Stockholders' Equity |
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Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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| Stockholders' Equity | STOCKHOLDERS’ EQUITY COMMON STOCK
On November 10, 2021, the Company concluded its IPO of 2,750,000 units, (the “Units”), with each Unit consisting of one share of common stock, par value $0.0001 per share (the “Common Stock”) and one warrant (the “Warrants”) to purchase Common Stock at a combined public offering price of $6.00 per Unit. The Common Stock and the Warrants were immediately separable and issued separately but were purchased together in the IPO. The Warrants will have a per share exercise price of $6.00 and are exercisable immediately. The Warrants will expire five years from the date of issuance.
The Company received approximately $14,713,000 in net proceeds from the IPO after deducting the underwriting discount and commission and other IPO expenses payable by the Company of approximately $1,800,000.
On November 10, 2021, as a result of the completion of the IPO and as required under the terms of the 2015 Notes, the Company converted the entirety of the outstanding principal of $5,084,000 and interest accrued of $1,204,404 to 1,497,216 shares of common stock at the Conversion Price of $4.20 per share and issued the shares to the 2015 Note holders, fully satisfying the Company’s obligations.
Upon consummation of the above mentioned IPO, the company was required to issue 78,025 shares of Common Stock to a consulting firm for services provided that were related to the IPO. The Company calculated the value of the common stock using closing stock price on November 11, 2022, resulting in a fair value of approximately $365,000. Additionally, the Company was required to issue 72,727 warrants based on performance metrics achieved in 2021, the warrants have an exercise price of $5.50 with an expiration of five years from the date of issuance. The Company calculated the fair value of $1.25 each for these warrants using the Black-Scholes option pricing model on the date the consulting firm achieved the milestone, using the following assumptions: (a) fair value of $2.28 per share, (b) expected volatility of 90.81%, (c) dividend yield of 0%, (d) risk-free interest rate of 0.87%, and (e) expected life of 5 years, resulting in the fair value of approximately $91,000.
During the years ended December 31, 2021 and 2020 the Company issued 34,846 and 45,000 shares of common stock upon exercise of vested stock options.
WARRANTS
In connection with the short term notes issued in 2019, the Board of Directors approved the issuance of warrants. The Company issued 15,277 fully vested warrants as an incentive to investors with the rights to convert into a fixed number of shares of the Company’s common stock for an above market fixed price of $2.75 per share, exercisable, in whole or in part, for a period of 4 years from the date of issuance.
During 2019, milestone warrants were issued to certain executives of the Company totaling 407,272 units (“Penny Warrants”), these were valued on the date of grant at $0.0003 and will vest upon meeting certain milestones. The warrant may be exercised, in whole or in part upon the earliest to occur of: (i) following the Company’s initial public offering, the date on which the Company has a market capitalization of at least $50,000,000 for consecutive business days; (ii) the closing of a Change of Control transaction with net proceeds to Company equity holders of at least $50,000,000; (iii) the date on which the Company receives a bona fide pre-money valuation from a third party investor of at least $50,000,000; (iv) the date on which the Holder’s continuous status as a Service Provider is terminated by the Company without Cause upon or within 12 months after a Change of Control; and (v) the date on which the Holder terminates his continuous status as a Service Provider for Good Reason within 12 months after a Change of Control.
Since these Penny Warrants have performance obligations to be met by the Company to become exercisable which are not met under any circumstance as of December 31, 2021, they are excluded from weighted-average shares outstanding in the net loss per share calculation.
In accordance with ASC Topic 480, Distinguishing Liabilities from Equity, as no derivative feature exists, the warrants issued to executives were classified as equity and the Company determined that as of December 31, 2021 and December 31, 2020 it is not likely that these warrants would vest and as such the value of the warrants would be deemed immaterial with no impact on the accompanying financial statements.
In connection with the IPO, the Company issued 2,750,000 Warrants, with a per share exercise price of $6.00 and exercisable immediately. The Warrants expire five years from the date of issuance.
Pursuant to the Underwriting Agreement dated November 10, 2021 between the Company and The Benchmark Company, LLC (the “Underwriter”) the Company granted the Underwriter a 30-day option to purchase up to an additional 412,500 shares of our Common Stock and/or Warrants to cover over-allotments. On consummation of the IPO, the Underwriter exercised the over-allotment option to purchase 412,500 Offering Warrants.
The Company also issued warrants to purchase Common Stock (7% of the number of Common Stock sold in IPO) to be issued to the Underwriter, as a portion of the underwriting compensation payable in connection with IPO. The Company issued 192,500 warrants, exercisable at a per share exercise price equal to $7.50 per share. The warrants will expire five years from the date of issuance and are subject to a 180-day lock-up period.
A summary of the outstanding warrants as of December 31, 2021 and 2020 is as follows:
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