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

NOTE 15 — STOCKHOLDERS’ EQUITY

 

As of December 31, 2022, and 2021 the Company had two classes of capital stock: common stock and preferred stock.

 

Common Stock

 

Holders of common stock generally vote as a class with the holders of the preferred stock and are entitled to one vote for each share held. Subject to the rights of the holders of the preferred stock to receive preferential dividends, the holders of common stock are entitled to receive dividends when and if declared by the Board of Directors. Following payment of the liquidation preference of the preferred stock, any remaining assets will be distributed ratably among the holders of the common stock and, on an as-if-converted basis, the holders of any preferred stock upon liquidation, dissolution or winding up of the affairs of the Company. The holders of common stock have no preemptive, subscription or conversion rights and there are no redemption or sinking fund provisions.

 

On December 1, 2021, the Company closed a Securities Purchase Agreement (dated November 29, 2021) with several institutional investors for the purchase and sale of 588,000 reverse split adjusted shares of Company common stock at a reverse split adjusted exercise price of $15.00 per share, for aggregate gross proceeds of $8.82 million.

 

On December 22, 2022, the Company issued to Alpha Capital, an 8% Senior Convertible Debenture in the aggregate principal amount of $3,300,000 for a purchase price of $3,000,000 pursuant to the terms of a Securities Purchase Agreement, dated December 21, 2022. The Debenture is convertible, at any time, and from time to time, at Alpha’s option, into shares of common stock of the Company, at a price equal to $1.32 per share, and other terms and conditions described in the Debenture (see Note 11 -Convertible Debt - Related Party). As part of this transaction, the Company issued to Alpha Capital a warrant to purchase 2,500,000 shares of the Company’s common stock (see Note 10-Warrant Liabilities).

 

At December 31, 2022, the Company has reserved 5,183,629 shares of authorized but unissued common stock for possible future issuance. At December 31, 2022, 5,183,629 shares were reserved as follows:

 

      
Exercise of issued and future grants of stock options   608,012 
Exercise of stock warrants   4,575,617 
Total   5,183,629 

 

 

Preferred Stock

 

At December 31, 2022 and 2021, there were no shares of preferred stock outstanding. All shares of Series A, B, C, D, D-1 convertible preferred stock were converted into common stock at the time of the May 2020 reverse recapitalization transaction.

 

During the year ended December 31, 2021, the holder of Series Alpha convertible preferred stock converted 180 of its shares of Series Alpha convertible preferred stock into an aggregate of 243,416 shares of the Company’s common stock.

 

Stock Options and Equity Classified Warrants

 

Stock Options

 

The Company recognizes all compensatory stock-based payments as compensation expense over the service period, which is generally the vesting period.

 

In April 2020, the Company adopted the 2020 Stock Incentive Plan (the “2020 Plan”) which provides for the grant of incentive or non-statutory common stock options, restricted stock, stock bonus awards, stock appreciation rights, restricted stock units and performance awards to qualified employees, officers, directors, consultants and other service providers. At December 31, 2022 and December 31, 2021 there were 608,012 and 484,186 outstanding stock options, respectively, under the 2020 Plan and there were 147,690 and 280,916 of Plan shares available, respectively, for future grant.

 

The following represents a summary of the options granted to employees and non-employee service providers that were outstanding at December 31, 2022, and changes during the twelve months then ended:

 

   Shares   Weighted–
Average
Exercise
Price		   Range of
Exercise
Price		   Weighted–
Average
Remaining
Life (Years)		 
Total outstanding – December 31, 2021   484,186   $60.70    $12.40 — $14,657.50    8.52 
Granted   134,469    5.24    5.14 — 10.50    5.99 
Expired   (9,379)   932.75    57.50 - 14,657.50    — 
Forfeited   (1,264)   22.64    5.14 - 49.70    — 
Total outstanding – December 31, 2022   608,012   $35.02    $5.14 — $51.30    8.09 
Exercisable (vested)   288,704   $46.32    $12.40 — $51.30    7.59 
Non-Exercisable (non-vested)   319,308   $24.80    $5.14 — $10.50    8.59 

 

The following represents a summary of the options granted (under the 2020 Plan and otherwise) to employees and non-employee service providers that were outstanding at December 31, 2021, and changes during the twelve months then ended:

 

   Shares   Weighted–
Average
Exercise
Price		   Range of
Exercise
Price		   Weighted–
Average
Remaining
Life (Years)		 
Total outstanding – December 31, 2020   401,136   $70.50    $35.20 — $14,657.50    9.29 
Granted   83,500    13.70    12.40 — 32.90    9.79 
Expired   —    —    —    — 
Forfeited   (450)   36.80    35.20 — 49.70    — 
Total outstanding – December 31, 2021   484,186   $60.70    $12.40 — $14,657.50    8.52 
Exercisable (vested)   140,820   $108.80    $35.20 — $14,657.50    7.94 
Non-Exercisable (non-vested)   343,366   $41.00    $12.40 — $51.30    8.81 

 

There was approximately $5.4 million and $5.3 million of compensation costs related to outstanding options for the year ended December 31, 2022 and December 31, 2021, respectively. As of December 31, 2022, there was approximately $3.3 million of total unrecognized compensation cost related to unvested stock-based compensation arrangements. This cost is expected to be recognized over a weighted average period of 0.93 years.

 

No stock options were exercised during the year ended December 31, 2022 or 2021.

 

The exercise price for an option issued under the 2020 Plan is determined by the Board of Directors, but will be (i) in the case of an incentive stock option (A) granted to an employee who, at the time of grant of such option, is a 10% stockholder, no less than 110% of the fair market value per share on the date of grant; or (B) granted to any other employee, no less than 100% of the fair market value per share on the date of grant; and (ii) in the case of a non-statutory stock option, no less than 100% of the fair market value per share on the date of grant. The options awarded under the 2020 Plan will vest as determined by the Board of Directors but will not exceed a 10-year period. The weighted average grant date fair value per share of the shares underlying options granted during the year ended December 31, 2022 was $3.96 and during the year ended December 31, 2021 was $11.00.

 

 

Fair Value of Equity Awards

 

The Company utilizes the Black-Scholes option pricing model to value awards under the 2020 Plan, and for equity classified compensatory warrants. Key valuation assumptions include:

 

  ● Expected dividend yield. The expected dividend is assumed to be zero, as the Company has never paid dividends and has no current plans to pay any dividends on the Company’s common stock.
     
  ● Expected stock-price volatility. The Company’s expected volatility is derived from the average historical volatilities of publicly traded companies within the Company’s industry that the Company considers to be comparable to the Company’s business over a period approximately equal to the expected term.
     
  ● Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the expected term.
     
  ● Expected term. The expected term represents the period that the stock-based awards are expected to be outstanding. The Company’s historical share option exercise experience does not provide a reasonable basis upon which to estimate an expected term because of a lack of sufficient data. Therefore, the Company estimates the expected term by using the simplified method provided by the SEC. The simplified method calculates the expected term as the average of the time-to-vesting and the contractual life of the options.

 

The material factors incorporated in the Black-Scholes model in estimating the fair value of the options granted for the periods presented were as follows:

 

   For the Years Ended
December 31,		 
   2022   2021 
Expected dividend yield   0.00%   0.00%
Expected stock-price volatility   103%   102%
Risk-free interest rate   1.58% — 3.77%    0.84% — 1.51% 
Expected average term of options (in years)   5.99    6.27 
Stock price   5.14 - 10.50    12.40 — 32.90 

 

The Company recorded stock-based compensation expense and classified it in the Consolidated Statements of Operations as follows:

 

   2022   2021 
   For the Years Ended
December 31,		 
   2022   2021 
General and administrative  $4,649,649   $4,465,911 
Research and development   834,395    827,740 
Total  $5,484,044   $5,293,651 

 

Equity Classified Compensatory Warrants

 

In connection with the $4.0 million equity capital raise as part of the May 2020 reverse recapitalization transaction, the Company issued common stock warrants to an advisor and its designees for the purchase of 81,143 reverse split adjusted shares of the Company’s common stock at a reverse split adjusted exercise price of $11.10 per share. The issuance cost of these warrants was charged to additional paid-in capital, and did not result in expense in the Company’s consolidated statements of operations and comprehensive loss.

 

In addition, various service providers hold equity classified compensatory warrants issued in 2017 and earlier (originally exercisable to purchase Series C convertible preferred stock, and now instead exercisable to purchase common stock) for the purchase of 66,802 reverse split adjusted shares of Company common stock at a weighted average exercise price of $23.40 per share. These are to be differentiated from the Series C Warrants described in Note 10- Warrant Liabilities.

 

During the year ended December 31, 2021, the Company issued equity classified compensatory warrants to a service provider for the purchase of 60,000 reverse split adjusted shares of Company common stock at a reverse split adjusted exercise price of $13.20 per share. The fair value issuance cost of approximately $0.3 million using the Black-Scholes options pricing model for these warrants was charged to general and administrative expenses in the Company’s consolidated statements of operations and comprehensive loss. On April 25, 2022, 60,000 warrants were repriced from $13.20 to a reverse split adjusted exercise price of $6.00 and extended from June 3, 2023 to September 14, 2023. The increase in fair value of $67,370 using a Monte Carlo pricing model for the modification of these warrants was charged to general and administrative expenses in the Company’s consolidated statements of operations and comprehensive loss. On April 25, 2022 and May 26, 2022 an additional 67,619 reverse split adjusted warrants were repriced from reverse split adjusted $11.10 to $5.136. The increase in fair value of $31,010 using a Monte Carlo pricing model for the modification of these warrants was charged to additional paid-in capital and did not result in expense on the Company’s consolidated statements of operations and comprehensive loss. On December 22, 2022 67,620 warrants were repriced from $5.136 to $1.32. The increase in fair value of $8,548 using a Monte Carlo pricing model for the modification of these warrants was charged to additional paid-in capital and did not result in expense on the Company’s consolidated statements of operations and comprehensive loss.

 

 

No new compensatory warrants were issued during the year ended December 31, 2022.

 

The following table summarizes the equity classified compensatory warrant activity for the year ended December 31, 2022:

 

   Common Stock 
   Shares   Weighted– Average
Exercise
Price		   Range of
Exercise Price		   Weighted–
Average
Remaining
Life (Years)		 
Total outstanding – December 31, 2021   179,046   $15.20   $11.10 — $25.40    2.64 
Granted to advisor and its designees   —    —           
Exercised   —    —           
Expired   —    —           
Forfeited   —    —           
Total outstanding – December 31, 2022   179,046   $9.12   $1.32 — $25.40    1.73 
Exercisable   179,046   $9.12   $1.32- $25.40    1.73 
Non-Exercisable   —   $—   $—    — 

 

The following table summarizes the equity classified compensatory warrant activity for the year ended December 31, 2021:

 

   Common Stock 
   Shares   Weighted– Average
Exercise
Price		   Range of
Exercise Price		   Weighted–
Average
Remaining
Life (Years)		 
Total outstanding – December 31, 2020   129,403   $16.60           
Granted to advisor and its designees   60,000    13.20           
Exercised   (3,839)   20.90           
Expired   —    —           
Forfeited   (6,518)   20.70           
Total outstanding – December 31, 2021   179,046   $15.20    $11.10 — $25.40    2.64 
Exercisable   179,046   $15.20    $11.10 — $25.40    2.64 
Non-Exercisable   —   $—   $—    — 

 

There were $67,370 in compensation costs related to outstanding warrants for the year ended December 31, 2022 and $0.3 million for the year ended December 31, 2021. As of December 31, 2022 and December 31, 2021, there was no unrecognized compensation cost related to nonvested warrants.

 

Noncompensatory Equity Classified Warrants

 

In May 2020, as a commitment fee, the Company issued noncompensatory equity classified warrants to Alpha Capital (a related party) for the purchase of 27,048 reverse split adjusted shares of Company common stock at a reverse split adjusted exercise price of $11.10 per share (of which warrants for 20,000 shares were subsequently exercised in December 2020). In July 2020 the Company issued noncompensatory equity classified warrants to Alpha Capital for the purchase of 78,019 reverse split adjusted shares of Company common stock at a reverse split adjusted exercise price of $0.01 per share (which were subsequently exercised in July 2020), and 192,068 reverse split adjusted shares of Company common stock at a reverse split adjusted exercise price of $52.50 per share. In August 2020, the Company issued noncompensatory equity classified warrants to Alpha Capital for the purchase of 128,783 reverse split adjusted shares of Company common stock at a reverse split adjusted exercise price of $60.00 per share. In December 2020, the Company issued noncompensatory equity classified warrants to Alpha Capital for the purchase of 100,000 reverse split adjusted shares of Company common stock at a reverse split adjusted exercise price of $0.10 per share (which were exercised in February 2021) and 219,101 reverse split adjusted shares of Company common stock at a reverse split adjusted exercise price of $40.70 per share. In May 2022, the Company issued noncompensatory equity classified warrants to Alpha Capital for the purchase of 331,464 reverse split adjusted shares of Company common stock at a reverse split adjusted exercise price of $0.01 per share (See Note 3 -Acquisition).

 

 

On November 29, 2021, with the exception of the warrants to purchase 27,048 reverse split adjusted shares of the Company’s common stock at a reverse split adjusted exercise price of $11.10 per share, the exercise prices of all outstanding warrants to purchase a total of 539,951 reverse split adjusted shares of the Company’s common stock were modified to a reverse split adjusted exercise price of $20.00 per share and each of their remaining terms extended by six months. The fair value of the modification cost of these warrant modifications of approximately $2.3 million was charged to additional paid-in capital and did not result in expense on the Company’s consolidated statements of operations and comprehensive loss. In May 2022, pre-funded warrants to purchase 331,464 reverse split adjusted shares of the Company’s common stock at a reverse split adjusted exercise price of $0.01 per share with no expiration date were issued. These warrants were subsequently exercised during the period ended September 30, 2022.

 

In conjunction with the NanoSynex Acquisition (See Note 3-Acquisition), on April 25, 2022 the exercise price of 7,048 reverse split adjusted outstanding warrants at $11.10 was modified to a reverse split adjusted exercise price of $6.00. The increase in fair value of $2,533, using a Monte Carlo pricing model for the modification of these warrants, was charged to additional paid-in capital and did not result in expense on the Company’s consolidated statements of operations and comprehensive loss. On May 26, 2022, the reverse split adjusted exercise price of these warrants was modified again to $5.136, and the increase in fair value of $696, using a Monte Carlo pricing model for the modification of these warrants, was included in consideration transferred in the NanoSynex Acquisition. On December 22, 2022 the exercise price of these warrants was modified again to $1.32. The increase in fair value of $891, using a Monte Carlo pricing model for the modification of those warrants, was charged to additional paid-in capital and did not result in expense on the Company’s consolidated statements of operations and comprehensive loss.

 

The following table summarizes the noncompensatory equity classified warrant activity for the year ended December 31, 2022:

 

   Common Stock 
   Shares   Weighted–
Average
Exercise
Price		   Range of
Exercise Price		   Weighted–
Average
Remaining
Life (Years)		 
Total outstanding – December 31, 2021   554,914   $20.10    11.10— 37.78    1.32 
Granted   331,464    0.01    0.01      
Exercised   (331,464)   0.01    0.01      
Expired   (7,911)   37.78    37.78      
Forfeited   —    —    —      
Total outstanding – December 31, 2022   547,003    19.76    1.32 - 20.00    

0.33

 
Exercisable   547,003   19.76    1.32 - 20.00    0.33 
Non-Exercisable   

—

   $

—

   $

—

    

—

 

 

The following table summarizes the noncompensatory equity classified warrant activity for the year ended December 31, 2021:

 

   Common Stock 
   Shares   Weighted–
Average
Exercise
Price		   Range of
Exercise Price		   Weighted–
Average
Remaining
Life (Years)		 
Total outstanding – December 31, 2020   654,978   $43.60           
Granted   —    —           
Exercised   (100,000)   0.01           
Expired   (64)   23,250.00           
Forfeited   —    —           
Total outstanding – December 31, 2021   554,914    20.10           
Exercisable   554,914    20.10    11.10— 37.78    1.32 
Non-Exercisable   —   $—   $—    —