| Stockholders' Deficit | NOTE 14 – STOCKHOLDERS’ DEFICIT Series A Preferred Stock Effective May 3, 2018, the Company’s
Board of Directors authorized and designated 75 shares of the Company’s Preferred Stock as Series A Preferred Stock. Each
share of the Series A Preferred Stock is entitled to a liquidation preference of $1,000 per share and is convertible into 1,000
shares of the Company’s common stock. The holders of a majority of the Series A Preferred Stock are entitled to elect up
to four (4) directors to the Company’s board of directors and have preferential rights in regard to the election of Series
A directors. In all other voting matters, the holders of Series A Preferred Stock are entitled to cast 1,000 votes per share. Series B Preferred Stock Effective May 3, 2018, the Company’s
Board of Directors authorized and designated 75 shares of the Company’s Preferred Stock as Series B Preferred Stock. Each
share of the Series B Preferred Stock is entitled to a liquidation preference of $1,000 per share and is convertible into 1,000
shares of the Company’s common stock. The holders of a majority of the Series B Preferred Stock are entitled to elect up
to three (3) directors to the Company’s board of directors and have preferential rights in regard to the election of Series
B directors. In all other voting matters, the holders of Series B Preferred Stock are entitled to cast 1,000 votes per share. Common Stock The Company is authorized to issue 200,000,000
shares of common stock, par value of $0.0001 per share. All common stock shares have equal voting rights, are non-assessable and
have one vote per share. Voting rights are not cumulative and, therefore, the holders of more than 50% of the common stock could,
if they choose to do so, elect all of the directors of the Company, subject to the rights of the preferred stockholders. On April 28, 2020, the Company executed an
intellectual property rights purchase and transfer agreement whereby this agreement grants certain IP to the Company. In connection
with the execution of this agreement, the Company issued 25,000 shares of the Company’s common stock at $0.53 a share to
the research organization. As of June 30, 2020 and December 31, 2019,
there were 74,250,151 and 74,225,141 shares of common stock issued and outstanding, respectively. Stock Options On September 1, 2017, the Company entered
into an agreement for consulting services. As compensation the Company granted options to purchase 100,000 shares of common stock
at a price of $2.00 per share and are exercisable for five years. The stock option vests in equal monthly installments of 24 months.
These options were valued at $20,154 using a Black-Scholes options pricing model. For the three months ended June 30, 2020 and
2019, the Company recorded $0 and $2,519, respectively. For the six months ended June 30, 2020 and 2019, the Company recorded
$0 and $5,038, respectively, as stock based compensation which is included in the general and administrative expenses in the condensed
consolidated statement of operations. The remaining expense outstanding for future periods is $0. On May 4, 2020, the Company granted options
to purchase 6,050,000 shares of common stock at a price of $0.57 per share to certain directors and employees of the Company
(including our named executive officers) and are exercisable for ten years. One quarter of these options vest on the grant
day, and the remainder of the options vest equally over thirty six (36) months starting January 1, 2020. These options were valued
at $3,152,050 using a Black-Scholes Options Pricing Model. For the three and six months ended June 30, 2020, the Company recorded
$947,569, respectively, as stock-based compensation and $234,450, respectively, as research and development expense, which are
included in the general and administrative and research and development expenses in the condensed consolidated statement of operations.
The remaining expense outstanding through December 31, 2022 is $1,970,031. The fair value of the options is estimated
using a Black-Scholes Options Pricing Model with the following assumptions:
Market value of common stock on issuance date $0.40 - 0.57
Exercise price $0.57 - 2.00
Expected volatility 100% - 138 %
Expected term (in years) 5 - 10
Risk-free interest rate 0.64% – 1.73
Expected dividend yields — On August 14, 2019, the Board authorized the
Kannalife, Inc. 2019 Equity Incentive Plan (the “2019 Plan”) in order to facilitate the grant of cash and equity incentives
to directors, employees (including our named executive officers) and consultants of our company and certain of its affiliates and
to enable our company and certain of its affiliates to obtain and retain services of these individuals, which is essential to our
long-term success. Our 2019 Plan allows for the grant of a variety of equity vehicles to provide flexibility in implementing equity
awards, including incentive stock options, non-qualified stock options, restricted stock grants, unrestricted stock grants and
restricted stock units. A total of 7,500,000 shares of common stock were authorized under the 2019 Plan, which was amended
to 11,500,000 shares of common stock, for which as of June 30, 2020 a total of 6,050,000 are outstanding. The following is a summary of outstanding and
exercisable options:
Number of Shares
Weighted Average Exercise Price
Balance at December 31, 2019 100,000 $ 2.00
Issued 6,050,000 0.57
Expired — —
Balance at June 30, 2020 6,150,000 $ 0.59 At June 30, 2020, 2,368,750 options for common
stock were exercisable and the intrinsic value of these options was $1,202,438. At June 30, 2020, the weighted average remaining
contractual life was 9.52 years for options outstanding. Warrants In December 2019, the Company entered into
a Securities Purchase Agreement with an investor pursuant to which the Company agreed to sell the investor a $100,000 convertible
note bearing interest at 8% per annum. The Company also sold warrants to the investors to purchase up to an aggregate of 100,000
shares of common stock, with an exercise term of three (3) years, at a per share purchase price of one hundred twenty five percent
(125%) of the voluntary or involuntary conversion price of the Company’s 8% convertible note. The warrants were deemed as
a derivative liability and was recorded as a debt discount at date of issuance. See Note 10. In January and February 2020, the Company entered
into a Securities Purchase Agreement with investors pursuant to which the Company agreed to sell the investors a $100,000 and $50,000
convertible note bearing interest at 8% per annum, respectively. The Company also sold warrants to the investors to purchase up
to an aggregate of 100,000 and 50,000 shares of common stock, respectively, with an exercise term of three (3) years, at a per
share purchase price of one hundred twenty five percent (125%) of the voluntary or involuntary conversion price of the Company’s
8% convertible note. The warrants were deemed as a derivative liability and was recorded as a debt discount at date of issuance.
See Note 10. On June 8, 2020, the Company entered into a
Securities Purchase Agreement, dated as of June 2, 2020 (the “Purchase Agreement”) with an accredited investor pursuant
to which the investor purchased a 12% unsecured convertible promissory note (the “12% Note”) from the Company. In connection
with the Purchase Agreement and the 12% Note, the Company issued a common stock purchase warrant to purchase 36,666 shares of the
Company’s common stock at $0.75 per share which may be exercised by cashless exercise, exercisable for a period of three
years. The warrants were deemed as a derivative liability and was recorded as a debt discount at date of issuance. See Note 10. On June 23, 2020, the Company entered into
a Securities Purchase Agreement, dated as of June 19, 2020 with an accredited investor pursuant to which the Investor purchased
a 12% convertible promissory note from the Company. In connection with the securities purchase agreement and the note, the Company
issued two common stock purchase warrants each to purchase 115,385 shares of the Company’s common stock at $1.30 per share
which may be exercised by cashless exercise, exercisable for a period of five years. One of the warrants is to be issued only in
the case of default on the note. The warrants were deemed as a derivative liability and was recorded as a debt discount at date
of issuance. See Note 10. The following is a summary of outstanding and
exercisable warrants:
Number of Shares
Weighted Average Exercise Price
Balance at December 31, 2019 100,000 $ 3.26
Issued 302,051 1.71
Expired — —
Balance at June 30, 2020 402,051 $ 1.11 At June 30, 2020, 402,051 warrants for common
stock were exercisable and the intrinsic value of these warrants was $18,146. At June 30, 2020, the weighted average remaining
contractual life was 3.25 years for warrants outstanding. |
