Note 6 – Stockholders’ Equity

Authorized Capital

The Company has authorized the issuance and sale of up to 185,000,000 shares of stock, consisting of 180,000,000 shares of common stock having a par value of $0.001 and 5,000,000 shares of Preferred Stock having a par value of $0.001 per share. As of September 30, 2021 and 2020, there were no shares of Preferred Stock outstanding and there were no declared but unpaid dividends or undeclared dividend arrearages on any shares of the Company’s capital stock.

Registration of Shares

During the nine months ended September 30, 2021, the Company filed a registration statement for the shares issued in its private offering (the “Private Offering”) with certain promissory note holders in December 2020. The Company converted outstanding amounts under its 8% Unsecured Promissory Notes (the “2018 Notes”) due in 2021 and 2022 in the Private Offering totaling an aggregate of $3,847,018 in principal and interest and issued 3,154,115 units at a price of $1.22 per unit. Each unit consists of one share of the Company’s common stock and one warrant to purchase 0.75 of one share of the Company’s common stock at an exercise price of $1.44 per share. Each warrant can be exercised at any time on or after June 18, 2021 and has an expiration date of June 18, 2026. Two officers of the Company participated in the Private Offering and converted an aggregate of approximately $131,000 in principal and interest into 107,000 units.

Stock Options

The Company has an incentive stock plan, the Amended and Restated 2011 Equity Incentive Plan (the “2011 Plan”), and has granted stock options to employees, non-employee directors and consultants from the 2011 Plan. Options granted under the 2011 Plan may be Incentive Stock Options or Non-statutory Stock Options, as determined by the Administrator at the time of grant. On June 16, 2020, the Company’s stockholders approved an amendment to the 2011 Plan to increase the number of shares authorized for issuance under the 2011 Plan to a total of 14,000,000 shares. As of September 30, 2021, there were 2,900,478 shares remaining available for issuance under the 2011 Plan.

In connection with the appointment of Joseph Sarret as the Company’s Chief Executive Officer, the Company entered into an Inducement Stock Option Agreement with Dr. Sarret on May 3, 2021. Pursuant to such agreement, the Company granted Dr. Sarret (1) a time-based inducement nonqualified stock option to purchase 2,250,000 shares of common stock and (2) a performance-based inducement nonqualified stock option to purchase 1,300,000 shares of common stock (the “Inducement Awards”). The options have an exercise price of $1.35, and the time-based grant will vest as to 25% of the shares on the one-year anniversary of the grant date, May 3, 2021, with the remaining shares subject to the option vesting in 36 equal monthly installments. The time-based Inducement Award has an aggregate grant date fair value of $2,227,000.

During the nine months ended September 30, 2021, the Company granted stock options to employees to purchase 5,522,000 shares of the Company’s common stock, including the time-based Inducement Award, with grant date prices that ranged between $1.10 to $1.38 per share. The stock options have terms of ten years and are subject to vesting based on continuous service of the awardee over periods ranging from three to four years. The stock options have an aggregate grant date fair value of $5,609,846.

During the nine months ended September 30, 2021, stock options to purchase 783,901 shares of common stock were exercised for cash proceeds of $1,116,147.

During the nine months ended September 30, 2021, stock options to purchase 1,043,369 shares of common stock were cancelled and returned to the option pool for future issuance.

The Company recorded stock-based compensation as follows:

The following table represents stock option activity for the nine months ended September 30, 2021:

The following table summarizes information on stock options outstanding and exercisable as of September 30, 2021:

Warrants

During the nine months ended September 30, 2021, the Company granted warrants to two service providers to purchase a total of 60,000 shares of its common stock with an exercise price of $1.38 per share. Fifty thousand of these warrants were valued using the Black-Scholes option pricing model and the corresponding expense will be recognized over the vesting period of one year. Ten thousand of these warrants are performance based and will be valued and expensed at the time the performance conditions are met. The warrants have terms that range from two to three years with vesting over a one-year period.

During the nine months ended September 30, 2021, warrants to purchase 1,451,025 shares of common stock were exercised for cash proceeds of $2,089,476.

During the nine months ended September 30, 2021, warrants to purchase 3,181,052 shares of common stock expired and were cancelled.

The following table summarizes information on warrants outstanding as of September 30, 2021.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan (“ESPP”) in which it purchases shares with the amounts accumulated during the offering period from employee directed payroll deferrals. Purchases of the Company’s common stock are equal to 85% of the closing market price of its common stock on the first day or last day of the offering period, whichever is lower. During the nine months ended September 30, 2021, 17,662 shares were issued under the ESPP for $16,814 of employee compensation deferrals. As of September 30, 2021, 482,338 shares are available for future issuance under the ESPP.