| Stockholders' Equity | Note 11 –Stockholders’ Equity On September 15, 2020, the Company completed
a special meeting of stockholders (the “Special Meeting”). At the Special Meeting, the Company’s stockholders,
among other things, (i) approved an amendment to the Company’s Amended and Restated Certificate of Incorporation (the “A&R
Certificate of Incorporation”) to increase the aggregate number of authorized shares of common stock by 200,000,000 shares
from 50,000,000 to 250,000,000 shares; (ii) approved an amendment to the A&R Certificate of Incorporation to reduce the vote
required to amend, repeal, or adopt any provisions of the A&R Certificate of Incorporation from the approval of 66 2/3% of
the voting power of the shares of the then outstanding voting stock of the Company entitled to vote to a majority of such shares;
and (iii) approved a reverse stock split of the Company’s common stock at a ratio of between one-for-five and one-for-twenty-five,
with such ratio to be determined at the sole discretion of the Company’s Board of Directors (the “Board”) and
with such reverse stock split to be effected at such time and date, if at all, as determined by the Board in its sole discretion. On November 30, 2020, the Company”) effected
a one-for-twenty five (1:25) reverse stock split (the “Reverse Stock Split”) of the shares of the Company’s common
stock, par value $0.00001 per share (the “Common Stock”). As a result of the Reverse Stock Split, every twenty five
shares of issued and outstanding Common Stock was automatically combined into one issued and outstanding share of Common Stock,
without any change in the par value per share. No fractional shares were issued as a result of the Reverse Stock Split and any
fractional shares resulting from the Reverse Stock Split were rounded up to the nearest whole share. Equity Issuances During 2020 and 2019 the Company has completed
various separate equity transactions to raise capital through the placement of its common and preferred stock. The following discussion
provides an overview of the key elements of these transactions. On February 25, 2020, the Company raised $570,341
in net proceeds through a private placement bridge offering of its common stock and warrants to purchase its common stock to certain
accredited investors (the “Bridge Offering”). The Company sold an aggregate of 52,000 shares of common stock and warrants
to purchase 52,000 shares of common stock in the Bridge Offering pursuant to a securities purchase agreement between the Company
and each of the investors in the Bridge Offering (the “Purchase Agreement”). The placement was intended to bridge into
a larger financing which did not occur. Pursuant to the terms of the Purchase Agreement, the Company agreed to hold a meeting of
its stockholders on or prior to May 25, 2020 for the purpose of seeking approval of either an increase in the number of shares
of common stock the Company is authorized to issue or a reverse split of the Company’s common stock (a “Capital Event”). The Company held a meeting of its stockholders
on September 15, 2020 where the Company’s stockholders approved resolutions comprising a Capital Event. The warrants became
exercisable upon the Capital Event, expire on February 25, 2025, and have an exercise price of $19.75 per share. On April 28, 2020, the Company raised $ $1,000,000
in gross proceeds, with cash offering costs of $188,359 in a registered direct offering of 75,472 shares of its common stock and
concurrent private placement of warrants to purchase 75,472 shares of its common stock for a combined issuance price of $13.25
per share. The exercise price of the warrants is $10.125 per share and they expire April 24, 2025. On June 3, 2020, the Company raised $1,333,000
in gross proceeds, with cash offering costs of $171,666 in a registered direct offering of 117,216 shares of its common stock and
concurrent private placement of warrants to purchase 117,216 shares of its common stock for a combined issuance price of $11.38
per share. The exercise price of the warrants is $8.25 per share and they expire June 3, 2025. On July 17, 2020, the Company raised $4,600,000
in gross proceeds, with cash offering costs of $718,093, in a public offering of 575,000 shares of its common stock for a purchase
price of $8.00 per share and warrants to purchase 575,000 shares of its common stock. The exercise price of the warrants is $8.00
per share, subject to customary adjustments and they expire on July 17, 2025. Certain investors in the July 17, 2020 public
offering agreed with the underwriter to enter into a lock-up and voting agreement (the “Lock-Up and Voting Agreements”)
whereby each such investor was subject to a lock-up period through July 21, 2020 and agreed to vote all shares of common stock
each beneficially owned on the closing date of the Public Offering with respect to any proposals presented to the stockholders
of the Company. Additionally, certain investors that agreed to enter into the Lock-Up and Voting Agreements, as consideration for
their waiver of certain rights described in the April 2020 Purchase Agreement and June 2020 Purchase Agreement, were issued unregistered
warrants (the “Waiver Warrants”) to purchase an aggregate of 139,800 shares of common stock. These warrants were substantially
similar to the warrants issued in the concurrent private placement, except that the warrants have a term of five (5) years, an
exercise price equal to $9.25 per share and carry piggy-back registration rights. On July 17, 2020, the Company raised $1,556,000
in gross proceeds, with cash offering costs of $197,901, in a private placement offering of 4,205,406 shares of its Series C Convertible
Preferred Stock (the “Preferred Stock”) to certain investors for a purchase price of $0.37 per share of Preferred Stock,
and warrants to purchase 243,125 shares of its common stock. The exercise price of the warrants is $8.00 per share, subject to
customary adjustments. The warrants expire on July 17, 2025. On October 9, 2020, the Company raised $5,100,000
in gross proceeds, with cash offering costs of $649,500 in a registered direct offering of 381,308 shares of its common stock and
concurrent private placement of warrants to purchase 381,308 shares of its common stock for a combined issuance price of $13.38
per share. The exercise price of the warrants is $10.25 per share. The warrants expire on October 7, 2025. On February 7, 2019, the Company entered into
an Agreement (“MZ Agreement”) with MZHCI, LLC a MZ Group Company (“MZ”) for MZ to provide investor relations
advisory services. The MZ Agreement was for an initial term of twelve (12) months with six-month automatic extension periods. MZ
received cash compensation of $8,000 per month and eighty-five thousand (85,000) restricted shares which vested quarterly over
the initial twelve-month term. Effective on July 24, 2020, the Company and MZ terminated the agreement. On March 12, 2019, the Company raised $2,704,000
in gross proceeds, with cash offering costs of $386,724 in a private placement offering of its common stock to certain accredited
investors (the “Offering”). The Company sold an aggregate of 93,185 shares of common stock in the Offering for a purchase
price of $28.75 per share pursuant to a share purchase agreement between the Company and each of the investors in the Offering.
Our CEO also participated in the Offering purchasing 736 shares at a price of $34 per share, the final bid price of our common
stock as reported on The Nasdaq Capital Market on the date of the Offering. On April 18, 2019, 246 unvested shares were
returned to the Company by a consultant as a result of the December 26, 2018 termination of such consultant’s consulting
agreement. On May 31, 2019, the Company issued 6,280 restricted
shares of common stock to the Boxer Parties pursuant to the Boxer Settlement Agreement valued at $298,300 or $47.50 per share,
the closing price of the Company’s common stock on the date the shares were issued. On June 14, 2019, the Company completed a public
offering of 144,625 shares of its common stock at a price to the public of $26.75 per share, for total gross proceeds of $3,868,716
(the “Public Offering”), with cash offering costs of $549,060. The shares were offered pursuant to a registration statement
that was declared effective on June 11, 2019. During 2020 and 2019, the Company issued restricted
shares of its common stock to its directors under the nonemployee directors compensation program for shares vesting during the
respective years. In 2020 the Company issued 3,542 shares valued at $36,213 to Mr. Bob Gray and Mr. Matthew Jenusaitis, 2,890 shares
valued at $24,842 to Mr. Francis Duhay, and 2,500 shares valued at $21,625 to Mr. Sanjay Shrivastava. In 2019, the Company issued
390 restricted shares of common stock to Dr. Francis Duhay at a fair value of $19,164. Series C Convertible Preferred Stock On July 17, 2020, the Company issued 4,205,406
shares of Preferred Stock in a private placement. On November 17, 2020 the Company entered exchange agreements with the holders
of the Preferred Stock pursuant to which all of the preferred shares were exchanged for common shares. While the Preferred Stock was outstanding,
the holders of the Company’s Preferred Stock could vote with holders of the Common Stock, and with any other shares of preferred
stock that vote with the Common Stock, with each holder of Preferred Stock being entitled to one vote per share of Preferred Stock,
and were entitled to receive 8% non-compounding cumulative dividends, payable when, as and if declared by the Board of Directors.
The Series C Preferred Stock ranked senior to the common stock as to dividends and the distribution of assets in the event of any
liquidation, dissolution, or winding up of the Company, either voluntary or involuntary, or any sale of the Company. In the event of any liquidation, dissolution,
or winding up of the Company, either voluntary or involuntary, or any sale of the Company, the holders of Preferred Stock were
entitled to receive, before and in preference to any distribution of any of the assets to the holders of the common stock, or any
other series of the Company’s preferred stock that would then be junior to the Preferred Stock, an amount per share
equal to $0.37 for each outstanding share of Preferred Stock (the “Original Series C Issue Price”), plus all accrued
but unpaid dividends thereon through the date of such event. In certain circumstances, the holders of Preferred
Stock were entitled to receive a liquidation preference payment of $0.37 per share of Preferred Stock, plus accrued and unpaid
dividends. Those accrued and unpaid dividends were $23,859 in the aggregate as of September 30, 2020 and were reflected as a deemed
dividend in determining net loss available to common stockholders during that period. As a result of the exchange of the
Preferred Stock for common stock, it is no longer outstanding (see below). The liquidation preference of the Preferred
Stock was subordinate and ranks junior to all indebtedness of the Company. The Company had the ability to elect to convert
the Preferred Stock to common stock in the event the Company either (i) consummated a merger, or (ii) raised an aggregate of at
least $8,000,000 in gross proceeds in a transaction or series of transactions within any twelve (12) month period. In the event
the Company elected to affect such a conversion, each share of Series C Preferred Stock would have been convertible into 0.05781
shares of common stock. The Company determined that the Preferred Stock
represented permanent equity due to the absence of a redemption feature and that the embedded conversion option was clearly and
closely related to the equity host and did not require bifurcation. The $2,431,250 fair value of the warrants was calculated using
the Black-Scholes option pricing model, using the $11.00 stock price, an expected term of 7.0 years, volatility of 118.7%, a risk-free
rate of 0.47% and expected dividends of 0.00%. The $1,556,000 of gross proceeds were allocated on a relative fair value basis of
$607,220 to the Preferred Stock and $948,781 to the warrants. The Preferred Stock includes a contingent beneficial conversion feature
(“BCF”) which was valued at its $2,067,155 intrinsic value using the commitment date stock price of $11.00 per share
and the effective conversion price of $2.50 per share, but was limited to the $607,220 of proceeds that were allocated to the Preferred
Stock. On November 17, 2020, the Company entered exchange
agreements with the holders of the Preferred Stock whereby the holders agreed to exchange all of their 4,205,406 shares of Preferred
Stock for 243,125 shares of common stock. This was the original conversion rate of the Preferred Stock after giving effect to the
25:1 reverse split of the Company’s common stock. This resolved the contingency related to the BCF and, accordingly, the
contingent BCF was recognized as a deemed dividend for the purposes of determining the net loss attributable to common stockholders
for calculating net loss per share. In addition, since the Company does not have retained earnings, the dividend has been recorded
against additional paid-in capital. Warrants In addition to the warrants issued to investors
in the equity issuances during 2020 discussed above, the Company issued warrants to the placement agents and underwriters
in those transactions. The placement agent in the February 25, 2020 transaction received warrants to purchase 5,200 shares of common
stock with an exercise price of $19.75 per share and expiring on February 25, 2025. The placement agent in the April 28, 2020 transaction
received warrants to purchase 6,038 shares of common stock with an exercise price of $10.13 per share and expiring on April 28,
2025. The placement agent in the June 3, 2020 transaction received warrants to purchase 9,378 shares of common stock at an exercise
price of $8.25 per share and expiring on June 3, 2025. The placement agent in the October 9, 2020 transaction received warrants
to purchase 22,875 shares of common stock at an exercise price of $12.81 and expiring on October 7, 2025. The underwriter in the July 17, 2020 transactions
received warrants to purchase 39,713 shares of common stock at an exercise price of $10 per share and expiring on July 16, 2025.
These underwriter warrants were cancelled in connection with the Company’s public offering completed on February 11, 2021
(see Note 14, Subsequent Events). On November 10, 2020 the Company agreed to
pay Spartan Capital Securities LLC $355,000 in cash, warrants to purchase 17,618 shares of common stock at a purchase price of
$8.00 per share, and warrants to purchase 18,056 shares of common stock at a purchase price of $10.25 per share. These amounts
were in dispute and were paid pursuant to an investment banking agreement dated February 12, 2020 in connection with financings
which occurred in July and October 2020. The fair value of these warrants on the settlement date was $92,492 and $85,766, respectively,
bringing the total amount of the payment to $533,261, of which $20,000 was for reimbursement of legal fees and expensed,
and $513,261 was included in the cost of the July and October financings. The fair value of the warrants was determined
using the Black-Scholes method with the following assumptions: stock price of $8.00 and $10.35, risk-free interest rate of 0.46%,
volatility of 112.7%, annual rate of quarterly dividends of 0%, and an expected term of 2.5 years. The investment banking agreement
has now been terminated with no further obligations. In November 2020 the Company’s Board
of Directors approved the issuance of warrants to purchase 6,400 shares of common stock to an advisor and warrants to purchase
20,000 shares of common stock to certain participants in the preferred share exchange (see Note 11, Stockholders Equity – Series
C Convertible Preferred Stock On January 3, 2019, the Company entered into
an Agreement (“Alere Agreement”) with Alere Financial Partners, a division of Cova Capital Partners LLC (“Alere”),
for Alere to provide capital markets advisory services. The Alere Agreement was on a month to month basis that could be cancelled
by either party with thirty (30) days advance notice. The Company paid a monthly fee of $7,500 and issued to Alere five-year warrants
to purchase 1,400 shares of the Company’s common stock at an exercise price of $39.75, equal to the closing price of the
Company’s common stock on February 7, 2019, the date of approval by the Company’s board of directors (the “Board”).
The warrants had a grant date fair value of $14,000 using the Black-Scholes pricing model, with the following assumptions used:
stock price of $39.75, risk free interest rate of 2.46%, expected term of 2.8 years, volatility of 34.4% and an annual rate of
quarterly dividends of 0%. The warrants vested monthly equally over a 12 month period provided that the Alere Agreement remained
in effect. On June 11, 2019, both parties agreed to terminate the Alere Agreement as of June 30, 2019 and the unvested warrants
as of June 30, 2019 totalling 700 were forfeited with a fair value of $7,000. The net charge to the statement of operations for
the year ended 2019 was $7,000. The placement agent for the Offering on March
12, 2019 received a warrant to purchase such number of shares of the Company’s common stock equal to 8% of the total shares
of common stock sold in the Offering or 7,525 shares. Such warrant is exercisable for a period of five years from the date of issuance
and has an exercise price of $37.50 per share. On May 31, 2019, the Company issued a five-year
warrant to purchase 6,000 shares of common stock pursuant to the Boxer Settlement Agreement that vested immediately with an exercise
price of $150 per share to the Boxer Parties. The warrants had a grant date fair value of $3,000 using the Black-Scholes pricing
model, with the following assumptions used: stock price of $47.50, risk free interest rate of 1.93%, expected term of 2.5 years,
volatility of 35.1% and an annual rate of quarterly dividends of 0%. On May 31, 2019, the Company issued a five-year
warrant to purchase 2,000 shares of common stock that vested immediately with an exercise price of $50 to DFC Advisory Services
LLC, D.B.A. Tailwinds Research Group, LLC (“Tailwinds”) to provide digital marketing services. The warrants had a grant
date fair value of $20,500 using the Black-Scholes pricing model, with the following assumptions used: stock price of $47.50, risk
free interest rate of 1.93%, expected term of 2.5 years, volatility of 35.1% and an annual rate of quarterly dividends of 0%. The placement agent for the Public Offering
on June 14, 2019 received a warrant to purchase such number of shares of the Company’s common stock equal to 5% of the total
shares of common stock sold in the Public Offering or 7,232 shares. Such warrant is exercisable for a period from December 8, 2019
through June 11, 2024 and has an exercise price of $32.10 per share. Warrants – Derivative Liabilities The warrants issued in connection with the
February 25, 2020 Bridge Offering were determined to be derivative financial instruments when issued because the Company did not
have control of the obligation to obtain shareholder approval by May 25, 2020 to increase the number of authorized shares or to
approve a reverse stock split. The accounting treatment of derivative financial instruments required that the Company record the
warrants as a liability at fair value and marked-to-market the instruments at fair values as of each subsequent balance sheet
date. Any change in fair value is recorded as a change in the fair value of derivative liabilities for each reporting period at
each balance sheet date. The warrant derivatives were valued as of the
February 25, 2020 issuance date, as of the quarter ended March 31, 2020, as of June 30, 2020, and as of September 15, 2020 when
the Company’s stockholders approved an increase in authorized shares in an amount sufficient to allow full exercise of these
warrants. The value at issuance was $546,036 and was recorded as a derivative liability. The value of the derivative liability
was $199,907 at March 31, 2020, $281,183 at June 30, 2020, and $334,229 at September 15, 2020. The derivative liability increased $53,046
and decreased $211,807 during the three and nine months ended September 30, 2020, respectively. The changes in derivative liability
is reflected in Other Income on the accompanying Statement of Operations. The Company reassessed the classification at
each balance sheet date to determine if it should be changed as a result of events during the period. On September 15, 2020,
the fair value of derivative liabilities was reclassified to equity when the Company’s stockholders approved items comprising
a Capital Event. Accordingly, there is no fair value of derivative liabilities as of December 31, 2020. The fair value of the warrants was determined
using a Monte Carlo simulation, incorporating observable market data and requiring judgment and estimates. The following inputs
and assumptions were used for the valuation of the derivative liability:
February 25, 2020 March 31, 2020 June 30, 2020 September 15, 2020
Projected Volatility 97.1 % 102.7 % 102.7 % 110.7 %
Risk-Free Rate 1.36 % 0.38 % 0.29 % 0.31 %
Contractual Term (Years) 5 5 4.75 4.5
● It was assumed the stock price would fluctuate with the Company’s projected volatility.
● The projected volatility was based on the historical volatility of the Company.
● If the Company was required to pay the fair value of the warrant in cash as of May 25, 2020, the obligation was discounted at the Company’s estimated cost of debt based on short-term C-CCC bond ratings of 19.5% and 28.5%.
● The likelihood of the Company calling a shareholder meeting and achieving shareholder approval was 90% as of February 25, 2020.
● As June 30, 2020, the Company projected shareholder approval would not be obtained until approximately 8/31/20. No mandatory exercise was allowed prior to that date.
● Until the Company obtained shareholder approval to increase the authorized shares on September 15, 2020, we assumed the warrant holders have an option to require the Company to pay the fair value of the warrants. The derivative value at that date was $334,229. The following table sets forth a summary of
the changes in the fair value of Level 3 derivative liabilities that are measured at fair value on a recurring basis:
Derivative
Liabilities
Balance – January 1, 2020 $ -
Derivative liabilities associated with the issuance of common stock warrants 513,534
Derivative liabilities associated with the issuance of placement agent warrants 32,502
Change in fair value of derivative liabilities (211,807 )
Reclassification of warrant derivatives to equity (334,229 )
Balance – December 31, 2020 $ - A summary of warrant activity during the years ended December 31,
2020 and 2019 is presented below:
Common Stock
Number of Weighted Weighted Intrinsic
Outstanding, January 1, 2019 151,224 $ 137.00
Issued 24,157 65.00
Exercised - -
Cancelled (700 ) 39.75
Outstanding, January 1, 2020 174,681 $ 127.50 3.3 $ -
Issued 1,702,810 9.26
Exercised (367,661 ) 8.13
Cancelled (2,028 ) 107.50
Outstanding and exercisable, December 31, 2020 1,507,802 $ 20.10 5.3 $ 448,140 A summary of outstanding and exercisable warrants
as of December 31, 2020 is presented below:
Warrants Outstanding Warrants Exercisable
Exercise Exercisable Outstanding Weighted Exercisable
$ 300.00 Common Stock 7,359 2.5 7,359
$ 156.25 Common Stock 3,000 2.4 3,000
$ 150.00 Common Stock 75,000 2.5 75,000
$ 124.75 Common Stock 4,000 2.5 4,000
$ 155.50 Common Stock 5,536 1.9 5,536
$ 107.50 Common Stock 2,649 0.3 2,649
$ 105.00 Common Stock 57,652 1.8 57,652
$ 50.00 Common Stock 2,000 3.4 2,000
$ 39.75 Common Stock 700 3.0 700
$ 37.50 Commons Stock 7,525 3.2 7,525
$ 32.10 Common Stock 7,232 3.4 7,232
$ 19.75 Common Stock 52,000 4.2 52,000
$ 10.00 Common Stock 5,200 4.2 5,200
$ 10.13 Common Stock 75,472 4.3 75,472
$ 10.13 Common Stock 6,038 4.3 6,038
$ 8.25 Common Stock 46,260 4.4 46,260
$ 8.25 Common Stock 9,378 4.4 9,378
$ 8.00 Common Stock 346,560 6.6 346,560
$ 10.00 Common Stock 39,713 4.5 39,713
$ 9.25 Common Stock 118,411 4.5 118,411
$ 8.00 Common Stock 196,250 4.6 196,250
$ 12.82 Common Stock 22,879 4.8 22,879
$ 10.25 Common Stock 381,312 6.8 381,312
$ 8.00 Common Stock 17,619 4.9 17,619
$ 10.25 Common Stock 18,057 4.9 18,057
1,507,802 1,507,802 |
