Note 12 – Equity Compensation to Officers, Board of Directors and Employees

As part of employment agreements with its former CEO and its former CFO (“Officers”), the Officers received a fully vested stock grant equal to aggregate of 10% and 1.5% of the fully diluted shares of common stock of the Company (calculated with the inclusion of the current stock holdings of the CEO) upon conversion of options, warrants and Convertible Notes in association with a national markets qualified financing as consideration for entering into the Agreement (with such stock to vest and be delivered within 30 days after the national markets qualified financing). In addition, the Company also granted similar equity compensation to members of the Company’s Board of Directors wherein these directors received stock grant equal to 1% and 1.25% of the fully diluted shares of common stock of the Company. Pursuant to the agreement, approximately 33% of the common stock to be issued vested immediately while the remaining 67% will vest over a period of two years.

On February 16, 2021, the Company completed its equity offering and listed its shares of common stock on the Nasdaq Capital Market (see Note 8). As such, 4,379,407 shares of its common stock were granted to these Officers and directors which had a fair value of $18.6 million. Since the grant of the common stock is subject to milestone or performance conditions, the Company measured the fair value of the common stock on the respective date of the agreement, and such awards were recorded as compensation expense as the milestone or performance condition is met and in accordance with its vesting terms.

The Company recognized stock compensation expense of $17.2 million which is comprised of the issuance of 4,053,024 shares of common stock and the vesting of 93,825 stock options to officers, directors and employees for the year ended December 31, 2021. In addition, on December 31, 2021, the Company cancelled 278,058 shares of common stock granted to a Board member in February 2021. The fair value of the 338,883 unvested shares of common stock was $1.7 million and will be recognized as stock compensation expense in future periods.