5. WARRANTS

The following table summarizes information with regard to warrants outstanding at March 31, 2022:

No warrants were issued during the three months ended March 31, 2022.

Common Stock Warrants

In March 2021, the Company granted to a financial advisor warrants to purchase 226,599 shares of the Company’s common stock (“Advisor Warrants”) as consideration for services in connection with its IPO. The warrants are exercisable at any time from the issuance date at the exercise price of $3.177 per share of common stock, subject to adjustment based on the amounts raised in the IPO, and have a 5-year term. These warrants were accounted for as equity under ASC 815 – Derivatives and Hedging, and the grant date fair value was estimated to be $180,339 using a Black-Scholes option pricing model and were netted against the IPO proceeds. The terms of the advisory services agreement also provided for an incentive bonus of $200,000 payable upon closing of the IPO. This amount was netted against the IPO proceeds. As of March 31, 2022, all of the Advisor Warrants remain outstanding.

In August 2021, the Company granted 225,000 warrants (“Dawson Warrants”) to its placement agent for compensation for their services in relation to the issuance of the convertible debentures. As of March 31, 2022, all of the Dawson Warrants remain outstanding.

In November 2021, the Company granted 108,000 warrants (“Underwriter Warrants”) with an exercise price of $12.50, and a fair value of approximately $356,000, to the underwriter of the IPO which is in addition to the cash fees paid for underwriting the Company’s IPO. As of March 31, 2022, all of the Underwriter Warrants remain outstanding.

In October 2020, in conjunction with the issuance of the Subordinated Notes, the Company granted 4,846,688 warrants (“Subordinated Note Warrants”) to the noteholders, of which 944,160 warrants were issued to LMBRI. In November 2021, the terms of some of the Subordinated Note Warrants were amended to provide for cashless exercise. As of March 31, 2022, 128,438 of the Subordinated Note Warrants were outstanding.

Class A Warrants and Class B Warrants

In conjunction with the Company’s IPO as described in Note 1 the Company issued 2,160,000 Class A Warrants and 2,160,000 Class B Warrants. Additionally, the underwriter of the IPO exercised their overallotment option, solely with respect to the Class A Warrants and Class B Warrants, shortly after the IPO date resulting in an additional issuance of 324,000 Class A Warrants and 324,000 Class B Warrants. From the net IPO proceeds, $5,164,751 and $7,323,161, respectively, were apportioned to the Class A Warrants and Class B Warrants.

Class A Warrants entitle the holder to purchase one share of common stock at an exercise price of $7.00 per share. As of March 31, 2022 all Class A Warrants were outstanding.

Class B Warrants entitle the holder to purchase one share of common stock at an exercise price of $10.00 per share. Holders of Class B Warrants may also exercise such warrants on a “cashless” basis after the earlier of (i) 10 trading days from closing date of the offering or (ii) the time when $10.0 million of volume is traded in our common stock, if the volume weighted average price of the Company’s common stock on any trading day on or after the closing date of the offering fails to exceed the exercise price of the Class B Warrant (subject to adjustment as described in the warrant agreement). In such event, the aggregate number of shares of common stock issuable in such cashless exercise shall equal the product of (x) the aggregate number of shares of common stock that would be issuable upon exercise of the Class B Warrant in accordance with its terms if such exercise were by means of a cash exercise rather than a cashless exercise and (y) 1.00. During the fourth quarter of 2021, 2,368,500 Class B Warrants were exercised, all on a cashless basis. During the first quarter of 2022, 39,000 Class B Warrants were exercised, all on a cashless basis. As of March 31, 2022, 76,500 Class B Warrants were outstanding.