Temporary Equity and Stockholders' Deficiency | 11. TEMPORARY EQUITY AND STOCKHOLDERS’ DEFICIENCY Series B Preferred Stock The Series B stockholders are entitled to cumulative cash dividends at an annual rate of 8% of the Series B liquidation value (equal to face value of $10 per share), as defined, payable when, as and if declared by the Board of Directors. Cumulative dividends earned by the Series B stockholders were $179,770 and $357,565 for the three and six months ended June 30, 2019, respectively and $157,522 and $313,312 for the three and six months ended June 30, 2018, respectively. During the six months ended June 30, 2018, the Company’s Board of Directors declared dividends in the amount of $474,719. During June 2018, the Company issued 378,193 shares of common stock valued at $0.70 per share, or $264,273, in satisfaction of certain dividends payable and paid cash dividends of $127,818. Dividends payable of $85,223 are included in the current portion of other liabilities at June 30, 2019. Cumulative unpaid dividends in arrears related to the Series B totaled $900,869 and $546,335 as of June 30, 2019 and December 31, 2018, respectively. Common Stock Between February 8, 2019 and March 27, 2019, GGH sold a total of 2,527,857 shares of its common stock to accredited investors for total gross proceeds of $884,750. On March 13, 2019, the Company issued 181,185 shares of common stock at $0.35 per share to employees for the year ended December 31, 2018 of the 401(k) profit sharing plan. Between April 1, 2019 and June 30, 2019, the Company issued 6,071,428 shares of its common stock to accredited investors at $0.35 per share for total gross proceeds of $2,125,000 and issued 83,587 shares of its common stock upon the conversion of 2017 Notes (see Note 8). Accumulated Other Comprehensive Income (Loss) For three and six months ended June 30, 2019, the Company recorded benefits of $357,078 and $365,417, respectively, of foreign currency translation adjustments as accumulated other comprehensive income (loss) and for the three and six months ended June 30, 2018, the Company recorded $(909,557) and $(1,195,166), respectively, of foreign currency translation adjustments as accumulated other comprehensive income (loss), primarily related to fluctuations in the Argentine peso to United States dollar exchange rates. Warrants A summary of warrants activity during the six months ended June 30, 2019 is presented below: Number of Warrants Weighted Average Exercise Price Weighted Average Remaining Life in Years Intrinsic Value Outstanding, December 31, 2018 1,229,630 2.15 Issued Exercised Cancelled (237,464 ) 2.30 Outstanding, June 30, 2019 992,166 $ 2.11 1.5 $ - Exercisable, June 30, 2019 992,166 $ 2.11 1.5 $ - A summary of outstanding and exercisable warrants as of June 30, 2019 is presented below: Warrants Outstanding Warrants Exercisable Exercise Price Exercisable Into Outstanding Number of Warrants Weighted Average Remaining Life in Years Exercisable Number of Warrants $ 2.00 Common Stock 741,879 1.5 741,879 $ 2.30 Common Stock 61,980 0.5 61,980 $ 2.50 Common Stock 188,307 1.7 188,307 Total 992,166 992,166 Stock Options On January 31, 2019, the Company granted five-year options for the purchase of 1,350,000 shares of the Company’s common stock under the 2018 Plan, of which options for the purchase of 1,100,000 shares of the Company’s common stock were granted to certain employees of the Company, options for the purchase of 100,000 shares of the Company’s common stock were granted to certain members of the Board of Directors and options for the purchase of 150,000 shares of the Company’s common stock were granted to consultants. The options had an exercise price of $0.385 per share and vest 25% at the first anniversary of date of grant, with the remaining shares vesting ratably on a quarterly basis over the following three years. The options had an aggregate grant date fair value of $200,092, which will be recognized ratably over the vesting period. The Company has computed the fair value of options granted using the Black-Scholes option pricing model. Assumptions used in applying the Black-Scholes option pricing model during the six months ended June 30, 2019 are as follows: For the Three Months Ended June 30, 2019 2018 Risk free interest rate 2.43 % 2.56 % Expected term (years) 3.6-5.0 5.0 Expected volatility 52 % 43.50 % Expected dividends 0.00 % 0.00 % The weighted average estimated fair value of the stock options granted during the six months ended June 30, 2019 was approximately $0.15 per share. The weighted average estimated fair value of the stock options granted during the six months ended June 30, 2018 was approximately $0.47 per share. No stock options were issued during the three months ended June 30, 2019 or 2018. Pursuant to agreements with certain option holders, on May 13, 2019, the Company canceled options for the purchase of 3,139,890 shares of common stock, which had been granted under the Company’s 2008 Equity Incentive Plan and were exercisable at prices between $2.20 and $2.48 per share, including options for the purchase of 2,109,890 shares of common stock held by the Company’s President & CEO, options for the purchase of 150,000 shares of common stock held by the Company’s CFO, and options for the purchase of 150,000 shares of common stock held by a member of the Company’s board of directors. During the three and six months ended June 30, 2019, respectively, the Company recorded stock-based compensation expense of $68,508 and $226,502, respectively, and during the three and six months ended June 30, 2018, the Company recorded stock-based compensation expense of $205,111 and $388,331, respectively, related to stock option grants, which is reflected as general and administrative expenses in the accompanying condensed consolidated statements of operations. As of June 30, 2019, there was $950,903 of unrecognized stock-based compensation expense related to stock option grants that will be amortized over a weighted average period of 2.82 years. A summary of options activity during the six months ended June 30, 2019 is presented below: Weighted Weighted Average Average Number of Exercise Remaining Intrinsic Options Price Term (Yrs) Value Outstanding, December 31, 2018 9,499,265 1.65 Granted 1,350,000 0.39 Exercised - - Expired (75,000 ) 1.10 Forfeited (3,364,890 ) 2.24 Outstanding, June 30, 2019 7,409,375 $ 1.16 3.0 Exercisable, June 30, 2019 2,849,136 $ 1.93 1.5 The following table presents information related to stock options at June 30, 2019: Options Outstanding Options Exercisable Exercise Price Outstanding Weighted Average Remaining Life Exercisable $ 0.39 1,350,000 - - $ 0.54 1,500,000 - - $ 0.77 1,320,000 3.63 412,501 $ 1.10 1,070,000 3.38 401,260 $ 2.20 1,242,000 1.08 1,117,000 $ 2.48 917,375 0.16 908,375 $ 3.30 10,000 0.94 10,000 7,409,375 1.48 2,849,136 |