| Stockholders' Equity | Note 5 – Stockholders’ Equity CRX Limited Liability Company Interest Purchase Agreement On October 26, 2018, Company entered into a
Limited Liability Company Interest Purchase Agreement (the “Purchase Agreement”) with the members of CRX Bio Holdings
LLC, a Delaware limited liability company (“CRX”), to acquire all of the membership interest in CRX in exchange for
11,000,000 restricted shares of the Company’s common stock (the “Acquisition”), valued at $0.76 per share. The
transaction has been accounted for as an asset acquisition, and not a business combination, and has been valued at the fair value
of the common stock issued by the Company, as CRX’s cost basis was $0 in the assets. CRX is engaged in the research and development
of advanced cannabinoid formulations and drug delivery systems with a focus on bioavailability and related pharmacokinetics and
pharmacodynamics (PK/PD) enhancement. The Acquisition transaction was consummated on October 26, 2018. By acquiring CRX as a wholly-owned
subsidiary, the Company acquired all of its assets, which consist primarily of three U.S. provisional patent applications relating
to cannabinoid formulations to treat convulsive disorders, chronic traumatic encephalopathy, and neuropathic pain. At the closing,
the Company issued to the six members of CRX (the “Sellers”) 1,100,000 shares not subject to any forfeiture restrictions
and 9,900,000 shares which shall be released from forfeiture restrictions according to the following vesting schedule:
● 30% shall be fully vested 12 months following the Closing (October 26, 2019);
● 30% shall be fully vested 24 months following the Closing (October 26, 2020);
● 30% shall be fully vested 36 months following the Closing (October 26, 2021). Any Seller who is not then providing services to the Company or
any of its subsidiaries on any vesting date, whether through voluntary termination or termination “for cause,” will
forfeit his unvested shares, which will be cancelled. The transaction has been valued at $8,360,000,
based on the fair value of the 11,000,000 shares issued of $0.76 per share, as per the closing market price of the Company’s
common stock on the date of the agreement. The $836,000 fair value of the 1,100,000 shares issued not subject to any forfeiture
restrictions was charged to operations during the six months ended December 31, 2018. The $7,524,000 fair value of the 9,900,000
shares subject to forfeiture has been charged to stockholders’ equity as a contra equity account, and will be amortized over
the vesting periods. The net amount charged to stockholder’s equity was $0 on the date of the acquisition. Effective December 31, 2018, one seller resigned
from the Company and forfeited 1,732,500 unvested shares, valued at $1,316,699 ($0.76 per share). Warrants The Company has issued warrants to investors
in a series of subscription agreements in equity financings. On July 27, 2018, Company extended the expiration
date of its Class C Warrants, from July 27, 2018, to August 8, 2018, and also offered holders of the Class C Warrants who did not
wish to exercise their warrants the opportunity to exchange their Class C Warrants for new warrants. Each new warrant, denominated
as Class D, was exercisable through November 30, 2018 to purchase one unit for $1.00, each unit consisting of one share of Common
Stock and a warrant to purchase one share of Common Stock at a price of $2.00 per share through January 31, 2019. Holders of 944,400
Class C warrants were issued Class D warrants. On September 12, 2018, the Company authorized
the issuance of 94,000 Class E warrants to those shareholders who exercised their Class C warrants and did not exchange them for
Class D warrants. Each Class E warrant is exercisable to purchase one share of common stock at a price of $2.00 per share through
January 31, 2019. The relative fair value of each warrant issuance
is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions
used for grants under the fixed option plan:
Average risk-free interest rates 2.0% - 2.16 %
Average expected life (in years) .35 to .39
Volatility 175% to 296 % The relative fair value attached to the Class
D warrants is $151,467 and the relative fair value attached to the Class E warrants is $4,467 as of the grant date. A summary of warrant activity during the six
months ended December 31, 2018 is presented below:
Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years)
Outstanding and exercisable – June 30, 2018 1,034,400 $ .53 .1
Granted 1,038,400 $ 1.09
Exercised -
Expired (1,978,800 ) $ .75
Outstanding and exercisable – December 31, 2018 94,000 $ 2.00 .1 The following table summarizes information
about warrants outstanding at December 31, 2018:
Number Exercise Price Expires
Class E 94,000 $ 2.00 January 31, 2019
The Class E warrants expired unexercised on January 31, 2019. 2017 Stock Incentive Plan On August 10, 2017, BioPharma adopted the “2017
Stock Incentive Plan” and granted an aggregate of 6,400,000 shares of Common Stock to five officers and directors of the
Company, valued at $800,000 ($0.125 per share). On July 25, 2018, the Company accelerated the vesting of 1,083,342 unvested shares
of Common Stock previously granted to its former Chief Executive Officer and Chief Financial Officer. As of December 31, 2018,
450,000 of the shares issued (valued at $56,250) are subject to forfeiture until vesting occurs. 2018 Equity Incentive Plan (i) On March 30, 2018, the Company’s
board of directors approved and recommended for adoption by the stockholders of the Company a 2018 Equity Incentive Plan and has
reserved 8,000,000 shares of Common Stock for issuance under the terms of that Plan. In July 2018, the Board of Directors granted
options to purchase a total of 1,810,000 shares of Common Stock, exercisable for a period of seven years, to officers/directors/consultants
of the Company at an exercise price of $0.54 per share. In August 2018, the Board of Directors granted
options to purchase a total of 150,000 shares of Common Stock, exercisable for a period of seven years, to two individuals, (i)
a director and (ii) a consultant of the Company, at an exercise price of $0.38 per share. The fair value of each option grant is estimated
on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants
under the fixed option plan:
Average risk-free interest rates 2.6% - 2.8 %
Average expected life (in years) 4.0 to 7.0
Volatility 171% to 296 % The fair value of the options granted as of
December 31, 2018 is $891,318. Amortization of the vested portion of the options charged to operations was $449,470 for the period,
and $441,848 is unamortized at December 31, 2018. (ii) On October 17, 2018, the Board of Directors
granted options to purchase an aggregate 800,000 shares of Common Stock, exercisable for a period of seven years, to officers/directors
of the Company at an exercise price of $0.655 per share and confirmed a grant of options made as of October 1, 2018, to purchase
500,000 shares of Common Stock, exercisable for a period of seven years, to an officer and director of the Company at an exercise
price $0.48. All of the options were fully vested as of the date of grant. The fair value of each option grant is estimated
on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions used for grants
under the fixed option plan:
Average risk-free interest rates 2.88% - 2.93 %
Average expected life (in years) 4.0
Volatility 171% to 172 % The fair value of the fully vested options
granted of $803,997 was charged to operations in the period ended December 31, 2018. A summary of option activity during the six
months ended December 31, 2018 is presented below:
Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Life (Years)
Outstanding and exercisable – June 30, 2018 -
Granted 3,260,000 $ 0.55
Exercised -
Expired -
Outstanding– December 31, 2018 3,260,000 $ 0.55 6.7
Exercisable – December 31, 2018 2,280,000 |
