Note 12 - Stockholders’ Equity (Deficit)

Preferred Stock

The Company currently has 5,000,000 shares of preferred stock authorized.

Voting

Shares of preferred stock may be issued in one or more series, from time to time, with each such series to consist of such number of shares and to have such voting powers relative to other classes or series of preferred stock, if any, or common stock, full or limited or no voting powers, and such designations, preferences and relative, participating, optional or other special rights, and such qualifications, limitations or restrictions thereof, as shall be stated in the resolution or resolutions providing for the issuance of such series adopted by the Company’s Board of Directors.

Common Stock

The Company currently has 75,000,000 shares of common authorized.

Voting

Each holder of a share of common stock is entitled to one vote for each share of common stock.

Dividends

Dividends may be declared and paid as and when determined by the Board of Directors and subject to any preferential dividend rights of any then outstanding preferred stock.

Preemptive Rights.

The holders of common stock shall have no preemptive rights to subscribe for any shares of any class of stock of the Company whether now or hereafter authorized.

Liquidation Rights

Upon the dissolution or liquidation of the Company, whether voluntary or involuntary, holders of the common stock will be entitled to receive all assets of the Company available for distribution to its stockholders, subject to any preferential rights of any then outstanding preferred stock.

2019 Issuance of Common Stock

In January 2019, Private PDS’s Board of Directors approved an amendment to the terms of the 2018 financing. The amendment increased the warrant coverage (which is the amount of warrants each investor is entitled to, based on how much they paid for the common stock) from 20% to 45% in connection with the 2018 bridge financing term sheet. As a result of the amendment, in 2019 investors who purchased shares of common stock in 2018 received an additional $32,500 in warrant coverage. In February 2019, Private PDS issued 48,930 shares of common stock resulting in proceeds of $750,000 and the investors collectively received a warrant coverage of $337,500. The exercise price of the warrants to purchase shares of Private PDS’s common stock is $9.87, which is the stock price as of the date of the Merger. Accordingly, during the year ended December 31, 2019, Private PDS issued 37,487 warrants to purchase shares of Private PDS’s common stock. These warrants were determined to be equity instruments under ASC 480, Distinguishing Liabilities from Equity and ASC 815-40, Derivatives and Hedging.

Warrant Liability Classified to Additional Paid in Capital

On March 13, 2019, in connection with the settlement agreement entered into with one of its vendors, Private PDS granted a warrant to purchase 45,288 shares of its common stock at an exercise price of $9.87 which is the stock price as of the date of the Merger. At March 13, 2019, the estimated fair value of the warrant was $372,925. As a result, at March 13, 2019, Private PDS marked the warrant liability to the estimated fair value by $81,700 from $291,225 at December 31, 2018 to $372,925 and recorded an increase to general and administrative expenses in its statement of operations in 2019 for the $81,700. Since Private PDS issued a fixed number of warrants and a fixed exercise price to the vendor the warrant liability of $372,925 was classified to additional paid in capital.

At March 13, 2019, Private PDS estimated the fair value of the warrant using the Black-Scholes option pricing model utilizing the following assumptions. Private PDS determined the expected stock price volatility based on volatilities of a peer group of similar companies in the biotechnology industry whose share prices are publicly available. The expected term of the warrant was based on the contractual term. The risk-free interest rate was based on the U.S. Treasury yield curve at the time of the grant over the term of the warrant grant. The expected dividend rate is based on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends.

Volatility		83	%
Risk-Free Interest Rate		2.63	%
Expected Term in Years		10
Dividend Rate		0.00	%
Fair Value of Warrant	$	8.23