Shareholders' Equity | NOTE 4 – Shareholders’ Equity 2020 Purchase Agreement and Registration Rights Agreement with Aspire Capital – On June 30, 2020, the Company entered into a Purchase Agreement (“2020 Purchase Agreement”) with Aspire Capital, which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $30.0 million of the Company’s ADS, with each ADS representing one hundred (100) ordinary shares, during a 30-month period beginning on the effective date of a registration statement related to the transaction. Concurrently with entering into the 2020 Purchase Agreement, the Company also entered into a registration rights agreement with Aspire Capital, in which the Company agreed to file one or more registration statements, as permissible and necessary to register under the Securities Act of 1933, as amended (the “Securities Act”), the sale of the Company’s securities that have been and may be issued to Aspire Capital under the 2020 Purchase Agreement. Under the 2020 Purchase Agreement, after the SEC declared effective the registration statement referred to above (which occurred in July 2020), on any trading day selected by the Company, the Company has the right, in its sole discretion, to present Aspire Capital with a purchase notice (each, a “Purchase Notice”), directing Aspire Capital (as principal) to purchase up to 150,000 ADSs per business day and up to $30.0 million of the Company’s ADSs in the aggregate at a per share price (the “Purchase Price”) equal to the lesser of: ● the lowest sale price of the Company’s ADSs on the purchase date; or ● the arithmetic average of the three ( 3 ) lowest closing sale prices for the ADSs during the ten ( 10 ) consecutive business days ending on the business day immediately preceding such Purchase Date (to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split, reverse stock split or other similar transaction). NOTE 4 – Shareholders’ Equity (cont.) In addition, on any date on which the Company submits a Purchase Notice to Aspire Capital in an amount of 150,000 ADSs, the Company also has the right, in its sole discretion, to present Aspire Capital with a volume-weighted average price purchase notice (each, a “VWAP Purchase Notice”) directing Aspire Capital to purchase an amount of ADSs equal to up to 30% of the aggregate shares of the Company’s ADSs traded on its principal market on the next trading day (the “VWAP Purchase Date”), subject to a maximum number of 250,000 ADSs. The purchase price per share pursuant to such VWAP Purchase Notice is generally 97% of the volume-weighted average price for the Company’s ADSs traded on its principal market on the VWAP Purchase Date. The Purchase Price will be adjusted for any reorganization, recapitalization, non-cash dividend, stock split, or other similar transaction occurring during the period(s) used to compute the Purchase Price. The Company may deliver multiple Purchase Notices and VWAP Purchase Notices to Aspire Capital from time to time during the term of the Purchase Agreement, so long as the most recent purchase has been completed. The 2020 Purchase Agreement provides that the Company and Aspire Capital shall not effect any sales under the Purchase Agreement on any purchase date where the closing sale price of the Company’s ADSs is less than $0.25. Additionally, governing law in the United Kingdom, where the Company is incorporated, requires a minimum payment per ADS to be issued pursuant to a purchase notice equal to the nominal value of an ADS (i.e., $0.0001). There are no trading volume requirements or restrictions under the Purchase Agreement, and the Company will control the timing and amount of sales of the Company’s ADSs to Aspire Capital. Aspire Capital has no right to require any sales by the Company, but is obligated to make purchases from the Company as directed by the Company in accordance with the Purchase Agreement. There are no limitations on use of proceeds, financial or business covenants, restrictions on future fundings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement. In accordance with ASC 815-40-15, Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock Derivatives and Hedging. In consideration for entering into the 2020 Purchase Agreement, the Company issued to Aspire Capital 40,760,900 ordinary shares of the Company (the “2020 Commitment Shares”) which had a fair value of approximately $900,000. Since the Company has determined that the 2020 Purchase Agreement was considered a freestanding put option derivative in accordance with ASC 815 Derivatives and Hedging During the twelve months ended December 31, 2020, the Company sold to Aspire Capital 460,758,800 ordinary shares of the Company for gross proceeds of approximately $6,000,000. During the twelve months ended December 31, 2021, the Company sold to Aspire Capital 117,647,100 ordinary shares of the Company for gross proceeds of $2,000,001. As of June 30, 2022, approximately $22 million of the original purchase commitment of $30 million remains available under the facility. NOTE 4 – Shareholders’ Equity (cont.) 2021 Private Placements - December 2021 Registered Direct Offering NOTE 4 – Shareholders’ Equity (cont.) March 2022 Registered Direct Offering Warrants issued in 2021 and 2022 The Company accounts for warrants issued to investors and a placement agent after December 8, 2020 as Additional paid-in capital within Shareholders’ equity on the Consolidated Balance Sheets and measured their fair values at their grant date with no subsequently re-measuring at each reporting period. The Company has determined that, at the time of their issuance, the July 2021 Warrants, the December 2021 Warrants as well as the March 2022 Warrants met the requirements for classification as equity under ASC 815-40-25. The costs directly attributable to realizing proceeds of issuing ADSs such as placement agent fees, commissions, legal and accounting fees pertaining to the financing and other external, incremental fees and expenses paid to advisors are recognized in Additional paid-in capital of the Shareholders’ Equity on the Consolidated Balance Sheets in accordance with ASC 814-40. At July 16, 2021, the fair value of the July 2021 Warrants was $231,063 and was recorded within Additional paid-in capital of Shareholders’ Equity. At January 4, 2022, the fair value of the December 2021 Warrants was $2,605,577 and was recorded within Additional paid-in capital of Shareholders’ Equity. At March 10, 2022, the fair value of the March 2022 Warrants was $3,693,622 and was recorded within Additional paid-in capital of Shareholders’ Equity. Below are the assumptions used for the fair value calculations of the warrants issued in 2021: July 16, 2021 Standard deviation 110.00 % Annual risk-free interest rate 0.79 % Required return on equity 17.00 % Expected life in years 4.98 Annual turnover rate 0.00 % Period risk-free rate 0.07 % NOTE 4 – Shareholders’ Equity (cont.) Below are the assumptions used for the fair value calculations of the warrants issued in 2022: January 4, March 10, 2022 2022 Expected dividend yield 0 % 0 % Expected volatility 110 % 110 % Risk-free interest 1.4 % 1.9 % Expected life 5.0 5.0 Balance Warrants Balance Warrants Balance Exercise December 31, Issued December 31, Issued June 30, Description Price 2020 in 2021 2021 in 2022 2022 2019 Investor Warrants $ 3.00 1,184,213 - 1,184,213 - 1,184,213 2019 Placement Warrants $ 2.85 177,629 - 177,629 - 177,629 2020 Investor Warrants $ 2.20 2,797,636 - 2,797,636 - 2,797,636 2020 Placement Warrants $ 2.55 449,623 - 449,623 - 449,623 July 2021 Placement Agent Warrants $ 2.32 - 398,384 398,384 - 398,384 December 2021 Investor Warrants $ 1.65 - - - 2,155,507 2,155,507 December 2021 Placement Agent Warrants $ 1.75 - - - 172,441 172,441 March 2022 Investor Warrants $ 1.40 - - - 3,720,409 3,720,409 March 2022 Placement Agent Warrants $ 1.50 - - - 297,633 297,633 4,609,101 398,384 5,007,485 6,345,990 11,353,475 Share Based Compensation Share option plan In accordance with the Company’s 2014 Equity Incentive Plan (the “Plan”), the number of shares that may be issued upon exercise of options under the Plan shall not exceed 890,000,000 ordinary shares. At June 30, 2022, 510,188,415 ordinary shares are available for future issuance under the Plan. The option plan is administered by the Company’s Board of Directors and grants are made pursuant thereto by the compensation committee. The per share exercise price for the shares to be issued pursuant to the exercise of an option shall be such price equal to the fair market value of the Company’s ordinary shares on the grant date and set forth in the individual option agreement. Options expire ten years after the grant date and typically vest over one The following is a summary of the Company’s share option activity and related information for employees and directors for the period ended June 30, 2022: Weighted average Weighted Weighted remaining average average contractual Aggregate Number exercise grant date term intrinsic of shares price fair value (in years) value Options outstanding as of January 1, 2022 142,949,035 $ 0.07 6.8 - Changes during the period: Granted 253,134,400 $ 0.01 0.01 9.7 - Forfeited 16,271,850 $ 0.32 0.21 3.2 - Options outstanding at June 30, 2022 379,811,585 $ 0.02 8.7 - Exercisable options at June 30, 2022 93,802,185 $ 0.05 6.2 - NOTE 4 – Shareholders’ Equity (cont.) The Company measures compensation cost for all share-based awards at fair value on the date of grant and recognizes compensation expense in general administrative and research and development expenses within its unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) using the straight-line method over the service period over which it expects the awards to vest. The Company estimates the fair value of all time-vested options as of the date of grant using the Black-Scholes option valuation model, which was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions, including the expected share price volatility, which is calculated based on the historical volatility of peer companies. The Company uses a risk-free interest rate, based on the U.S. Treasury instruments in effect at the time of the grant, for the period comparable to the expected term of the option. Given its limited history with share option grants and exercises, the Company uses the “simplified” method in estimating the expected term, the period of time that options granted are expected to be outstanding, for its grants. The Company classifies its stock-based payments which are settled in ordinary shares as equity-classified awards. The Company measures equity-classified awards at their grant date fair value and does not subsequently re-measure them. Compensation costs related to equity-classified awards generally are equal to the grant date fair value of the award amortized over the vesting period of the award. Estimates of fair values are not intended to predict actual future events or the reasonableness of the original estimates of fair value made by the Company. Below are the assumptions used for the options granted during the six months ended June 30, 2022: June 30, 2022 Expected dividend yield 0 % Expected volatility 72.8 - 90.4 % Risk-free interest 1.5% - 3.1 % Expected life 5.5-6.3 years The following is a summary of the Company’s share options granted separated into ranges of exercise price as of June 30, 2022: Weighted Remaining average Weighted contractual exercise average Weighted life (years price ($ Exercise remaining average for for price Options contractual exercise Options exercisable exercisable (range) ($) outstanding life (years) price ($) exercisable options) options) 0.01 244,634,400 9.7 0.01 - - - 0.02 101,950,000 7.7 0.02 60,575,000 7.1 0.02 0.03-0.05 14,450,000 5.2 0.04 14,450,000 5.2 0.04 0.12-0.32 18,777,185 3.8 0.16 18,777,185 3.8 0.16 379,811,585 93,802,185 Restricted Stock Units Restricted stock units (RSUs) are stock-based awards granted to recipients with specified vesting provisions. In the case of RSUs, common stock is generally delivered on or following satisfaction of vesting conditions. The Company issues RSUs to management that vest solely based on the recipient’s continued service over time, primarily with a two NOTE 4 – Shareholders’ Equity (cont.) The Company estimates the fair value of its time-based RSUs on the date of grant based on the Company’s closing stock price at the time of grant. The following tables summarize the activity of the Company’s unvested RSUs for the six months ended June 30, 2022: Weighted average grant date Intrinsic Shares/ fair value value Units per share per share Outstanding as of January 1, 2022 - - Changes during the period: Granted 21,475,400 $ 0.01 Vested - - Forfeited - - Outstanding at June 30, 2022 21,475,400 $ 253,410 $ 214,754 During the three months ended June 30, 2022 and 2021, the Company recorded approximately $122,856 and $82,102, respectively, in stock-based compensation expenses for employees and directors. During the six months ended June 30, 2022 and 2021, the Company recorded approximately $221,692 and $166,994, respectively, in stock-based compensation expenses for employees and directors. At June 30, 2022, there was approximately $2,619,879 of unrecognized compensation cost related to unvested share-based compensation arrangements granted under the Company’s share option plans which the Company expects to recognize over a weighted average of 3.5 years. |