| STOCKHOLDERS’ EQUITY (DEFICIT) | NOTE
10 – STOCKHOLDERS’ EQUITY (DEFICIT) Common
Stock On May 24, 2021, the Company increased the number of authorized shares
of the Company’s common stock, par value $0.001 per share, from 27,000,000 to 100,000,000 (the “Authorized
Shares Increase”) by filing a Certificate of Amendment (the “Certificate of Amendment”) to its Amended and Restated
Certificate of Incorporation with the Secretary of State of the State of Delaware. In accordance with the General Corporation Law of the
State of Delaware, the Authorized Shares Increase and the Certificate of Amendment were approved by the stockholders of the Company at
the Company’s Annual Meeting of Stockholders on May 19, 2021. On September 13, 2022, the Company effectuated a 1 for 50 reverse
stock split (the “2022 Reverse Split”). The Company’s stock began trading at the 2022 Reverse Split price effective
on the Nasdaq Stock Market on September 14, 2022. There was no change to the number of authorized shares of the Company’s common
stock. On August 17, 2023, the Company effectuated a 1 for 40 reverse stock split (the “2023 Reverse Split”). The Company’s
stock began trading at the 2023 Reverse Split price effective on the Nasdaq Stock Market on August 17, 2023. There was no change to the
number of authorized shares of the Company’s common stock. During the nine months ended September 30, 2023, the Company issued 4,675 shares
of common stock and recognized expense of $168,300 in stock-based compensation for consulting services. The stock-based compensation
for consulting services is calculated by the number shares multiplied by the closing price on the effective date of the contract. During
the nine months ended September 30, 2023, 170 Restricted Stock Units (“RSUs”) vested which resulted in the
issuance of shares. The Company recognized expense of $308,479 in stock-based compensation related to the RSUs for the nine months
ended September 30, 2023. The stock-based compensation for shares issued or RSUs granted during the period were valued based on the fair
market value on the date of grant. During the nine months ended September 30, 2023, the Company issued 184,374 shares of common stock
for the exercise of prefunded warrants. During the nine months ended September 30, 2022,
the Company issued 413 shares of common stock and recognized expense of $253,719 in stock-based compensation for consulting services.
The Company also granted 291 RSUs, 379 vested and resulted in the issuance of shares. As a result, the Company recognized expense of $993,462
in stock-based compensation. The stock-based compensation for shares issued or RSU’s granted during the period were valued based
on the fair market value on the date of grant. On
December 20, 2022, the Company entered into an At The Market Offering Agreement (the “ATM”) with H.C. Wainwright & Co.,
LLC as agent (the “Agent”), pursuant to which the Company may offer and sell, from time to time through the Agent, shares
of the Company’s common stock having an aggregate offering price of up to $50,000,000 (the “Shares”). The
offer and sale of the Shares was made pursuant to a shelf registration statement on Form S-3 and the related prospectus (File No. 333-257645)
filed by the Company with the SEC on July 2, 2021, amended on July 6, 2021 and declared effective by the SEC on July 13, 2021, under
the Securities Act of 1933, as amended. For
the nine months ended September 30, 2023, the Company sold 8,466 Shares at an average price of $62.05 per share under
the ATM. The sale of Shares generated net proceeds of $507,016 after paying commissions and related fees. On
April 20, 2023, the Company entered into an amendment to the ATM, pursuant to which the Company and the Agent agreed to reduce the aggregate
gross sales price of the Shares under the ATM from $50,000,000 to zero. Preferred
Stock The
Company is authorized to issue 3,000,000 shares of preferred stock, par value $0.001 per share. There were no Issuance
of Series B Preferred Stock: On
July 19, 2022, the Company entered into a Subscription and Investment Representation Agreement with its Chief Executive Officer (the
“Purchaser”), pursuant to which the Company agreed to issue and sell one (1) share of the Company’s Series
B Preferred Stock (the “Preferred Stock”), par value $0.001 per share, to the Purchaser for $20,000 in cash. On
July 19, 2022, the Company filed a certificate of designation (the “Certificate of Designation”) with the Secretary of State
of Delaware, effective as of the time of filing, designating the rights, preferences, privileges and restrictions of the share of Preferred
Stock. The Certificate of Designation provides that the share of Preferred Stock will have 250,000,000 votes and will vote
together with the outstanding shares of the Company’s common stock as a single class exclusively with respect to any proposal to
amend the Company’s Restated Certificate of Incorporation to effect a reverse stock split of the Company’s common stock.
The Preferred Stock will be voted, without action by the holder, on any such proposal in the same proportion as shares of common stock
are voted. The Preferred Stock otherwise has no voting rights except as otherwise required by the General Corporation Law of the State
of Delaware. The
Preferred Stock is not convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the
Company. The Preferred Stock has no rights with respect to any distribution of assets of the Company, including upon a liquidation, bankruptcy,
reorganization, merger, acquisition, sale, dissolution or winding up of the Company, whether voluntarily or involuntarily. The holder
of the Preferred Stock will not be entitled to receive dividends of any kind. The
outstanding share of Preferred Stock shall be redeemed in whole, but not in part, at any time (i) if such redemption is ordered by the
Board of Directors in its sole discretion or (ii) automatically upon the effectiveness of the amendment to the Certificate of Incorporation
implementing a reverse stock split. Upon such redemption, the holder of the Preferred Stock will receive consideration of $20,000 in
cash. On September 13, 2022, the share was redeemed. Redemption
of Series B Preferred Stock On
October 7, 2022, the Company paid $20,000 in consideration for the one share of Preferred Stock which was redeemed on
September 13, 2022. Series
C Preferred Stock On
July 11, 2023, the Company filed a certificate of designation (the “Certificate of Designation”) with the Secretary of State
of Delaware, effective as of the time of filing, designating the rights, preferences, privileges and restrictions of the share of Preferred
Stock. The Certificate of Designation provides that the share of Preferred Stock will have 250,000,000 votes and will vote together with
the outstanding shares of the Company’s common stock as a single class exclusively with respect to any proposal to amend the Company’s
Amended and Restated Certificate of Incorporation to effect a reverse stock split of the Company’s common stock. The Preferred
Stock will be voted, without action by the holder, on any such proposal in the same proportion as shares of common stock are voted. The
Preferred Stock otherwise has no voting rights except as otherwise required by the General Corporation Law of the State of Delaware. The
Preferred Stock is not convertible into, or exchangeable for, shares of any other class or series of stock or other securities of the
Company. The Preferred Stock has no rights with respect to any distribution of assets of the Company, including upon a liquidation, bankruptcy,
reorganization, merger, acquisition, sale, dissolution or winding up of the Company, whether voluntarily or involuntarily. The holder
of the Preferred Stock will not be entitled to receive dividends of any kind. The outstanding share of Preferred Stock shall
be redeemed in whole, but not in part, at any time (i) if such redemption is ordered by the Board of Directors in its sole discretion
or (ii) automatically upon the effectiveness of the amendment to the Certificate of Incorporation implementing a reverse stock split.
Upon such redemption, the holder of the Preferred Stock will receive consideration of $1,000 in cash. As of September 30, 2023, the share
has been redeemed and the consideration has not been paid. On
July 11, 2023, the Company entered into a Subscription and Investment Representation Agreement (the “Subscription Agreement”)
with Amro Albanna, its Chief Executive Officer, who is an accredited investor (the “Purchaser”), pursuant to which the Company
agreed to issue and sell one (1) share of the Company’s Series C Preferred Stock, par value $0.001 per share (the “Preferred
Stock”), to the Purchaser for $1,000 in cash. The sale closed on July 11, 2023. The Subscription Agreement contains customary representations
and warranties and certain indemnification rights and obligations of the parties. Stock-Based
Compensation In
October 2017, our Board of Directors adopted the Aditx Therapeutics, Inc. 2017 Equity Incentive Plan (the “2017 Plan”). The
2017 Plan provides for the grant of equity awards to directors, employees, and consultants. The Company is authorized to issue up
to 2,500,000 shares of our common stock pursuant to awards granted under the 2017 Plan. The 2017 Plan is administered by our
Board of Directors, and expires ten years after adoption, unless terminated earlier by the Board of Directors. All shares of our
common stock pursuant to awards under the 2017 Plan have been awarded. On February 24, 2021, our Board of Directors adopted the Aditx Therapeutics,
Inc. 2021 Omnibus Equity Incentive Plan (the “2021 Plan”). The 2021 Plan provides for grants of nonqualified stock options,
incentive stock options, stock appreciation rights, restricted stock and restricted stock units, and other stock-based awards (collectively,
the “Awards”). Eligible recipients of Awards include employees, directors or independent contractors of the Company or any
affiliate of the Company. The Compensation Committee of the Board of Directors (the “Committee”)administers the 2021 Plan.
A total of 60,000 shares of common stock, par value $0.001 per share, of the Company may be issued pursuant to Awards granted
under the 2021 Plan. The exercise price per share for the shares to be issued pursuant to an exercise of a stock option will be no less
than one hundred percent (100%) of the Fair Market Value (as defined in the 2021 Plan) of a share of Common Stock on the date of grant.
The 2021 Plan was submitted and approved by the Company’s stockholders at the 2021 annual meeting of stockholders, held on May 19,
2021. During
the three and nine months ended September 30, 2023 and 2022, the Company granted no new options. The
following is an analysis of the stock option grant activity under the Plan:
Vested and Nonvested Stock Options Number Weighted Weighted
Outstanding December 31, 2022 1,127 $ 6,802.93 5.74
Granted - - -
Exercised - - -
Expired or forfeited - - -
Outstanding September 30, 2023 1,127 $ 6,802.93 5.00
Nonvested Stock Options Number Weighted-
Nonvested on December 31, 2022 55 $ 3,840
Granted - -
Vested (55 ) 3,840
Forfeited - -
Nonvested on September 30, 2023 - $ - As of September 30, 2023 there were 1,127 exercisable options;
these options had a weighted average exercise price $6,802.93. The Company recognized stock-based compensation
expense related to options granted and vesting expense of $59,964 during the three months ended September 30, 2023, of which $24,429 is
included in general and administrative expenses and $35,535 is included in research and development expenses in the accompanying
statements of operations. The remaining value to be expensed is zero as of September 30, 2023. The weighted average vesting
term is zero The Company recognizes option forfeitures as they occur, as there is
insufficient historical data to accurately determine future forfeitures rates. Warrants For the
nine months ended September 30, 2023, the fair value of each warrant granted was estimated using the assumption and/or factors in the
Black-Scholes Model as follows:
Exercise price $ 10.00-12.50
Expected dividend yield 0 %
Risk free interest rate 4.44 %
Expected life in years 5.50
Expected volatility 171 % The
risk-free interest rate assumption for warrants granted is based upon observed interest rates on the United States Government Bond Equivalent
Yield appropriate for the expected term of warrants. The
Company determined the expected volatility assumption for warrants granted using the historical volatility of comparable public companies’
common stock. The Company will continue to monitor peer companies and other relevant factors used to measure expected volatility for
future warrant grants, until such time that the Company’s common stock has enough market history to use historical volatility. The
dividend yield assumption for warrants granted is based on the Company’s history and expectation of dividend payouts. The Company
has never declared nor paid any cash dividends on its common stock, and the Company does not anticipate paying any cash dividends in
the foreseeable future. The Company recognizes warrant forfeitures as they occur, as there
is insufficient historical data to accurately determine future forfeitures rates. A
summary of warrant issuances are as follows:
Vested and Nonvested Warrants Number Weighted Weighted
Outstanding December 31, 2022 127,281 $ 514.97 4.54
Granted 2,190,367 6.36 5.20
Exercised (184,374 ) 1.35 -
Expired or forfeited (392 ) 8,250.00 -
Outstanding September 30, 2023 2,132,882 $ 35.22 5.10 On
September 1, 2023, the Company recognized a deemed dividend resulting in the issuance of 9,086 warrants, 6,128 of which were immediately
exercised. On August 31, 2023, the Company entered into
a securities purchase agreement with an institutional investor for the issuance and sale in a private placement of (i) pre-funded warrants
(the “August 2023 Pre-Funded Warrants”) to purchase up to 1,000,000 shares of the Company’s common stock, at an exercise
price of $0.001 per share, and (ii) warrants to purchase up to 1,000,000 shares of the Company’s Common Stock at an exercise price
of $10.00 per share. In addition, the Company issued to the exclusive placement agent on this transaction, Wainwright or its designees,
warrants to purchase up to an aggregate of 60,000 shares of Common Stock. The August 2023 Pre-Funded Warrants do not have an expiration
date, therefore the August 2023 Pre-Funded Warrants have been excluded from the weighted average remaining life calculation.
Nonvested Warrants Number Weighted-
Nonvested on December 31, 2022 2,500 $ 300.00
Granted 2,190,367 6.36
Vested (2,192,867 ) 6.70
Forfeited - -
Nonvested on September 30, 2023 - $ - The
Company recognized stock-based compensation expense related to warrants granted and vesting expense of zero and $660,191 during
the nine months ended September 30, 2023 and 2022, respectively, which is included in general and administrative in the accompanying
Statements of Operations. The remaining value to be expensed is zero zero On April 20, 2023, the Company entered into a
securities purchase agreement (the “Purchase Agreement”) with an institutional investor, pursuant to which the Company agreed
to sell to such investor pre-funded warrants (the “Pre-Funded Warrants”) to purchase up to 39,634 shares of common stock of
the Company (the “Common Stock”) at a purchase price of $48.76 per Pre-Funded Warrant, resulting in proceeds of approximately
$1.6 million after deducting approximately $291,000 in commissions and closing fees. Concurrently with the sale of the Pre-Funded Warrants,
pursuant to the Purchase Agreement in a concurrent private placement, for each Pre-Funded Warrant purchased by the investor, such investor
received from the Company an unregistered warrant (the “Warrant”) to purchase two shares of Common Stock. The warrants have
an exercise price of $34.40 per share and are exercisable for a three year period. In addition, the Company issued a warrant to the placement
agent to purchase up to 2,379 shares of common stock at an exercise price of $61.00 per share. On August 31, 2023, the Company entered into a
securities purchase agreement (the “August Purchase Agreement”) with an institutional investor for the issuance and sale
in a private placement (the “Private Placement”) of (i) pre-funded warrants (the “Pre-Funded Warrants”) to purchase
up to 1,000,000 shares of the Company’s common stock at an exercise price of $0.001 per share, and (ii) warrants (the “Common
Warrants”) to purchase up to 1,000,000 shares of the Company’s Common Stock at an exercise price of $10.00 per share. 60,000
warrants were also issued to the placement agent. These warrants had an exercise price of $12.50 and a term of 5.5 years. The Common Warrants
were valued at $32.3 million and the 60,000 warrants issued to the placement agents were valued at $1.9 million using a Black Scholes
valuation model. The Private Placement closed on September 6, 2023. The net proceeds to the Company from the Private Placement were approximately
$9 million, after deducting placement agent fees and expenses and estimated offering expenses payable by the Company. The Company intends
to use the net proceeds received from the Private Placement for (i) the payment of approximately $3.1 million in outstanding obligations,
(ii) the repayment of approximately $0.4 million of outstanding debt, and (iii) the balance for continuing operating expenses and working
capital. Restricted
Stock Units A
summary of Restricted Stock Units (“RSUs”) issuances are as follows:
Nonvested RSUs Number Weighted
Nonvested December 31, 2022 187 $ 1,856,21
Granted - -
Vested (170 ) 2,714.15
Forfeited (35 ) 1,345.77
Rounding for Reverse Split 18 -
Nonvested September 30, 2023 - $ - The Company recognized stock-based compensation
expense related to RSUs granted and vesting expense of $3 During
the nine months ended September 30, 2023, the Company granted a total of zero RSUs. During the nine months ended September
30, 2023, 170 RSUs vested and the Company issued 157 shares of common stock for the 170 vested RSUs. |
