SHAREHOLDERS’ EQUITY, REDEEMABLE CONVERTIBLE PREFERRED STOCK, OPTIONS AND WARRANTS

12 Months Ended

Dec. 31, 2021

Equity [Abstract]

SHAREHOLDERS’ EQUITY, REDEEMABLE CONVERTIBLE PREFERRED STOCK, OPTIONS AND WARRANTS

NOTE 9 – SHAREHOLDERS’ EQUITY, REDEEMABLE CONVERTIBLE PREFERRED STOCK, OPTIONS AND WARRANTS

Warrants

In December 2019, the Company entered into the 2019 Promissory Note, as discussed above. In connection with the 2019 Promissory Note, the company issued 20,250,000 Class O Warrants to purchase shares of the Company’s common stock at a purchase price of $0.045 per share. All 20,250,000 Class O Warrants were exercised in January 2021.

In February 2020, the Company borrowed the remaining amount available for borrowings under the 2019 Promissory Note as discussed above. As a result and according to the terms of the 2019 Promissory Note, the Company issued 9,750,000 additional Class O Warrants to purchase shares of the Company’s common stock at a purchase price of $0.045 per share. All 9,750,000 Class O Warrants were exercised in January 2021.

The following table summarizes warrant activity for the years ended December 31, 2021 and 2020:

Warrants	Outstanding Shares			Weighted Average Exercise
Outstanding at December 31, 2019		40,340,000		$	0.08
Granted		9,750,000			0.045
Exercised		—			—
Forfeited		—			—
Outstanding at December 31, 2020		50,090,000			0.07
Granted					—
Exercised		(43,025,000	)		0.07
Forfeited		—			—
Outstanding at December 31, 2021		7,065,000		$	0.11

Warrants outstanding at December 31, 2021, included 4,140,000 Class M Warrants which were immediately exercisable at an exercise price of $0.12 per share and expired on February 17, 2022; 2,925,000 Class N Warrants which are immediately exercisable at an exercise price of $0.10 per share and expire on May 12, 2022.

Warrants outstanding at December 31, 2020, included 17,165,000 Class M Warrants which were immediately exercisable at an exercise price of $0.12 per share and expired on February 17, 2022; 2,925,000 Class N Warrants which are immediately exercisable at an exercise price of $0.10 per share and expire on May 12, 2022; and 30,000,000 Class O Warrants which are immediately exercisable at an exercise price of $0.045 per share and expire December 30, 2024.

Mandatorily Redeemable Convertible Preferred Stock

The Company is authorized to issue up to 5,000,000 shares of preferred stock, par value $0.01 per share. The Board is authorized to set the distinguishing characteristics of each series prior to issuance, including the granting of limited or full voting rights, rights to the payment of dividends and amounts payable in event of liquidation, dissolution or winding up of the Company.

At December 31, 2021, there were 675 shares of the Series B Convertible Redeemable Preferred Stock (the “Series B Preferred Stock”) outstanding with a mandatory redemption date of May 2022 at $1,000 per share, or $675,000 in aggregate redemption value. The Series B Preferred Stock is convertible into common stock at a conversion price of $2.00 per share. These preferred shares carry no dividend preferences. Due to the mandatory redemption provision, the Series B Preferred Stock has been classified as a liability in the accompanying consolidated balance sheets. In 2021, 175 shares of Series B Preferred Stock were converted into shares of common stock. At December 31, 2020, there were 850 shares of the Series B Convertible Redeemable Preferred Stock (the “Series B Preferred Stock”) outstanding with a mandatory redemption date of May 2022 at $1,000 per share, or $850,000 in aggregate redemption value.

On February 17, 2017, the Company entered into subscription agreements with certain investors, including two of the Company’s directors, for the sale of (i) an aggregate of 3,433 shares of Series C Preferred Stock, and (ii) Class M warrants to purchase an aggregate of 17,165,000 shares of the Company’s common stock (the Class M Warrants), for gross proceeds of $3,433,000. The Series C Preferred Stock accrues dividends at a rate of 6% per annum, payable annually on February 17th of each year, commencing on February 17, 2018. The Series C Preferred Stock are convertible at the option of the investors at any time into shares of the Company's common stock at an initial conversion price equal to $0.10 per share, subject to adjustment. At any time after February 17, 2019, if the volume-weighted average closing price of the Company’s common stock over a period of 90 consecutive trading days is greater than $0.25 per share, the Company may redeem all or any portion of the outstanding Series C Preferred Stock at the original purchase price per share ($1,000) plus any accrued and unpaid dividends, payable in shares of common stock. All outstanding shares of Series C Preferred Stock will be redeemed by the Company on February 17, 2022 at the original purchase price per share, payable in cash or shares of common stock, at the option of the holder. Holders of Series C Preferred Stock do not have any voting rights, except as required by law and in connection with certain events as set forth in the Statement of Designation of the Series C Preferred Stock. In 2021, 150 shares of Series C Preferred Stock were converted into shares of common stock. At December 31, 2021, there were 4,063 shares of the Series C Preferred Stock outstanding. At December 31, 2020, there were 4,213 shares of the Series C Preferred Stock outstanding

The Class M Warrants are immediately exercisable at an exercise price of $0.12 per share, subject to adjustment as set forth in the warrant, and expired in February 2022.

The Company allocated the proceeds to the Series C Preferred Stock and Class M Warrants based on their relative fair value, which resulted in $2,895,379 being allocated to the Series C Preferred Stock and $537,621 being allocated to the Class M Warrants. The allocated Class M Warrant value was recorded as a discount to the Series C Preferred Stock and will be amortized to interest expense over the five-year life of the warrants. At December 31, 2021, the balance of the discount to the Series C Preferred Stock was $13,440 and the net carrying value of these 3,433 shares of Series C Preferred Stock was $3,419,560. At December 31, 2020, the balance of the discount to the Series C Preferred Stock was $120,965 and the net carrying value of these 3,433 shares of Series C Preferred Stock was $3,312,035.

On March 24, 2017, the Company entered into an Amendment to the 8% Convertible Notes (the Amendment), pursuant to which the 8% Convertible Notes (the Notes) issued by the Company in July 2012 were amended to give noteholders certain additional rights. Pursuant to the Amendment, the Notes were modified to provide each holder the right, at the holder’s option and exercisable prior to May 12, 2017, to convert all or any portion of the principal amount of the Notes, plus accrued but unpaid interest, into shares of Series C Preferred Stock at a conversion price of $1,000 per share. Holders that elected to convert their Notes into Series C Preferred Stock received a Class N Warrant to purchase up to 3,750 shares of the Company’s common stock for each share of Series C Preferred Stock received upon conversion of the Notes, with each Warrant having a five-year term, a cashless exercise feature, and an exercise price of $0.10 per share of common stock. On May 12, 2017, the Company completed the retirement of $1,835,000 of the Notes in early cash redemptions, and $780,000 of the Notes were converted into an aggregate of 780 shares of Series C Preferred Stock and Class N Warrants to purchase an aggregate of 2,925,000 shares of the Company’s common stock.

The Class N Warrants are immediately exercisable at an exercise price of $0.10 per share, subject to adjustment as set forth in the warrant, and have a term of five years.

The Company allocated the proceeds to the Series C Preferred Stock and Class N Warrants based on their relative fair value, which resulted in $675,947 being allocated to the Series C Preferred Stock and $104,053 being allocated to the Class N Warrants. The allocated Class N Warrant value was recorded as a discount to the Series C Preferred Stock and will be amortized to interest expense over the five-year life of the warrants. At December 31, 2021, the balance of the discount to the Series C Preferred Stock was $4,737 and the net carrying value of 655 outstanding shares of Series C Preferred Stock was $650,263. At December 31, 2020, the balance of the discount to the Series C Preferred Stock was $28,614 and the net carrying value of 780 shares of Series C Preferred Stock was $751,386.

The Company pays dividends on the Series C Preferred Stock in February each year. Dividends payable totaled $254,280 in February 2021 and $252,780 in February 2020. Some holders of the Series C Preferred Stock elected to settle their dividend payments with shares of the Company’s common stock in lieu of cash. The Company issued 1,398,200 shares of common stock in lieu of a dividend payment of $205,980 in 2021 and 3,408,000 shares of common stock in lieu of a dividend payment of $204,480 in 2020. $46,800 of dividend payable was settled with cash in 2021 and 2020.

Employee Stock Purchase Plan

In September 2004, the Company’s Board approved an employee stock purchase plan for an aggregate of up to 2,000,000 shares of the Company’s common stock. The plan allows employees to deduct up to 15% of their salary or wages each pay period to be used for the purchase of common stock at a discounted rate. The common shares will be purchased at the end of each three-month offering period or other period as determined by the Board. The plan is intended to qualify as an “employee stock purchase plan” under Section 423 of the Internal Revenue Code. An amendment and restatement of the plan was approved in July 2020 by the Company’s shareholders, which increased the number of shares available for purchase by 3,000,000 shares. At December 31, 2021 there were 2,786,491 shares available under the employee stock purchase plan.

During 2021 and 2020, the Company issued 313,420 and 375,250 shares of common stock to employees for proceeds of $18,888 and $16,474, respectively, in accordance with the employee stock purchase plan.

2015 Incentive Plan

In April 2015, the Company’s Board of Directors approved the International Isotopes Inc. 2015 Incentive Plan (as amended, the “2015 Plan”,) which was subsequently approved by the Company’s shareholders in July 2015. The 2015 Plan was amended and restated in July 2018 to increase the number of shares authorized for issuance under the 2015 plan by an additional 20,000,000 shares. The 2015 Plan provides for the grant of incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares and units, and other stock or cash-based awards.  The 2015 Plan amends and restates the Company’s Amended and Restated 2006 Equity Incentive Plan (the “2006 Plan”).

The 2015 Plan authorizes the issuance of up to 80,000,000 shares of common stock, plus 11,089,967 shares authorized, but not issued under the 2006 Plan. Unless earlier terminated, the 2015 Plan will terminate on July 13, 2025. At December 31, 2021 there were 34,453,313 shares available for issuance under the 2015 Plan.

Non-Vested Stock Grants

Pursuant to an employment agreement with its Chief Executive Officer, the Company awarded 195,804 fully vested shares of common stock to its Chief Executive Officer in February 2021 under the 2015 Plan. The number of shares awarded was based on a $28,000 stock award using a price of $0.143 per share. The employment agreement provides that the number of shares issued will be based on the average closing price of common stock for the 20 trading days prior to issue date but not less than $0.05 per share. Compensation expense recorded pursuant to this stock grant was $23,496, which was determined by multiplying the number of shares awarded by the closing price of the common stock on February 28, 2021, which was $0.12 per share. The Company withheld 77,489 shares of common stock to satisfy the employee’s payroll tax obligations in connection with this issuance. The net shares issued on February 28, 2021 totaled 118,315.

Pursuant to an employment agreement with its Chief Executive Officer, the Company awarded 500,000 fully vested shares of common stock to its Chief Executive Officer in February 2020 under the 2015 Plan. The number of shares awarded was based on a $28,000 stock award using a price of $0.056 per share. The employment agreement provides that the number of shares issued will be based on the average closing price of common stock for the 20 trading days prior to issue date but not less than $0.05 per share. Compensation expense recorded pursuant to this stock grant was $30,000, which was determined by multiplying the number of shares awarded by the closing price of the common stock on February 28, 2020, which was $0.06 per share. The Company withheld 197,875 shares of common stock to satisfy the employee’s payroll tax obligations in connection with this issuance. The net shares issued on February 28, 2020 totaled 302,125.

Stock Options

A summary of the stock options issued under the Company’s equity plans is as follows:

						Weighted
				Weighted		Average
				Average		Remaining		Average
	Outstanding			Exercise		Contractual		Intrinsic
Warrants	Shares			Price		Life		Value
Outstanding at December 31, 2019		23,655,000		$	0.05			$	141,000
Granted		1,325,000			0.05
Exercised		(1,000,000	)		0.04				25,000
Forfeited		(3,580,000	)		0.06
Outstanding at December 31, 2020		20,400,000			0.06				107,250
Granted		3,250,000			0.11
Exercised		(2,552,500	)		0.04				362,410
Forfeited		(320,000	)		0.07
Outstanding at December 31, 2021		20,777,500			0.06		5.4		627,615
Exercisable at December 31, 2021		15,507,500		$	0.05		4.3	$	557,985

The total intrinsic value of stock options outstanding at December 31, 2021 was $627,615. The intrinsic value for stock options outstanding is calculated as the amount by which the quoted price of $0.09 of the Company’s common stock as of the end of 2021 exceeds the exercise price of the options.

The Company recognized $70,366 and $70,054 of compensation expense related to these options for the years ended December 31, 2021 and 2020, respectively. At December 31, 2021, the remaining compensation expense was $136,244 and will be recognized over 2.48 years.

In January 2021, 2,000,000 qualified stock options were exercised under a cashless exercise. The company withheld 250,000 shares to satisfy the exercise price and issued 1,750,000 shares of common stock. The options exercised were granted under the 2015 Plan, and, accordingly, there was not any income tax effect in the condensed consolidated financial statements for the year ended December 31, 2021.

In January 2021, 62,500 qualified stock options were exercised under a cashless exercise. The company withheld 13,393 shares to satisfy the exercise price and issued 49,107 shares of common stock. The options exercised were granted under the 2015 Plan, and, accordingly, there was not any income tax effect in the condensed consolidated financial statements for the year ended December 31, 2021.

In September 2021, 200,000 qualified stock options were exercised under a cashless exercise. The company withheld 90,909 shares to satisfy the exercise price and issued 109,091 shares of common stock. The options exercised were granted under the 2015 Plan, and, accordingly, there was not any income tax effect in the condensed consolidated financial statements for the year ended December 31, 2021.

In December 2021, 290,000 qualified stock options were exercised under a cashless exercise. The company withheld 173,400 shares to satisfy the exercise price and issued 116,600 shares of common stock. The options exercised were granted under the 2015 Plan, and, accordingly, there was not any income tax effect in the condensed consolidated financial statements for the year ended December 31, 2021.

In August 2020, 1,000,000 qualified stock options were exercised under a cashless exercise. The company withheld 583,333 shares to satisfy the exercise price and issued 416,667 shares of common stock. The options exercised were granted under the 2015 Plan, and, accordingly, there was not any income tax effect in the condensed consolidated financial statements for the year ended December 31, 2020.

During the year ended December 31, 2020, the Company granted 1,325,000 qualified stock options to several of its employees. All options vest over a five-year period with the first vesting at one-year anniversary for all grants and expiration at ten-year anniversary for all grants. The weighted average exercise price for these options was $0.05 per share. The options have a fair value of $36,815 as estimated on the date of issue using the Black-Scholes options pricing model with the following weighted-average assumptions: risk free interest rate of 0.36% to 0.63%, expected dividend yield rate of 0%, expected volatility of 51.96% to 58.75% and an expected life between 5.5 and 7.5 years.

During the year ended December 31, 2021, the Company granted 3,250,000 qualified stock options to several of its employees. All options vest over a five-year period with the first vesting at one-year anniversary for all grants and expiration at ten-year anniversary for all grants. The weighted average exercise price for these options was $0.11 per share. The options have a fair value of $209,748 as estimated on the date of issue using the Black-Scholes options pricing model with the following weighted-average assumptions: risk free interest rate of 0.46% to 1.44%, expected dividend yield rate of 0%, expected volatility of 52.52% to 69.01% and an expected life between 5.5 and 7.5 years.

All options exercised were issued under a qualified plan and accordingly, there is no income tax effect in the accompanying financial statements.