| Redeemable Convertible Preferred Stock and Stockholders' Equity (Deficit) | Note
10 Redeemable
Convertible Preferred Stock and Stockholders’ Equity (Deficit): Common
Stock The
Company’s common stock confers upon their holders the following rights:
▪ The
right to participate and vote in the Company’s stockholder meetings, whether annual or special. Each share will entitle
its holder, when attending and participating in the voting in person or via agent or letter, to one vote;
▪ The
right to a share in the distribution of dividends, whether in cash or in the form of bonus shares, the distribution of assets
or any other distribution pro rata to the par value of the shares held by them; and
▪ The
right to a share in the distribution of the Company’s excess assets upon liquidation pro rata to the par value of the
shares held by them. Convertible
Series A Preferred Stock The
terms of the Convertible Series A Preferred Stock were governed by a certificate of designation (the “Series A Certificate
of Designation”) filed by the Company with the Nevada Secretary of State on May 15, 2017. Pursuant to the Series A Certificate
of Designation, the Company designated 3,000,000 shares of the Company’s preferred stock as “Series A Convertible
Preferred Stock.” The Company issued 123,668 shares of Convertible Series A Preferred Stock in connection with the Contribution
Agreement. A total of 27,898 shares remained outstanding as of December 31, 2018, but were converted in January 2019 into 697,450
shares of the Company’s common stock based on the conversion rate that was in effect at that time (see also Note 12). On
February 26, 2019, the Series A Certificate of Designation was withdrawn. Following
is a summary of the material terms of the Series A Convertible Preferred Stock:
■ Dividends.
■ Liquidation.
■ Voting.
■ Conversion.
Redeemable
Convertible Series B Preferred Stock The
terms of the Redeemable Convertible Series B Preferred Stock were governed by a certificate of designation (the “Series
B Certificate of Designation”) filed by the Company with the Nevada Secretary of State on December 22, 2017, as supplemented
by that certain supplemental agreement, dated April 20, 2018, between the Company and OFI (the “Supplemental Agreement”),
which clarified certain voting and conversion limitations with respect to the Series B Preferred Stock in response to comments
from the staff of NASDAQ. Pursuant to the Series B Certificate of Designation, the Company designated 15,000,000 shares of the
Company’s preferred stock as “Series B Preferred Stock”. As more fully described below, the Company issued total
of 3,825,000 shares of Redeemable Convertible Series B Preferred Stock in connection with a OFI Purchase Agreement during 2017
and 2018. On September 24, 2018, all shares of Series B Preferred Stock were cancelled in conjunction with the entry into the
Remediation Agreement described below. All such shares have been converted into another series of the Company’s Preferred
Stock as of December 31, 2018. On September 25, 2018, the Series B Certificate of Designation was withdrawn, and as a result,
no shares of Series B Preferred stock are authorized. Following
is a summary of the material terms of the Redeemable Convertible Series B Preferred Stock:
■ Dividends.
■ Liquidation.
- pari passu - pari passu - pari passu
■ Voting
Rights.
■ Conversion.
In
the light of the above, on May 31, 2018, 1,869,663 shares of the Series B Preferred Stock along with pro-rata accrued
dividends of $66 were considered under accounting rules to be automatically converted into 2,965,301 shares of common
stock. As a result of this conversion, an amount of $2,553 (representing the relative amount of the portion of Series
B Preferred Stock that were converted) was transferred from Redeemable Convertible Preferred Stock Series B account into
common stock and additional paid-in capital.
■ Redemption.
Convertible
Series C Preferred Stock The
terms of the Series C Preferred Stock were governed by a certificate of designation (the “Series C Certificate of Designation”)
filed by the Company with the Nevada Secretary of State on September 24, 2018. Pursuant to the Series C Certificate of Designation,
the Company designated 7,485,627 shares of its preferred stock as Series C Preferred Stock. The Company issued 7,485,627 shares
of Convertible Series C Preferred Stock in connection with the Remediation Agreement, Those shares were converted to common stock
following approval of the Remediation Agreement by the stockholders at the Company’s Annual Meeting on November 29, 2018.
On December 28, 2018, the Series C Certificate of Designation was withdrawn, and as a result, no shares of Series C Preferred
stock are authorized. Following
is a summary of the material terms of the Series C Preferred Stock:
■ Dividends
■ Liquidation pari
passu
■ Voting
Rights
■ Conversion
■ Redemption Convertible
Series D Preferred Stock The
terms of the Series D Preferred Stock are governed by a certificate of designation (the “Series D Certificate of Designation”)
filed by the Company with the Nevada Secretary of State on September 24, 2018. Pursuant to the Series D Certificate of Designation,
the Company designated 9,294,414 shares of its preferred stock as Series D Preferred Stock. The Company issued 6,525,182 shares
of Convertible Series D Preferred Stock in connection with the Remediation Agreement. Those shares were converted to common stock
following approval of the Remediation Agreement by the stockholders at the Company’s Annual Meeting on November 29, 2018.
On December 28, 2018, the Series D Certificate of Designation was withdrawn, and as a result, no shares of Series D Preferred
stock are authorized. Following
is a summary of the material terms of the Series D Preferred Stock:
■ Dividends
■ Liquidation pari passu
■ Voting
Rights
■ Conversion.
■ Redemption.
Securities
Purchase Agreement On
December 22, 2017, the Company had entered into the OFI Purchase Agreement with OFI, under which OFI could, but was not obligated
to, invest up to $15,000 in the Company in a series of closings over a period prior to December 31, 2018, in exchange for which
OFI would receive shares of the Company’s Redeemable Convertible Series B Preferred Stock (“Series B Shares”)
at a purchase price of $1.00 per share (the “Option”). On
December 22, 2017 (the “Initial Date”), the Company and OFI completed the first closing under the OFI Purchase Agreement,
pursuant to which OFI exercised a portion of the Option and provided $1,500 to the Company in exchange for 1,500,000 Series B
Shares. On January 24, 2018 (the “Second Date”), the Company and OFI completed a second closing under the OFI Purchase
Agreement, pursuant to which OFI provided $2,225 to the Company in exchange for 2,225,000 Series B Shares. On August 24, 2018
(the “Third Date”), the Company and OFI completed a third closing under the OFI Purchase Agreement, pursuant to which
OFI provided $100 to the Company in exchange for 100,000 Series B Shares. Under
ASC 480, “Distinguishing Liabilities from Equity”, since the Series B Shares had conditional redemption provisions
which are outside of the control of the Company and also contained a deemed liquidation preference, the Series B Shares were classified
as mezzanine financing at the Initial Date at the residual amount, which was the difference between the total proceeds received
and the fair value of the Option. Subsequently, changes in the redemption value were accreted over the period from the date of
issuance (or from the date that it becomes probable that the instrument will become redeemable, if later) to the earliest redemption
date of the instrument using an appropriate methodology, usually the interest method. Changes in the redemption value were considered
to be changes in accounting estimates. Under
ASC 480, the aforementioned right granted to OFI to further invest in the Company represented a written call Option which was
considered freestanding, as the Company believed it was legally detachable and separately exercisable. As the option was exercisable
for shares subject to possible redemption at the option of the holder, as of the Initial Date, the Option was measured at fair
value and recorded as a non-current financial liability on the consolidated balance sheet. Excess of the initial value of the
option liability over the proceeds received was charged immediately into the consolidated statement of comprehensive loss as financing
expenses in the fourth quarter of 2017. The Option was marked to market in each reporting period until it was exercised or expired,
as earlier, with changes in the fair value of the Option charged into the statement of comprehensive income or loss. For the year
ended December 31, 2018, the Company recorded income in the total amount of $3,288 due to revaluation of Option to purchase Series
B Shares. In
addition, at the Initial Date, the Company incurred de minimis direct and incremental issuance costs which were charged immediately
into the consolidated statement of comprehensive loss as finance expenses, as the written call Option was presented at fair value. At
the Initial Date, each Series B Share was convertible into 1.24789 shares of common stock valued at $1.00 per share. As a result,
Beneficial Conversion Feature (the “BCF”) amounting to approximately $372 was measured assuming full conversion. However,
the conversion of the Preferred Stock is subject to certain contingencies, which impact the timing and amount of the BCF. At the
Initial Date which is also the commitment date, the Company should record a BCF for the Preferred Stock for any shares convertible
at that time without requiring stockholder approval through the planned proxy statement. However, as no residual proceeds were
allocable to the Series B Shares at the Initial Date, no BCF was recognized with respect to the first closing. In
conjunction with the Second Date, OFI partially exercised the written call option present in the OFI Purchase Agreement and therefore
upon exercise, the pro-rata share of this liability amounting to $677 was reclassified in the condensed consolidated balance sheet
from Option to purchase Series B Shares into Series B Shares, during the three months ended March 31, 2018. On the Second Date,
each Series B Share (exclusive of dividends) was convertible into 1.24789 shares of common stock valued at $1.00 per share. Because
of reclassification of the exercised written call option together with cash amount received, there was no additional BCF measured. In
conjunction with the Third Date, OFI partially exercised the written call option present in the OFI Purchase Agreement and therefore
upon exercise, the pro-rata share of this liability amounting to $4 was reclassified in the condensed consolidated balance sheet
from Option to purchase Series B Shares into Series B Shares, during the year ended December 31, 2018. On the Third Date, each
Series B Share (exclusive of dividends) was convertible into 1.24789 shares of common stock valued at $1.00 per share. Because
of reclassification of the exercised written call option, there was no additional BCF measured. The
fair value of the Option was based on management estimates and values derived from a calculation to provide an approximate indication
of value. The fair value of Option was estimated at each reporting and exercise date, including, December 31, 2017, January 24,
2018, August 30, 2018 and September 24, 2018 (the date of cancellation of the option as described below) by using hybrid method
that includes scenario of conversion and scenario of liquidation and the Black-Scholes option pricing model. In the first scenario,
the Series B Preferred Stock price applied in the model was assumed based on the as-converted price on the date of estimation.
Expected volatility was estimated by using a group of peers in the real estate development, homebuilding and income-producing
properties sectors, and applying a 75% percentile ranking based on the total capitalization of the Company. In the second scenario,
the Option was estimated based on the value of the Option in a proposed liquidation scenario. A probability weighting was applied
to determine the expected value of the Option. The Company measured the fair value of the Option on a recurring basis in accordance
with ASC 820, “Fair Value Measurement and Disclosures” (primary inputs classified at level 3). The
following are the key underlying assumptions that were used:
December
31, January
24, August
30, September
24,
Dividend yield (%) 0 0 0 0
Expected volatility (%) 36.9 37.9 37.3 36.4
Risk free interest rate (%) 1.74 1.75 2.15 2.21
Strike price 1.00 1.00 1.00 1.00
Series B Preferred Stock price 1.13 1.10 0.44 0.38
Probability of if-converted scenario (%) 90 90 90 90
Probability assumed liquidation scenario (%) 10 10 10 10
Expected term of Option (years) 1.0 0.9 0.33 0.25
Option’s fair value per share $ 0.33 $ 0.30 $ 0.04 $ 0.04 The
following tabular presentation reflects the activity in the fair value of Option to purchase Series B Shares during the years
ended December 31, 2018 and 2017 -
For the
year ended December 31,
2018 2017
Opening
balance, January 1 $ 4,390 $ —
Recognition
of written call Option as a discount of Series B Shares — 1,500
Partial
exercise of Series B Shares written call option (681 ) —
Revaluation
of option to purchase Series B Shares (3,288 ) 2,890
Extinguishment
of option to purchase Series B Shares (*) (421 ) —
Closing
balance, December 31 $ — $ 4,390
(*) On September
24, 2018, the OFI Purchase Agreement was superseded by the Remediation Agreement entered into with OFI and Note Holders. Consequently,
the option to purchase Series B Shares has been extinguished, as described below in more details.
In
the absence of voluntary conversion and assuming no breaches as described above under “ Redemption,”
December
31,
2018 2017
Opening
balance, January 1 $ 87 $ —
Proceeds
from issuance of Series B Shares 2,325 1,500
Recognition
of written call Option as a discount of Series B Shares — (1,500 )
Accretion
of Series B Shares to redemption value 2,001 —
Partial
exercise of Series B Shares written call option at the Second Date and Third Date 681
Conversion
of Series B Shares into Common Stock (*) (2,553 ) —
Amortization of
discount — 84
Dividend on Series
B Shares 177 3
Cancellation
of Series B Shares in exchange for Series D Preferred Stock (**) (2,718 ) —
Closing
balance, December 31 $ — $ 87 (*)
Under the OFI Purchase Agreement, the Series B Preferred Stock, up to the stated limits, would automatically convert to the Company’s
common stock on May 31, 2018. Consequently, 1,869,663 shares of Series B Preferred Stock held by OFI have been recorded as converted
into 2,965,301 shares, or 19.99% of the then 11,868,619 outstanding shares of common stock as of May 31, 2018, which is the applicable
conversion date under the OFI Purchase Agreement. The then remaining 1,855,337 unconverted shares of the Series B Preferred Stock
remained as mezzanine and accrued a preferred dividend until September 24, 2018, when the Series B shares were withdrawn and Series
D preferred shares were issued in replacement, as described below in more details. (**)
On September 24, 2018, the OFI Purchase Agreement was superseded by the Remediation Agreement entered into with OFI and Note Holders.
Consequently, the Series B Shares have been withdrawn and Series D Shares were issued in replacement, as described below in more
details. Cancellation
and Exchange Agreement On
April 20, 2018, the Company and OFI entered into a Cancellation and Exchange Agreement (the “Exchange Agreement”),
pursuant to which OFI agreed to provide an additional $2,000 to the Company in exchange for 2,000,000 shares of the Company’s
Series B Preferred Stock, subject to certain conditions set forth in the Exchange Agreement, including, among other things, the
cancellation of 95,770 shares of the Company’s Series A Preferred Stock held by OFI in exchange for 5,382,274 shares of
the Company’s common stock. Under the Exchange Agreement, closing of this additional investment, including cancellation
discussed above, would occur promptly following the filing of a definitive information statement on Schedule 14C with the SEC
and mailing the stockholders of the Company, and in any event within 3 days thereafter. However, on September 24, 2018, the Exchange
Agreement was terminated by the Remediation Agreement. Payout
Notes and Stock Grant Agreement Under
the Contribution Agreement, amounts due to Dr. Dolev Rafaeli and Dennis M. McGrath under their employment agreements, as well
as amounts due to Dr. Yoav Ben-Dror for his services as a board member and officer of the Company’s foreign subsidiaries,
were converted to convertible secured notes in the principal amounts of approximately $3.1 million, $1 million and $1.5 million,
respectively, following approval from the Company’s stockholders on October 12, 2017 (the “Payout Notes”). The
Payout Notes were due on October 12, 2018, carried a ten percent (10%) interest rate, payable monthly in arrears commencing on
December 1, 2017, were secured by a security interest in all of the Company’s assets pursuant to a security agreement that
the Company entered into with the Note Holders, and were convertible into shares of common stock. On
December 22, 2017, the Company entered into a Stock Grant Agreement with the Note Holders to (i) cause the early conversion of
the Payout Notes into an aggregate of 5,628,291 shares of common stock (the “Payout Shares”), (ii) effectuate the
release of all security interests associated with the Payout Notes, (iii) provide for the issuance of an aggregate of 1,857,336
additional shares of common stock to the Note Holders as consideration for the various agreements of the Note Holders contained
in the Stock Grant Agreement (the “Additional Shares”), (iv) provide for certain cash payments to the Note Holders
in amounts equal to the interest payments that would have been made to the Note Holders absent the conversion of the Payout Notes,
(v) obtain the agreement of the Note Holders to provide certain support services to the Company, and (vi) obtain the conditional
resignation of certain of the Note Holders from the board of directors. Accordingly, the Payout Notes were deemed paid in full. Pursuant
to the Stock Grant Agreement, the Company ultimately made 12 monthly payments on the first of each month commencing on January
1, 2018 in the amounts of approximately $21, $7 and $10 to Messrs. Rafaeli, McGrath, and Ben-Dror, respectively. Such cash payments
were consideration for certain consulting services provided by the Note Holders specified in the Stock Grant Agreement. The Company
was required to issue the Additional Shares promptly, but in any event within 10 days after the Company obtained stockholder approval
of such issuance. Such stockholder approval was not obtained. However, the Stock Grant Agreement was terminated in connection
with the Remediation Agreement. Remediation
Agreement On
September 24, 2018 (the “Exchange Date”), the Company entered into the Remediation Agreement with OFI and the Note
Holders, pursuant to which inter alia the following have been determined -
1. The
Stock Grant Agreement was terminated, the Payout Shares were cancelled, and the Company issued to the Note Holders an aggregate
of 7,485,627 shares of newly-designated Series C Preferred Stock in exchange for 5,628,291 shares of common stock.
2. The
OFI Purchase Agreement (subject to the survival of certain provisions identified in the Remediation Agreement), the Supplemental
Agreement and the Exchange Agreement were terminated and 3,825,000 shares of the Series B Stock issued to OFI were cancelled
and the Company issued to OFI 6,217,490 shares of newly-designated Series D Preferred Stock. In addition, in conjunction with
the exchange of OFI’s existing Series B Preferred Stock for Series D Preferred Stock, the option for OFI to purchase
future Series B Preferred Stock up to aggregate amount of $15 million has been cancelled but OFI agreed to purchase $100 of
shares of Series D Preferred Stock for a purchase price of $0.65 per share on the last day of each month, commencing on September
30, 2018, until it has purchased an aggregate of $500 of shares of Series D Preferred Stock, provided that, upon closing of
any material business combination involving the Company that is approved by OFI, OFI agreed to purchase an additional $1,500
of shares of Series D Preferred Stock at a price of $0.65 per share. Notwithstanding the foregoing, from and after the date
that stockholder approval of the conversion of shares issued under Remediation Agreement has been obtained, instead of purchasing
shares of Series D Preferred Stock, OFI agreed to purchase shares of common stock at a price of $0.65 per share. On September
28, 2018, a first closing under the Remediation Agreement was completed, pursuant to which OFI provided $100 to the Company
in exchange for 153,846 shares of the Company’s Series D Preferred Stock. On October 31, 2018, a second closing under
the Remediation Agreement was completed, pursuant to which OFI provided $100 to the Company in exchange for 153,846 shares
of the Company’s Series D Preferred Stock. On November 29, 2018, a third closing under the Remediation Agreement was
completed, pursuant to which OFI provided $100 to the Company in exchange for 153,846 shares of common stock. On December
31, 2018, OFI agreed, notwithstanding the investment schedule set forth in the Remediation Agreement, to provide the remaining
funds to the Company, and the parties completed a final closing under the Remediation Agreement, pursuant to which OFI provided
$1.6 million to the Company in exchange for 2,461,538 shares of common stock.
3. The
Company was required, as promptly as possible following the date of the Remediation Agreement (and in no event later than
30 days thereafter), to prepare and file a preliminary proxy statement relating to stockholder approval of the issuance of
common stock upon conversion of all shares of Series C Preferred Stock and Series D Preferred Stock issued under the Remediation
Agreement. The preliminary proxy statement was filed on September 27, 2018. The final proxy statement was filed on October
25, 2018 and mailed to the Company’s stockholders on or about October 31, 2018. A stockholder meeting to approve this
matter was held on November 29, 2018, at which the stockholders approved to the Remediation Agreement. As a result on November
29, 2018, all shares of Series D Preferred Stock issued to OFI were converted into 6,619,483 shares of common stock and all
shares of Series C Preferred Stock issued to the Note Holders were converted into 7,485,627 shares of common stock.
4. On
September 24, 2018, in connection with the Remediation Agreement, the Company entered into the Registration Rights Agreement
with OFI and the Note Holders. In
accordance with ASC 480-10-S99, since the Series C Preferred Shares and Series D Preferred Shares had no conditional (outside
of the control of the Company) or mandatory redemption provisions, the Series C Preferred Stock and Series D Preferred Stock were
classified as part of the stockholders’ equity on the Company’s Consolidated Balance Sheet. Based on such determination
and due to the economic characteristics and risks of the Preferred Stock, based on their stated or implied substantive terms and
features, Series C and Series D Preferred Stock were considered as more akin to equity than debt. Accordingly,
it was determined that the economic characteristics and the risks of the embedded conversion option to common stock and those
of the Series C and Series D Preferred Stock themselves (the ‘host contract’) were clearly and closely related. As
a result, the embedded conversion feature was not required to be bifurcated. Also,
as the Series C Preferred Stock and Series D Preferred Stock are valued in excess of the common stock and since each share of
Series C Preferred Stock and Series D Preferred Stock was contingently convertible into one share of common stock, it was determined
that at the exchange date, the effective exercise price of the conversion feature (based on the effective conversion rate of the
Series C Preferred Stock and the Series D Preferred Stock into common stock) was higher than the estimated fair value of the Company’s
common stock (which was valued at $0.24 per share). Thus, it was determined that the conversion feature was not beneficial. In
addition, the Remediation Agreement with OFI constitutes a firm forward purchase contract for an amount of $500 at $0.65 per share
and an additional contingent purchase commitment of $1,500 in the event of a material business combination. Based on its terms
(the fixed share price and number of shares) it was determined that the forward contract meets the scope exception requirements
for derivative treatment under ASC 815 and therefore it is classified as an equity instrument. At
the Exchange Date, in conjunction with the Remediation Agreement, the Note Holders’ common stock
was exchanged for issuance of Series C Preferred Stock, OFI’s existing Series B Preferred Stock
were exchanged in consideration for issuance of Series D Preferred Stock and the remaining portion of the Option for OFI to purchase
future Series B Preferred Stock up to aggregate amount of $15 million had been cancelled for the future commitment of OFI to invest
up to aggregate amount of $2,000. If
a preferred share has characteristics that cannot be reliably assessed using the cash flow model in ASC 470-50, it is evaluated
using another quantitative model, such as the fair value model or based on an analysis of the significance of any contractual
terms added, contractual terms removed, and changes to existing contractual terms. In such analysis the issuer considers, among
others critical terms such as a change in the liquidation preference order/priority (including the determination whether the classification
of the instrument has changed from mezzanine to equity or to liability vice versa), voting rights, or conversion ratio. In addition,
the issuer considers the business purpose for the changes and how the changes may influence the economic decisions of the investor,
if any. Based
on an analysis of the significance of the contractual terms added, contractual terms removed, and changes to existing contractual
terms of the preferred stock, which considered, among others the change in the liquidation preference order/priority (mostly the
classification change from mezzanine to equity) and the removal of voting rights, it was determined that the exchange should be
accounted for as an extinguishment of the original financial instruments involved and an issuance of new instruments. At the Exchange
Date, the fair value of the 7,485,627 shares of Series C Preferred Stock was $1,797. Such amount relates to the 5,628,291 shares
of common stock that were exchanged, which the fair value was $1,351 and the difference of $446 was accounted for as a deemed
dividend. Also, at the Exchange Date, the total fair value of consideration which was paid by the Company (i.e. the 6,217,490
shares of Series D Preferred Stock less the fair value of the firm forward purchase contract which was determined to be favorable
for the Company) amounted to an aggregate amount of $325 which was allocated to the instruments that have been cancelled/exchanged
based on their relative fair values as determined by the Company’s management. The fair value of the instruments that have
been cancelled/exchanged amounted to $3,911 as follows: 1) the 3,825,000 shares of Series B Preferred Stock was $3,431; 2) the
option to purchase Series B Preferred Stock has been marked to market at the total amount of $421 and 3) the registration rights
liability was $59. Therefore, an amount of $285 out of the above consideration was allocated to the Series B Preferred Stock and
accordingly, the difference between such amount and the carrying amount of the Series B Preferred Stock at the exchange date was
accounted for as an additional deemed dividend in the Statement of Changes in Shareholders’ Equity (Deficit). The remaining
amount of $40 was allocated to the financial liability in connection with the option to purchase Series B Preferred Stock and
the registration rights liability and accordingly, the difference between such amount and the carrying amount of the option to
purchase Series B Preferred Stock and the registration rights liability at the exchange date of $440 was recorded as separate
line in the consolidated statement of comprehensive loss. Restricted
Stock On
June 20, 2018, the Company’s board of directors approved an employment agreement with the current Chief Executive Officer,
pursuant to which the Company agreed to issue 400,000 shares of common stock that will be vest over a 3-year period. One-third
of the shares issued shall vest on each of the first anniversary and the two ensuing anniversaries of the date of execution of
the employment agreement. The foregoing notwithstanding, the Chief Executive Officer shall fully vest in all of the shares if
the Chief Executive Officer’s employment with the Company shall terminate upon the occurrence of a Change in Control as
defined in the employment agreement. The closing price of the Company’s share at June 20, 2018 is $0.47 and therefore the
overall expenses to be recorded amounted to $188. For the period commencing June 20, 2018 through December 31, 2018, the Company
recorded an expense of $58 as part of the general and administrative expenses in the Company’s Consolidated Statements of
Comprehensive Loss. Issuance of these shares was subject to stockholder approval of the Company’s 2018 Equity Incentive
Plan which was obtained at the 2018 annual meeting on November 29, 2018. Issuance
of Common Stock As
discussed in Note 9, on August 12, 2018, the Company issued 271,000 fully vested non-forfeitable shares of common stock to Mr.
Johnson (the former Chief Financial Officer of the Company) in the amount of $87, representing a price per share of $0.32. The
Company issued 222,222 fully vested non-forfeitable shares of common stock as payment of a retainer fee to the Company’s
legal consultant. The shares were valued at $16 based upon the Company’s closing price per share on the date of issuance,
which was $0.074. The
Company also issued a total of 12,962,450 shares of common stock to OFI upon (a) the conversion of its Series D Preferred Stock
on November 29, 2018 following approval of the Remediation Agreement by the Company’s stockholders; (b) the conversion by
OFI on December 27, 2018 of the 95,770 shares of Series A Convertible Preferred Stock it purchased from FCOP; (c) contribution
by OFI to the Company of an additional $100 on November 29, 2018; and (d) contribution by OFI to the Company of an additional
$1,600 on December 28, 2018. The
Company issued 7,485,627 shares of common stock to the Note Holders upon the conversion of its Series C Preferred Stock on November
29, 2018 following approval of the Remediation Agreement by the Company’s stockholders. Common
Stock Warrants On
August 30, 2018, the Company granted to one service provider a warrant to purchase 446,429 shares of common stock of the Company
over a period of 5-years at an exercise price of $0.28 subject to certain standard adjustments. The warrant is fully vested and
was granted in consideration for legal services that were rendered by the service provider. The fair value of the granted warrants
was determined by using the Black-Scholes pricing model in total amount of $98 and was recorded as part of the general and administrative
expenses in the Company’s Consolidated Statements of Comprehensive Income (Loss). Common
Stock Options In
January 2018, the Company issued 100,000 options to Vineet P. Bedi, then its Chief Executive Officer; and 47,088 options to Matthew
Stolzar, then its Chief Financial Officer. The options vested ratably over a three-year period; or immediately upon a change of
control of the Company. The options remained exercisable for ninety days following the termination of either officer’s employment.
Both Mr. Bedi and Mr. Stolzar resigned from the Company effective June 22, 2018. The options granted to both officers therefore
had lapsed by the end of the third quarter of 2018. On
April 18, 2018, the Company’s Board of Directors adopted the 2018 Equity Incentive Plan (the “2018 Plan”), which
provides for grants of restricted stock, stock options and other forms of incentive compensation to officers, employees, directors
and consultants. The Company is authorized to issue up to 5,000,000 shares of common stock under the |
