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STOCKHOLDERS’ EQUITY (DEFICIT)
 9 Months Ended
Sep. 30, 2022
Equity [Abstract]  
STOCKHOLDERS’ EQUITY (DEFICIT)

NOTE 6 – STOCKHOLDERS’ EQUITY (DEFICIT)

 

Series A Preferred Stock

 

On November 8, 2021, in connection with the Company’s public offering, the Company’s Board of Directors adopted a resolution allowing for the authorization and issuance of 1,543,458 shares of the Company’s Preferred Stock, $.01 par value per share, designated as Series A Preferred Stock (“Series A”). The Series A has a liquidation preference of $0.001 per share. On September 8, 2022, the Company issued 1,543,158 shares of Series B Preferred Stock (“Series B”) to Auctus Fund, LLC (“Auctus”) in exchange for an equal number of shares of the Company’s outstanding Series A. Simultaneously, the stock certificate representing the Series A shares was being returned to the Company for cancellation. On such date and upon such exchange, the Company’s Board of Directors cancelled the Series A.

 

 

Series B Preferred Stock

 

Effective September 8, 2022, the Company issued 1,543,158 shares of Series B to Auctus in exchange for an equal number of shares of the Company’s outstanding Series A. The terms of the Series B are substantially identical to those of the Series A, except that, among other things, the limitation on beneficial ownership of common stock of the Company upon a conversion of the Series B into Common Stock, and the limitation on the number of votes attributable to the Series B, is 9.99% of the then outstanding Common Stock of the Company instead of 4.99% as provided for the Series A. The Company shall, at all times, reserve from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of Common Stock upon the full conversion of the Series B. The Series B is not subject to redemption by the Company or any Series B holder. The exchange of Series A for Series B had no impact on the Company’s financial statements as of September 30, 2022.

 

On October 25, 2022, Auctus converted 25,000 shares of Series B into 25,000 shares of Common Stock at a conversion rate of $10.00 per share. The number of shares of Series B remaining outstanding after this conversion is 1,518,158.

 

Dividends

 

Series B holders shall be entitled to receive, when and as declared by the Board of Directors, dividends on a pari passu basis with the holders of the shares of Common Stock based upon the number of shares of Common Stock into which the Series B is then convertible.

 

Voting Rights

 

Series B holders shall be entitled to vote on all matters presented to the stockholders of the Company for a vote at a meeting of stockholders of the Company or a written consent in lieu of a meeting of stockholders of the Company, and shall be entitled to such number of votes for each share of Series B entitled to vote at such meetings or pursuant to such consent, voting together with the holders of shares of Common Stock and other shares of preferred stock who are entitled to vote, and not as a separate class, except as required by law. The number of votes to which the Series B holders shall be entitled to vote for each share of Series B shall equal the number of shares of Common Stock into which such Series B is then convertible; provided, however, that in no event shall a Series B holder be entitled to vote more than 9.99% of the then outstanding shares of Common Stock.

 

Conversion

 

Optional Conversion - Each share of Series B shall be convertible, at any time and from time to time, at the option of the Series B holder, into one share of Common Stock based upon a conversion price of $10.00 per share; provided, however, that in no event shall a Series B holder be entitled to convert any shares of Series B to the extent that such conversion would result in beneficial ownership by such Series B holder of more than 9.99% of the outstanding shares of common stock.

 

Automatic Conversion – From time to time, in the event of that an event occurs, including adjustment due to merger, consolidation, etc., subdivision or combination of Common Stock, adjustment due to distribution, purchase rights, and notice of adjustments, which has the effect of reducing a Series B holder’s beneficial ownership of shares of common stock to less than 9.5% of the then publicly disclosed outstanding shares of Common Stock, then, within five (5) business days, the Series B holder shall provide notice to the Company to such effect, which notice shall state the number of shares of Common Stock beneficially owned by the Series B holder and shall provide reasonable detail with regard thereto, including the number of derivative securities compromising a portion of such beneficial share amount. Such notice shall have the effect of a notice of conversion with respect to the conversion of such number of shares of Series B as would increase the Series B holder’s beneficial ownership of Common Stock to 9.99% of the then publicly disclosed outstanding shares of Common Stock.

 

2021 Stock Incentive Plan

 

On March 18, 2021, the Company’s Board of Directors adopted the BioRestorative Therapies, Inc. 2021 Stock Incentive Plan (the “2021 Plan”). Pursuant to the 2021 Plan, a total of 1,175,000 shares of Common Stock were initially authorized to be issued pursuant to the grant of stock options, restricted stock units, restricted stock, stock appreciation rights and other incentive awards. As of September 30, 2022, based on stock options and restricted stock units currently outstanding under the 2021 Plan, no shares remained available for future grants under the 2021 Plan.

 

 

Amendments to 2021 Stock Incentive Plan

 

On December 10, 2021, subject to stockholder approval, the Company’s Board of Directors approved amendments to the 2021 Plan to increase the number of shares of Common Stock authorized to be issued from 1,175,000 to 2,500,000 and to clarify certain provisions of the 2021 Plan as to the authority of the Board of Directors and the Compensation Committee to make adjustments to, among other things, the exercise price of granted options. Concurrently, subject to stockholder approval of the amendments to the 2021 Plan, the Company’s Compensation Committee reduced the exercise price of the outstanding options under the 2021 Plan for the purchase of an aggregate of 838,549 shares of the Company’s common stock from $13.50 per share to $5.08 per share (the closing price of the Company’s common stock on the day immediately preceding the Compensation Committee determination), including the options held by the Company’s officers and directors as follows: (i) Lance Alstodt, the Company’s President, Chief Executive Officer and Chairman of the Board: 335,538 shares, (ii) Francisco Silva, the Company’s Vice President of Research and Development and a director: 335,538 shares; (iii) Robert Kristal, the Company’s Chief Financial Officer: 10,490 shares; (iv) Robert Paccasassi, the Company’s Vice President of Quality Assurance and Regulatory Compliance: 8,277 shares; (v) Nickolay Kukekov, one of the Company’s directors: 25,236 shares; (vi) Patrick F. Williams, one of the Company’s directors: 10,490 shares; and (vii) David Rosa, one of the Company’s directors: 10,490 shares. On November 3, 2022, the Company’s stockholders approved the amendments to the 2021 Plan.

 

As of September 30, 2022, options for the purchase of 864,609 shares of Common Stock had been granted pursuant to the 2021 Plan. In addition, as of such date, 318,356 restricted stock units (“RSUs”) had been granted pursuant to the 2021 Plan and no shares were reserved for future grants under the 2021 Plan (without giving effect to the amendment to the 2021 Plan increasing the number of shares authorized to be issued under the 2021 Plan to 2,500,000). As a result of the November 3, 2022 stockholder approval, the exercise price of the outstanding options under the 2021 Plan was reduced to $5.08 per share. The changes had no impact on the Company’s financial statements at September 30, 2022.

 

Warrant and Option Valuation

 

The Company has computed the fair value of warrants and options granted using the Black-Scholes option pricing model. The expected term used for warrants and options issued to non-employees is the contractual life and the expected term used for options issued to employees and directors is the estimated period of time that options granted are expected to be outstanding. The Company utilizes the “simplified” method to develop an estimate of the expected term of “plain vanilla” employee option grants. The Company is utilizing an expected volatility figure based on a review of the historical volatilities, over a period of time equivalent to the expected life of the instrument being valued, of similarly positioned public companies within its industry. The risk-free interest rate was determined from the implied yields from U.S. Treasury zero-coupon bonds with a remaining term consistent with the expected term of the instrument being valued.

 

Warrant Activity Summary

 

No warrants were granted or issued during the nine months ended September 30, 2022 and 2021.

 

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

       Weighted 
       Average 
   Number of   Exercise 
   Warrants   Price 
Outstanding, January 1, 2022   4,739,871   $11.78 
Granted   -    - 
Exercised   -    - 
Expired   (148)   16,099.00 
Outstanding, September 30, 2022   4,739,723   $10.89 
           
Exercisable, September 30, 2022   4,739,723   $10.89 

 

 

Stock Options

 

The Company grants stock options to certain employees which are recognized as compensation expense on a straight-line basis over the vesting term of the grants. Vesting terms are generally two years, and grants expire between five and ten years.

 

For the three months ended September 30, 2022 and 2021, the Company recognized compensation expense related to stock option grants of $1.9 million and $1.7 million, respectively. For the nine months ended September 30, 2022 and 2021, the Company recognized compensation expense related to stock option grants of approximately $6.0 million and $17.4 million, respectively.

 

The Company granted options for the purchase of 25,000 shares of common stock during the nine months ended September 30, 2022, with a grant date fair value of $4.88 per share. As of September 30, 2022, the unamortized compensation expense related to these grants was $0.09 million.

 

The Company granted options for the purchase of 586,959 shares of common stock during the nine months ended September 30, 2021, with a grant date fair value of $47.25 per share, after taking into effect the reverse stock split. At September 30, 2022, the unamortized compensation expense related to these grants was $3.2 million.

 

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

       Weighted 
       Average 
   Number of   Exercise 
   Options   Price 
Outstanding, January 1, 2022   839,639   $18.73 
Granted   25,000    4.92 
Forfeited   (30)   3,273.00 
Outstanding, September 30, 2022   864,609   $18.73 
           
Exercisable, September 30, 2022   532,045   $17.50 

 

Restricted Stock Units

 

Pursuant to the 2021 Plan, the Company grants RSUs to employees, consultants and non-employee directors (“Eligible Individuals”). The number, terms and conditions of the RSUs that are granted to Eligible Individuals are determined on an individual basis by the plan administrator. On the distribution date, the Company shall issue to the Eligible Individual one share of the Company’s common stock for each vested and nonforfeitable RSU.

 

On March 18, 2022, the Company granted an aggregate of 24,876 RSUs to its Chief Executive Officer, President and Chairman of the Board and its Vice President, Research and Development with a fair value of $4.21 per share. The RSUs vest in twelve equal monthly installments.

 

A summary of the Company’s unvested RSUs as of September 30, 2022 is as follows:

   Number of 
   Shares 
Outstanding, January 1, 2022   293,480 
Granted   24,876 
Forfeited   - 
Vested   (110,270)
Outstanding, September 30, 2022   208,086 

 

There were 2,074 restricted stock units vested in October 2022.

 

 

For the three months ended September 30, 2022 and 2021, the Company recognized compensation expense related to RSUs of $1.2 million and $1.2 million, respectively. For the nine months ended September 30, 2022 and 2021, the Company recognized compensation expense related to RSUs of $3.6 million and $2.5 million, respectively.

 

For the three months ended September 30, 2022 and 2021, the Company recognized compensation expense of $3.1 million and $2.9 million, respectively. For the nine months ended September 30, 2022 and 2021, the Company recognized compensation expense of $9.6 million and $19.9 million, respectively.

 

The Company’s unrecognized compensation expense was $10.8 million as of September 30, 2022.