Annual report pursuant to Section 13 and 15(d)

Stockholders' Equity

v3.20.1
Stockholders' Equity
12 Months Ended
Dec. 31, 2019
Equity [Abstract]  
Stockholders' Equity

NOTE 7 – Stockholders’ Equity

 

Common Stock

 

Effective February 27, 2020, our Articles of Incorporation were amended to provide for a reverse stock split of the outstanding shares of our common stock on a 1-for-10 basis (the “Reverse Stock Split”), and a corresponding decrease in the number of shares of our common stock that we are authorized to issue (the “Share Decrease”).

 

The effects of the stock split have been retroactively reflected to all periods presented.

 

In January 2019, the Company issued 20,000 shares of common stock to directors valued at $15.00 per share, or $300,000, with such shares to vest ratably over four quarterly installments, subject in each case to such director’s continuing service as a director.

 

Also in January 2019, the Company issued 8,843 shares of common stock upon the cashless exercise of Unit Purchase Options issued in our June 2018 public offering.

 

In January and February 2019, the Company issued a total of 7,023 shares of common stock upon the exercise of 7,023 warrants having an exercise price of $10.80 resulting in gross cash proceeds of $75,848.

 

In March 2019, the Company issued 150 shares of common stock valued at $20.00 per share to the Company’s Vice President of Business Development in connection with his achievement of performance milestones, with such shares vesting immediately.

 

Also in March 2019, the Company closed a public offering of equity securities in which it issued 140,080 shares of common stock and warrants to purchase a total of 42,024 shares of common stock resulting in net proceeds of approximately $1,679,230, after deducting placement agent commissions and other offering expenses payable by the Company.

 

In May 2019, the Company closed a private placement of equity securities in which it issued 40,000 shares of common stock and warrants to purchase a total of 22,000 shares of common stock resulting in net proceeds of approximately $515,000, after deducting placement agent commissions and other offering expenses payable by the Company.

 

On August 2, 2019, the Company closed a public offering of equity securities in which it issued 287,500 shares of common stock resulting in net proceeds of approximately $1,971,000, after deducting commissions and other offering expenses payable by the Company.

 

On August 15, 2019, the Company issued 2,500 shares of common stock valued at $6.84 per share to MHZCI, LLC, an investor relations firm engaged by the Company, as partial compensation for services to be rendered.

 

On September 13, 2019, Aegis Capital Corp. partially exercised its over-allotment option granted by the Company in the foregoing August 2019 public offering by purchasing an additional 20,000 shares of common stock, resulting in net proceeds of $148,800 after deducting commissions.

 

During 2018, the Company issued 20,000 shares of common stock valued at $12.80 per share as compensation for serviced, totaling $256,264.

 

In May 2018, we issued an aggregate of 100,000 shares of common stock upon conversion of the 1,000 shares of Series B Preferred Stock issued in April 2018 (as described below under “Preferred Stock”).

 

In May 2018, the Company issued 2,980 shares of common stock as the result of a conversion of the $50,000 principal balance of Notes Payable and the cashless exercise of 2,400 warrants.

 

In June 2018, as part of its public offering of equity securities described in Note 1, the Company issued 350 shares of Series C convertible preferred stock, 204,000 shares of common stock, and warrants to purchase a total of 71,700 shares of common stock (including the warrants described under “Preferred Stock” below that were issued on June 26, 2018). Each warrant has an initial price of $10.80 per share. The net proceeds to the Company were approximately $2,068,900 after commissions and other offering expenses. The Company also issued to Dawson James Securities, Inc., its placement agent in the public offering, a Unit Purchase Option to acquire up to 19,120 Units, at an exercise price of $12.50 per Unit, consisting of 19,120 shares of common stock and warrants to purchase up to 5,736 shares of common stock at an exercise price of $10.80 as compensation.

 

Between August and October 2018, the Company issued 35,000 shares of common stock upon conversion of 350 shares of Series C Preferred Stock issued in June 2018 (as described below under “Preferred Stock”).

 

Between October and December 2018, the Company issued 17,790 shares of common stock as the result of the exercise of warrants resulting in cash proceeds of $192,132.

 

Deferred Compensation

 

In previous years and 2019, the Company issued to various employees, directors, and contractors shares of the Company’s common stock, subject to restrictions, pursuant to the 2013 Equity Incentive Plan (the “2013 Plan”). Such shares were valued at the fair value at the date of issue. The fair value was expensed as compensation over the vesting period and recorded as a reduction of stockholders’ equity. During 2019 and 2018, $303,000 and $277,515, respectively, of the unvested compensation cost related to these issues was recognized.

 

As of December 31, 2019, and 2018, the balance of unvested compensation to be recognized was $0 and $21,355, respectively, and is recorded as prepaid stock compensation as of those dates.

 

Preferred Stock

 

The Company is authorized to issue 10,000,000 shares of preferred stock, $0.001 par value. No shares of preferred stock were issued and outstanding at December 31, 2019 or 2018.

 

In April 2018, the Company issued 1,000 shares of the Company’s newly-created non-voting Series B Convertible Preferred Stock, which were convertible into 100,000 shares of common stock and warrants to purchase an aggregate of 75,000 shares of the Company’s common stock, for an aggregate purchase price of $1,000,000. The Series B Convertible Preferred Stock was fully converted into shares of common stock during 2018. The warrants have an initial exercise price of $14.70 per share, the closing price of the Company’s common stock reported on The NASDAQ Capital Market on April 6, 2018, subject to adjustment in certain circumstances. The net proceeds to the Company were approximately $877,500 after commissions and other offering expenses. The Company also issued to Dawson James Securities, Inc., its placement agent in the foregoing private placement, warrants to purchase up to 14,000 shares of common stock, at an exercise price of $14.70 per share, as compensation. The warrants issued pursuant to this transaction are unexercised as of December 31, 2019.

 

In June 2018, as part of the public offering described in Note 1, the Company issued 350 shares of the Company’s newly-created non-voting Series C Convertible Preferred Stock, which were convertible into 35,000 shares of common stock, and warrants to purchase an aggregate of 10,500 shares of the Company’s common stock. The warrants have an initial exercise price of $10.80 per share, 11% above the closing price of the Company’s common stock reported on The NASDAQ Capital Market on June 26, 2018, subject to adjustment in certain circumstances.

 

Stock Options

 

In July 2019, at the Annual Meeting of Stockholders of the Company, the Company’s stockholders approved an amendment to the 2013 Plan to increase the number of shares of the Company’s common stock reserved for issuance under the 2013 Plan by 75,000 shares of our common stock to a total of 240,000 shares. As of December 31, 2019, an aggregate of 8,211 shares of common stock were reserved for issuance under the 2013 Plan.

 

During 2019, the Company granted a total of 100,326 options to 22 employees and 2 consultants with vesting periods ranging from immediately/upon issue to 4 years beginning January 1, 2019. In 2019, 38,143 options vested and $494,240 of compensation cost was recognized during the year. As of December 31, 2019, there were options to purchase 180,903 shares issued and outstanding under the 2013 Plan. Of this amount, there are vested options exercisable for 88,163 shares of common stock. No options were exercised during the year ended December 31, 2019.

 

During 2018, the Company granted a total of 53,433 options to 18 employees and 1 consultant with vesting periods ranging from immediately/upon issue to 4 years beginning February 2018. In 2018, 41,549 options vested and $868,015 of compensation cost was recognized during the year. As of December 31, 2018, there were options to purchase 82,627 shares issued and outstanding under the 2013 Plan. Of this amount, there are vested options exercisable for 50,098 shares of common stock. No options were exercised during the year ended December 31, 2018.

 

The Company generally grants stock options to employees and directors at exercise prices equal to the fair market value of the Company’s stock on the dates of grant. Stock options are typically granted throughout the year and generally vest over four years of service and expire ten years from the date of the award, unless otherwise specified. The Company recognizes compensation expense for the fair value of the stock options over the requisite service period for each stock option award.

 

Total share-based compensation expense included in the statements of operations for the years ended December 31, 2019 and 2018 is $797,238, of which $494,240 is related to stock options, and $1,145,530, of which $868,015 is related to stock options, respectively. There was no capitalized share-based compensation cost as of December 31, 2019 and 2018, and there were no recognized tax benefits during the years ended December 31, 2019 and 2018.

 

To estimate the value of an award, the Company uses the Black-Scholes option-pricing model. This model requires inputs such as expected life, expected volatility and risk-free interest rate. The forfeiture rate also impacts the amount of aggregate compensation. These inputs are subjective and generally require significant analysis and judgment to develop. While estimates of expected life, volatility and forfeiture rate are derived primarily from the Company’s historical data, the risk-free rate is based on the yield available on U.S. Treasury constant maturity rates with similar terms to the expected term of the stock option awards. The fair value of share-based awards was estimated using the Black-Scholes model with the following weighted-average assumptions for the years ended December 31, 2019 and 2018:

 

Assumptions:

 

    2019     2018  
Dividend yield     0.00       0.00  
Risk-free interest rate     1.42-2.53 %      2.68-3.10 %
Expected volatility     105.2-112.1 %      104.9-137.3 %
Expected life (in years)     5-10        5-10  

 

Option activity for the year ended December 31, 2019 and 2018 was as follows:

 

          Weighted Average     Weighted Average        
          Exercise     Remaining     Aggregate  
          Price     Contractual     Intrinsic  
    Options     ($)     Life (Yrs.)     Value ($)  
Options outstanding at December 31, 2017     29,994       4.57       7.33       16,600  
Granted     53,433       1.45       6.58       0  
Exercised     -       -       -       -  
Forfeited or cancelled     (8,00 )     4.59       -       -  
Options outstanding at December 31, 2018     82,627       2.49       6.47       60,090  
Granted     100,326       1.25       4.79       -  
Exercised     -       -       -       -  
Forfeited or cancelled     (2,050 )     1.68       -       -  
Options outstanding at December 31, 2019     180,903       1.81       5.09       25,988  
Options expected to vest in the future as of December 31, 2019     92,740       1.38       4.88       1,792  
Options exercisable at December 31, 2019     88,163       2.27       5.30       24,196  
Options vested, exercisable, and options expected to vest at December 31, 2019     180,903       1.81       5.09       25,988  

 

The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying awards and the quoted price of our common stock for those awards that have an exercise price currently below the $9.82 closing price of our Common Stock on December 31, 2019. Six of the 2019 option grants have an exercise price currently below $9.82.

 

At December 31, 2019, there was $793,796 of unrecognized share-based compensation expense related to unvested share options with a weighted average remaining recognition period of 4.88 years.

 

Warrants

 

At December 31, 2019, the Company had outstanding warrants to purchase a total of 363,727 shares of common stock; 162,150 warrants at an exercise price of $40.00 per share, which if not exercised, will expire on February 21, 2022, 89,000 warrants at an exercise price of $14.70 per share, which if not exercised, will expire on October 07, 2023, 46,887 warrants at an exercise price of $10.80 per share, which if not exercised, will expire on June 26, 2023, 42,024 warrants at an exercise price of $16.10 per share, which if not exercised, will expire on March 15, 2024, 20,000 warrants with an exercise price of $15.60 per share, which if not exercised, will expire on May 7, 2024, 2,000 warrants with an exercise price of $17.50 per share, which if not exercised, will expire on May 7, 2024, and 1,666 warrants with an exercise price of $0.10, which if not exercised, will expire on November 18, 2022.

 

Warrant activity for the year ended December 31, 2019 and 2018 was as follows:

 

          Weighted Average    

Weighted

Average

 
          Exercise     Remaining  
          Price     Contractual  
    Warrants     ($)     Life (Yrs.)  
Warrants outstanding at December 31, 2017     164,550       39.70       4.11  
Granted     160,700       13.00       4.64  
Exercised     (20,190 )     11.90       -  
Forfeited or cancelled     -       -       -  
Options outstanding at December 31, 2018     305,060       27.50       3.86  
Granted     65,690       15.60       4.39  
Exercised     (7,023 )     10.80       -  
Forfeited or cancelled     -       -       -  
Warrants outstanding at December 31, 2019     363,727       25.60       3.12