Note 7 – Stockholders’ Equity

The Company’s authorized capital as of March 31, 2022 was 750,000,000 shares of common stock, par value $0.001 per share, and 15,000,000 shares of preferred stock, par value $0.01 per share.

Common Stock

Common Stock Issuable

On February 16, 2021, as a result of the mandatory conversion of the notes payable and accrued interest in the aggregate amount of $38.8 million, the Company issued a total of 11,413,322 shares of common stock to the respective noteholders, of which 11,086,024 were already issued as of December 31, 2021. The remaining 327,298 common shares issuable at December 31, 2021 valued at $1.1 million, were issued during the three months period ended March 31, 2022.

Cancellation of common stock

During the period ended March 31, 2022, the Company cancelled and returned to authorized capital 290,999 previously issued shares of common stock.

Equity compensation to officers, employees, and board of directors

As part of employment agreements with its former CEO and its former CFO (“Officers”), the Officers received a fully vested stock grant equal to an 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 grants 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. As such, 4,379,407 shares of its common stock were granted to these Officers, employees and board of 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.

During the period ended March 31, 2021, the Company recognized $14.3 million of stock compensation expense related to vesting of shares to officers, employees and board of directors.

During the period ended March 31, 2022, the Company recognized $447,000 of stock compensation expense related to vesting of shares to officers, employees and board of directors. The fair value of the remaining 291,700 unvested shares of common stock to officers, employees and board of directors at March 31, 2022 was $1.4 million and will be recognized as stock compensation expense in future periods.

Issuance of common shares for services

As part of consulting agreements with certain consultants, the Company agreed to grant these consultants common stock equal to 1% and 3% of the fully diluted shares of common stock of the Company 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).

On February 16, 2021, the Company completed its equity offering and listed its shares of common stock on the Nasdaq Capital Market. As a result of this offering, the Company agreed to issue to these consultants 2,850,090 shares of common stock with a grant date fair value of $10.7 million, of which 1,934,817 shares of common stock vested immediately while the remaining 915,273, shares of common stock vests over two years. Pursuant to current accounting guidelines, as 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 then such award is being recorded as compensation expense based upon the vesting term of the grant.

During the period ended March 31, 2021, the Company recognized $8.5 million of stock compensation expense related to the issuance of 1,957,374 shares of common stock and the vesting of shares to these consultants.

During the period ended March 31, 2022, the Company recognized $872,000 of stock compensation expense related to the issuance of 46,500 shares of common stock and the vesting of 116,247 shares of common stock issued to consultants for services in fiscal 2022. The fair value of the 389,570 unvested shares of common stock to consultants at March 31, 2022 was $1.3 million and will be recognized as stock compensation expense in future periods.

Preferred Stock

Series C Preferred Stock

At March 31, 2022 and March 31, 2021, there were 96,230 shares of series C preferred stock, par value $0.01 per share (the “Series C Preferred Stock”) issued and outstanding.

As a result of reverse stock splits in previous years and the agreement terms for adjusting the rights of the related shares, the 96,230 shares of Series C Preferred Stock are not currently convertible, have no voting rights, and in the event of liquidation, the holders of the Series C Preferred Stock would not participate in any distribution of the assets or surplus funds of the Company. The holders of Series C Preferred Stock also are not currently entitled to any dividends if and when declared by the Company’s board of directors (the “Board”). No dividends to holders of the Series C Preferred Stock were issued or unpaid through March 31, 2022 and 2021.

Series K Preferred Stock

On February 16, 2021, the Board designated 115,000 shares of Series K preferred stock, par value $.01. (the “Series K Preferred Stock”).

Shares of the Series K Preferred Stock are convertible at any time, at the option of the holders, into shares of the Company’s common stock at an effective conversion rate of 100 shares of common stock for each share of Series K Preferred. Shares of the Series K Preferred Stock have the same voting rights as the shares of the Company’s common stock, with the holders of the Series K Preferred Stock entitled to vote on an as-converted-to-common stock basis, subject to the beneficial ownership limitation, together with the holders of the Company’s common stock on all matters presented to the Company’s stockholders. The Series K Preferred Stock are not entitled to any dividends (unless specifically declared by the Board) but will participate on an as-converted-to-common-stock basis in any dividends to the holders of the Company’s common stock. In the event of the Company’s dissolution, liquidation or winding up, the holders of the Series K Preferred Stock will be on parity with the holders of the Company’s common stock and will participate, on a on an as-converted-to-common stock basis, in any distribution to holders of the Company’s common stock.

As of March 31, 2022 and December 31, 2021, there were no shares of Series K Preferred stock issued and outstanding.

Warrants and Options

Common Stock Warrants

Stock warrant transactions for the three months ended March 31, 2022:

 Schedule of Warrant Activity

As of March 31, 2022, all issued and outstanding warrants are fully vested, and have no intrinsic value as the exercise price of these warrants was greater than the market price.

Common Stock Options

Stock option transactions for the three months ended March 31, 2022:

 Schedule of Options Activity

At March 31, 2022, there were 191,285 unvested options with a grant date fair value of $511,115 which will be recognized as stock compensation in future periods based upon the remaining vesting term of the applicable grants.

There was no intrinsic value of the outstanding options as of March 31, 2022 as the exercise price of these options was greater than the market price.