for the three months ended March 31, 2024 and 2023, respectively.


Revenue Recognition



The Company recognizes revenue in accordance with FASB Topic 606, Revenue from Contracts with Customers (“ASC 606”).



Under ASC 606, the Company recognizes revenue when (or as) customers obtain control of promised goods or services, in an amount that reflects the consideration which is expected to be received in exchange for those goods or services. The Company recognizes revenue following the five-step model prescribed under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and (v) recognize revenues when (or as) the Company satisfies a performance obligation. The Company applies the provisions of ASC 606 to an arrangement when a substantive contract exists, and collectability is probable.



The Company derives revenue primarily from license fees for the Company’s information products. Information products contracts are generally for a period of one month to five years. Information products’ customers may access data analytics products through the use of tools provided by the Company or by utilizing their own tools per the contract. Data products may consist of historical information as it exists at the time of delivery or information that will be updated over a period of time as agreed with the customer. In most cases, the provision of information products is considered a single performance obligation. In cases where the Company is not obligated to update information over the access period, and control over the use of the products passes to the customer when delivered, revenue is recognized when the information products are made available to the customer. In cases where information updates are provided over the contract term, they are considered highly interrelated with the information product delivered upon contract inception, and revenue is recognized ratably over the life of the contract. Customers are generally invoiced according to monthly, quarterly or annual amounts specified in the contract. Any amounts invoiced in excess of revenue recognized are recorded as deferred revenue. Revenue recognized in excess of amounts invoiced is recorded as a contract asset.



In some cases, contracts provide for variable consideration that is contingent upon the occurrence of uncertain future events, which can either increase or decrease the transaction price, including sales of products by customers derived from data analytics products the Company provides. Variable consideration based on sales of products by customers is recognized in the period of sales, subject to minimum amounts specified in contracts. Variable consideration is estimated at the expected value or at the most likely amount depending on the type of consideration. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. The estimate of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of anticipated performance and all information (historical, current and forecasted) that is reasonably available to the Company and reevaluated each reporting period. The effect of revisions in recognized estimated variable consideration in excess of minimums are recorded beginning in the period in which the estimates are revised. Actual results could differ from periodic estimates.



Significant judgments and estimates are sometimes necessary for the determination of whether performance obligations in a contract are distinct and whether they are delivered at a point in time or over time. Judgement is also necessary to assess revenue recognized under contingent revenue arrangements.


Contract acquisition costs, which consist of sales commissions paid or payable, are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial and renewal contracts are deferred and then amortized on a straight-line basis over the contract term.


During November 2020, the Company entered into a Master Services Agreement (the “November 2020 Agreement”) with a customer to provide information services described in certain statements of work under the November 2020 Agreement. As part of the November 2020 Agreement, the Company was granted shares of restricted stock representing approximately 23.4% of the outstanding common stock of the customer at the time of issuance, vesting in quarterly increments specified in the November 2020 Agreement through December 2023. Concurrently, the Company entered into a Stockholders Agreement specifying its voting and other rights as a stockholder. As a result, the Company determined that it did not exert influence over the customer. ASC 606-10-32-21 requires an entity to measure the fair value of noncash consideration at contract inception. The fair value of the restricted stock was determined to be $0 on the date of inception. The Company recorded revenue from the customer of $798,134 and $651,762 for the three months ended March 31, 2024 and 2023, respectively. The Company has outstanding accounts receivable from this customer of $795,278 and $1,827 at March 31, 2024 and December 31, 2023, respectively.


On July 21, 2023, the customer merged with Vox Merger Sub, Inc. As a result of the merger, the Company received $5,805,858 of cash proceeds, net of holdbacks, in consideration for all of its equity interest in the customer, which was recorded as gain on sale of investment during the year ended December 31, 2023. Forian may receive additional earnout payments in 2025 and 2026 in an aggregate amount of up to approximately $3,600,000 if certain conditions are met.



Contract assets and deferred revenues consist of the following as of March 31, 2024:

 
 
Contract Assets
   
Contract
Liability
 
 
 
Costs of
obtaining
contracts
   
Unbilled
revenue
   
Total
   
Deferred
Revenue
 
Balance at January 1, 2023
 
$
158,016
   
$
2,094,942
   
$
2,252,958
   
$
2,581,287
 
Beginning deferred revenue balance recognized during the period
   
     
     
     
(2,581,286
)
Net change due to timing of billings, payments and recognition
   
(50,684
)
   
(1,075,561
)
   
(1,126,245
)
   
2,413,550
 
Balance at December 31, 2023
   
107,332
     
1,019,381
     
1,126,713
     
2,413,551
 
Beginning deferred revenue balance recognized during the period
   
     
     
     
(1,748,676
)
Net change due to timing of billings, payments and recognition
   
(17,076
)
   
(86,224
)
   
(103,300
)
   
2,187,579
 
Balance at March 31, 2024
 
$
90,256
   
$
933,157
   
$
1,023,413
   
$
2,852,454
 


Transaction price allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes unearned revenue and unbilled amounts that will be recognized as revenue in future periods. The majority of the Company’s noncurrent remaining performance obligations will be recognized over the next 36 months.


The transaction price allocated to remaining performance obligations consisted of the following:

 
 
March 31, 2024
   
December 31, 2023
 
Estimated next twelve months
 
$
17,661,721
   
$
17,202,223
 
Thereafter
   
20,923,875
     
20,831,200
 
Total
 
$
38,585,596
   
$
38,033,423
 


Segment Information


FASB ASC 280, Segment Reporting (“ASC 280”), establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is the chief executive officer, who reviews the financial performance and the results of operations of the segments prepared in accordance with U.S. GAAP when making decisions about allocating resources and assessing performance of the Company.



As discussed above, the Company disposed of its businesses servicing the cannabis industry in 2023, and has reclassified its historical results as discontinued operations. As such, the Company’s continuing operations are comprised of a single reportable segment providing analytic and information services to the healthcare and life sciences industries.


Customer Concentration



During the three months ended March 31, 2024, the Company had two customers representing 16.4% and 13.8% of revenue. At March 31, 2024, the Company had three customers representing 18.6%, 11.6% and 10.9% of accounts receivable.


During the three months ended March 31, 2023, the Company had two customers representing 13.4% and 12.6% of revenue. At March 31, 2023, the Company had four customers representing 29.9%, 13.1%, 10.5% and 10.5% of accounts receivable.


Vendors and Licensors


The Company licenses certain information assets from third parties as a key input to certain Information and Software products. Any disruptions associated with these suppliers could have a material short-term impact on the business while alternate sources are secured. The information licenses specify content deliverables and specified use rights for a fixed fee and time period. Payment terms for information licenses generally consist of upfront payments and annual licensing fees. The Company expenses the contract costs over the expected period of benefit, and records any differences between amounts expensed and payments incurred as other assets or liabilities on a contract by contract basis. Payments for licensed information, including the changes in related assets and liabilities, are classified within “Net cash provided by operating activities” on the condensed consolidated statements of cash flows. In cases where the Company pays variable fees based on content usage, such costs are expensed as incurred.

Vendor Concentration


During the three months ended March 31, 2024, the Company had three vendors representing 15.2%, 12.7% and 10.5% of purchases and expenses.


During the three months ended March 31, 2023, the Company had three vendors representing 17.4%, 12.6% and 10.1% of purchases and expenses.


Property and Equipment, Net



Property and equipment are stated at cost, net of accumulated depreciation, which is recorded commencing at the in-service date using the straight-line method at rates sufficient to charge the cost of depreciable assets to operations over their estimated useful lives, which are 1 to 7 years. Maintenance and repairs are charged to operations as incurred.


Contingencies


Occasionally, the Company may be involved in claims and legal proceedings arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and assumptions change or prove to be incorrect, it could have a material impact on the Company’s condensed consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of complex judgments about future events and can rely heavily on estimates and assumptions.

Advertising


Advertising costs are expensed as incurred and included in sales and marketing expenses and amounted to $35,642 and $15,125 for the three months ended March 31, 2024 and 2023, respectively.


Net Income (Loss) per Share


The calculation of earnings per share is based on the weighted average number of common shares or common stock equivalents outstanding during the applicable period. The dilutive effect of common stock equivalents is excluded from basic earnings per share and is included in the calculation of diluted earnings per share, unless their impact is antidilutive to the “control number,” which is income (loss) from operations. Convertible notes, employee stock options, employee restricted stock awards and similar equity instruments granted by the Company are treated as potential ordinary shares outstanding in computing diluted earnings per share. Diluted shares outstanding are calculated using the as if converted method for convertible notes and the treasury stock method for other potentially dilutive securities. Under the as if converted method, the dilutive impact of securities is calculated as if conversion occurred at the beginning of the reporting period. Under the treasury stock method, the amount the employee must pay for exercising stock options, the amount of compensation cost for future service that the Company has not yet recognized, and the amount of benefits that would be recorded in common shares when the award becomes deductible for tax purposes are assumed to be used to repurchase shares.


Distinguishing Liabilities from Equity


The Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging: Contracts in Entity’s Own Equity (“ASC 815-40”), to classify certain redeemable and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares.


Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet (“temporary equity”). The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity.


Initial Measurement


The Company records its financial instruments classified as liability, temporary equity or permanent equity at issuance at the fair value, or cash received.


Subsequent Measurement – Financial instruments classified as liabilities


The Company records the fair value of its financial instruments classified as liabilities at each subsequent measurement date. The changes in fair value of its financial instruments classified as liabilities are recorded as other expense/income.

Stock-based Compensation


The Company’s 2020 Equity Incentive Plan (“2020 Plan”) permits the grant of stock options, restricted stock awards and/or restricted stock units. A total of 4,000,000 shares of Company common stock were originally authorized and reserved for issuance under the 2020 Plan. On June 15, 2022, the Company’s stockholders approved an amendment to the 2020 Plan, which amended the 2020 Plan to increase the number of shares available for issuance by 2,400,000 shares to a total of 6,400,000 shares. Stock options represent the right to purchase Company common stock at the exercise price on the date of grant of the stock option at a future date. Restricted stock awards are grants of shares of Company common stock. Restricted stock units represent the right to receive shares of Company common stock on future specified dates. Stock options, restricted stock awards and restricted stock units granted contain restrictions that cause them to be subject to substantial risk of forfeiture and restrict their exercise, sale or other transfer by the grantee until they vest. The terms of the stock options, restricted stock awards and units granted under the 2020 Plan are determined by the Board of Directors in the agreement evidencing the award, including the number of shares, period of restriction or vesting schedule and other terms. The fair value of the stock options, restricted stock awards and restricted stock units is based on the underlying grant date fair value of Company common stock. The fair value is then expensed over the requisite service periods of the awards, net of forfeitures, which is generally the service period and the related amount is recognized in the condensed consolidated statements of operations.


Income Taxes


The Company accounts for income taxes in accordance with FASB ASC 740 (“ASC 740”). Deferred income tax assets and liabilities are determined based upon differences between financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.


The provision for income taxes represents Federal and state and local income taxes. The effective rate differs from statutory rates due to the effect of state and local income taxes, tax benefit of R&D credits, and certain nondeductible expenses. Our effective tax rate will change from quarter to quarter based on recurring and non-recurring factors including, but not limited to, the geographical mix of earnings, enacted tax legislation and state and local income taxes. In addition, changes in judgment from the evaluation of new information resulting in the recognition, derecognition, or re-measurement of a tax position taken in a prior annual period is recognized separately in the quarter of the change.


For the three months ended March 31, 2024 and 2023, the Company recognized net income tax expense of $102,540 and $29,909, respectively. The Company claims R&D tax credits on eligible R&D expenditures. The R&D tax credits are recognized as a reduction to income tax expense.


The Company recognized a taxable gain on sale of discontinued operations for the three months ended March 31, 2023, which resulted in utilization of certain available federal and state net operating loss carryforwards. As a result, the Company recorded income taxes related to discontinued operations of $2,690,144 after utilization of federal and state net operating losses during the three months ended March 31, 2023.


The Company files a consolidated U.S. income tax return and tax returns in certain state and local jurisdictions. As of March 31, 2024, the Company is not subject to examination in any tax jurisdictions.


Tax contingencies are recorded, if needed, to address potential exposure involving tax positions the Company has taken that could be challenged by tax authorities. These potential exposures could result from applications of various statutes, rules, regulations and interpretations. Any estimates of tax contingencies contain assumptions and judgments about potential actions by taxing jurisdictions. Any interest and penalties related to uncertain tax positions would be included as part of the income tax provision. The Company’s conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon ongoing analysis of or changes in tax laws, regulations and interpretations thereof as well as other factors.


On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted and signed into law. Regarded as the reduced version of the proposed Build Back Better Act, the IRA contains two main corporate income tax provisions, including a 15% minimum tax on the average annual adjusted financial statement income of corporations with profits over $1 billion over a three-year period, as well as a 1% excise tax on the corporate stock buybacks by domestic publicly traded corporations. The Company has evaluated the impact of the IRA on its financial statements for tax year 2023 and the IRA did not have a material impact on the Company’s financial statements.


Separation Expenses


Effective February 10, 2023, the Company’s Chief Executive Officer, President and Class II member of the Board of Directors resigned. In connection with the resignation, the Company entered into a separation agreement providing for, among other things, (i) salary continuation for twelve months and (ii) accelerated vesting of 106,656 unvested restricted shares of Company common stock. Separation expenses for the three months ended March 31, 2023, include $250,000 related to the salary continuation and $349,832 related to the accelerated vesting of stock.


In addition, the Company records normal course of business severance expenses in the operating expense line item related to its employees’ activities.

Recent Accounting Pronouncements


In December 2023, the FASB issued Accounting Standards Update No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 requires additional disclosures related to rate reconciliation, income taxes paid, and other disclosures. Under ASU 2023-09, for each annual periods presented, public entities are required to (1) disclose specific categories in the tabular rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires all reporting entities to disclose on an annual basis the amount of income taxes paid disaggregated by federal, state, and foreign taxes as well as the amount of income taxes paid by individual jurisdiction. ASU 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024, and can be applied on a prospective basis with an option to apply the standard retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-09 on its condensed consolidated financial statements and related disclosures.


In November 2023, the FASB issued Accounting Standards Update No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). ASU 2023-07 improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The amendments in this update require public companies to disclose on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (CODM) and require that a public entity disclose, on an annual and interim basis, an amount for other segment items by reportable segment and a description of its composition. In addition, the amendment requires that a public entity provide all annual disclosures about a reportable segment’s profit or loss and assets currently required in interim periods and require that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources. Early adoption is permitted. The Company is currently evaluating the impact of ASU 2023-07 on its condensed consolidated financial statements and related disclosures. This amendment will go into effect for the fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.


The Company has considered all other recently issued accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its financial statements.

Note 4
DISCONTINUED OPERATIONS


Helix Businesses Discontinued Operations



On February 10, 2023, Helix completed the sale of 100% of the outstanding capital stock of its wholly owned subsidiary, BioTrack, in exchange for $30,000,000, consisting of $20,000,000 paid at closing and $10,000,000 paid in twelve unconditional monthly installments thereafter. In March 2022, Helix sold its security monitoring business and in October 2022, Helix sold its Argentinian subsidiary, Engeni LLC. The security monitoring business, BioTrack and Engeni are collectively referred to as the “Helix Businesses.” As a result of these transactions, as of February 10, 2023, the Company no longer provides products or services to the cannabis industry. The Company continues to provide analytics solutions to customers in the healthcare and life sciences industries.



The Helix Businesses have been presented in discontinued operations separate from continuing operations for the three months ended March 31, 2023.



The Company recorded a gain on the sale of assets related to its security monitoring business of $11,531,849 and a loss from discontinued operations of $94,427 during the three months ended March 31, 2023, which is included as part of discontinued operations. The Company also recorded income taxes related to discontinued operations of $2,690,144 during the three months ended March 31, 2023.


The following table summarizes the major income and expense line items of the Helix Businesses as reported in the condensed consolidated statements of operations for the three months ended March 31, 2023, through the date of sale:

   
For the Three Months Ended
 
   
March 31, 2023
 
Income and expense line items related to Helix Businesses:
     
Revenues:
     
Information and Software
 
$
1,121,677
 
Services
   
179,798
 
Total revenues
   
1,301,475
 
         
Costs and Expenses:
       
Cost of revenues
   
699,015
 
Research and development
   
160,164
 
Sales and marketing
   
35,005
 
General and administrative
   
129,283
 
Depreciation and amortization
   
372,435
 
Total costs and expenses
   
1,395,902
 
         
Net loss from discontinued operations for Helix Businesses before income taxes
   
(94,427
)
Gain on sale of discontinued operations
   
11,531,849
 
Income tax expense
   
(2,690,144
)
         
Net gain from discontinued operations, net of tax for Helix Businesses
 
$
8,747,278
 

Note 5
MARKETABLE SECURITIES


Marketable securities are stated at estimated fair value based upon current market quotes (level 1 inputs) and are classified as available-for-sale. Realized gains and losses are included in investment income. Unrealized gains and losses are immaterial and therefore the Company has presented such amounts within investment income in the condensed consolidated statements of operations. Marketable securities consists of U.S. Treasury Bills. As of March 31, 2024 and December 31, 2023, marketable securities consisted of the following:

   
March 31, 2024
   
December 31, 2023
 
United States Treasury Bills
           
Amortized Cost
 
$
46,424,484
   
$
42,289,441
 
Fair Market Value
 
$
46,405,857
   
$
42,296,589
 

Note 6
PREPAID EXPENSES AND OTHER CURRENT ASSETS


The Company has various agreements which require upfront and periodic payments. The Company records the expenses related to these agreements ratably over the annual terms. As of March 31, 2024 and December 31, 2023, the Company’s balance sheet reflected prepaid expenses of $868,525 and $1,077,233, respectively, primarily relating to various software and information licenses and insurance policies with durations ranging from 3 months to 1 year.


Included in other current assets as of March 31, 2024, are income taxes receivable of $1,786,581, deferred license costs of $382,481 and amounts receivable from employees of $164,765.


Included in current other assets as of December 31, 2023, are income taxes receivable of $1,890,391, deferred license costs of $381,820 and amounts receivable from employees of $236,364.

Note 7
PROPERTY AND EQUIPMENT, NET


As of March 31, 2024 and December 31, 2023, property and equipment were comprised of the following:

   
March 31, 2024
   
December 31, 2023
 
Personal computing equipment
 
$
94,521
   
$
94,521
 
Office equipment and capitalized software
   
73,260
     
73,260
 
Total
   
167,781
     
167,781
 
Less: Accumulated depreciation
   
(100,583
)
   
(91,696
)
Property and equipment, net
 
$
67,198
   
$
76,085
 

Note 8
DEPOSITS AND OTHER ASSETS


As of March 31, 2024, deposits and other assets included $1,264,435 of assets related to information license vendors (see Note 3 – Summary of Significant Accounting Policies – Vendors and Licensors).


As of December 31, 2023, deposits and other assets included $1,390,156 of assets related to information license vendors (see Note 3 – Summary of Significant Accounting Policies – Vendors and Licensors).


Note 9
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES


As of March 31, 2024 and December 31, 2023, accrued expenses were comprised of the following:

   
March 31, 2024
   
December 31, 2023
 
Employee compensation
  $ 904,073     $ 1,546,614  
Information Contracts (see Note 3 - Vendors and Licensors)
    1,411,216       1,533,861  
Accrued expenses
   
920,255
     
1,171,782
 
Total
 
$
3,235,544
   
$
4,252,257
 

Note 10
WARRANT LIABILITY


In conjunction with the business combination with Helix, outstanding warrants to purchase Helix common stock were converted to warrants to purchase Company common stock. As the warrant holders have the option to receive cash in lieu of common stock in certain circumstances, the Company determined that the warrants require classification as a liability pursuant to ASC 815-40. In accordance with the applicable accounting guidance, the outstanding warrants are recognized as a warrant liability on the condensed consolidated balance sheet and were measured at their inception date fair value (the closing date of the business combination with Helix) and subsequently remeasured to fair value at each reporting period with changes being recorded in the condensed consolidated statements of operations. As of March 31, 2024 and 2023, the Company had 16,132 and 86,502 warrants outstanding classified as liabilities, respectively. During the three months ended March 31, 2024, 34,822 warrants expired.


The fair value of the Company’s warrant liability, measured at Level 3 in the fair value hierarchy, was calculated using the Black-Scholes model using the following inputs:

   
As of March 31, 2024
   
As of December 31, 2023
 
Fair value of Company’s common stock
 
$
3.32
   
$
2.93
 
Dividend yield
   
0%

   
0%

Expected volatility
   
80.0%

   
68% - 83%

Risk free interest rate
   
5.00%

   
5.06% - 5.54%

Expected life (years)
   
0.35
     
0.30
 
Exercise price
 
$
8.00 - $20.00
   
$
8.00 - $28.00
 
Fair value of financial instruments - warrants
 
$
450
   
$
563
 


The following table summarizes the change in fair value of the Company’s financial instruments – warrants, measured at Level 3 in the fair value hierarchy:

   
Amount
 
Balance as of January 1, 2024
  $ 563  
Change in fair value of warrant liability
   
(113
)
Balance as of March 31, 2024
  $ 450  

   
Amount
 
Balance as of January 1, 2023
  $ 4,547  
Change in fair value of warrant liability
   
5,559
 
Balance as of March 31, 2023
  $ 10,106  

Note 11
CONVERTIBLE NOTES

   
March 31, 2024
   
December 31, 2023
 
Principal outstanding
 
$
22,000,000
   
$
23,000,000
 
Add: accrued interest
   
1,989,342
     
1,879,068
 
Less: unamortized debt issuance costs
   
(7,554
)
   
(8,887
)
Convertible note payable, net of debt issuance costs
 
$
23,981,788
   
$
24,870,181
 


On September 1, 2021, the Company entered into a Note Purchase Agreement with certain accredited investors and a director of the Company, pursuant to which the Company issued at 100% of par value $24,000,000 in aggregate principal balance of 3.5% Convertible Promissory Notes due September 1, 2025 (the “Notes”), convertible into (i) shares of Company common stock, and (ii) warrants to purchase shares of Company common stock equal to 20% of the principal amount of the Notes divided by the conversion price of the Notes (the “Warrants”). The Notes will mature on the fourth-year anniversary of the date of issuance, which time is also the termination date of the Warrants, if issued. The conversion price of the Notes and the exercise price of the Warrants is $11.98 per share, which was the consolidated closing bid price of the Company common stock as reported by Nasdaq on August 31, 2021, the most recently completed trading day preceding the Company entering into the Note Purchase Agreement with investors with respect to the Notes. The holders of the Notes may, at any time, convert all or a portion of the Notes plus accrued interest (subject to a minimum principal amount of $100,000) at the conversion price. The Company may redeem all or a portion of any Notes then outstanding at any time after the first anniversary of issuance at a price of 112.5% of par value plus accrued interest. In the event of a change of control of the Company, the Company may redeem all Notes then outstanding at a price of 108% of par value plus accrued interest. Interest expense on the Notes is payable upon maturity or earlier redemption unless the Notes are converted prior to such time. In the event the holders of the Note convert all or a portion of the Notes, the related accrued interest is converted at the conversion price. Interest expense related to the Notes was $197,630 and $208,456 for the three months ended March 31, 2024 and 2023, respectively.

The Company evaluated the embedded features in accordance with ASC 815-15-25 and determined embedded features are all clearly and closely related to the debt host instrument and therefore are not required to be bifurcated and separately measured at fair value. The Warrants were not issued in connection with the Notes, and issuance of the Warrants is contingent upon conversion of the Notes at the option of the Holder, therefore no portion of the proceeds are allocated to the Warrants.


The Company incurred debt issuance costs associated with the Notes in the amount of $21,330, which were deferred and are being amortized over the term of the Notes. During the three months ended March 31, 2024 and 2023, the Company recognized $1,333 in amortization of debt issuance costs.


On February 28, 2024, the Company redeemed $1,000,000 in principal and $87,356 of accrued interest thereon for an aggregate redemption price of $950,000 resulting in a gain of $137,356, which is included in other income and expense in the Condensed Consolidated Statements of Operations.

Note 12
STOCK-BASED COMPENSATION

Restricted Stock Awards and Restricted Stock Units


The table below includes issuances of restricted stock awards and units under the 2020 Plan and unvested equity interests of MOR which were converted into restricted common stock.

   
Number of Restricted
Shares and Units
   
Weighted Average
Grant Date Fair Value
Per Share
 
Unvested at January 1, 2023
   
551,258
   
$
3.28
 
Issued
   
570,000
     
3.79
 
Vested
   
(331,934
)
   
7.30
 
Canceled
   
(44,339
)
   
0.44
 
Unvested at December 31, 2023
   
744,985
     
2.05
 
Issued
   
350,000
     
2.68
 
Vested
   
(199,719
)
   
3.85
 
Canceled
   
     
 
Unvested at March 31, 2024
   
895,266
   
$
1.89
 


The 895,266 of unvested awards at March 31, 2024 consisted of 873,498 restricted stock units and 21,768 shares of restricted stock.
Stock Options


As part of the business combination with Helix, the Company assumed the Helix TCS, Inc. Omnibus Stock Incentive Plan and the Bio-Tech Medical Software, Inc. 2014 Stock Incentive Plan, each as amended, pursuant to which options exercisable at prices between $2.00 and $51.80 per share for 455,089 shares of Company common stock were outstanding. As of March 31, 2024, options to purchase 210,493 shares of common stock remain outstanding.


The fair value of the stock options was estimated at Level 3 in the fair value hierarchy using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgement. The assumptions used to calculate the grant date fair value of the options outstanding as of March 31, 2024 and December 31, 2023 are as follows:

   
2024
   
2023
 
Exercise Price
 
$
2.00 to $33.20
   
$
2.00 to $51.80
 
Fair value of Company common stock
 
$
1.90 to $15.61
   
$
2.40 to $15.61
 
Dividend yield
   
0%

   
0%

Expected volatility
 
74% to 188%
   
74% to 188%
 
Risk Free interest rate
 
0.27% to 4.67%
   
0.27% to 4.67%
 
Expected life (years) remaining
 
0.01 to 9.99
   
0.01 to 9.99
 


The following summarizes option activity under the Company’s stock plan for the three months ended March 31, 2024 and for the year ended December 31, 2023:

   
Shares Underlying
Options
   
Weighted Average
Exercise Price
   
Weighted Average
Remaining
Contractual Term
(in years)
 
Outstanding at January 1, 2023
   
3,983,808
   
$
10.53
     
8.23
 
Granted
   
1,416,000
   
$
3.46
     
9.28
 
Exercised
   
(2,452
)
 
$
2.20
     
4.42
 
Forfeited and expired
   
(1,556,812
)
 
$
12.53
     
7.40
 
Outstanding at December 31, 2023
   
3,840,544
   
$
7.12
     
8.96
 
Granted     467,500     $ 2.81       9.84  
Exercised     (14,375 )   $ 2.98       (1.01 )
Forfeited and expired     (86,001 )   $ 10.41       2.06  
Outstanding at March 31, 2024
    4,207,668     $ 6.59       9.23  
Vested options at March 31, 2024
   
1,833,270
   
$
9.10
     
6.65
 


The weighted average exercise price and remaining contractual life of exercisable options as of March 31, 2024 is $9.10 and 6.65 respectively. The total aggregate intrinsic value of the exercisable options as of March 31, 2024 was approximately $130,534.
Stock Compensation Expense


The weighted-average grant date fair value per share for the stock options granted was $2.00 and $3.42 for the three months ended March 31, 2024 and 2023, respectively.


On February 10, 2023, the Company’s Chief Executive Officer, President and Class II member of the Board of Directors resigned. In connection with the resignation, the Company entered into a separation agreement providing for, among other things, accelerated vesting of 106,656 unvested restricted shares of the Company common stock. Stock based compensation expense for the three months ended March 31, 2023 includes $349,832 related to the accelerated vesting of stock, which is included in “separation expenses” in the condensed consolidated statements of operations.


At March 31, 2024, the total unrecognized stock compensation expense related to unvested stock option awards and restricted stock awards and restricted stock units granted was $11,507,944, which the Company expects to recognize over a weighted-average period of approximately 3.22 years. Stock compensation expense for the three months ended March 31, 2024 and 2023 is as follows:

   
For the Three Months Ended March 31,
 
   
2024
   
2023
 
Services
 
$
32,321
   
$
37,926
 
Research and development
   
58,491
     
38,192
 
Sales and marketing