Stockholders’ Equity and Convertible Preferred Stock

12 Months Ended

Dec. 31, 2022

Stockholders' Equity Note [Abstract]

Stockholders’ Equity and Convertible Preferred Stock

Note 13. Stockholders’ Equity and Convertible Preferred Stock

Common Stock

Public Offering

On February 19, 2021, the Company consummated the public offering pursuant to an amended and restated underwriting agreement (the “Underwriting Agreement”) with H.C. Wainwright & Co., LLC, as representative to the underwriters named therein (the “Underwriter”), pursuant to which the Company agreed to issue and sell to the Underwriter in an underwritten public offering (the “Offering”) an aggregate of 2,757,352 shares (the “Shares”) of common stock, $0.0001 par value per share, of the Company (the “Common Stock”). The Company received gross proceeds of approximately $75 million before deducting underwriting discounts and commissions and estimated offering expenses payable by the Company. On February 23, 2021, the Underwriter partially exercised its over-allotment option and purchased an additional 413,583 Shares, resulting in aggregate proceeds of approximately $86.2 million, before deducting underwriting discounts and commissions and other expenses. The total net proceeds received from these two offerings were approximately $78.2 million.

In connection with the Offering, the Company issued the Underwriter warrants (the “Underwriter’s Warrants”) to purchase up to 253,674 shares of Common Stock, or 8% of the Shares sold in the Offering. The Underwriter’s Warrants will be exercisable for a period of five years from February 19, 2021 at an exercise price of $34.00 per share, subject to adjustment.

Treasury Stock

On January 21, 2022, the Company’s board of directors authorized a share buyback program (the “Share Buyback Program”), pursuant to which the Company authorized the Share Buyback Program in an amount of up to three million dollars. During the year ended December 31, 2022, the Company repurchased 468,017 shares at a cost of approximately $3.1 million or $6.53 per share through marketable securities account under the Share Buyback Program. The Company records treasury stock using the cost method.

Preferred Stock

Series D Convertible Preferred Stock

In connection with the acquisition of North South’s patent portfolio in September 2013, the Company issued 1,379,685 shares of its Series D Convertible Preferred Stock (“Series D Preferred Stock”) to the stockholders of North South. Each share of Series D Preferred Stock has a stated value of $0.0001 per share and is convertible into 10 over 1,373 of a share of Common Stock. Upon the liquidation, dissolution or winding up of the Company’s business, each holder of Series D Preferred Stock shall be entitled to receive, for each share of Series D Preferred Stock held, a preferential amount in cash equal to the greater of (i) the stated value or (ii) the amount the holder would receive as a holder of Common Stock on an “as converted” basis. Each holder of Series D Preferred Stock shall be entitled to vote on all matters submitted to its stockholders and shall be entitled to such number of votes equal to the number of shares of Common Stock such shares of Series D Preferred Stock are convertible into at such time, taking into account the beneficial ownership limitations set forth in the governing Certificate of Designation and the conversion limitations described below. The conversion ratio of the Series D Preferred Stock is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions.

On December 21, 2021, the Company issued 112 shares of common stock upon the conversion of 900 shares of Series D Convertible Preferred stock.

As of December 31, 2022, and 2021, 5,000,000 Series D Preferred Stock was designated; 3,825 and 3,825 shares remained issued and outstanding, respectively.

Series D-1 Convertible Preferred Stock

The Company’s Series D-1 Convertible Preferred Stock (“Series D-1 Preferred Stock”) was established on November 22, 2013. Each share of Series D-1 Preferred Stock has a stated value of $0.0001 per share and is convertible into 10 over 1,373 of a share of Common Stock. Upon the liquidation, dissolution or winding up of the Company’s business, each holder of Series D-1 Preferred Stock shall be entitled to receive, for each share of Series D-1 Preferred Stock held, a preferential amount in cash equal to the greater of (i) the stated value or (ii) the amount the holder would receive as a holder of Common Stock on an “as converted” basis. Each holder of Series D-1 Preferred Stock shall be entitled to vote on all matters submitted to the Company’s stockholders and shall be entitled to such number of votes equal to the number of shares of Common Stock such shares of Series D-1 Preferred Stock are convertible into at such time, taking into account the beneficial ownership limitations set forth in the governing Certificate of Designation. The conversion ratio of the Series D-1 Preferred Stock is subject to adjustment in the event of stock splits, stock dividends, combination of shares and similar recapitalization transactions. The Company commenced an exchange with holders of Series D Convertible Preferred Stock pursuant to which the holders of the Company’s outstanding shares of Series D Preferred Stock acquired in the Merger could exchange such shares for shares of the Company’s Series D-1 Preferred Stock on a one-for-one basis.

As of December 31, 2022 and 2021, 5,000,000 Series D-1 Preferred Stock was designated; 834 shares remained issued and outstanding.

Warrants

A summary of warrant activity for year ended December 31, 2022, and 2021 is presented below:

	Warrants			Weighted Average Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2020		101,347		$	52.26		57,333		1.11
Issued		253,670			34.00		-		4.14
Exercised		(4,705	)		17.85		-		-
Expired		(9,044	)		334.51		-		-
Outstanding as of December 31, 2021		341,268		$	31.68		-		3.87
Issued		103,528			21.25		-		4.15
Outstanding as of December 31, 2022		444,796		$	29.25		-		3.20

Confirmation of Mutual Understanding - In March 2022, pursuant to a Confirmation of Mutual Understanding (the “Confirmation”), all parties to the Confirmation acknowledged and confirmed a scrivener’s error set forth in warrants to purchase shares of the Company’s common stock (the “Warrants”) dated March 10, 2020, April 15, 2020 and March 2, 2021. Pursuant to the Confirmation, all parties, which were involved in the original execution of the warrants, agreed that clause (v) of the definition of Fundamental Transaction in Section 3(d) of the Warrants, is as follows:

“the Company, directly or indirectly, in one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off, merger or scheme of arrangement) with another Person or group of Persons whereby such other Person or group acquires more than 50% of the voting power of the Company’s outstanding equity securities, including with respect to the election of directors (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share purchase agreement or other business combination)”.

Restricted Stock Awards

Pursuant to the January 5, 2021, License Agreement, the Company issued and delivered to Silo Pharma 36,764 shares of the Company’s restricted stock as consideration for the license of the Silo Pharma patents. This restricted stock award vested immediately.

On July 31, 2021, the Company issued each of its six directors 1,470 shares of the Company’s common stock pursuant to the Company’s 2014 Equity Incentive Plan. These shares have a total fair value of approximately $0.1 million. These restricted stock awards vested immediately.

During the year ended December 31, 2022, the Company issued an aggregate of 238,244 shares of the Company’s common stock to members of the Company’s Board of Directors and an employee for services rendered.

A summary of restricted stock awards activity for the year ended December 31, 2022, is presented below:

	Number of Restricted Stock Awards			Weighted Average Grant Day Fair Value
Nonvested at December 31, 2021		-		$	-
Granted		238,244			6.13
Vested		(230,176	)		6.15
Nonvested at December 31, 2022		8,068		$	5.64

As of December 31, 2022, approximately $300 of unrecognized stock-based compensation expense was related to restricted stock awards. The weighted average remaining contractual terms of unvested restricted stock awards was approximately 0.01 year as of December 31, 2022.

Stock Options

A summary of option activity under the Company’s stock option plan for year ended December 31, 2022 and 2021 is presented below:

	Number of Shares			Weighted Average Exercise Price		Total Intrinsic Value		Weighted Average Remaining Contractual Life (in years)
Outstanding as of December 31, 2020		22,591		$	680.79	$	68,996		8.9
Employee options granted		5,882			21.08		-		9.1
Employee options expired		(270	)		-		-		-
Outstanding as of December 31, 2021		28,203		$	548.35	$	-		8.2
Employee options granted		170,587			5.95		-		0.3
Employee options forfeited		(167,381	)		41.90		-		-
Employee options expired		(216	)		73.70		-		-
Outstanding as of December 31, 2022		31,193		$	302.97	$	-		7.9
Options vested and exercisable		25,311		$	372.00	$	-		7.6

The fair value of options granted in 2022 and 2021 was estimated using the following assumptions:

	For the Years Ended December 31,
	2022			2021
Exercise price	$	5.95		$	21.08
Term (years)		10.00			10.00
Expected stock price volatility		117.0	%		124.1	%
Risk-free rate of interest		2.92	%		0.45	%

Stock-based compensation associated with the amortization of stock option expense was $13,000 and $0.2 million for the years ended December 31, 2022, and 2021, respectively. All stock compensation was recorded as a component of general and administrative expenses.

Estimated future stock-based compensation expense relating to unvested stock options is approximately $76,000.

2014 Plan and Option Grants

On November 17, 2020, the Board of Directors approved to amend 2014 Equity Incentive Plan to increase the number of shares of common stock authorized to be issued pursuant to the 2014 Plan from 14,314 to 294,117 shares.

At December 31, 2022, there were 25,537 shares available for grant under the 2014 Equity Incentive Plan.