Quarterly report pursuant to Section 13 or 15(d)

CAPITAL STOCK

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CAPITAL STOCK
3 Months Ended
Mar. 31, 2022
CAPITAL STOCK  
CAPITAL STOCK

9. CAPITAL STOCK

 

Preferred Stock and Common Stock

 

On July 26, 2021, the Company filed a Certificate of Designation, Preferences and Rights of the Series A-2 Convertible Preferred Stock, par value $0.001 per share (“Series A-2 Preferred Stock”) with the Secretary of State of Nevada, designating up to 45,000 shares of the Company’s preferred stock as Series A-2 Preferred Stock. The holders shall be entitled to receive, and the Company shall pay, dividends on shares of Series A-2 Preferred Stock equal (on an as-if-converted-to common stock basis) to and in the same form as dividends actually paid on shares of common stock when, as and if such dividends are paid on shares of common stock. The Series A-2 Preferred Stock shall have no voting rights.

 

On January 5, 2022, the Company closed the second tranche of the equity financing and issued 12,258 shares of Series A-2 Preferred Stock, 4,301,004 shares of common stock and warrants to purchase 40,018,583 shares of common stock for gross proceeds of approximately $12.2 million and net proceeds of approximately $10.9 million after deduction of placement agent commissions and expenses of the offering. Such net proceeds are expected to be used by the Company for domestic and international expansion of its Bellissima brand, the expansion of the production facilities of the Company’s TopPop subsidiary, new product launches, marketing, and other general working capital purposes.

 

Between January 2022 and March 2022, stockholders converted 701 shares of Series A-2 Preferred Stock into 2,243,200 shares of common stock, par value $.001 per share, at $0.31 per share.

 

On March 23, 2021, the Company issued 401,670 shares of its common stock to an investors relations firm for services rendered to the Company. The $180,752 fair value of the 401,670 shares of common stock was expensed as investors relations in the three months ended March 31, 2021.

 

Warrants

 

In connection with the second tranche of the equity financing, on January 5, 2022, the Company granted 40,018,583 warrants to purchase common stock. The warrants expire in five years and have an exercise price of $0.31 per share.

 

A summary of warrant activity for the period December 31, 2021, to March 31, 2022, as follows:

 

 

 

Warrants

 

 

Weighted Average Exercise Price

 

 

Weighted Average Contractual Term Outstanding

 

Outstanding at December 31, 2021

 

 

87,593,083

 

 

$ 0.31

 

 

 

4.23

 

Granted

 

 

40,018,583

 

 

 

0.31

 

 

 

4.77

 

Outstanding at March 31, 2022

 

 

127,611,666

 

 

 

0.31

 

 

 

4.46

 

Options

 

During the three months ended March 31, 2022, the Company recognized $280,798 of expense for the option awards. There were no options outstanding as of March 31, 2021.

 

The following table summarizes the activity of our stock options for the three months ended March 31, 2022:

 

 

 

Shares

 

 

Weighted Average

Exercise Price

 

 

   Weighted Average Contractual Term Outstanding

 

Outstanding at December 31, 2021

 

 

7,408,200

 

 

$ 0.45

 

 

 

9.79

 

Granted

 

 

-

 

 

 

-

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

 

 

-

 

Forfeited or expired

 

 

-

 

 

 

-

 

 

 

-

 

Outstanding at March 31, 2022

 

 

7,408,200

 

 

 

0.45

 

 

 

9.54

 

 

The aggregate intrinsic value of outstanding options as of December 31, 2021 was $298,544. The outstanding options had no aggregate intrinsic value as of March 31, 2022. The intrinsic value is calculated as the difference between the market value and the exercise price of the shares on balance sheet date. The market values based on the closing bid price as of March 31, 2022 and December 31, 2021 was $0.39 and $0.49, respectively.

 

As of March 31, 2022, there was approximately $2,800,000 of unrecognized compensation cost related to unvested stock options granted and outstanding, net of estimated forfeitures. The cost is expected to be recognized on a weighted average basis over a period of approximately three years.