Warrants and Options

12 Months Ended

Nov. 30, 2022

Note 11 - Warrants and Options

Summary of warrants

The following represents a summary of all outstanding warrants to purchase the Company’s common stock, including warrants issued to vendors for services and warrants issued as part of the units sold in the private placements, at November 30, 2022 and 2021 and the changes during the period then ended (warrants amount and intrinsic value are rounded to nearest thousand):


				Weighted Average
		Weighted Average		Remaining Contractual
	Warrants	Exercise Price		Life (years)	Intrinsic Value
Outstanding at November 30, 2021	11,752,000	$	1.97	2.60	$	—
Issued	400,000		0.50	2.23		—
Forfeited/expired	(932,000)		—	—		—
Outstanding and exercisable at November 30, 2022	11,220,000	$	1.01	3.8	$	—

Grant date fair value of all outstanding warrants was based on the following key inputs:


	For the year ended November 30,
	2022			2021
Strike price	$	1.25		$	1.25
Term (years)		5.0			5.0
Volatility		114	%		114	%
Risk-free rate		0.4	%		0.8	%
Dividend yield		0.0	%		0.0	%

Modification date fair value of all outstanding warrants was based on the following key inputs:


	After Modification			Before Modification
Strike price	$	1.77		$	2.51
Term (years)		3.5			0.8
Volatility		123	%		77	%
Risk-free rate		0.5	%		0.4	%
Dividend yield		0.0	%		0.0	%

Warrants issued on February 22, 2022, were classified as liabilities. The fair value of the warrants on grant date was based on the following key inputs:


	February 22, 2022
Strike price	$	0.50
Terms (years)		3.0
Volatility		126	%
Risk-free rate		1.7	%
Dividend yield		0.0	%

Modification of Warrants

On February 1, 2022, the Company modified an aggregate of 245,625 warrants (the “Warrants”) that were originally granted to certain investors and consultants. The exercise price of the Warrants was reduced to $0.65 per share and the maturity dates of the Warrants were extended until August 1, 2024.

The Company received $20,000 cash from one of the investors as consideration for this modification. The Company immediately recognized approximately $17,000 incremental stock-based compensation on February 1, 2022 based on the following weighted average assumptions:


	After Modification			Before Modification
Strike price	$	0.65		$	2.33
Term (years)		2.5			2.1
Volatility		135	%		127	%
Risk-free rate		1.0	%		1.0	%
Dividend yield		0.0	%		0.0	%

Between April and May 2022, the Company modified an aggregate of 4,765,807 warrants (the “Warrants”) that were originally granted to certain investors and officers during 2017 and 2021. The exercise price of the Warrants was reduced to between $0.50 and $0.65 per share and the maturity date of the Warrants were extended for an additional 5 years.

The Company immediately recognized approximately $261,000 incremental stock-based compensation during the quarter ended May 31, 2022, based on the following weighted average assumptions:


	After Modification			Before Modification
Strike price	$	0.51		$	1.76
Term (years)		6.9			2.1
Volatility		118	%		128	%
Risk-free rate		2.7	%		2.2	%
Dividend yield		0.0	%		0.0	%

On August 31, 2022, the Company modified an aggregate of 3,608,641 warrants (the “Warrants”) that were originally granted to certain officers during 2017 and 2021. The exercise price of the Warrants was reduced to $0.10 per share.

The Company immediately recognized approximately $22,000 incremental stock-based compensation during the quarter ended August 31, 2022, based on the following weighted average assumptions:


	After Modification			Before Modification
Strike price	$	0.10		$	0.50
Term (years)		2.7			2.7
Volatility		151	%		151	%
Risk-free rate		3.5	%		3.5	%
Dividend yield		0.0	%		0.0	%

The new warrants issued in February 2022 and warrant modifications, described above, resulted in reclassifying such modified warrants to purchase an aggregate of 5,461,432 common shares from equity to liability as a result of applying the reassessment under ASC 815. The warrants are subsequently recognized at fair value with changes in fair value recognized in the Company’s Consolidated Statements of Operations.

Options issued for services

The following represents a summary of all outstanding options to purchase the Company’s common stock at November 30, 2022 and 2021 and the changes during the period then ended (options amount and intrinsic value are rounded to nearest thousand):


				Weighted Average
		Weighted Average		Remaining Contractual
	Options	Exercise Price		Life (years)	Intrinsic Value
Outstanding at November 30, 2021	4,450,000	$	1.13	4.0	$	1,000
Issued	3,000,000		0.10	5.0		—
Forfeited/expired	—		—	—		—
Outstanding at November 30, 2022	7,450,000	$	0.10	6.5	$	—
Exercisable at November 30, 2022	5,200,000	$	0.10	7.5	$	—

Fair value of all options issued as of November 30, 2021was calculated with the following key inputs:


	For the year ended November 30,
	2021
Strike price	$	0.45
Term (years)		5.0
Volatility		111	%
Risk-free rate		1.2	%
Dividend yield		0.0	%

Stock-based Compensation

The Company recognized general and administrative expenses of approximately $ million and $2.3 million as a result of the shares, outstanding warrants and options issued to consultants and employees during the years ended November 30, 2022 and 2021, respectively.

As of November 30, 2021, the estimated unrecognized stock-based compensation associated with these agreements is approximately $210,000 and was fully recognized by November 30, 2022.

Q BioMed Inc. 10-K