| Stockholders' Equity | NOTE 14 — STOCKHOLDERS’ EQUITY Preferred Stock In March 2013, by approval of the majority
of the stockholders, the Company was authorized to issue 10,000,000 shares of “Blank Check” preferred stock, par value
$0.00001 per share. On December 31, 2014, 3,000,000 shares were designated as authorized Series A Convertible Preferred Stock (“Series
A Preferred Stock”). On February 11, 2015, 3,000,000 shares were designated as authorized Series B Convertible Preferred
Stock (“Series B Preferred Stock”). On February 24, 2015, 3,000,000 shares were designated as authorized Series C Convertible
Preferred Stock (“Series C Preferred Stock”). On February 5, 2016, the Company terminated the Series A Preferred Stock
and Series C Preferred Stock and increased the number of designated shares of Series B Preferred Stock to 5,000,000. On April 25,
2016, 5,000,000 shares were designated as authorized Series D Convertible Preferred Stock (“Series D Preferred Stock”).
On December 6, 2016, the Company terminated the Series B Preferred Stock. In addition, on December 21, 2016, 5,000 shares were
designated as authorized Series E Convertible Preferred Stock (“Series E Preferred Stock”). Series D Convertible Preferred Stock Stated Value The stated value of the Series D Preferred
Stock is $1.00 per share. Ranking The Series D Preferred Stock shall rank junior
to the Series B Preferred Stock, $0.00001 par value per share, of the Company in respect of the preferences as to dividends, distributions
and payments upon the liquidation, dissolution or winding up of the Company. The Series D Preferred Stock will rank senior to all
of the Company’s common stock and other classes of capital stock with respect to dividend rights and/or rights upon distributions,
liquidation, dissolution or winding up of the Company, other than to the Series B Preferred Stock and any class of parity stock
that the holders of a majority of the outstanding shares of Series D Preferred Stock consent to the creation of. Liquidation Preference of Preferred Stock Upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company, before the payment of any amount to the holder of shares of junior stock, but pari-passu
with any parity stock, the holders of Preferred Stock are entitled to receive the amount equal to the greater of (i) the stated
value of the Series D Preferred Stock or (ii) the amount the holder of Series D Preferred Stock would receive if such holder converted
the Series D Preferred Stock into common stock immediately prior to the date of the liquidation event, including accrued and unpaid
dividends. Conversion Rights of Preferred A holder of Series D Preferred Stock shall
have the right to convert the Series D Preferred Stock, in whole or in part, upon written notice to the Company at a conversion
price equal to $1.20 per share, which is adjusted for any share dividend, share split, share combination, reclassification or similar
transaction that proportionately decreases or increases the common stock. Voting Rights Except with respect to certain material changes
in the terms of the Series D Preferred Stock and certain other matters, and except as may be required by Delaware law, holders
of Series D Preferred Stock shall have no voting rights. The approval of a majority of the holders of the Series D Preferred Stock
is required to amend the Certificate of Designations. Series E Convertible Preferred Stock The board of directors of the Company has designated
up to 5,000 shares of the 10,000,000 authorized shares of preferred stock as Series E Preferred Stock. When issued, the shares
of Series E Preferred Stock will be validly issued, fully paid and non-assessable. Each share of Series E Preferred Stock will
have a stated value of $1,000 per share. In connection with the December 2016 financing, the Company issued 2,400 shares of Series
E Preferred Stock which was immediately converted into 1,200,000 shares of common stock after closing. Rank. The Series E Preferred Stock will rank on parity
to our common stock. Conversion. Each share of the Series E Preferred is convertible
into shares of the Company’s common stock (subject to adjustment as provided in the related certificate of designation of
preferences, rights and limitations) at any time at the option of the holder at a conversion price of not less than 100% of the
public offering price of the common stock. Holders of Series E Preferred Stock will be prohibited from converting Series E Preferred
Stock into shares of common stock if, as a result of such conversion, the holder, together with its affiliates, would own more
than 4.99% of the total number of shares of common stock then issued and outstanding. However, any holder may increase or decrease
such percentage to any other percentage not in excess of 9.99%, provided that any increase in such percentage shall not be effective
until 61 days after such notice to the Company. Liquidation Preference. In the event of the Company’s liquidation,
dissolution or winding-up, holders of Series E Preferred Stock will be entitled to receive an amount equal to the stated value
per share before any distribution shall be made to the holders of any junior securities, and then will be entitled to receive the
same amount that a holder of common stock would receive if the Series E Preferred Stock were fully converted into shares of common
stock at the conversion price (disregarding for such purposes any conversion limitations) which amounts shall be paid pari-passu
with all holders of common stock. Voting Rights. Shares of Series E Preferred Stock will generally
have no voting rights, except as required by law and except that the affirmative vote of the holders of a majority of the then
outstanding shares of Series E Preferred Stock is required to, (a) alter or change adversely the powers, preferences or rights
given to the Series E Preferred Stock, (b) amend the Company’s certificate of incorporation or other charter documents in
any manner that materially adversely affects any rights of the holders, (c) increase the number of authorized shares of Series
E Preferred Stock, or (d) enter into any agreement with respect to any of the foregoing. Dividends. Shares of Series E Preferred Stock will not
be entitled to receive any dividends, unless and until specifically declared by the Company’s board of directors. The holders
of the Series E Preferred Stock will participate, on an as-if-converted-to-common stock basis, in any dividends to the holders
of common stock. Redemption. The Company is not obligated to redeem or repurchase
any shares of Series E Preferred Stock. Shares of Series E Preferred Stock are not otherwise entitled to any redemption rights
or mandatory sinking fund or analogous fund provisions. Common Stock The Company is authorized to issue up to 100,000,000
shares of Common Stock, $0.00001 par value per share. As of December 31, 2019, and 2018, the Company had 21,551,333 and 1,877,697
shares of common stock outstanding, respectively. On April 30, 2019, our stockholders approved a reverse stock split of our outstanding
Common Stock . In accordance therewith, on May 13, 2019, a 1-for-10 reverse stock split of our outstanding Common Stock became
effective for the trading of our Common Stock. Unless otherwise noted, impacted amounts and
share information included in the financial statements and notes thereto, and elsewhere in this Form 10-K have been retroactively
adjusted for the reverse stock split as if such reverse stock split occurred on the first day of the first period presented. Proportional
adjustments have been made to the exercise prices of the Company’s outstanding warrants, stock options, and to the number
of shares issued and issuable under the Company’s Stock Incentive Plans. Certain amounts in the financial statements, the
notes thereto, and elsewhere in this Form 10-K, may be slightly different than previously reported due to rounding of fractional
shares as a result of the reverse stock split. Common Stock Issuances For the year ending December 31, 2019 November 2019 Financing On November 27, 2019, the Company closed an
equity financing for 3,201,200 shares of common stock, warrants to purchase 11,893,100 shares of common stock and, warrants to
purchase 11,320,725 shares of Common Stock. The Company received gross proceeds of approximately $3,988,000 from the offering,
before deducting underwriting-related fees and other offering expenses payable by the Company. July 2019 Financing On July 11, 2019, the Company closed an equity
financing for 1,550,000 shares of common stock, warrants to purchase 6,000,000 shares of common stock and, 4,450,000 pre-funded
warrants to purchase common stock in place of common stock. The Company received gross proceeds of approximately $11,996,000 from
the offering, before deducting underwriting-related fees and other offering expenses payable by the Company. Other Stockholders’ Equity Transactions
During the year ended December 31, 2019, the
Company:
● Issued 14,419,226 shares of common stock upon the exercise of (i) 37,701 common stock warrants at $4.50 per share (ii) the exercise of 8,200,000 pre-funded warrants at $0.001 per share and, (iii) the exercise of 6,181,525 cashless warrants for net proceeds of $177,900.
● Issued 19,632 shares of common stock for employees, directors, consultants, and other professionals for a total fair value of $70,625. The determination of the fair value of the common stock is at the time of issuance.
● Issued 158,130 shares of common stock in satisfaction of amounts previously deferred for employee/consultant agreements in the amount of $223,967 and the liability equaled the fair value of the shares issued.
● Issued 12,469 shares of common stock in satisfaction of related party obligations valued at $31,466. The determination of the fair value of the common stock is at the time of issuance and the liability equaled the fair value of the shares issued.
● Issued 328,932 shares of common stock in satisfaction of principal and interest for convertible promissory notes valued at $528,000. Of which $97,675 was for interest, $397,808 was for principal with a loss of $32,982 recognized on conversion. The determination of the fair value of the common stock is at the time of issuance.
● Recognized $2,069,158 of compensation costs associated with outstanding stock options recorded in general and administrative expenses.
● Recognized $23,638 related to the intrinsic value of common stock warrants with embedded derivative liabilities, transferred into additional paid-in capital. For the year ending December 31, 2018 The Company transacted the following:
● issued 2,083,136 shares of its common stock for employees, directors, consultants and other professionals for a total value of $1,793,336. The value of the common stock issued was based on the fair value of the stock at the time of issuance.
● recognized $2,069,158 of compensation costs associated with outstanding stock options recorded in general and administrative expenses.
● issued 429,585 shares of its common stock in satisfaction of related party obligations valued at $240,000. The value of the common stock issued was based on the fair value of the stock at the time of issuance.
● issued 12,232 shares of common stock in satisfactions of amounts previously deferred for employee/consultant agreements in the amount of $19,081.
● issued 276,796 shares of its common stock in satisfaction of accrued interest on a convertible promissory note valued at $180,000. The value of the common stock issued was based on the fair value of the stock at the time of issuance.
● reviewed the conversion features embedded in the May 2018 convertible promissory notes. We evaluated the beneficial conversion feature (“BCF”) and calculated a relative fair value in the amount of $193,877. On October 9, 2018, the Company evaluated a modification of the embedded conversion option and recognized an increase in the value of the BCF in the amount of $90,050. The amounts recognized are recorded as a charge to debt discount and offset as a credit to additional paid-in capital. The amounts charged to debt discount are amortized to interest expense using the interest method.
● issued 775,184 shares of its common stock valued at $2,338,758 as payment towards outstanding convertible promissory notes. The value of the common stock issued was based on the fair value of the stock at time of issuance.
● issued 302,655 shares of its common stock valued at $160,407 as the compensatory fee incurred for the October 9, 2018 debt modification. The value of the common stock issued was based on the fair value of the stock at time of issuance. Stock Options — Equity Incentive
Plans The Company’s stock option plans provide
for the grant of options to purchase shares of common stock to officers, directors, other key employees, and consultants. The purchase
price may be paid in cash or “net settled” in shares of the Company’s common stock. In a net settlement of an
option, the Company does not require a payment of the exercise price of the option from the holder but reduces the number of shares
of common stock issued upon the exercise of the stock option by the smallest amount of whole shares that has an aggregate fair
market value equal to or over the aggregate exercise price for the option shares covered by the option exercised. Options generally
vest over a period of three years from the date of grant and expire ten years from the date of grant. The Company has four plans under which they
awarded share-based compensation grants of options to certain directors, employees, and advisors of the Company: the 2013 Stock
Option Plan, 2015 Incentive Compensation Plan, 2016 Incentive Compensation Plan and the 2017 Incentive Compensation Plan. Effective, April 30, 2018, the Board of Directors
by unanimous written consent, approve of the immediate vesting of all remaining options for employees who were terminated as part
of the cost curtailment measures on April 30, 2018, and June 25, 2018. During the years ended December 31, 2019, and
2018, the Company recorded approximately $2,069,000 and $3,728,000, respectively, as stock compensation expense from the amortization
of stock options issued. The weighted average fair value of options
granted during the years ended December 31, 2019 and 2018 was $3.20 and $8.90, respectively. Each option is estimated on the date
of grant, using the Black-Scholes model and the following assumptions (all in weighted averages):
2019 2018
Exercise price $ 3.20 $ 8.90
Volatility 35.15 % 148.71 %
Risk-free interest rate 3.76 % 2.63 %
Expected dividend yield 0 % 0 %
Expected term (years) 1.2 6 The risk-free rate is based on the rate for
the U.S. Treasury note over the expected term of the option. The expected term for employees represents the period that options
granted are expected to be outstanding using the simplified method, as the Company’s historical share option exercise experience
does not provide a reasonable basis upon which to estimate the expected term. For non-employee options, the expected term is the
full term of the option. Expected volatility is based on the average of the weekly share price changes over the shorter of the
expected term or the period from the placement on London Stock Exchange’s Alternative Investment Market to the date of the
grant. As of December 31, 2019, the weighted average
remaining contractual life was 7.5 years for options outstanding and for options exercisable, respectively. The intrinsic value
of options exercisable at December 31, 2019, was $-0-. As of December 31, 2019, the remaining stock
compensation expense is approximately $0.63 million with 1.1 years remaining for the amortization period. The Company estimates
forfeiture and volatility using historical information. The risk-free interest rate is based on the implied yield available on
U.S. Treasury zero-coupon issues over the equivalent lives of the options. The expected life of the options represents the estimated
period using the simplified method. The Company has not paid dividends on its common stock, and no assumption of dividend payment(s)
is made in the model. A summary of the status of the Company’s
stock option plan for the year ended December 31, 2019 is as follows:
Number
Weighted Price
Outstanding, January 1, 2019 585,717 $ 15.50
Options granted 36,500 $ 3.18
Options exercised – $ –
Options cancelled/expired (117,167 ) $ (14.79 )
Outstanding, December 31, 2019 505,050 $ 14.83
Exercisable, December 31, 2019 341,083 $ 15.68
Common stock issuable upon exercise Common stock issuable upon
Range of Options Outstanding (in shares ) Weighted Average Remaining Contractual Life (years) Weighted Average Exercise Options Exercisable (in shares) Weighted Average Remaining Exercisable Contractual Life (years) Weighted Average Exercise Price
$ -0- to $46,202 505,050 7.51 $ 14.83 341,083 7.37 $ 15.68
Common Stock Warrants During the year ended December 31, 2019, the
Company granted 37,437,400 warrants, exercised 13,481,101 warrants, and 15,033 warrants expired. The weighted average exercise
prices of warrants outstanding at December 31, 2019 is $1.10 with a weighted average remaining contractual life of 0.98 years.
The intrinsic value of warrants outstanding at December 31, 2019, was approximately $2,277,000. Additionally, the exercise price
of common stock warrants issued in July 2016, as part of a financing, was adjusted down to $0.265 per share from $1.00 by the terms
of the “ratchet down” provision of the warrant agreement. The following tables sets forth common stock
purchase warrants outstanding as of December 31, 2019:
Weighted Quantity Weighted
Outstanding, December 31, 2018 1,187,181 $ 19.80
Warrants granted 37,437,400 $ 0.90
Warrants exercised (13,481,101 ) $ (2.20 )
Warrants cancelled/expired (15,033 ) $ 53.40
Outstanding, December 31, 2019 25,128,447 $ 1.10
Exercisable, December 31, 2019 25,128,447 $ 1.10 A summary of the status of the Company’s
stock option plans for the year ended December 31, 2019 is as follows:
Common Stock Issuable Upon Exercise of Warrants Outstanding Common Stock Issuable Upon Warrants Exercisable
Range of Exercise Prices Number Outstanding at 12/31/19 Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Number Exercisable at 12/31/19 Weighted Average Exercise Price
$ *0.001 9,143,100 0.91 $ 0.001 9,143,100 $ 0.001
$ **0.265 66,789 1.55 $ 0.265 66,789 $ 0.265
$ 0.292 14,846,800 0.91 $ 0.292 14,846,800 $ 0.292
$ 5.00 4,100 4.54 $ 5.00 4,100 $ 5.00
$ 10.00 320,000 3.41 $ 10.00 320,000 $ 10.00
$ 20.00 651,252 2.02 $ 20.00 651,252 $ 20.00
$ 25.00 83,296 2.47 $ 25.00 83,296 $ 25.00
$ 84.00 2,083 1.82 $ 84.00 2,083 $ 84.00
$ 137.88 10,902 1.38 $ 137.90 10,902 $ 137.90
$ 13,800.00 90 0.14 $ 13,800.00 90 $ 13,800.00
$ 24,000.00 35 0.15 $ 24,000.00 35 $ 24,000.00
25,128,447 .98 $ 1.10 25,128,447 $ 1.10 * represents group of penny warrants **represents group of warrants repriced to $0.265 from the
$1.00 exercise price |
