Quarterly report pursuant to Section 13 or 15(d)

Stockholders??? Equity

v3.22.2.2
Stockholders’ Equity
 9 Months Ended
Sep. 30, 2022
Equity [Abstract]  
Stockholders’ Equity

Note 7 – Stockholders’ Equity

 

The Company’s authorized capital as of September 30, 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. The Company subsequently changed its authorized shares of common stock to 250,000,000 shares (see Note 9).

 

Common Stock

 

Common Stock Issuable

 

On February 16, 2021, because 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 nine months ended September 30, 2022.

 

Cancellation of common stock

 

The Company cancelled 290,999 previously issued shares of common stock during the nine months ended September 30, 2022.

 

Equity compensation to officers, employees and directors

 

  a. 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% vests 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 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 was met and in accordance with its vesting terms.
     
   

During the three months and nine months ended September 30, 2022, the Company recognized $382,000 and $1.1 million of stock compensation expense related to the vesting of common shares to officers, employees and directors.

     
   

During the three months and nine months ended September 30, 2021, the Company recognized $577,000 and $15.4 million of stock compensation expense related to the vesting of these common shares to officers, employees and directors.
     
  b. In July 2022, the Company granted 378,058 shares of fully vested common stock with a fair value of $938,000 to certain officers of the Company for services rendered.
     
   

During the three months and nine months ended September 30, 2022, the Company recognized $938,000 and $938,000 of stock compensation expense related to the vesting of these common shares.
     
  c.

During the three months and nine months ended September 30, 2022, the Company also recognized stock compensation expense of $1.6 million and $1.8 million, respectively, to account for the fair value of vested stock options.

 

As a result, the Company recognized total stock compensation expense of $2.9 million and $3.8 million for the three months and nine months ended September 30, 2022.

 

As of September 30, 2022, there were 134,836 unvested shares of common stock issued to officers, employees and directors with a fair value of $626,000 that will be recognized as stock compensation expense in future periods pursuant to its vesting term.

 

 

Equity compensation to consultants

 

  a. 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 three months and nine months ended September 30, 2022, the Company recognized stock compensation expense of $325,000 and $976,000, respectively, related to the vesting of these common shares to consultants.
     
  b. In July 2022, the Company granted 20,882 shares of fully vested common stock with a fair value of $52,000 to certain consultants for services rendered. This was recognized as stock compensation expense for the three months and nine months ending September 30, 2022.
     
   

During the three months and nine months ended September 30, 2022, the Company recognized $64,000 and $675,000 of stock compensation expense related to the vesting of common shares.
     
  c.

During the three months and nine months ended September 30, 2022, the Company also recognized stock compensation expense of $759,000 and $759,000, respectively, to account for the fair value of all vested stock options.

 

As a result, the Company recognized total stock compensation expense of $1.2 million and $2.5 million during the three and nine months ended September 30, 2022, respectively.

 

During the three months and nine months ended September 30, 2021, the Company recognized an aggregate of $327,000 and $9.1 million of stock compensation expense related to the vesting of common shares granted to consultants.

 

As of September 30, 2022, there were 160,752 unvested shares of common stock issued to consultants with a fair value of $552,000 that will be recognized as stock compensation expense in future periods based upon their vesting term.

 

Settlement of common stock with a former Officer

 

On April 29, 2022, the Company entered into a settlement agreement with its former Chief Executive Officer (“Officer”) and received 1,845,000 shares of its previously issued common stock in full and final settlement of all its claims against the Officer. The common stock was subsequently cancelled. In addition, the Company incurred legal and professional expenses of $223,000. Pursuant to current accounting guidelines, this amount was accounted as costs of the acquisition of the common stock and recorded as a reduction to additional paid in capital. Both the Company and the Officer released each other from claims under the settlement agreement.

 

Preferred Stock

 

Series C Preferred Stock

 

At September 30, 2022 and December 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 September 30, 2022 and 2021, respectively.

 

 

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 September 30, 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 nine months ended September 30, 2022 were as follows:

 

    Number of     Weighted Average  
    Warrants     Exercise Price  
Warrants outstanding at December 31, 2021     2,337,274     $ 5.30  
Granted     -       -  
Forfeited/cancelled     -       -  
Exercised     -       -  
Warrants outstanding at September 30, 2022     2,337,274     $ 5.30  
Warrants exercisable at September 30, 2022     2,337,274     $ 5.30  

 

As of September 30, 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

 

Common stock option transactions for the nine months ended September 30, 2022 were as follows:

 

    Number of     Weighted Average  
    Options     Exercise Price  
Options outstanding at December 31, 2021     302,500     $ 3.05  
Granted     1,532,952       2.48  
Forfeited/cancelled     -       -  
Exercised     -       -  
Options outstanding at September 30, 2022     1,835,452     $ 2.57  
Options exercisable at September 30, 2022     1,209,847     $ 2.56  

 

 

On July 15, 2022, the Company granted certain consultants, employees, officers and directors stock options to purchase an aggregate of 1,532,952 shares of common stock. The stock options are exercisable at $2.48 with a vesting term over a period of 5 months up to 36 months, will expire in ten years from grant date and with an estimated fair value of $3.4 million using the Black Scholes Option pricing model. The Company is recognizing the corresponding stock compensation expense of these options based upon the vesting term. During the three months and nine months ended September 30, 2022, the Company recognized stock compensation expense relating to the vesting of these options of $2.3 million and $2.3 million, respectively.

 

At September 30, 2022, there were 625,605 unvested options with a grant date fair value of $1.5 million which will be recognized as stock compensation expense in future periods based upon the remaining vesting term of the applicable grants.

 

There was no intrinsic value of the outstanding options as of September 30, 2022 as the exercise price of these options was greater than the market price.