NOTE 8 – SHARE-BASED PAYMENTS TO VENDORS

While the Company was a limited liability company in its pre-IPO phase of corporate development, the Company granted Class A Membership Interests to certain vendors in the ordinary course of business in exchange for consulting services relating to research and development activities and investor relations. The Company granted 30,145 and 147,413 Class A Membership Interests for the years ended December 31, 2021 and 2020, respectively. The fair value of the Class A Membership Interests granted was equal to the value of the most recent private placement. The Company recognized the expense in the same period and in the same manner as if the Company had paid cash for the services. The Company recorded general and administrative expenses and research and development expenses for vendor equity grants in the amounts of $201,375 and $21,596 for the year ended December 31, 2021, respectively, and $338,802 and $233,311 for the year ended December 31, 2020, respectively.

In October 2019, the Company granted a total of 150,000 restricted Class A Membership Interests to three consultants for investor relations consulting services performed in 2019 through October 2021. These Class A Membership Interests vested on the second anniversary of the grant date, and were subject to accelerated vesting provisions upon a change of control of the Company. The fair value of the Class A Membership Interests granted was equal to the value of the most recent private placement, $2.00 per Class A Membership Interest. The Company recognized the expense on a straight-line basis over the vesting period. The Company recorded general and administrative expenses of $125,000 and $150,000 for the years ended December 31, 2021 and 2020, respectively. The conversion adjusted shares of common stock were issued in October 2021.

During 2020, the Company issued 10,077 warrants to an investment banker for services relating to the October 2020 private placement. Each warrant vested upon issuance, is exercisable for 10 years from the date of issuance and has an exercise price of $3.25 per Class A Membership Interest. The Company used the Black-Scholes model to calculate the fair value of the warrants. The inputs utilized in the calculation were as follows: 10-year term, 0.32% risk-free rate, stock price at grant date of $3.25, and a 94% volatility utilizing comparable companies. The Company reduced the amount of the respective equity issuance by $23,177 relating to the warrant issuance.

In the second quarter of 2021, the Company entered into a number of agreements with vendors pursuant to which the Company will make grants of a total of 175,000 shares of common stock, cash payments in the amount of $343,500, and 100,000 options which were included as a part of the July 2021 grant. These contracts have terms which range from six months to three years. The common stock was valued based on the grant date fair value and the options valued utilizing Black-Scholes option pricing model. The cash payments will be expensed over the service period and the equity component expensed consistent with the contractual vesting. These shares and options were granted in the third quarter pursuant to the Plan.

In the third quarter of 2021, the Company granted vendors a total of 35,695 shares of common stock pursuant to the Plan. The Company recorded general, and administrative expense of $208,270, based on the respective grant date fair values, for the year ended December 31, 2021.

In October 2021, the Company entered into an agreement with a consultant to provide financial advisory services for a six-month term. Pursuant to the agreement, the Company will grant $150,000 of common stock over the term of service. The Company granted 13,889 shares of common stock at grant date fair value and recorded general and administrative expenses of $75,000 for the year ended December 31, 2021.