EQUITY

3 Months Ended

Mar. 31, 2024

NOTE 5—EQUITY

(a) General

At March 31, 2024 and December 31, 2023, the Company had issued and outstanding 46,881,475 shares of its common stock, par value $0.01 per share. Holders of outstanding common stock are entitled to receive dividends when, as and if declared by the Board and to share ratably in the assets of the Company legally available for distribution in the event of a liquidation, dissolution or winding up of the Company.

(b) Summary Employee Option Information

The Company’s stock option plan provides for the grant to officers, directors, third party contractors and other future key employees of options to purchase shares of common stock. The purchase price may be paid in cash or, if the option is “in-the-money”, it is automatically exercised “net”. In a net exercise of an option, the Company does not require a payment of the exercise price of the option from the optionee but reduces the number of shares of common stock issued upon the exercise of the option by the smallest number of whole shares that has an aggregate fair market value equal to or in excess of the aggregate exercise price for the option shares covered by the option exercised. Each option is exercisable to one share of the Company’s common stock. Most options expire within six years from the date of the grant and generally vest on the first anniversary date of their issuance. Pursuant to the Equity Incentive Plan the Company’s board of directors approved on November 12, 2018, an aggregate of 5,760,000 options have been issued to directors and investor relations professionals as of March 31, 2024. An additional 600,000 options were issued to directors on April 1, 2024.

The Company utilized the Black-Scholes option-pricing model to estimate fair value, utilizing the following assumptions for the options issued during the three months ended March 31, 2023 (all in weighted averages):

Risk-free interest rate		3.5	%
Expected term of options, in years		4.00
Expected annual volatility		191.1	%
Expected dividend yield		0	%
Determined weighted average grant date fair value per option	$	0.19

The expected term of the options represents an estimate of the length of time until the expected date of exercising the options. Options granted have a maximum life of 7 years. With respect to determining expected exercise behavior, the Company has grouped its option grants into certain groups to track exercise behavior and establish historical rates. The Company estimated volatility by considering historical stock volatility over the expected term of the option. The risk-free interest rates are based on the U.S. Treasury yields for a period consistent with the expected term. The dividend yield of 0% is based on the Company’s history and expectation of dividend payout. The Company has not paid and does not anticipate paying dividends in the near future.

A summary of the Company’s option plans for the three months ended March 31, 2024, is presented below (unaudited):

SCHEDULE OF STOCK OPTION ACTIVITIES

	Number		Weighted
	of		Average
	Options		Exercise
	(in shares)		Price
Outstanding, December 31, 2023		5,760,000	$	0.14
Granted		-		-
Outstanding, March 31, 2024		5,760,000	$	0.14
Exercisable, March 31, 2024		5,760,000	$	0.14

Stock-based compensation expense was approximately $13,000 and $15,000 in the three months ended March 31, 2024 and 2023, respectively.

The total compensation cost related to non-vested awards not yet recognized was approximately $67,000 as of March 31, 2023. As of March 31, 2023, 360,000 options were unvested. These options vested during March 2024.

(d) Warrants

The Company has issued warrants at exercise prices equal to or greater than the market value of the Company’s common stock at the date of issuance. A summary of warrant activity follows (unaudited):

SUMMARY OF WARRANTS ACTIVITY

	Number of		Weighted
	shares		Average
	underlying		Exercise
	warrants		Price
Outstanding, December 31, 2023		3,000,000	$	0.12
Granted		-		-
Exercised		-		-
Forfeited or expired		-		-
Outstanding, March 31, 2024		3,000,000	$	0.12

The warrant agreements were amended on May 12, 2023 to extend the expiration date to June 28, 2025. The warrants outstanding at March 31, 2024 have a weighted average remaining contractual life of approximately one year and three months.

- Definition

The entire disclosure for equity.

+ References

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+ Details

NovelStem International Corp. 10-Q