| Warrants | A summary of warrants as of December
31, 2018 and 2017, and the changes during the years ended December 31, 2018 and 2017, is presented as follows:
Outstanding Outstanding Outstanding
as of as of as of
December 31, December 31, December 31,
Warrant
class 2016 Issued Exercised 2017 Issued Exercised Expired 2018
Class F Warrants 300,000 - - 300,000 - - (300,000 ) -
Class G Warrants 1,503,409 - - 1,503,409 - - (1,503,409 ) -
Class H Warrants 1,988,095 - - 1,988,095 - - (1,988,095 ) -
Class I Warrants 1,043,646 - - 1,043,646 - - (1,043,646 ) -
Class K Warrants 5,200,000 2,000,000 - 7,200,000 - - - 7,200,000
Class L Warrants 65,945,005 - (2,046,832 ) 63,898,173 - (6,639,834 ) - 57,258,339
Class N Warrants - 13,943,180 - 13,943,180 17,644,999 (1,136,364 ) - 30,451,815
Class O Warrants - 6,540,000 - 6,540,000 1,509,091 (120,000 ) - 7,929,091
Series A Warrants 2,106,594 - (545,246 ) 1,561,348 - (405,666 ) - 1,155,682
78,086,749 22,483,180 (2,592,078 ) 97,977,851 19,154,090 (8,301,864 ) (4,835,150 ) 103,994,927 A summary of the warrant exercise price
per share and expiration date is presented as follows:
Exercise Expiration
price/share
date
Class K Warrants $ 0.08 June 2025
Class K Warrants $ 0.11 August 2027
Class L Warrants $ 0.08 May 2019
Class N Warrants $ 0.11 June 2019
Class O Warrants $ 0.11 June 2019
Series A Warrants $ 0.03 May 2019 On January 23, 2019, the Company extended
the expiration date to May 1, 2019 for Series A Warrants, Class L Warrants and Class N Warrants. On March 1, 2019, the Company
extended the expiration date to June 28, 2019 for Class N Warrants and Class O Warrants. The exercise price and the number of
shares covered by the warrants will be adjusted if the Company has a stock split, if there is a recapitalization of the Company’s
common stock, or if the Company consolidates with or merges into another company. The exercise price of the Class K Warrants
and the Series A Warrants are subject to a “down-round” anti-dilution adjustment if the Company issues or is deemed
to have issued securities at a price lower than the then applicable exercise price of the warrants. The Class K Warrants
may be exercised on a physical settlement or on a cashless basis. The Series A Warrants may be exercised on a physical settlement
basis if a registration statement underlying the warrants is effective. If a registration statement is not effective (or
the prospectus contained therein is not available for use) for the resale by the holder of the Series A Warrants, then the holder
may exercise the warrants on a cashless basis. On January 26, 2018, the Company issued
Class O Warrant Agreements to a related party vendor to purchase 909,091 shares of common stock at an exercise price of $0.11 per
share. Each Class O Warrant represents the right to purchase one share of Common Stock. The estimated fair value of the Class O
Warrants at the grant date was $160,455 and was recorded as general and administrative expense and an increase to additional paid-in
capital. The warrants vested upon issuance and expire on March 17, 2019. On March 1, 2019, the Company extended the expiration
date to June 28, 2019. In 2018, the Company issued Class O
Warrant Agreements to a vendor to purchase 600,000 shares of common stock at an exercise price of $0.11 per share. Each Class O
Warrant represents the right to purchase one share of Common Stock. The estimated fair value of the Class O Warrants at their respective
grant dates was $159,370 and was recorded as general and administrative expense and an increase to additional paid-in capital.
The warrants vested upon issuance and expire on March 17, 2019. On March 1, 2019, the Company extended the expiration date to June
28, 2019. In August 2017, the Company, in connection
with the Third Amendment (Note 10), issued to HealthTronics, Inc., an additional 2,000,000 Class K Warrants to purchase shares
of the Company’s Common Stock at an exercise price of $0.11 per share, subject to certain anti-dilution protection. The warrants
vested upon issuance and expire after ten years. On November 30, 2017, the Company issued
Class O Warrant Agreements to a vendor to purchase 2,500,000 shares of common stock at an exercise price of $0.11 per share. Each
Class O Warrant represents the right to purchase one share of Common Stock. The estimated fair value of the Class O Warrants at
the grant date was $174,731 and was recorded as general and administrative expense and an increase to additional paid-in capital.
The warrants vested upon issuance and expire on March 17, 2019. On December 6, 2017, the Company issued
Class O Warrant Agreements to a vendor to purchase 100,000 shares of common stock at an exercise price of $0.11 per share. Each
Class O Warrant represents the right to purchase one share of Common Stock. The estimated fair value of the Class O Warrants at
the grant date was $8,125 and was recorded as general and administrative expense and an increase to additional paid-in capital.
The warrants vested upon issuance and expire on March 17, 2019. On December 11, 2017, the Company issued
Class O Warrant Agreements to active employees, independent contractors, members of the board of directors and members of the medical
advisory boards to purchase 3,940,000 shares of common stock at an exercise price of $0.11 per share. Each Class O Warrant represents
the right to purchase one share of Common Stock. The estimated fair value of the Class O Warrants at the grant date was $285,810
and was recorded as research and development expense in the amount of $98,655 and general and administrative expense in the amount
of $187,155 and an increase to additional paid-in capital for the full amount of $285,810. The warrants vested upon issuance and
expire on March 17, 2019. Kevin A. Richardson II and A. Michael Stolarski, both members of the Company’s board of directors
and existing shareholders of the Company, were issued 640,000 and 200,000 warrants, respectively. John Nemelka, Alan Rubino and
Maj-Britt Kaltoft, members of the Company’s board of directors, were each issued 200,000 warrants. Lisa E. Sundstrom, an
officer of the Company was issued 440,000 warrants as well as other employees of the Company. The Class K Warrants and the Series
A Warrants are derivative financial instruments. The estimated fair value of the Class K Warrants at the date of grant was
$36,989 and recorded as debt discount, which is accreted to interest expense through the maturity date of the related notes
payable, related parties. The estimated fair values of the Series A Warrants and the Series B Warrants at the date of grant were
$557,733 for the warrants issued in conjunction with the 2014 Private Placement and $47,974 for the warrants issued in conjunction
with the 18% Convertible Promissory Notes. The fair value of the Series A Warrants and Series B Warrants were recorded as equity
issuance costs in 2014, a reduction of additional paid-in capital. The Series B Warrants expired unexercised in March 2015. The estimated fair values were determined
using a binomial option pricing model based on various assumptions. The Company’s derivative liabilities have
been classified as Level 3 instruments and are adjusted to reflect estimated fair value at each period end, with any decrease
or increase in the estimated fair value being recorded in other income or expense accordingly, as adjustments to the fair value
of derivative liabilities. Various factors are considered in the pricing models the Company uses to value the warrants, including
the Company’s current common stock price, the remaining life of the warrants which ranged from 0.21 to 8.6 years, the volatility
of the Company’s common stock price which ranged from 112% to 134%, and the risk-free interest rate which ranged from 2.43%
to 2.64% for the year ended December 31, 2018. The remaining life of the warrants which ranged from 1.21 to 9.6 years, the
volatility of the Company’s common stock price which ranged from 109% to 133%, and the risk-free interest rate which ranged
from 1.79% to 2.39% for the year ended December 31, 2017. In addition, as of the valuation dates, management assessed the
probabilities of future financing and other re-pricing events in the binominal valuation models. A summary of the changes in the warrant
liability during the years ended December 31, 2018 and 2017, is as follows:
Class K Series A
Warrants Warrants Total
Warrant liability as of December 31, 2016 $ 884,000 $ 358,120 $ 1,242,120
Issued 200,000 - 200,000
Redeemed - (66,966 ) (66,966 )
Change in fair value 532,000 36,729 568,729
Warrant liability as of December 31, 2017 1,616,000 327,883 1,943,883
Issued - - -
Redeemed - (118,838 ) (118,838 )
Change in fair value (74,000 ) 18,624 (55,376 )
Warrant liability as of December 31, 2018 $ 1,542,000 $ 227,669 $ 1,769,669 |
