NOTE 9 – STOCKHOLDERS’ EQUITY

Common Stock

Common Stock Issued for Services

During the three and nine months ended September 30, 2022, the Company issued an aggregate 55,112 and 151,010, respectively, of immediately vested shares of the Company’s common stock as compensation to consultants, directors, and officers, with an aggregate issuance date fair value of $60,622 and $270,967, respectively, which was charged immediately to the condensed consolidated statement of operations for the three and nine months ended September 30, 2022.

Restricted Stock Shares

During the three and nine months ended September 30, 2022, the Company issued zero and 12,000 restricted shares of the Company’s common stock, or Restricted Stock Shares, as of the end of both periods as compensation to consultants with an issuance date fair value of zero and $48,600 as of the end of both periods. Per the two year consulting agreement which evidences the issuance of the 12,000 restricted shares during the nine months ended September 30, 2022, the Restricted Stock Shares are issued at the beginning of the contract term and annually and vest monthly over a period of 24 months. The Company recognized stock-based compensation expense related to the amortization of the Restricted Stock Shares of $6,075 and $20,250 for the three and nine months ended September 30, 2022.

Below is a table summarizing the Restricted Stock Shares granted and outstanding as of and for the nine months ended September 30, 2022:

Stock Options

A summary of the option activity during the nine months ended September 30, 2022 is presented below:

For options issued during the nine months ended September 30, 2022, the assumptions used in the Black Scholes valuation method were as follows:

A summary of outstanding and exercisable stock options as of September 30, 2022 is presented below:

The Company recognized stock-based compensation expense of $672,083 and $2,273,947 for the three and nine months ended September 30, 2022, respectively, related to the issuance of shares to consultants and directors for services provided, as well as for the amortization of stock options and restricted stock shares. Expense of $584,237 and $1,959,919 is included within general and administrative expenses on the condensed consolidated statements of operations for the three and nine month periods, respectively, and expense of $87,846 and $314,028 is included within research and development expenses on the condensed consolidated statements of operations for the three and nine month periods, respectively. The full amount of stock-based compensation recognized for the three and nine month periods ended September 30, 2022 is considered to be related party expense. Stock-based compensation expense related to the amortization of stock options for the three and nine months ended September 30, 2021 was $434,979 and $1,871,473, respectively; these expenses were included within general and administrative expenses or research and development expenses on the condensed consolidated statement of operations for both of those periods. The full amount of stock-based compensation recognized for the three and nine month periods ended September 30, 2021, respectively, was considered to be related party expense. As of September 30, 2022, there was $4,827,266 of unrecognized stock-based compensation expense related to stock options that will be recognized over the weighted average remaining vesting period of 2.3 years, as well as $28,350 of unrecognized expense related to Restricted Stock Shares that will be recognized over the weighted average remaining vesting period of 1.3 years.

July 2022 Offering

On July 17, 2022, the Company entered into a Securities Purchase Agreement with certain purchasers, pursuant to which the Company agreed to sell an aggregate of 3,500,000 shares of common stock, pre-funded warrants to purchase up to an aggregate of 2,632,076 shares of common stock (“July 2022 Pre-Funded Warrants”), and common stock warrants to purchase up to an aggregate of 6,132,076 shares of common stock (the “July 2022 Common Warrants”), at a combined purchase price of $1.06 per share and warrant (the “July 2022 Offering”). Aggregate gross proceeds from the July 2022 Offering were $6,499,737. The July 2022 Offering closed on July 20, 2022.  

The July 2022 Pre-Funded Warrants have an exercise price equal to $0.0001, are immediately exercisable and are subject to customary anti-dilution adjustments for stock splits or dividends or other similar transactions. The exercise price of the July 2022 Pre-Funded Warrants will not be subject to adjustment as a result of subsequent equity issuances at effective prices lower than the then-current exercise price. The July 2022 Pre-Funded Warrants are exercisable until they are exercised in full. The July 2022 Pre-Funded Warrants are subject to a provision prohibiting the exercise of such July 2022 Pre-Funded Warrants to the extent that, after giving effect to such exercise, the holder of such July 2022 Pre-Funded Warrants (together with the holder’s affiliates, and any other persons acting as a group together with the holder or any of the holder’s affiliates), would beneficially own in excess of 9.99% of the Company’s outstanding common stock (which may be increased or decreased, with 61 days prior written notice by the holder). Although the July 2022 Pre-Funded Warrants have a tender offer provision, the July 2022 Pre-Funded Warrants were determined to be equity-classified because they met the limited exception in the case of a change-in-control. Because the July 2022 Pre-Funded Warrants are equity-classified, the placement agent fees and offering expenses will be accounted for as a reduction of additional paid in capital.

The July 2022 Common Warrants have an exercise price equal to $1.06 per share, are exercisable 6 months following the closing of the July 2022 Offering (the “Initial Exercise Date”) and are subject to customary anti-dilution adjustments for stock splits or dividends or other similar transactions. The exercise price of the July 2022 Common Warrants will not be subject to adjustment as a result of subsequent equity issuances at effective prices lower than the then-current exercise price. The July 2022 Common Warrants are exercisable for 5 years following the Initial Exercise Date. The July 2022 Common Warrants are subject to a provision prohibiting the exercise of such July 2022 Common Warrants to the extent that, after giving effect to such exercise, the holder of such July 2022 Common Warrants (together with the holder’s affiliates, and any other persons acting as a group together with the holder or any of the holder’s affiliates), would beneficially own in excess of 4.99% of the Company’s outstanding common stock (which may be increased or decreased, with 61 days prior written notice by the holder). Although the July 2022 Common Warrants have a tender offer provision, the July 2022 Common Warrants were determined to be equity-classified because they met the limited exception in the case of a change-in-control. Because the July 2022 Common Warrants are equity-classified, the placement agent fees and offering expenses will be accounted for as a reduction of additional paid in capital.

As of September 30, 2022, 1,547,076 of the July 2022 Pre-Funded Warrants have been exercised for a value of $155; there are 1,085,000 unexercised July 2022 Pre-Funded Warrants remaining as of the end of the period. No July 2022 Common Warrants have been exercised as of September 30, 2022.