Note 10 – Stock-Based Compensation, Restricted Stock and Stock Options:

On December 16, 2020, the Company adopted its 2020 Long-Term Incentive Plan ( the “2020 Plan”). Under the 2020 Plan, there are 5,333,333 shares of the Company’s common stock available for issuance and the 2020 Plan has a term of 10 years. The available shares in the 2020 Plan will automatically increase on the first trading day in January of each calendar year during the term of this Plan, commencing with January 2021, by an amount equal to the lesser of (i) five percent (5%) of the total number of shares of common stock issued and outstanding on December 31 of the immediately preceding calendar year, (ii) 1,000,000 shares of common stock or (iii) such number of shares of common stock as may be established by the Company’s Board of Directors.

The Company grants equity-based compensation under its 2020 Plan and its 2016 Equity Incentive Plan (the “2016 Plan”). The 2020 Plan and 2016 Plan allows the Company to grant incentive and nonqualified stock options, and shares of restricted stock to its employees, directors and consultants. As of March 31, 2021, there is a total of 7,333,333 shares of the Company’s common stock available under the 2016 Plan.

Stock-based compensation:

The Company recognized total expenses for stock-based compensation during the years ended March 31, 2021 and 2020, which are included in the accompanying statements of operations, as follows:

Restricted stock units:

Upon the Company’s uplisting to Nasdaq in January 2021, the Company granted 1,061,905 restricted stock units with a fair value of approximately $4.7 million to the Company’s Chief Executive Officer. During the year ended March 31, 2021, the Company recognized stock-based compensation of approximately $0.8 million, and as of March 31, 2021, unrecognized stock-based compensation totaled approximately $3.9 million related to the restricted stock units.

Restricted stock awards:

A summary of the Company’s restricted stock activity during the years ended March 31, 2021 and 2020 is as follows:

During the year ended March 31, 2021, the Company issued 1,571,428 shares of fully vested restricted common stock to its Chief Executive Officer. The Company repurchased 166,667 shares of the restricted stock.

In December 2020, the Company canceled 2,000,000 shares of its vested and unvested restricted common stock with a fair value of approximately $0.9 million issued to officers and employees, in exchange for 4,461,130 options to purchase shares of the Company’s common stock with a fair value of approximately $10.2 million (See Stock Options).

During the year ended March 31, 2021, the Company issued 800,000 shares of restricted stock to an officer of the Company and a consultant. The fair value of the restricted shares is approximately $4.1 million and the shares vest equally over period of 3 years.

The fair value of restricted stock awards is measured based on their fair value at the grant date and amortized over the vesting period, which is generally 2-3 years. As of March 31, 2021, the unrecognized stock-based compensation expense related to restricted stock awards was approximately $3.7 million which is expected to be recognized over a weighted-average period of 1.5 years.

Stock Options:

The Company provides stock-based compensation to employees, directors and consultants under the Plan. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The Company historically has been a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. The risk-free interest rate is determined by referencing the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. The Company granted 8,949,107 stock options during the year ended March 31, 2021 and did not grant stock options during the year ended March 31, 2020. The following was used in determining the fair value of stock options granted during the year ended March 31, 2021.

A summary of activity under the Plan for the years ended March 31, 2021 and 2020 is as follows:

On June 22, 2020, the Company’s Board of Directors adopted a resolution to accelerate the vesting of all options granted to be fully vested as of June 22, 2020.

During the year ended March 31, 2021, the Company granted 3,854,088 options to purchase shares of its common stock with a fair value of approximately $6.0 million to the Company’s Board of Directors, executives and employees. The options vest over a period of one month – 2 years.

On December 30, 2020, the Company granted 4,464,463 options to purchase shares of its common stock with a fair value of approximately $10.2 million to its officers and employees, in exchange for 2,000,000 shares of vested and non-vested restricted common shares. The options vest on the 90 day anniversary of the grant date. The restricted stock had a fair value of approximately $0.9 million on the date the shares were canceled. The incremental fair value of $1.2 million related to the options will be recognized as stock-based compensation expense over the 90 day vesting period.

During the year ended March 31, 2021, the Company granted 630,556 options to purchase shares of its common stock with a fair value of approximately $0.9 million for consulting services.

As of March 31, 2021, the Company had approximately $1.0 million of unrecognized compensation expense related to options granted under the Company’s equity incentive plan, which is expected to be recognized over a weighted-average period of 1.8 years. 

Warrants:

A summary of the Company’s warrant (excluding penny warrants) activity during the year ended March 31, 2021 is as follows:

During the year ended March 31, 2021, the Company issued 116,667 warrants to purchase shares of the Company’s common stock. The warrants were exercised on a cashless basis on June 30, 2020, and the Company issued 97,222 shares of its common stock.

During the year ended March 31, 2021, the Company issued 398,896 warrants to purchase common stock in connection with the Company’s private placement transactions.

During the year ended March 31, 2021 the Company issued 208,000 warrants to purchase shares of the Company’s common stock and recorded a $0.2 million loss on issuance of these common stock warrants.

On January 26, 2021, in connection with the Company’s public offering, the Company issued a warrant to the underwriters to purchase 381,800 shares of its common stock. (See Note 9).

During the year ended March 31, 2021, 53,093 warrants were exercised for cash of approximately $0.2 million and the Company issued 53,093 shares of its common stock.

During the year ended March 31, 2021, the Company amended and restated 956,775 warrants related to its convertible notes and issued replacement warrants totaling 2,090,847. (See Note 8).

During the year ended March 31, 2021, the Company issued 531,555 warrants in connection with its convertible notes.

The Company estimated the fair value of the warrants using the Black-Scholes pricing model as follows: