UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 000-22245

SEELOS THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in Its Charter)

Nevada	87-0449967
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

300 Park Avenue, 2nd Floor, New York, NY 10022

(Address of Principal Executive Offices) (Zip Code)

(646) 293-2100

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, par value $0.001 per share	SEEL	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 28, 2022, 106,090,773 shares of the common stock, par value $0.001, of the registrant were outstanding.

Table of Contents

	PART I.


		PAGE

ITEM 1.	FINANCIAL STATEMENTS (UNAUDITED)	1


ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	19


ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	28


ITEM 4.	CONTROLS AND PROCEDURES	28



	PART II.


ITEM 1.	LEGAL PROCEEDINGS	29


ITEM 1A.	RISK FACTORS	29


ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	61


ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	61


ITEM 4	MINE SAFETY DISCLOSURES	61


ITEM 5.	OTHER INFORMATION	61


ITEM 6.	EXHIBITS	61


SIGNATURES		66

PART I.

ITEM 1. FINANCIAL STATEMENTS

Seelos Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)

(Unaudited)

		March 31,		December 31,
		2022		2021
Assets
Current assets
Cash	$	61,772	$	78,734
Prepaid expenses and other current assets		8,895		4,727
Total current assets		70,667		83,461
Operating lease right-of-use asset		26		39
Total assets	$	70,693	$	83,500


Liabilities and stockholders’ equity
Current liabilities
Accounts payable	$	2,127	$	1,693
Accrued expenses		3,549		3,728
Licenses payable		-		200
Short-term portion of convertible notes payable, at fair value		4,238		1,030
Derivative liability		-		1,174
Warrant liabilities, at fair value		190		424
Operating lease liability		26		38
Total current liabilities		10,130		8,287



Convertible notes payable, at fair value		14,926		17,890
Total liabilities		25,056		26,177


Commitments and contingencies (note 12)		-		-

Stockholders’ equity
Preferred stock, $0.001 par value, 10,000,000 shares authorized, no shares issued or outstanding as of March 31, 2022 and December 31, 2021		-		-
Common stock, $0.001 par value, 240,000,000 shares authorized, 105,590,773 and 105,500,445 issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		105		105
Additional paid-in-capital		200,743		198,428
Accumulated deficit		(155,211)		(141,210)
Total stockholders’ equity		45,637		57,323
Total liabilities and stockholders’ equity	$	70,693	$	83,500

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Seelos Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss

For the Three Months Ended March 31, 2022 and 2021

(In thousands, except share and per share data)

(Unaudited)


		Three Months Ended March 31,
		2022		2021
Operating expense
Research and development	$	10,009	$	14,112
General and administrative		4,001		2,500
Total operating expense		14,010		16,612
Loss from operations		(14,010)		(16,612)

Other income (expense)
Interest income		26		19
Interest expense		(7)		(990)
Change in fair value of convertible notes		(244)		-
Change in fair value of warrant liabilities		234		(1,533)
Total other income (expense)		9		(2,504)
Net loss and comprehensive loss	$	(14,001)	$	(19,116)


Net loss per share basic and diluted	$	(0.13)	$	(0.28)



Weighted-average common shares outstanding basic and diluted		105,529,772		69,053,332

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Seelos Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

For the Three Months Ended March 31, 2022 and 2021

(In thousands, except share data)

(Unaudited)

					Additional				Total
	Common Stock				Paid-In		Accumulated		Stockholders'
	(Shares)		(Amount)		Capital		Deficit		Equity
Balance as of December 31, 2021	105,500,445	$	105	$	198,428	$	(141,210)	$	57,323
Stock-based compensation expense	-		-		2,232		-		2,232

Issuance of common stock, options exercised	6,250		-		8		-		8
Issuance of common stock, ESPP	84,078		-		75		-		75

Net loss	-		-		-		(14,001)		(14,001)
Balance as of March 31, 2022	105,590,773	$	105	$	200,743	$	(155,211)	$	45,637

					Additional				Total
	Common Stock				Paid-In		Accumulated		Stockholders'
	(Shares)		(Amount)		Capital		Deficit		Equity
Balance as of December 31, 2020	54,535,891	$	54	$	77,680	$	(75,162)	$	2,572
Stock-based compensation expense	-		-		705		-		705
Issuance of common stock, options exercised	29,999		-		65		-		65
Issuance of common stock, ESPP	40,518		-		30		-		30
Warrants exercised for cash	6,146,125		6		7,017		-		7,023
Issuance of common stock, net of issuance costs	17,530,488		18		33,463		-		33,481
Net loss	-		-		-		(19,116)		(19,116)
Balance as of March 31, 2021	78,283,021	$	78	$	118,960	$	(94,278)	$	24,760

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Seelos Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2022 and 2021

(In thousands)

(Unaudited)


		Three Months Ended
		March 31,
		2022		2021
Cash flows from operating activities
Net loss	$	(14,001)	$	(19,116)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation expense		2,232		705
Change in fair value of warrant liability		(234)		1,533
Change in fair value of convertible notes payable		244		-
Amortization of debt discount		-		986
Changes in operating assets and liabilities
Prepaid expenses and other current assets		(4,168)		(777)
Accounts payable		434		(259)
Accrued expenses		(178)		(199)
Derivative liability		(1,174)		-
Licenses payable		(200)		5,875
Net cash used in operating activities		(17,045)		(11,252)

Cash flows provided by financing activities
Payment of convertible note		-		(5,167)
Proceeds from issuance of common stock, net of issuance costs		-		33,481
Proceeds from exercise of warrants		-		5,868
Proceeds from exercise of options		8		65
Proceeds from sales of common stock under ESPP		75		30
Net cash provided by financing activities		83		34,277
Net increase (decrease) in cash		(16,962)		23,025
Cash, beginning of period		78,734		15,662
Cash, end of period	$	61,772	$	38,687


Supplemental disclosure of cash flow information:
Cash paid for interest	$	4	$	4
Cash paid for income taxes	$	-	$	-
Non-cash investing and financing activities:
Reclass of warrant liabilities related to Series A warrants exercised for cash	$	-	$	1,155
Right-of-use assets obtained in exchange for operating lease liabilities	$	-	$	74

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Seelos Therapeutics, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Description of Business

Seelos Therapeutics, Inc. (together with its subsidiaries, the “Company”) is a clinical-stage biopharmaceutical company focused on achieving efficient development of products that address significant unmet needs in Central Nervous System (“CNS”) disorders and other rare disorders. The Company’s lead programs are SLS-002 for the potential treatment of acute suicidal ideation and behavior in patients with major depressive disorder (“ASIB in MDD”) and SLS-005 for the potential treatment of Amyotrophic Lateral Sclerosis (“ALS”) and Spinocerebellar Ataxia (“SCA”). SLS-005 for the potential treatment of Sanfilippo Syndrome currently requires additional natural history data, which is being considered. Additionally, the Company is developing several preclinical programs, most of which have well-defined mechanisms of action, including: SLS-004, SLS-006, SLS-007 for the potential treatment of Parkinson’s Disease (“PD”) and SLS-008, which is being developed for the potential treatment of an undisclosed indication, but may also be targeted at chronic inflammation in asthma and orphan indications such as pediatric esophagitis.

2. Liquidity and Going Concern

The accompanying condensed consolidated unaudited financial statements have been prepared assuming the Company will continue to operate as a going concern, which contemplates the realization of assets and settlement of liabilities in the normal course of business, and do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from uncertainty related to its ability to continue as a going concern.

The Company has generated limited revenues, has incurred operating losses since inception, and expects to continue to incur significant operating losses for the foreseeable future and may never become profitable. As of March 31, 2022, the Company had $61.8 million in cash and an accumulated deficit of $155.2 million. The Company has historically funded its operations through the issuance of convertible notes (see Note 9), the sale of common stock (see Note 6) and exercises of warrants (see Note 10).

On May 24, 2021, the Company completed an underwritten public offering, pursuant to which the Company sold 22,258,066 shares of its common stock, at a price to the public of $3.10 per share, which included the exercise in full by the underwriter of its option to purchase up to 2,903,226 additional shares of common stock. The net proceeds to the Company from the offering were approximately $64.5 million, after deducting underwriting discounts and commissions and other offering costs. The Company used $7.3 million of the net proceeds from the offering for the partial repayment of certain outstanding convertible promissory notes.

On January 28, 2021, the Company completed an underwritten public offering, pursuant to which the Company sold 17,530,488 shares of its common stock, at a price to the public of $2.05 per share, which included the exercise in full by the underwriter of its option to purchase up to 2,286,585 additional shares of common stock. The net proceeds to the Company from the offering were approximately $33.5 million, after deducting underwriting discounts, commissions and other offering costs. The Company used $3.8 million of the net proceeds from the offering for the partial repayment of certain outstanding convertible promissory notes.

The Company currently has an effective shelf registration statement on Form S-3 filed with the Securities and Exchange Commission (the “SEC”). The Company may use the shelf registration statement on Form S-3 to offer from time to time any combination of debt securities, common and preferred stock and warrants. As of March 31, 2022, the Company had approximately $95.1 million available under its Form S-3 shelf registration statement. The Company also has the ability to raise funds through other means, such as through the filing of a registration statement on Form S-1 or in private placements. The rules and regulations of the SEC or any other regulatory agencies may restrict the Company’s ability to conduct certain types of financing activities or may affect the timing of and amounts it can raise by undertaking such activities.

The Company evaluated whether there are any conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year beyond the filing of this Quarterly Report on Form 10-Q. Based on such evaluation and the Company’s current plans (including the ongoing clinical programs for SLS-002, SLS-005, and other product candidates), which are subject to change, management believes that the Company’s existing cash and cash equivalents as of March 31, 2022 are not sufficient to satisfy its operating cash needs for the year after the filing of this Quarterly Report on Form 10-Q.

The Company’s future liquidity and capital funding requirements will depend on numerous factors, including:

•

its ability to raise additional funds to finance its operations;

•

its ability to maintain compliance with the listing requirements of the Nasdaq Capital Market;

•

the outcome, costs and timing of clinical trial results for the Company’s current or future product candidates;

•

potential litigation expenses;

•

the emergence and effect of competing or complementary products or product candidates;

•

its ability to maintain, expand and defend the scope of its intellectual property portfolio, including the amount and timing of any payments the Company may be required to make, or that it may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;

•

its ability to retain its current employees and the need and ability to hire additional management and scientific and medical personnel;

•

the terms and timing of any collaborative, licensing or other arrangements that it has or may establish;

•

the trading price of its common stock; and

•

its ability to increase the number of authorized shares outstanding to facilitate future financing events.

The Company may raise substantial additional funds, and if it does so, it may do so through one or more of the following: issuance of additional debt or equity and/or the completion of a licensing or other commercial transaction for one or more of the Company’s product candidates. If the Company is unable to maintain sufficient financial resources, its business, financial condition and results of operations will be materially and adversely affected. This could affect future development and business activities and potential future clinical studies and/or other future ventures. Failure to obtain additional equity or debt financing will have a material, adverse impact on the Company’s business operations. There can be no assurance that the Company will be able to obtain the needed financing on acceptable terms or at all. Additionally, equity or convertible debt financings will likely have a dilutive effect on the holdings of the Company’s existing stockholders.

3. Significant Accounting Policies

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto as of and for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K (the “Annual Report”) filed with the SEC on March 4, 2022. The accompanying financial statements have been prepared by the Company in accordance with United States generally accepted accounting principles (“U.S. GAAP”) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. In the opinion of management, the accompanying unaudited condensed consolidated financial statements for the periods presented reflect all adjustments, consisting of only normal, recurring adjustments, necessary to fairly state the Company’s financial position, results of operations and cash flows. The December 31, 2021 condensed consolidated balance sheet was derived from audited financial statements, but it does not include all U.S. GAAP disclosures. The unaudited condensed consolidated financial statements for the interim periods are not necessarily indicative of results for the full year. The preparation of these unaudited condensed consolidated financial statements requires the Company to make estimates and judgments that affect the amounts reported in the financial statements and the accompanying notes. The Company’s actual results may differ from these estimates under different assumptions or conditions.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. The most significant estimates in the Company’s financial statements relate to the valuation of warrants, valuation of convertible notes payable, and the valuation of stock options. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

Fair Value Measurements

The Company follows the accounting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), for its fair value measurements of financial assets and liabilities measured at fair value on a recurring basis. Under this accounting guidance, fair value is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability.

The accounting guidance requires fair value measurements be classified and disclosed in one of the following three categories:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than Level 1 prices, for similar assets or liabilities that are directly or indirectly observable in the marketplace.

Level 3: Unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

Fair Value Option

As permitted under FASB ASC Topic 825, Financial Instruments (“ASC 825”), the Company elected the fair value option to account for its November 2021 and December 2021 convertible notes (collectively, the “2021 Convertible Notes”). In accordance with ASC 825, the Company records these convertible notes at fair value with changes in fair value recorded in the Consolidated Statement of Operations and Comprehensive Loss. As a result of applying the fair value option, direct costs and fees related to the convertible notes were expensed as incurred and were not deferred.

Stock-based Compensation

The Company expenses stock-based compensation to employees, non-employees and board members over the requisite service period based on the estimated grant-date fair value of the awards and forfeitures rates. The Company accounts for forfeitures as they occur. Stock-based awards with graded-vesting schedules are recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model, and the assumptions used in calculating the fair value of stock-based awards represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment. All stock-based compensation costs are recorded in general and administrative or research and development costs in the statements of operations based upon the underlying individual’s role at the Company.

Performance share awards are initially valued based on the Company’s closing stock price on the date of grant. The number of performance share awards that vest will be determined based on the achievement of specified performance milestones by the end of the performance period. Compensation expense for performance awards is recognized over the service period and will vary based on remeasurement during the performance period. If achievement of the performance milestone is not probable of achievement during the performance period, compensation expense is reversed.

Net Loss Per Share

Basic loss per share is computed by dividing net loss applicable to common stockholders by the weighted average number of shares of common stock outstanding during each period. Diluted loss per share includes the effect, if any, from the potential exercise or conversion of securities, such as convertible debt, warrants, performance-based restricted stock unit awards and stock options that would result in the issuance of incremental shares of common stock. In computing the basic and diluted net loss per share applicable to common stockholders, the weighted average number of shares remains the same for both calculations due to the fact that when a net loss exists, dilutive shares are not included in the calculation as the impact is anti-dilutive.

The following potentially dilutive securities outstanding for the three months ended March 31, 2022 and 2021 have been excluded from the computation of diluted weighted average shares outstanding, as they would be anti-dilutive (in thousands):

	Three Months
	Ended March 31,
	2022	2021
Outstanding stock options	10,299	7,204
Restricted stock units	-	2,400
Outstanding warrants	2,635	3,920
Convertible debt	3,704	5,326

	16,638	18,850

Amounts in the table reflect the common stock equivalents of the noted instruments.

Recent Accounting Pronouncements

In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06: Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”). This standard simplifies the accounting for convertible debt instruments by removing the separation models for convertible debt with a cash conversion feature, as well as convertible instruments with a beneficial conversion feature. As a result, entities will account for a convertible debt instrument wholly as debt, unless certain other conditions are met. The elimination of these models will reduce non-cash interest expense for entities that have issued a convertible instrument that was within the scope of those models before the adoption of ASU 2020-06. Additionally, ASU 2020-06 requires the application of the if-converted method for calculating diluted earnings per share and precludes the use of the treasury stock method for certain debt instruments. The provisions of ASU 2020-06 are applicable for the Company beginning after January 1, 2024, with early adoption permitted, and an entity should adopt the provisions at the beginning of its annual fiscal year. The Company does not expect the adoption of ASU 2020-06 to have an impact on its consolidated financial statements and related disclosures.

4. Fair Value Measurement

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values. There were no transfers between fair value measurement levels during the three months ended March 31, 2022.

The Company’s financial assets and liabilities measured at fair value at March 31, 2022 and December 31, 2021 are as follows (in thousands):

		Fair Value Measurements
		as of March 31, 2022
		(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Cash	$	61,772	$	-	$	-	$	61,772
Liabilities:
Convertible notes payable, at fair value	$	-	$	-	$	19,164	$	19,164
Warrant liabilities, at fair value		-		-		190		190
	$	-	$	-	$	19,354	$	19,354

		Fair Value Measurements
		as of December 31, 2021
		(Level 1)		(Level 2)		(Level 3)		Total
Assets:
Cash	$	78,734	$	-	$	-	$	78,734
Liabilities:
Convertible notes payable, at fair value	$	-	$	-	$	18,920	$	18,920
Derivative liability, at fair value		1,174		-		-		1,174
Warrant liabilities, at fair value		-		-		424		424
	$	1,174	$	-	$	19,344	$	20,518

The fair value of the Company’s money market funds is based on quoted active market prices for the funds and is determined using the market approach.

The Company measures the 2021 Convertible Notes and warrant liabilities at fair value based on significant inputs not observable in the market, which causes them to be classified as a Level 3 measurement within the fair value hierarchy. These valuations use assumptions and estimates the Company believes would be made by a market participant in making the same valuation. The Company assesses these assumptions and estimates on an on-going basis as additional data impacting the assumptions and estimates are obtained. Changes in the fair value of the convertible notes payable and warrant liabilities related to updated assumptions and estimates are recognized within the Consolidated Statements of Operations and Comprehensive Loss.

The fair value of the convertible notes payable and warrant liabilities may change significantly as additional data is obtained, impacting the Company’s assumptions regarding probabilities of outcomes used to estimate the fair value of the liabilities. The estimates of fair value may not be indicative of the amounts that could be realized in a current market exchange. Accordingly, the use of different market assumptions and/or different valuation techniques may have a material effect on the estimated fair value amounts, and such changes could materially impact the Company’s results of operations in future periods.

Derivative Liability

The derivative liability represents the fair value of the “Shortfall Amount” provision provided for in the license agreement with iX Biopharma Europe Limited.

At issuance, the fair value of the embedded derivative was estimated by using a Monte Carlo simulation model. As of December 31, 2021, the Company determined it was probable it would settle the Shortfall Amount in cash and estimated the fair value based on a probability weighted market approach. The Company paid the Shortfall Amount of $1.2 million in cash in January 2022.

2021 Convertible Notes

The 2021 Convertible Notes are valued using a Monte Carlo simulation model. The following assumptions were used in determining the fair value of the 2021 Convertible Notes as of March 31, 2022 and December 31, 2021:

		Three Months Ended		Year Ended
		March 31, 2022		December 31, 2021
Risk-free interest rate		2.45%		0.90% - 0.95%
Volatility		105%		113% - 114%
Dividend yield		-%		-%
Contractual term (years)		2.7		3.0
Stock price	$	0.84	$	1.74 - 1.95

Warrant Liabilities

The common stock warrant liabilities were recorded at fair value using the Black-Scholes option pricing model.

The following assumptions were used in determining the fair value of the warrant liabilities valued using the Black-Scholes option pricing model for the three months ended March 31, 2022 and 2021.


		Three Months Ended March 31,
		2022		2021
Risk-free interest rate		1.96%		0.32%
Volatility		103.30%		120.91%
Dividend yield		-%		-%
Expected term (years)		1.82		2.82
Weighted-average fair value	$	0.63	$	4.76

The following table is a reconciliation for the common stock warrant liabilities and convertible notes measured at fair value using Level 3 unobservable inputs (in thousands):


		Warrant		Derivative		Convertible notes,
		liabilities		liability		at fair value
Balance as of December 31, 2020	$	1,062	$	-	$	-
Warrant liability reclassified to stockholders' equity		(1,155)		-		-
Issuance of convertible notes, at fair value		-		-		19,150
Issuance of derivative liability		-		805		-
Change in fair value measurement of derivative liability		-		369		-
Change in fair value measurement of convertible notes		-		-		(230)
Change in fair value measurement of warrant liability		517		-		-
Balance as of December 31, 2021	$	424	$	1,174	$	18,920
Settlement of derivative liability		-		(1,174)		-
Change in fair value measurement of convertible notes		-		-		244
Change in fair value measurement of warrant liability		(234)		-		-
Balance as of March 31, 2022	$	190	$	-	$	19,164

For the three months ended March 31, 2022 and the year ended December 31, 2021, the changes in fair value of the convertible notes, derivative liability and warrant liability primarily resulted from the volatility of the Company’s common stock.

5. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets are comprised of the following (in thousands):


		March 31,		December 31,
		2022		2021
Prepaid insurance	$	787	$	59
Prepaid clinical costs		7,694		4,481
Other		414		187
Prepaid expenses and other current assets	$	8,895	$	4,727

6. Common Stock Offerings

Public Offerings

On May 24, 2021, the Company completed an underwritten public offering, pursuant to which the Company sold 22,258,066 shares of its common stock, at a price to the public of $3.10 per share, which included the exercise in full by the underwriter of its option to purchase up to 2,903,226 additional shares of common stock. The net proceeds to the Company from the offering were approximately $64.5 million, after deducting underwriting discounts, commissions and other offering expenses. The Company used $7.3 million of the net proceeds from the offering for the partial repayment of certain outstanding convertible promissory notes.

On January 28, 2021, the Company completed an underwritten public offering, pursuant to which the Company sold 17,530,488 shares of its common stock, at a price to the public of $2.05 per share, which included the exercise in full by the underwriter of its option to purchase up to 2,286,585 additional shares of common stock. The net proceeds to the Company from the offering were approximately $33.5 million, after deducting underwriting discounts, commissions and other offering expenses. The Company used $3.8 million of the net proceeds from the offering for the partial repayment of certain outstanding convertible promissory notes.

Stock Purchase Agreement with iX Biopharma Europe Limited

On November 24, 2021, the Company entered in an exclusive license agreement and stock purchase agreement (the “iXBEL Stock Purchase Agreement”) with iX Biopharma Europe Limited (“iXBEL”). As consideration for the license under the license agreement, the Company paid iXBEL an upfront fee of $9.0 million, comprised of $3.5 million in cash and 2,570,266 restricted shares of the Company’s common stock. Pursuant to the iXBEL Stock Purchase Agreement, the Company agreed to reimburse iXBEL for the difference in value (the “Shortfall Amount”) in the event the aggregate value of the 2,570,266 shares of the Company’s common stock at the time of registration and issuance was less than $5.5 million. The initial fair value of this Shortfall Amount was $0.8 million and in January 2022, the Company settled the Shortfall Amount by the payment of $1.2 million in cash to iXBEL. The change in fair value of the Shortfall Amount is included in Change in fair value of derivative liability on the Condensed Consolidated Statement of Operations and Comprehensive Loss (see Note 4).

7. License Agreements

Specific information pertaining to each of the Company’s significant license agreements is discussed in its audited financial statements included in the Annual Report for the years ended December 31, 2021 and 2020, including their nature and purpose, the significant rights and obligations of the parties, and specific accounting policy elections. The following represents updates for the three months ended March 31, 2022, if applicable, to the Company’s significant license agreements:

Acquisition of Assets from Phoenixus AG f/k/a Vyera Pharmaceuticals, AG and Turing Pharmaceuticals AG (“Vyera”)

See Note 13 for a subsequent event related to the Vyera Purchase Agreement.

Acquisition of License from Stuart Weg, MD

On August 29, 2019, the Company entered into an amended and restated exclusive license agreement with Stuart Weg, M.D. (the “Weg License Agreement”), pursuant to which the Company was granted an exclusive worldwide license to certain intellectual property and regulatory materials related to SLS-002. Under the terms of the Weg License Agreement, the Company paid an upfront license fee of $75,000 upon execution of the agreement. The Company agreed to pay additional consideration to Dr. Weg as follows: (i) $0.1 million on January 2, 2020, (ii) $0.125 million on January 2, 2021, and (iii) in the event the FDA has not approved an NDA for a product containing ketamine in any dosage on or before December 31, 2021, $0.2 million on January 2, 2022. The Company paid the required $0.1 million on January 2, 2020, $0.125 million on January 2, 2021 and $0.2 million on January 2, 2022.

The remaining potential regulatory and commercial milestones are not yet considered probable, and no other milestone payments have been accrued at March 31, 2022.

8. Accrued Expenses

Accrued expenses are comprised of the following (in thousands):


		March 31,		December 31,
		2022		2021
Professional fees	$	190	$	181
Personnel related		332		1,303
Outside research and development services		2,387		2,219
Insurance		580		-
Other		60		25
Accrued expenses, net	$	3,549	$	3,728

9. Debt

Convertible Notes

November 2021 and December 2021 Convertible Notes and Private Placement

On November 23, 2021, the Company entered into a Securities Purchase Agreement (the “2021 Lind Securities Purchase Agreement”) with Lind Global Asset Management V, LLC (“Lind V”) pursuant to which, among other things, on November 23, 2021 (the “Closing Date”), the Company issued and sold to Lind V, in a private placement transaction (the “Private Placement”), in exchange for the payment by Lind V of $20.0 million, (i) a convertible promissory note (the “2021 Note”) in an aggregate principal amount of $22.0 million (the “Principal Amount”), which will bear no interest until the first anniversary of the issuance of the 2021 Note and will thereafter bear interest at a rate of 5% per annum, and mature on November 23, 2024 (the “Maturity Date”), and (ii) 534,759 shares of Company common stock.

At the first anniversary of the Closing Date, the Company shall have the option, at its sole discretion, to issue to Lind V a convertible promissory note (the “Second Note”) in the principal amount of $11.0 million in exchange for the payment by Lind V of $10.0 million. At the earlier of (i) the two-year anniversary of the Closing Date, or (ii) the successful readout for SLS-005 in ALS, and subject to the mutual agreement of the Company and Lind V, the Company shall issue to Lind V a convertible promissory note (the “Third Note”) in the principal amount of $11.0 million in exchange for the payment by Lind V of $10.0 million. In the event of the filing of a new drug application with the U.S. Food & Drug Administration for either SLS-002 or SLS-005, and subject to the mutual agreement of the Company and Lind V, the Company shall issue to Lind V a convertible promissory note (the “Fourth Note”) in the principal amount of $11.0 million in exchange for the payment by Lind V of $10.0 million. The Second Note, the Third Note and the Fourth Note, if issued, would be in substantially the same form as the 2021 Note.

At any time following August 23, 2022, from time to time and before the Maturity Date, Lind V shall have the option to convert any portion of the then-outstanding Principal Amount of the 2021 Note into shares of Common Stock at a price per share of $6.00, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions (the “Conversion Price”). At any time prior August 23, 2022, the Company shall have the right to prepay, in whole or in part (exercisable by the Company at any time or from time to time during such period), up to an aggregate of $14.7 million of the outstanding Principal Amount of the 2021 Note with no penalty. If the Company does not prepay any amounts of the 2021 Note prior to August 23, 2022 then, commencing August 23, 2022, the Company shall have the right to prepay, in whole or in part (exercisable by the Company at any time or from time to time prior to the Maturity Date), up to the full remaining Principal Amount of the 2021 Note with no penalty; however, if the Company exercises such prepayment right, Lind V will have the option to convert up to thirty-three and one-third percent (33 1/3%) of the amount that the Company elects to prepay at the Conversion Price. If the Company prepays any amounts of the 2021 Note prior to August 23, 2022 then, commencing November 23, 2022, the Company shall not have the right to prepay any amounts of the 2021 Note between August 23, 2022 to November 23, 2022 and, commencing November 23, 2022, the Company shall have the right to prepay, in whole or in part (exercisable by the Company at any time or from time to time prior to the Maturity Date) up to the full remaining Principal Amount of the 2021 Note with no penalty; however, if the Company exercises such prepayment right, Lind V will have the option to convert up to thirty-three and one-third percent (33 1/3%) of the amount that the Company elects to prepay at the Conversion Price.

Subject to certain exceptions, the Company will be required to direct proceeds from any subsequent debt financings (including subordinated debt, convertible debt or mandatorily redeemable preferred stock but other than purchase money debt or capital lease obligations or other indebtedness incurred in the ordinary course of business) to repay the 2021 Notes, unless waived by Lind V in advance.

Beginning on November 23, 2022, the 2021 Note will amortize in twenty-four monthly installments equal to the quotient of (i) the then-outstanding Principal Amount of the 2021 Note, divided by (ii) the number of months remaining until the Maturity Date. All amortization payments shall be payable, at the Company’s sole option, in cash, shares of Common Stock or a combination of both. In addition, commencing on the last business day of the first month following November 23, 2022, the Company will pay, on a monthly basis, all interest that has accrued and remains unpaid on the then-outstanding Principal Amount of the 2021 Note. Any portion of an amortization payment or interest payment that is paid in shares of Common Stock shall be priced at 90% of the average of the five lowest daily volume weighted average prices of the Common Stock during the 20 trading days prior to the date of issuance of the shares. If, after the first amortization payment, the Company elects to make any amortization payments in cash, the Company shall pay a 5% premium on each cash payment. In conjunction with the 2021 Lind Securities Purchase Agreement and the 2021 Note, on the Closing Date, the Company and Lind V entered into a security agreement, which provides Lind V with a first priority lien on the Company’s assets and properties.

On December 2, 2021, the Company entered into two separate securities purchase agreements with certain accredited investors on substantially the same terms as the 2021 Lind Securities Purchase Agreement, pursuant to which the Company sold, in private placement transactions, in exchange for the payment by the accredited investors of an aggregate of $201,534, (i) convertible promissory notes in an aggregate principal amount of $221,688, which will bear no interest and mature on December 2, 2024, and (ii) an aggregate of 5,388 shares of its common stock. These notes have substantially the same terms as the 2021 Note.

During the year ended December 31, 2021, the Company received aggregate gross proceeds of $20.2 million from the convertible note offerings. The Company elected to account for these notes under the fair value option. At time of issuance, the Company recorded a liability of $19.2 million, which was determined to be the fair value at time of issuance. As of December 31, 2021, the Company recognized a $0.2 million gain on change in fair value of convertible notes, recognizing a total convertible note liability of $18.9 million. During the three months ended March 31, 2022, the Company recognized a $0.2 million loss on change in fair value of convertible notes, recognizing a total convertible note liability of $19.2 million.

As of March 31, 2022, the principal contractual balance of the convertible notes totaled $22.2 million.

December 2020 Convertible Note and Private Placement

On December 11, 2020, the Company entered into a Securities Purchase Agreement (the “2020 Lind Securities Purchase Agreement”) with Lind Global Asset Management II, LLC (the “Investor”) pursuant to which, among other things, on December 11, 2020, the Company issued and sold to the Investor, in a private placement transaction, in exchange for the payment by the Investor of $10,000,000, (1) a convertible promissory note (the “2020 Note”) in an aggregate principal amount of $12,000,000 (the “Principal Amount”), which did not bear interest and was to mature on December 11, 2022 (the “Maturity Date”), and (2) 975,000 shares of the Company’s common stock. At any time following June 11, 2021, and from time to time before the Maturity Date, the Investor had the option to convert any portion of the then-outstanding Principal Amount of the Note into shares of common stock at a price per share of $1.60, subject to adjustment for stock splits, reverse stock splits, stock dividends and similar transactions. Prior to June 11, 2021, the Company had the right to prepay up to sixty-six and two-thirds percent (66 2/3%) of the then-outstanding Principal Amount of the 2020 Note with no penalty. Subject to certain exceptions, the Company was required to direct proceeds from any subsequent debt financings (including subordinated debt, convertible debt or mandatorily redeemable preferred stock but other than purchase money debt or capital lease obligations or other indebtedness incurred in the ordinary course of business) to repay the 2020 Note, unless waived by the Investor in advance. The 2020 Note began amortizing in June 2021 and was to amortize in eighteen monthly installments equal to the quotient of (i) the then-outstanding Principal Amount of the 2020 Note, divided by (ii) the number of months remaining until the Maturity Date. All amortization payments were to be payable solely in cash, plus a 2% premium. During the first half of 2021, the Company made certain repayments on the outstanding principal balance of the convertible notes. On June 14, 2021, the Company and the Investor entered into an Acknowledgment and Termination Agreement, pursuant to which the Company agreed to issue to the Investor an aggregate of 406,250 additional shares of its common stock (the “Lind Shares”) and to pay the Investor the remaining principal amount of $790,804 (the “Final Payment”) in full satisfaction of the Company’s remaining obligations to the Investor under the 2020 Note. The Company issued the Lind Shares and made the Final Payment to the Investor, and the 2020 Lind Securities Purchase Agreement and the 2020 Note terminated, effective June 15, 2021.

On December 17, 2020, the Company entered into three separate securities purchase agreements with certain accredited investors on substantially the same terms as the Lind Securities Purchase Agreement (the “December 17 SPAs”), pursuant to which the Company sold, in private placement transactions, in exchange for the payment by the accredited investors of an aggregate of $1,138,023, (1) convertible promissory notes (the “December 17 Notes”) in an aggregate principal amount of $1,365,628, which did not bear interest and were to mature on December 17, 2022, and (2) an aggregate of 110,956 shares of its common stock. On December 18, 2020, the Company entered into an additional securities purchase agreement with an accredited investor on substantially the same terms as the Lind Securities Purchase Agreement (the “December 18 SPA” and, together with the December 17 SPAs, the "Subsequent Securities Purchase Agreements"), pursuant to which the Company sold, in a private placement transaction, in exchange for the payment by the accredited investor of $269,373, (1) a convertible promissory note in an aggregate principal amount of $323,247, which did not bear interest and was to mature on December 18, 2022 (the “December 18 Note” and, together with the December 17 Notes, the “Subsequent Notes”), and (2) 26,263 shares of the Company’s common stock. The Subsequent Securities Purchase Agreements had substantially the same terms as the Lind Securities Purchase Agreement, and the Subsequent Notes had substantially the same terms as the Note. During the first half of 2021, the Company made certain repayments on the outstanding principal balance of the convertible notes. On July 7, 2021, the Company and the holder of the December 18 Note (the “December 18 Note Holder”) entered into an Acknowledgement and Termination Agreement, pursuant to which: (i) the December 18 Note Holder agreed to return to the Company $42,777 in cash (the “Repayment”) previously paid by the Company to the December 18 Note Holder as a payment against the Company’s obligations under the December 18 Note, and (ii) the Company agreed to issue to the December 18 Note Holder an aggregate of 43,664 additional shares of its common stock (the “December 18 Note Shares”) in full satisfaction of the Company’s remaining obligations to the December 18 Note Holder under the December 18 Note. The December 18 Note Holder paid the Company the Repayment and the Company issued the December Note Shares, and the December 18 SPA and the December 18 Note terminated, effective July 7, 2021.

The Company received aggregate net proceeds of $10.9 million from the convertible note offering, net of $0.5 million of issuance costs. The total gross proceeds were allocated to the convertible notes and common stock issued under the agreements based on their relative fair values. Due to the principal payments made during the year, the Company remeasured the beneficial conversion feature discount at each payment date and recorded a loss on extinguishment of debt of approximately $1.0 million during the year ended December 31, 2021 as well as a reduction in additional paid-in capital of $1.5 million as of December 31, 2021.

During the year ended December 31, 2021, the Company paid approximately $13.6 million in principal payments on the outstanding convertible notes and issued an aggregate of 475,315 shares of its common stock upon conversion of the convertible notes, and none of the 2020 convertible notes remain outstanding as of December 31, 2021.

10. Stockholders’ Equity

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock, par value $0.001. No shares of preferred stock were outstanding as of March 31, 2022 or December 31, 2021.

Common Stock

The Company has authorized 240,000,000 shares of common stock as of March 31, 2022 and December 31, 2021. Each share of common stock is entitled to one voting right. Common stock owners are entitled to dividends when funds are legally available and declared by the Board of Directors.

Warrants

September 2020 Warrants

On September 4, 2020, the Company entered into a securities purchase agreement with certain institutional investors pursuant to which the Company issued and sold an aggregate of 8,865,000 shares of common stock in a registered direct offering and issued warrants to purchase up to 6,648,750 shares of common stock in a concurrent private placement (the “September 2020 Warrants”). The September 2020 Warrants are initially exercisable for 6,648,750 shares of common stock at an exercise price per share equal to $0.84. The September 2020 Warrants became exercisable beginning on March 9, 2021 and will expire on March 9, 2026.

During the three months ended March 31, 2022 and 2021, September 2020 Warrants were exercised for 0 and 4.7 million shares of common stock, respectively, for approximately $0 and $3.9 million, respectively. As of March 31, 2022, September 2020 Warrants exercisable for 1.0 million shares of common stock remain outstanding at an exercise price of $0.84 per share.

August 2019 Warrants

On August 23, 2019, the Company entered into a securities purchase agreement with certain institutional investors pursuant to which the Company issued and sold an aggregate of 4,475,000 shares of common stock in a registered direct offering and issued warrants to purchase up to 2,237,500 shares of common stock in a concurrent private placement (the “August 2019 Warrants”). The August 2019 Warrants were initially exercisable for 2,237,500 shares of common stock at an exercise price per share equal to $1.78. The August 2019 Warrants became exercisable beginning on February 27, 2020 and will expire on August 28, 2023.

During the three months ended March 31, 2022 and 2021, August 2019 Warrants for 0 and 1.0 million shares of common stock were exercised for approximately $0 and $1.8 million, respectively. As of March 31, 2022, August 2019 Warrants exercisable for 900,000 shares of common stock remain outstanding at an exercise price of $1.78 per share.

Series A Warrants

On January 24, 2019, STI and the Company closed a private placement with certain accredited investors pursuant to which, among other things, the Company issued warrants representing the right to acquire 1,463,519 shares of common stock (the “Series A Warrants”). The Series A Warrants were initially exercisable for 1,463,519 shares of common stock at an exercise price per share equal to $4.15, which was adjusted several times pursuant to the terms thereof to 3,629,023 shares of common stock at an exercise price per share equal to $0.2957 per share. The most recent adjustment to the exercise price (from $0.60 to $0.2957 per share) occurred during the three months ended September 30, 2020 as a result of the announcement of the registered direct offering of 8,865,000 shares of common stock in September 2020. The Series A Warrants were immediately exercisable upon issuance and will expire on January 31, 2024.

During the three months ended March 31, 2022 and 2021, Series A Warrants for 0 and 0.5 million shares of common stock, respectively, were exercised for approximately $0 and $0.1 million, respectively. As of March 31, 2022, Series A Warrants exercisable for 0.3 million shares of common stock remain outstanding at an exercise price of $0.2957 per share.

A summary of warrant activity during the three months ended March 31, 2022 is as follows (share amounts in thousands):

				Weighted-
			Weighted-	Average
			Average	Remaining
			Exercise	Contractual Life
	Warrants		Price	(in years)
Outstanding as of December 31, 2021	2,635	$	4.29	2.4
Issued	-	$	-
Exercised	-	$	-
Cancelled	-	$	-
Outstanding as of March 31, 2022	2,635	$	4.29	2.2
Exercisable as of March 31, 2022	2,635	$	4.29	2.2

The Series A Warrants were recognized as a liability at their fair value upon issuance. The warrant liability is remeasured to the then fair value prior to their exercise or at period end for warrants that are unexercised and the gain or loss recognized in earnings during the period.

11. Stock-based Compensation

The Company has the Seelos Therapeutics, Inc. Amended and Restated 2012 Stock Long Term Incentive Plan (the “2012 Plan”), which provides for the issuance of incentive and non-incentive stock options, restricted and unrestricted stock awards, stock unit awards and stock appreciation rights. Options and restricted stock units granted generally vest over a period of one to four years and have a maximum term of ten years from the date of grant. The 2012 Plan provides that an additional number of shares will automatically be added annually to the shares authorized for issuance under the 2012 Plan on January 1st of each year commencing on January 1, 2020 and ending on (and including) January 1, 2029. The number of shares added each year will be equal to the lesser of (a) 4% of the number of shares of common stock issued and outstanding on a fully-diluted basis as of the close of business on the immediately preceding December 31, and (b) a number of shares of common stock set by the Company’s board of directors on or prior to each such January 1. On January 1, 2022, in accordance with the foregoing, an aggregate of 4,713,637 shares of common stock were added to shares authorized for issuance under the 2012 Plan. As of March 31, 2022, an aggregate of 15,817,818 shares of common stock were authorized under the 2012 Plan, of which 5.5 million shares of common stock were available for future grants. No further awards may be issued under the Seelos Therapeutics, Inc. 2016 Equity Incentive Plan (the "2016 Plan").

On May 15, 2020, the Company’s stockholders approved the Company's 2020 Employee Stock Purchase Plan (the "ESPP"), whereby qualified employees are allowed to purchase limited amounts of the Company’s common stock at the lesser of 85% of the market price at the beginning or end of the offering period. The stockholders have authorized an initial amount of 1.0 million shares for purchase by employees under the ESPP. The ESPP provides that an additional number of shares will automatically be added annually to the shares authorized for issuance under the ESPP on January 1st of each year commencing on January 1, 2021 and ending on (and including) January 1, 2030, which amount shall be equal to the lesser of (i) 1% of the number of shares of the Company's common stock issued and outstanding on the immediately preceding December 31, and (ii) a number of shares of common stock set by the Company’s Board of Directors or the Compensation Committee of the Board of Directors (the “Compensation Committee”) of the Company on or prior to each such January 1. On January 1, 2022, the Company added 1,055,004 shares for purchase by employees under the ESPP. During the three months ended March 31, 2022, the Company sold 84,078 shares of common stock under the ESPP. The compensation costs are calculated as the fair value of the 15% discount from market price and were approximately $17,000 for the three months ended March 31, 2022.

On July 28, 2019, the Compensation Committee of the Board of Directors (the “Compensation Committee”) of the Company adopted the Seelos Therapeutics, Inc. 2019 Inducement Plan (the “2019 Inducement Plan”), which became effective on August 12, 2019. The 2019 Inducement Plan provides for the grant of equity-based awards in the form of stock options, stock appreciation rights, restricted stock, unrestricted stock, stock units, including restricted stock units, performance units and cash awards, solely to prospective employees of the Company or an affiliate of the Company provided that certain criteria are met. Awards under the 2019 Inducement Plan may only be granted to an individual, as a material inducement to such individual to enter into employment with the Company, who (i) has not previously been an employee or director of the Company or (ii) is rehired following a bona fide period of non-employment with the Company. The maximum number of shares available for grant under the 2019 Inducement Plan is 1,000,000 shares of the Company’s common stock. The 2019 Inducement Plan is administered by the Compensation Committee and expires on August 12, 2029.

Stock options

During the three months ended March 31, 2022, the Company granted 560,605 incentive stock options and 2,299,395 non-qualified stock options to employees with a weighted average exercise price per share of $1.46 and a 10-year term, subject to the terms and conditions of the 2012 Plan above. The stock options are subject to time vesting requirements. The stock options granted to employees vest 25% on the first anniversary of the grant and monthly thereafter over the next three years.

During the three months ended March 31, 2022, the Company also granted 140,000 non-qualified stock options to non-employee directors with a weighted average exercise price per share of $1.56 and a 10-year term, subject to the terms and conditions of the 2012 Plan above. The stock options granted to non-employee directors vest monthly over the 12 months following the grant.

The fair value of stock option grants are estimated on the date of grant using the Black-Scholes option-pricing model. The Company was historically a private company and lacked sufficient company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on a weighted average blend of the historical volatility of a publicly traded set of peer companies, as well as its own historical volatility. Additionally, due to an insufficient history with respect to stock option activity and post-vesting cancellations, the expected term assumption for employee grants is based on a permitted simplified method, which is based on the vesting period and contractual term for each tranche of awards. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect for time periods approximately equal to the expected term of the award. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.

During the three months ended March 31, 2022, 6,250 stock options were exercised and no options were forfeited.

The following assumptions were used in determining the fair value of the stock options granted during the three months ended March 31, 2022 and 2021:

		Three Months Ended
		March 31, 2022		March 31, 2021
Risk-free interest rate		1.5% - 1.6%		0.5% - 0.9%
Volatility		113%		120%-125%
Dividend yield		-%		-%
Expected term (years)		5 - 6		5 - 6
Weighted-average fair value	$	1.24 - 1.27	$	3.62

A summary of stock option activity during the three months ended March 31, 2022 is as follows (share amounts in thousands):

				Weighted-
			Weighted-	Average		Total
			Average	Remaining		Aggregate
	Stock		Exercise	Contractual		Intrinsic
	Options		Price	Life (in years)		Value
Outstanding as of December 31, 2021	7,306	$	2.60
Granted	3,000		1.47
Exercised	(6)		1.06
Cancelled	-		-
Outstanding as of March 31, 2022	10,300	$	2.27	8.7	$	2,894
Vested and expected to vest as of March 31, 2022	10,300	$	2.27	8.7	$	2,894
Exercisable as of March 31, 2022	3,085	$	3.00	8.1	$	2,894

The intrinsic value of options exercised during the three months ended March 31, 2022 and 2021 was $0.1 million and $0, respectively. As of March 31, 2022, unrecognized stock-option compensation expense of $10.2 million is expected to be realized over a weighted-average period of 2.6 years.

SEC Form 10-Q filed by Seelos Therapeutics Inc.