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STOCKHOLDERS’ EQUITY (DEFICIT)
 12 Months Ended
Dec. 31, 2022
Equity [Abstract]  
STOCKHOLDERS’ EQUITY (DEFICIT)

Note 7 - 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 designation and issuance of 1,543,158 shares of the Company’s Preferred Stock, $.01 par value per share, designated as Series A Preferred Stock (“Series A”). The Series A had 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 December 31, 2022.

 

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; 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.

 

On October 25, 2022, Auctus converted 25,000 shares of Series B into 25,000 shares of Common Stock. The number of shares of Series B remaining outstanding after this conversion is 1,518,158.

 

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.

 

 

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.

 

The impact resulting from the amendments was immaterial to the Company’s financial statements.

 

Compensatory Common Stock Issuance

 

During the year ended December 31, 2022, the Company issued 15,898 shares of immediately vested common stock with an aggregate value of $135,888 to third parties for services rendered. During the year ended December 31, 2021, the Company issued 5,000 shares of immediately vested common stock with a value of $25,476 to a consultant for services rendered.

 

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

 

On October 21, 2021, the Company issued 22,917 shares of common stock to a warrant holder, as a result of the cashless exercise of 25,000 warrants.

 

During the year ended December 31, 2021, the Company issued an aggregate of 147,832, shares of the Company’s common stock, as a result of the cashless exercise of 170,473 warrants by Auctus.

 

During the year ended December 31, 2022, the Company issued 51,370 warrants to the SCTC as part of consideration transferred in exchange for exclusivity under a license agreement.

 

 

A summary of the warrant activity during the years ended December 31, 2022 and 2021 is presented below:

 

 SCHEDULE OF WARRANT ACTIVITY

   Number of Warrants   Weighted Average Exercise Price   Weighted Average Remaining Life In Years   Aggregate Intrinsic Value 
Outstanding, January 1, 2021   3,750,598   $4.40         - 
Issued   4,862,710    9.91         - 
Exercised   (195,473)   4.00         - 
Exchanged or forfeited   (3,677,964)   3.39        - 
Outstanding, December 31, 2021   4,739,871   $11.78    4.9    - 
Granted   51,370    2.92            - 
Exercised   -    -         - 
Expired   (159)   16,083         - 
Outstanding, December 31, 2022   4,791,082    10.71    3.9    - 
                     
Exercisable, December 31, 2022   4,791,082   $10.71    3.9    - 

  

In applying the Black-Scholes option pricing model to warrants granted during 2022 and 2021, the Company used the following assumptions:

 

 SCHEDULE OF WARRANTS GRANTED ASSUMPTIONS

   2022   2021 
Risk free interest rate   4.40%   0.98%
Expected term (years)   5.00    4.10 - 5.00 
Expected volatility   313.55%   314.00%
Expected dividends   0.00%   0.00%

 

The weighted average estimated fair value of the warrants granted during the years ended December 31, 2022 and 2021 was $2.28 and $11.77 per warrant, respectively. The Company did not issue any shares during the years ended December 31, 2022.

 

The following table presents information related to stock warrants at December 31, 2022:

 

SCHEDULE OF STOCK WARRANTS

Exercise Price   Outstanding Number of Warrants   Weighted Average Remaining Life In Years   Exercisable Number of Warrants 
$2.92    51,370    4.9    51,370 
$10.00    4,501,937    3.9    4,501,937 
$12.00    235,970    3.9    235,970 
$60.00    250    2.0    250 
$800.00    869    1.8    869 
$2,240.00    50    1.1    50 
$2,800.00    264    1.2    264 
$3,400.00    264    1.2    264 
$4,000.00    55    1.1    55 
$8,000.00    19    0.8    19 
$14,000.00    18    0.5    18 
$16,000.00    16    0.3    16 
      4,791,082         4,791,082 

 

Stock Options

 

On March 18, 2021, the Company, pursuant to two employment agreements, granted to its Chief Executive Officer, President and Chairman of the Board and its Vice President, Research and Development options to purchase an aggregate of 586,959 shares of the Company’s common stock. The options initially vested to the extent of 50% on the date of grant, 25% on the one-year anniversary of the grant date and 25% on the two-year anniversary of the grant date.

 

 

On November 4, 2021, the Company granted options to purchase an aggregate of 140,824 shares of its common stock (including options to purchase 10,490 shares each granted to Robert Kristal, its Chief Financial Officer, Patrick Williams, a director of the Company, and David Rosa, a director of the Company) to its officers and directors. Also included within the 140,824 share option grants were grants to each of Mr. Alstodt and Mr. Silva for the purchase of 42,059 shares of common stock and to Dr. Nickolay Kukekov, a director of the Company, for the purchase of 25,236 shares of common stock. Such options are exercisable to the extent of 50% on the date of grant and 50% quarterly over a period of two years commencing one year from the date of grant.

 

On November 4, 2021, the Company granted options to purchase an aggregate of 110,767 shares of the Company’s common stock to members of its Scientific Advisory Board and various employees and consultants.

 

On December 10, 2021, the Company reduced the exercise price of all options from $13.50 per share to $5.08 per share, subject to stockholder approval. On November 3, 2022, stockholder approval was obtained. Per ASC 718 - Compensation - Stock Compensation, the Company accounted for these changes as a modification and the net effect was immaterial to the financial statements as a whole.

 

The Company granted an option for the purchase of 25,000 shares of common stock during the year ended December 31, 2022.

 

A summary of the option activity during the years ended December 31, 2022 and 2021 is presented below:

 

SCHEDULE OF STOCK OPTION ACTIVITY

   Number of Options   Weighted Average Exercise Price   Weighted Average Remaining Life in Years   Aggregate Intrinsic Value 
Outstanding, January 1, 2021   1,215    5.08           
Granted   838,550    5.08           
Expired   (126)   5.08           
Outstanding, January 1, 2022   839,639    5.08           
Granted   25,000    4.92           
Forfeited   -    -           
Expired   -    -           
Outstanding, December 31, 2022   864,639    5.08    7.8    - 
                     
Exercisable, December 31, 2022   578,628    5.08    7.8          

 

The weighted average grant date fair value of the stock options granted during the years ended December 31, 2022 and 2021, was approximately $4.88 and $5.05, respectively.

 

In applying the Black-Scholes option pricing model to stock options granted, the Company used the following assumptions:

 

SCHEDULE OF STOCK OPTION GRANTED ASSUMPTIONS 

   2022 
Risk free interest rate   2.42%
Expected term (years)   3.50 
Expected volatility   285.91%
Expected dividends   0.00%

 

 

Restricted Stock Units

 

Pursuant to the 2021 Plan, the Company may grant restricted stock units (“RSUs”) to employees, consultants or 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 2021 Plan administrator. On the distribution date, the Company shall issue to the Eligible Individual one unrestricted, fully transferable share of the Company’s common stock (or the fair market value of one such share in cash) for each vested and nonforfeitable RSU.

 

On March 18, 2021, the Company, pursuant to two employment agreements, granted an aggregate of 293,479 RSUs to its Chief Executive Officer, President, and Chairman of the Board and its Vice President, Research and Development with a fair value of $47.60 per share. The RSUs vest to the extent of one-third on the one-year anniversary of the grant date, one-third on the two-year anniversary of the grant date, and one-third on the three-year anniversary of the grant date. The RSUs had a grant date fair value of $13,969,624.

 

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 unvested RSUs as of December 31, 2022 is as follows:

 

SCHEDULE OF UNVESTED RESTRICTED STOCK UNITS

   Number of Shares 
Outstanding, January 1, 2022   293,480 
Granted   24,876 
Forfeited   - 
Vested   (116,486)
Outstanding, December 31, 2022   201,870 

 

The following table presents information related to stock compensation expense:

 

 SCHEDULE OF STOCK OPTION EXPENSE

   For the Years Ended December 31,   Unrecognized at December 31,   Weighted Average Remaining Amortization Period 
   2022   2021   2022   (Years) 
Research and development   -    81,479    803,257      
General and administrative   12,612,862    23,027,476    1,294,684    0.73 
    12,612,862    23,108,955    2,097,941      

 

The following table presents stock compensation by award type:

SCHEDULE OF STOCK COMPENSATION BY AWARD TYPE

   For the Years Ended December 31, 
   2022   2021 
Options   7,741,864    19411976 
RSUs   4,735,108    3,671,503 
Shares issued for services   135,890    25,476 
    12,612,862    23,108,955