Stockholders' Equity | NOTE 15 – 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. Equity Purchase Agreement with Cross & Company On September 18, 2020, the Company entered into an Equity Purchase Agreement with Cross and Company. We have the right to “put,” or sell, up to 8,108,108 shares of our common stock to Cross. Unless terminated earlier, Cross’s purchase commitment will automatically terminate on the earlier of the date on which Cross shall have purchased shares pursuant to the Equity Purchase Agreement for an aggregate purchase price of $6,000,000 or September 18, 2023. The purchase price per share is calculated at a fifteen percent discount of the lowest trading price of the Company’s common stock during the ten days after Cross and Co. receives the shares. On January 4, 2021, the Company issued 109,098 shares of common stock for the conversion of $10,000 convertible notes payable and $272 of related accrued interest at $0.09 per share. On January 12, 2021, the Company issued 175,000 shares of common stock at the price of $0.18 per share in exchange for a settlement of accrued expenses. On January 13, 2021, the Company issued 117,609 shares of common stock for the conversion of $10,000 convertible notes payable and $97 of related accrued interest On January 15, 2021, the Company issued 29,167 shares of common stock at $0.23 a share, to a consultant for business development services. On January 15, 2021, the Company issued 313,972 shares of common stock at the price of $0.19 per share for the purchase of intellectual property based on a five year installment sale. This compensation is included in research and development on the consolidated statement of operations. The issuance was an error and was intended, as per agreement to be 200,000 shares at the floor price of $.30 per share. The Company and the recipient have discussed the cancellation of 113,972 shares which will occur in the second quarter of 2021. On January 28, 2021, the Company sold 388,583 shares of common stock at the purchase price of $0.13 per share for a total purchase price of $51,410. On February 1, 2021, the Company issued 517,674 shares of common stock for the conversion of $45,000 convertible notes payable and $162 of related accrued interest On February 10, 2021, the Company issued 243,688 shares of common stock for the conversion of $20,000 convertible notes payable and $4,200 of related accrued interest On February 10, 2021, the Company issued 697,714 shares of common stock in exchange of cash at $0.17 per share for a total purchase price of $121,577. On February 10, 2021, the Company issued 3,500,000 shares of common stock in exchange of cash at $0.10 per share for a total purchase price of $350,000. On February 22, 2021, the Company issued 715,893 shares of common stock in exchange of cash at $0.16 per share for a total purchase price of $115,617. On February 26, 2021, the Company issued 1,050,045 shares of common stock in exchange of cash at $0.09 per share for a total purchase price of $90,146. O n March 2, 2021, the Company issued 520,000 shares of common stock at the price of $0.10 per share in exchange for a settlement of accrued expenses. On March 4, 2021, the Company issued 320,833 shares of common stock at $0.23 a share, to a consultant for business development services. On March 12, 2021, the Company issued its CEO 692,308 shares of common stock at $0.13 a share in lieu of $90,000 of deferred salary. On March 25, 2021, the Company issued 657,394 shares of common stock in exchange of cash at $0.14 per share for a total purchase price of $56,437. Stock Options 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. On May 18, 2020, the Company granted options to purchase 75,000 shares of common stock at a price of $0.51 per share to a consultant 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 twelve (12) months. These options were valued at $34,260 using a Black-Scholes Options Pricing Model. On September 14, 2020 and December 24, 2020, the Company granted options to purchase 250,000 shares of common stock, respectively, at a price of $0.84 and $0.20 per share, respectively, to a consultant 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 twelve (12) months. These options were valued at $180,950 using a Black-Scholes Options Pricing Model. On September 23, 2020, the Company granted options to purchase 200,000 shares of common stock at a price of $0.80 per share to a consultant, who is a related party, 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 twenty four (24) months. These options were valued at $109,060 using a Black-Scholes Options Pricing Model. On December 28, 2020, the Company granted options to purchase 200,000 shares of common stock at a price of $0.18 per share to a consultant 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 twelve (12) months. These options were valued at $26,720 using a Black-Scholes Options Pricing Model. On March 12, 2021, the Company granted options to purchase 7,350,000 shares of common stock at a price of $0.13 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 vested on the grant day, and the remainder of the options vest equally over thirty-six months starting March 12, 2021. These options were valued at $732,795 using a Black-Scholes Options Pricing Model. On March 12, 2021, the Company granted options to purchase 200,000 shares of common stock at a price of $0.13 per share to a certain member of the Company’s corporate advisory board, as governed under agreement. One quarter of these options vested on the grant day, and the remainder of the options vest equally over twenty four months thereafter. These options were valued at $19,940 using a Black-Scholes Options Pricing Model. The remaining expense outstanding through March 12, 2024 is $2,079,225. For the three months ended March 31, 2021 and 2020, the Company recorded $382,473 and $0, respectively, as stock based compensation which is included in the general and administrative expenses in the condensed consolidated statement of operations and $71,477 and $0, respectively, as research and development expense. 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 $0.13 – 0.84 Exercise price $0.13 – 2.00 Expected volatility 86 – 138% Expected term (in years) 5.50 – 6.50 Risk-free interest rate 0.64 – 1.73% Expected dividend yields — On August 14, 2019, the Board authorized the Company’s 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. There were initially 7,500,000 shares of Company common stock authorized for issuance under our 2019 Plan. On May 4, 2020, the Company amended its 2019 Plan to increase the number of shares of Company common stock authorized for issuance thereunder to 11,500,000 shares. On March 12, 2021, the Company executed a second amendment to the 2019 Plan to (i) replace all references to “Kannalife, Inc.,” the Company’s former name, to “Neuropathix, Inc.,” and (ii) increase the number of shares of Company common stock authorized for issuance thereunder 20,000,000 shares (the “Second Plan Amendment”). The Second Plan Amendment was approved by the Company’s Board of Directors on March 12, 2021. The Second Plan Amendment remains subject to shareholder approval, which the Company shall undertake to obtain as soon as reasonably practicable, but in no event later than one year from the amendment date. In the event that the Company does not obtain the requisite shareholder approval of the Second Plan Amendment within one year, the Second Plan Amendment shall not be effective. As of March 31, 2021, there were 13,000,000 shares of Company common stock issued and outstanding under the 2019 Plan, as amended. The following is a summary of outstanding and exercisable options: Numbers of Options Weighted Avg Exercise Price Weighted Avg Remaining Years Outstanding as of December 31,2020 7,125,000 $ 0.58 9.30 Granted 7,550,000 0.13 9.95 Exercised — — — Forfeited — — — Expired — — — Outstanding as of March 31,2021 14,675,000 $ 0.35 9.52 Outstanding as of March 31, 2021, vested 5,898,177 $ 0.45 9.28 Warrants 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. During the first quarter of 2021, the anti-dilution clause was triggered and the exercise price was reset to $0.09 resulting in the number of warrants to be increased to 1,696,838. The warrants were deemed as a derivative liability and was recorded as a debt discount at date of issuance. See Note 10. On February 10, 2021, the Company entered into a letter agreement with Lyons Capital, pursuant to which the Company agreed to issue and sell 3,500,000 shares of the Company’s common stock, par value $0.0001 per share, and two warrants to purchase an aggregate of 3,500,000 additional shares of Common Stock, the terms of such warrants are further discussed below, for an aggregate purchase price of $1,207,500. The first warrant grants Lyons Capital the right to purchase up to 1,750,000 shares of common stock at an exercise price of $0.22 per share. The second warrant grants Lyons Capital the right to purchase up to an additional 1,750,000 shares of common stock at an exercise price of $0.27 per share. The warrants are exercisable immediately, will expire five years from the date of issuance, and contain customary provisions allowing for adjustment to the exercise price and number of shares of common stock issuable upon exercise in the event of any stock dividend, recapitalization, reorganization, reclassification, or similar transaction. Lyons Capital has the right to exercise the warrants at any time; provided, however, that subject to limited exceptions, Lyons Capital may not exercise any portion of the warrants if Lyons Capital, together with any of its affiliates, would beneficially own in excess of 4.99% of the number of shares of the Company’s common stock outstanding immediately after giving effect to such exercise. The following is a summary of outstanding and exercisable warrants: Number of Shares Weighted Average Exercise Price Balance at December 31, 2020 1,289,343 $ 0.18 Issued 4,194,161 0.25 Expired — — Balance at March 31, 2021 5,483,504 $ 0.20 At March 31, 2021, 5,483,504 warrants for common stock were exercisable and the intrinsic value of these warrants was $33,258 and the weighted average remaining contractual life for warrants outstanding was 4.51 years. |