Stockholder's Equity

9 Months Ended

Sep. 30, 2022

Stockholder's Equity

Stockholder's Equity

Note 5. Stockholder’s Equity

The Company entered into a Merger Agreement with BioPharmX and effective May 18, 2020, the Company converted its common and preferred units into shares of common and preferred stock (see Note 1).

2022 Reverse Stock Split

On November 7, 2022, at a special meeting of stockholders (the “Special Meeting”), the holders of a majority of the Company’s outstanding shares of common stock and Series B Mirroring Preferred Stock approved the reverse stock split proposal and gave the Company’s board of directors discretionary authority to select a ratio for the split from 1-for-25 to 1-for-50. The Company’s board of directors approved the reverse split at a ratio of 1-for-50 on October 27, 2022, subject to stockholder approval.

On November 8, 2022, the Company filed a Certificate of Amendment to its Certificate of Incorporation, as amended , with the Secretary of State of Delaware that effected a 1-for-50 reverse stock split of its common stock, which became effective at 5:00 PM (EST) on November 8, 2022.  As a result of the 2022 Reverse Stock Split, the 13,000 shares of Series

B Mirroring Preferred Stock were automatically cancelled for no consideration and resume the status of authorized but unissued shares of preferred stock of the Company.  The 2022 Reverse Stock Split traded on an as-adjusted basis upon market open on November 9, 2022.  The purpose of the 2022 Reverse Stock Split was to enable the Company to regain compliance with the requirements of Section 1003(f)(v) of the NYSE American Company Guide.

All shares of common stock, including common stock underlying warrants, stock options, restricted stock units, and VARs, as well as all conversion ratios, exercise prices, conversion prices and per share information in these consolidated financial statements give retroactive effect to the 2022 Reverse Stock Split.

Series B Warrants

During the nine months ended September 30, 2021, the remaining Series B Warrants outstanding totaling 149,481 shares of common stock were exercised on a cashless basis, and the Company issued 149,353 shares of its common stock.  

	Shares	Weighted		Aggregate
	Underlying	Average		Intrinsic
	Warrants	Exercise Price		Value
Outstanding as of January 1, 2020	149,481	$	0.05	$	7,474
Exercised	(149,481)	$	0.05		—
Outstanding and exercisable as of September 30, 2021	—	$	—	$	—

Series A Warrants

During the nine months ended September 30, 2021, 69,528 Series A Warrants were exercised on a cashless basis, and the Company issued 41,192 shares of its common stock. The following is a summary of the Series A Warrants outstanding as of September 30, 2022:

				Weighted
				Average
	Shares	Weighted		Remaining	Aggregate
	Underlying	Average		Contractual	Intrinsic
	Warrants	Exercise Price		Term (Years)	Value
Outstanding as of December 31, 2021	334,036	$	58.00	3.4		—
Outstanding and exercisable as of September 30, 2022	334,036	$	58.00	2.7	$	—

Bridge Warrants

The following table summarizes the Company’s Bridge Warrants for the nine months ended September 30, 2022:

				Weighted
				Average
	Shares	Weighted		Remaining	Aggregate
	Underlying	Average		Contractual	Intrinsic
	Warrants	Exercise Price		Term (Years)	Value
Outstanding as of December 31, 2021	8,275	$	1.00	3.4	$	28,963
Outstanding and exercisable as of September 30, 2022	8,275	$	1.00	2.6	$	41,375

November 2021 Warrants

The warrants issued by the Company were recorded as equity and recognized at fair value which was approximately $7.1 million.  The value of the warrants issued by the Company in connection with November 2021 Offering, were estimated using a Black Scholes option pricing model. The inputs using the Black Scholes model to calculate the fair value of the warrants related to the November 2021 offering included no dividend yield, expected price volatility of 73.1%, a risk-free interest rate of 1.05%-1.08% and an expected term of 5 years.

No November Warrants have been exercised as of September 30, 2022, or December 31, 2021 (See Note 1).

The following table summarizes the Company’s November Warrants for the nine months ended September 30, 2022:

				Weighted
				Average
	Shares	Weighted		Remaining	Aggregate
	Underlying	Average		Contractual	Intrinsic
	Warrants	Exercise Price		Term (Years)	Value
Outstanding as of December 31, 2021	539,063	$	35.00	4.8	$	7,101,563
Outstanding and exercisable as of September 30, 2022	539,063	$	35.00	4.1	$	7,101,563

Redeemable Series A Preferred Stock

In connection with the Merger, on May 18, 2020, the Company filed a Certificate of Designation of Preferences, Rights and Limitations (the “Certificate of Designations”) with the Secretary of State of the State of Delaware that became effective immediately.

Pursuant to the Certificate of Designations, the Company designated 2,500 shares of the Company’s previously undesignated preferred stock as Series A Preferred Stock. The shares of Series A Preferred Stock had no voting rights. The holders of the Series A Preferred Stock were entitled to cumulative dividends from and after the date of issuance at a per annum of eight percent (8.0%) of the stated value. Dividends were payable as and if declared by the Board out of amounts legally available therefore or upon a liquidation or redemption. Each share of Series A Preferred Stock was convertible at any time at the holder’s option into a number of shares of common stock (subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions as specified in the Certificate of Designations) at a conversion price of $902.70. Holders of the Series A Preferred Stock were entitled to a liquidation preference in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company. In addition, upon a Change of Control (as defined in the Certificate of Designations), the Series A Preferred Stock were redeemable for cash at the option of the holders, in whole or in part.

As of May 18, 2020, pursuant to the Merger Agreement, the holder of 1,819,289 preferred units of Timber Sub outstanding immediately prior to the Merger, received 1,819 shares of Series A Preferred Stock. The Company’s Series A Preferred Stock, as to which the holder had demanded redemption, was redeemable at December 31, 2021, subject to certain limitations under Delaware law, and was recorded at the redemption value of approximately $2.1 million at December 31, 2021.  Interest was accrued on the unredeemed balance at 8.0% annually. The shares of Series A Preferred Stock previously held by TardiMed were converted into a pre-funded warrant to purchase 181,083 shares of common stock as described below.

Pre-Funded Warrant for TardiMed

On November 23, 2021, the Company received a request for redemption by TardiMed for the Series A Preferred Stock.  The Company asserted that such right to redemption was limited under Delaware corporate law.  As a result of the request,

the convertible Series A Preferred Stock was reclassified as a liability, Redeemable Series A Preferred Stock under redemption.  The previously outstanding shares of Series A Preferred Stock accrued dividends but as a liability and the dividends were recorded prospectively as non-cash interest expense in the Condensed Consolidated Statement of Operations until the Series A Preferred Stock held by TardiMed were redeemed.  The Company recognized no non-cash interest expense during the three months ended September 30, 2022, and $108,591 in non-cash interest expense for the nine months ended September 30, 2022, and $36,685 and $108,858 of non-cash dividends, for the three months and nine months ended September 30, 2021, respectively.  As result of the reclassification, interest was recorded in the Consolidated Statement of Operations rather than additional-paid-in-capital.

On July 27, 2022, the Company, entered into Letter Agreement with TardiMed pursuant to which TardiMed agreed to exchange its 1,819 shares of  Series A Preferred Stock  plus accrued dividends for the TardiMed Warrant to purchase 181,083 shares of  common stock in the Warrant Exchange.  The number of shares underlying the TardiMed Warrant is based on the redemption price of the Series A Preferred Stock (which had been demanded by TardiMed) divided by $11.95, the last closing price of the Company’s common stock prior to the date the Letter Agreement was executed.

Twenty percent of the TardiMed Warrant was immediately exercisable upon issuance. Beginning on September 30, 2022, and then at the end of each subsequent calendar quarter upon written request of TardiMed, the Company has agreed to  allow an additional 20% of the initial balance of the TardiMed Warrant to become exercisable, provided that only 20% of the initial balance of the TardiMed Warrant will be exercisable in any given quarter. The TardiMed Warrant’s exercise price is $0.005 and may be exercised on a cashless basis. The TardiMed Warrant will terminate when exercised in full. On August 3, 2022, 20% of the TardiMed Warrant was exercised on a cashless basis and 36,196 shares of common stock were issued to TardiMed.

Pursuant to the Letter Agreement, TardiMed released and discharged the Company and its affiliates from any and all claims, rights, demands, actions, suits, causes of action, liabilities, obligations, damages and costs of any nature whatsoever that TardiMed has, had or may have against the Company or related parties in any way arising from or related to the Series A Preferred Stock.

The following table summarizes the TardiMed Warrant for the nine months ended September 30, 2022:

				Weighted
				Average
	Shares	Weighted		Remaining	Aggregate
	Underlying	Average		Contractual	Intrinsic
	TardiMed Warrant	Exercise Price		Term (Years)	Value
Outstanding as of December 31, 2021	—	$	—	*	$	—
Issued	181,083	$	0.005	*	$	1,085,590
Exercised	(36,217)	$	0.005	*	$	(217,118)
Outstanding and exercisable as of September 30, 2022	144,866	$	0.005	*	$	868,472
* Options expire once fully exercised; until exercised there is no expiration term

August 2022 Common Stock Warrants

In August 4, 2022, the Company announced the pricing of the public offering (the “August 2022 Offering”) of (i) 931,667 shares (the “Shares”) of common stock, (ii) pre-funded warrants to purchase up to an aggregate of 401,667 shares of common stock and (iii) August Warrants  to purchase up to an aggregate of  1,333,333 shares of common stock.  Each share of common stock and pre-funded warrant to purchase one share of common stock was sold together with an August Warrant to purchase one share of common stock. All pre-funded warrants were exercised.

The warrants issued by the Company were recorded as equity and recognized at fair value which was approximately $4.9 million.   The value of the warrants issued by the Company in connection with August 2022 Offering, were estimated using a Black Scholes option pricing model.  The inputs using the Black Scholes model to calculate the fair value of the warrants related to the August 2022 Offering included no dividend yield, expected price volatility of 97.67%, a risk-free interest rate of 2.91% and an expected term of 5 years.

The following table summarizes the August Warrants for the nine months ended September 30, 2022:

				Weighted
				Average
	Shares	Weighted		Remaining	Aggregate
	Underlying	Average		Contractual	Intrinsic
	Warrants	Exercise Price		Term (Years)	Value
Outstanding as of December 31, 2021	—	$	—	—	$	—
Granted	1,333,333	$	6.00	4.9	$	4,933,333
Exercised	(24,000)	$	6.00	—	$	(88,800)
Outstanding and exercisable as of September 30, 2022	1,309,333	$	6.00	4.9	$	4,844,533