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STOCKHOLDERS’ DEFICIT
 9 Months Ended
Sep. 30, 2021
Equity [Abstract]  
STOCKHOLDERS’ DEFICIT

NOTE 6 - STOCKHOLDERS’ DEFICIT

 

Common Stock

 

On April, 29, 2021, the Company completed a public offering (“the Offering”) to sell an aggregate of 3,180,000 shares of the Company’s common stock together with warrants to purchase an aggregate of 3,180,000 shares of common stock. The Company also granted the underwriters warrants to purchase an aggregate of 477,000 shares of Common Stock at the same price. Net proceeds from the Offering were approximately $11.7 million (excluding any sale of the Option Shares), after deducting underwriting discounts and commissions and public offering expenses payable by the Company. In connection with the Offering, the Company issued 79,500 shares to the underwriter which were recognized as stock issuance costs.

 

During the nine months ended September 30, 2021, a total of 872,766 shares of the Company’s Series B preferred stock was converted to 872,766 shares of the Company’s common stock.

 

Stock-Based Compensation

 

In connection with the consummation of the Merger completed on February 12, 2016, we adopted Prior Protagenic’s 2006 Employee, Director and Consultant Stock Plan (the “2006 Plan”). On June 17, 2016, our stockholders adopted the 2016 Plan and, as a result, we terminated the 2006 Plan. We will not grant any further awards under the 2006 Plan. All outstanding grants under the 2006 Plan will continue in effect in accordance with the terms of the particular grant and the 2006 Plan.

 

Pursuant to the 2016 Plan, the Company’s Compensation Committee may grant awards to any employee, officer, director, consultant, advisor or other individual service provider of the Company or any subsidiary. On each of January 1, 2017, January 1, 2019 and January 1, 2020, pursuant to an annual “evergreen” provision contained in the 2016 Plan, the number of shares reserved for future grants was increased by 564,378 shares, or a total of 1,693,134 shares. As a result of these increases, as of September 30, 2021 and December 31, 2020, the aggregate number of shares of common stock available for awards under the 2016 Plan was 4,868,623 shares and 4,868,623 shares, respectively. Options issued under the 2016 Plan are exercisable for up to ten years from the date of issuance.

 

 

There were 5,530,861 options outstanding as of September 30, 2021. The fair value of each stock option granted was estimated using the Black-Scholes assumptions and or factors as follows:

 SCHEDULE OF SHARE-BASED PAYMENT AWARD, STOCK OPTIONS, VALUATION ASSUMPTIONS

Exercise price  $1.96-5.60 
Expected dividend yield   0%
Risk free interest rate   0.81%-1.58%
Expected life in years   5-10 
Expected volatility   147%-158%

 

There were 5,597,861 options outstanding as of December 31, 2020. The fair value of each stock option granted was estimated using the Black-Scholes assumptions and or factors as follows:

 

      
Exercise price  $1.75 
Expected dividend yield   0%
Risk free interest rate   0.64%-1.61%
Expected life in years   10 
Expected volatility   140%-146%

 

The following is an analysis of the stock option grant activity under the Plan:

 SCHEDULE OF SHARE-BASED COMPENSATION, STOCK OPTIONS, ACTIVITY

      

Weighted

Average

  

Weighted

Average

 
   Number   Exercise Price   Remaining Life 
Stock Options               
                
Outstanding December 31, 2020   5,597,861   $1.47    6.48 
Granted   583,000   $4.77    9.38 
Expired   (280,000)  $1.00    - 
Exercised   (370,000)  $1.48    - 
Outstanding September 30, 2021   5,530,861   $1.84    6.56 

 

A summary of the status of the Company’s nonvested options as of September 30, 2021, and changes during the nine months ended September 30, 2021, is presented below:

 SCHEDULE OF SHARE-BASED COMPENSATION NONVESTED SHARES

Nonvested Options  Options  

Weighted-

Average
Exercise Price

 
Nonvested at December 31, 2020   862,833   $1.75 
Granted   583,000   $4.77 
Vested   (540,104)  $3.15 
Forfeited   -   $- 
Nonvested at September 30, 2021   905,729   $3.03 

 

As of September 30, 2021, the Company had 5,530,861 shares issuable under options outstanding at a weighted average exercise price of $1.84 and an intrinsic value of $1,837,818.

 

The total number of options granted during the nine months ended September 30, 2021 and 2020 was 583,000 and 1,762,495, respectively. The exercise price for these options ranges from $1.96 to $5.60 per share.

 

The Company recognized compensation expense related to options issued of $231,649 and $458,567 during the three months ended September 30, 2021 and 2020, respectively, in which $230,173 and $458,091 is included in general and administrative expenses and $1,476 and $1,476 in research and development expenses, respectively. For the three months ended September 30, 2021, $53,966 of the stock compensation was related to employees and $177,683 was related to non-employees.

 

 

The Company recognized compensation expense related to options issued of $1,300,590 and $1,123,151 during the nine months ended September 30, 2021 and 2020, respectively, in which $1,296,162 and $1,052,294 is included in general and administrative expenses and $4,428 and $70,857 in research and development expenses, respectively. For the nine months ended September 30, 2021, $718,366 of the stock compensation was related to employees and $582,224 was related to non-employees.

 

As of September 30, 2021, the unamortized stock option expense was $2,385,046 with $289,828 being related to employees and $2,095,218 being related to non-employees. As of September 30, 2021, the weighted average period for the unamortized stock compensation to be recognized is 3.37 years.

 

On February 25, 2021, the Company issued a total of 366,000 options to purchase shares of the Company’s common stock to five individuals, with 350,000 of these options being issued to related parties. These options had a grant date fair value of $2,009,063. These options have an exercise price of $5.60 and a term of 10 years or 5 years. 16,000 of the options vest immediately and 350,000 of the options vest monthly over 48 months.

 

On May 26, 2021, the Company issued a total of 180,000 options to purchase shares of the Company’s common stock to a related party. These options had a grant date fair value of $474,231. These options have an exercise price of $3.65, a term of 10 years, and vest immediately.

 

On July 26, 2021, the Company issued a total of 32,000 options to purchase shares of the Company’s common stock. These options had a grant date fair value of $65,626. These options have an exercise price of $2.09, a term of 10 years, and vest over 48 months.

 

On August 10, 2021, the Company issued a total of 5,000 options to purchase shares of the Company’s common stock. These options had a grant date fair value of $9,615. These options have an exercise price of $1.96, a term of 10 years, and vest over 48 months.

 

During the three months ended March 31, 2021, 10,000 options were exercised for 10,000 shares of the Company’s common stock. These options had an exercise price of $1.00.

 

During the three months ended June 30, 2021, the Company issued 360,000 shares of the Company’s common stock to a related party for the exercise of 360,000 options. The Company received proceeds of $532,500 from the exercise.

 

Warrants:

 

A summary of warrant issuances are as follows:

      

Weighted

Average

  

Weighted

Average

 
   Number   Exercise Price   Remaining Life 
Warrants               
                
Outstanding December 31, 2020   4,007,058   $1.06    1.86 
Granted   3,657,000    4.98    4.83 
Expired   (150,249)   1.25    - 
Exercised   (1,381,179)   1.13    - 
Outstanding September 30, 2021   6,132,630   $3.38    3.40 

 

As of September 30, 2021, the Company had 6,132,630 shares issuable under warrants outstanding at a weighted average exercise price of $3.38 and an intrinsic value of $2,129,482.

 

During the three months ended March 31, 2021, 373,042 warrants were exercised for 240,123 shares of the Company’s common stock. The Company received $27,125 from these exercises.

 

During the three months ended June 30, 2021, the Company issued 836,558 shares of the Company’s common stock for the net exercise of 1,008,137 warrants. 231,277 of these shares of common stock were issued to a related party. The Company received proceeds of $300,000 from the exercise.