NOTE 6 – TEMPORARY EQUITY, PREFERRED STOCK, COMMON STOCK, AND WARRANTS

Series A Redeemable Convertible Preferred Stock (“Series A Stock”)

As of March 31, 2023 and December 31, 2022, the Company has 480 shares of Series A Stock issued and outstanding. The Series A Stock has no voting rights until converted to common stock and has a liquidation preference equal to the aggregate purchase price of $480,000 plus accrued dividends. Pursuant to a modification agreement effective as of March 31, 2023, the two Series A Stockholders have agreed to change the redemption date on their Series A Stock to December 31, 2023 and waive any prior defaults by the Company.

The Series A Stock carries a 6% per annum dividend calculated on the stated value of the stock and is cumulative and payable quarterly beginning July 1, 2016. These dividends are accrued at each reporting period and are added to the redemption value of the stock; however, since the Company has an accumulated deficit, the charge has been recognized in additional paid-in capital. The accrued dividends are $248,400 and $241,200 as of March 31, 2023 and December 31, 2022, respectively. As of March 31, 2023 and December 31, 2022, the stated value of the Series A Stock and the accrued dividends was $728,400 and $721,200, respectively, which has been presented as mezzanine equity on the consolidated balance sheets, which resides between liabilities and stockholders’ deficit.

The outstanding principal and accrued dividends on the shares of Series A Stock as of March 31, 2023 are convertible into the Company’s common stock at $3.00 (the “Conversion Price”), which was reduced in 2023 pursuant to a price protection provision included in the Series A Stock Certificate of Designation (“Series A Designation”), as the Company offered an inducement to holders of warrants to convert their warrants at such lower conversion price. The Series A Designation requires an adjustment to the Conversion Price if a subsequent equity sale occurs at a price below the conversion rate. The Company recorded a deemed dividend within stockholders’ deficit associated with the reduction in Conversion Price from $3.33 to $3.00 of $96,245 based on the incremental value to the Series A Stockholders due to the Conversion Price reduction. This incremental value has also been presented on the consolidated statement of operations as an addition to the net loss available to common stockholders. The incremental value was determined by computing the additional shares the Series A Stockholders would receive based on the Conversion Price reduction multiplied by the estimated fair value of common stock of $4.00.

The outstanding shares of Series A Stock as of December 31, 2022 were convertible at $3.33 per share of the Company’s common stock, which was reduced in 2022 pursuant to the Series A Designation as the Company sold a common stock and warrant unit in an offering at $4.50, the fair value of which was determined to be $3.33. The Company recorded a deemed dividend within stockholders’ equity associated with the reduction in Conversion Price from $6.40 to $3.33 of $342,497 based on the incremental value to the Series A Stockholders due to the Conversion Price reduction. This incremental value has also been presented on the consolidated statement of operations as an addition to the net loss available to common stockholders. The incremental value was determined by computing the additional shares the Series A Stockholders would receive based on the Conversion Price reduction multiplied by the estimated fair value of common stock of $3.33.

Management has determined that the Series A Stock is more akin to a debt security than equity primarily because it contains a mandatory 2-year redemption at the option of the holder (which pursuant to a March 31, 2023 modification signed by both Series A Stockholders, was changed to December 31, 2023), which only occurs if the Series A Stock is not converted to common stock. Therefore, management has presented the Series A Stock outside of permanent equity as mezzanine equity, which resides between liabilities and equity.

Series B Convertible Preferred Stock (“Series B Stock”)

In December 2020, the Company filed an amendment to its Articles of Incorporation to authorize the issuance of up to 2,500 shares of Series B Stock, par value $0.001 per share, pursuant to a Certificate of Designation (“Series B Designation”). The Series B Stock provides the holders a 10% annual paid-in-kind dividend, a liquidation preference equal to the purchase price of the shares ($1,000 per share) followed by the right to participate with the common stockholders in the instance of a liquidation or other exit event, and provide the holders the right to vote along with the common holders based on the common conversion amount of their holdings. In January 2021, the Company closed a private offering of its Series B Stock for $1,000 per share, raising a total of $2,500,000, inclusive of $156,000 in prior debt conversion and $23,000 of notes payable with directors converted to shares of Series B Stock and warrants. Between July 27 and August 24, 2021, 15 holders of an aggregate of 991 shares of Series B Stock converted their preferred shares into 163,134 shares of common stock, which included $53,061 of accrued dividends. As of March 31, 2023 and December 31, 2022, 1,509 shares of Series B Stock were issued and outstanding. The accrued dividends are $341,860 and $304,653, as of March 31, 2023 and December 31, 2022, respectively, which are presented on the consolidated balance sheets.

The Series B Stock was originally convertible into common stock at a ratio of $6.40 per share, subject to anti-dilution protections in the case of certain issuances of securities below that conversion price, and as a result of this price protection, the ratio was reduced in the fourth quarter of 2022 to $6.19 per share based on the Series B Designation which defines the adjustment to the conversion ratio and incremental shares when the Company issues common stock at a price below the conversion ratio. For the year ended December 31, 2022, the Company recorded a deemed dividend within stockholders’ equity associated with the reduction in conversion price from $6.40 to $6.19 of $30,938 based on the incremental value to the Series B Stockholders due to the conversion price reduction. This incremental value has also been presented on the consolidated statement of operations as an addition to the net loss available to common stockholders.

For the three-month period ended March 31, 2023, the anti-dilution protections were triggered as a result of additional common stock issuances and the warrant conversion repricing, and the conversion ratio was reduced to $5.42. The Company recorded a deemed dividend within stockholders’ equity associated with the reduction in conversion price from $6.19 to $5.42 of $168,835 based on the incremental value to the Series B Stockholders due to the conversion price reduction. This incremental value has also been presented on the consolidated statement of operations as an addition to the net loss available to common stockholders.

Series E-1 Preferred Stock (“Series E-1 Stock”)

On December 3, 2020, the Company filed an amendment to its Articles of Incorporation to authorize the issuance of up to 8,500 shares of Series E-1 Stock pursuant to a Certificate of Designation. As discussed below, no shares of Series E-1 Stock are currently outstanding. The shares of Series E-1 Stock were incentive-based, vesting and forfeitable securities that were issued to the Company’s executives and one director. The Series E-1 Stock also provided the holders the right in the aggregate to receive an “earnout” equal to 20% of the total consideration received by the Company in the instance of a sale or sub-license of its core licensed radiopharmaceutical Technology, or sale or merger of the Company, which was to be paid on a priority, senior basis, as well as other conversion and voting rights.

On December 6, 2021, the Company entered into an Exchange Agreement and Plan of Reorganization (the “Exchange Agreement”) with all Series E-1 Stockholders pursuant to which all shares of Series E-1 Stock were exchanged into an aggregate of 720,986 shares of common stock of the Company. The fair value of the Series E-1 Stock was determined to be approximately $8.65 million at the time of exchange, and was based upon a valuation report provided to the Board by an independent third party expert, and approved for fairness by the independent chairman of the Compensation Committee. The common stock issued in the exchange was based on a value of $12.00 per share using a 30-day weighted average closing price calculation, and was issued proportionately to each holder based on their individual holdings of Series E-1 Stock. All shares of common stock issued to the shareholders are subject to the same vesting schedules as was originally provided in each shareholder’s Series E-1 Stock issuance agreement, meaning that such shares of common stock are forfeitable if certain conditions of employment are not met by the holders. As of March 31, 2023, all 720,986 common shares are fully vested and there are no remaining common shares that are unvested.

For the three-month periods ending March 31, 2023 and 2022, the Company recognized stock-based compensation to employees and directors totaling $36,741 and $213,041, respectively, related to the Series E-1 Stock, which is included in compensation and related expenses on the consolidated statements of operations. As of March 31, 2023, there is no unrecognized compensation remaining.

Common Stock

In 2022, the Company effected a 40:1 reverse stock split and all share numbers herein have been adjusted for that change.

During the three-month periods ended March 31, 2023 and 2022, the Company issued shares of common stock as follows:

SCHEDULE OF ISSUED SHARES OF COMMON STOCK

During the three-month period ended March 31, 2023, the Company issued 69,834 shares of common stock for $314,251 in its common stock and warrant unit offering. Additionally, the Company converted outstanding convertible debt of $480,000 plus interest totaling $519,712 into 164,446 shares of common stock at a conversion price of $3.50. Additionally, the Company received exercises of 365,001 warrants into 381,500 shares of common stock at an exercise price of $3.00, for a total of $1,144,501, which included $49,500 that offset fees owed for services, and which also included $342,669 in subscription receivables related to conversion notices that were executed prior to March 31, 2023 and funds that were received in April 2023.

During the three-month period ended March 31, 2022, $35,000 of debentures and accrued interest were converted into 5,469 shares of common stock at a price of $6.40 per share. Additionally, the Company issued 18,750 shares of common stock for services, and 10,000 shares of common stock for services provided by one director who resigned from the Board in the same period.

Warrants

During the three-month period ended March 31, 2023, the Company issued 69,834 warrants in connection with the common stock and warrant unit offering (the “Common Stock Warrants”), and 50,000 warrants to a service provider totaling $91,979 in consulting services expense. The Company did not issue any warrants in the same period in 2022.

A summary of warrant activity and related information for the period ending March 31, 2023 is as follows:

 SCHEDULE OF ALL OUTSTANDING COMMON STOCK WARRANTS

The aggregate intrinsic value of the warrants is the difference between the fair market value of the Company’s closing price of its common stock at each reporting date, less the exercise price multiplied by the number of warrants outstanding, which was $0 at March 31, 2023 and December 31, 2022, respectively.

The following is a summary of the outstanding common stock warrants as of March 31, 2023:

 SCHEDULE OF STOCKHOLDERS’ EQUITY NOTE WARRANTS OR RIGHTS