|3 Months Ended|
Mar. 31, 2020
NOTE 4 - Stockholders’ Equity
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.
On March 27, 2020, at a special shareholders’ meeting, our authorized shares of common stock were increased from 2,250,000 to 8,000,000.
In the first quarter of 2020, the Company issued 321,517 shares of common stock in exchange for the conversion of 1,107 shares of Series D Convertible Preferred stock, and 86,801 shares of common stock as in-kind payment of preferred stock dividends.
In February 2020, the Company issued 2,500 shares of common stock valued at $8.70 per share to MHZCI, LLC, an investor relations firm engaged by the Company, as partial compensation for services to be rendered.
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 vesting 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.
The Company is authorized to issue 10,000,000 shares of preferred stock, $0.001 par value. 1,378 and 0 shares of preferred stock were issued and outstanding at March 31, 2020 and 2019, respectively.
In January 2020, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain institutional investors (the “Institutional Private Placement”). Pursuant to the SPA, the Company issued and sold 1,640 shares of the Company’s newly created Series D Convertible Preferred Stock (the “Series D Preferred Stock”). Under the Certificate of Designations for the Series D Preferred Stock, the Series D Preferred Stock has an initial stated value of $1,000 per share (the “Stated Value”). Dividends accrue at a dividend rate of 9% per annum (subject to increase upon the occurrence (and during the continuance) of certain triggering events described therein) and, on a monthly basis, shall be payable in kind by the increase of the Stated Value of the Series D Preferred Shares by said amount. The holders of the Series D Preferred Shares will have the right at any time to convert all or a portion of the Series D Preferred Shares (including, without limitation, accrued and unpaid dividends and make-whole dividends through the third anniversary of the closing date) into shares of the Company’s Common Stock at the conversion price then in effect, which initially is $10.00 (subject to adjustment for stock splits, dividends, recapitalizations and similar events and full ratchet price protection). In addition, a holder may at any time, alternatively, convert all, or any part, of its Series D Preferred Shares at an alternative conversion price, which equals the lower of the applicable conversion price then in effect, and the greater of (x) $1.80 and (y) 85% of the average volume weighted average price (“VWAP”) of the Common Stock for a five (5) trading day period prior to such conversion. Upon the occurrence of certain triggering events, described in the Certificate of Designations, including, but not limited to payment defaults, breaches of transaction documents, failure to maintain listing on the Nasdaq Capital Market, and other defaults set forth therein, the Series D Preferred Shares would become subject to redemption, at the option of a holder, at a 125% premium to the underlying value of the Series D Preferred Shares being redeemed.
At March 31, 2020 there were 1,045 shares of Series D Convertible Preferred stock outstanding, which if converted at the Alternate Conversion Price of $2.36 as of March 31, 2020, including the make-whole dividends, would have resulted in the issuance of 562,762 shares of common stock.
Concurrent with the Institutional Private Placement, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain of its directors and the Company’s largest shareholder (the “Other Private Placement”). Pursuant to the SPA, the Company issued and sold 333 shares of the Company’s newly created Series E Convertible Preferred Stock (the “Series E Preferred Stock”). Dividends accrue at a dividend rate of 9% per annum and, on a monthly basis, shall be payable in kind by the increase of the Stated Value of the Series E Preferred Shares by said amount. The Series E Preferred Stock is initially convertible into 48,544 shares of Common Stock,
At March 31, 2020, all of the issued Series E Convertible Preferred Stock was outstanding, which if converted as of March 31, 2020, including the make-whole dividends, would have resulted in the issuance of 61,651 shares of common stock.
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 750,000 shares of our common stock to a total of 2,400,000 shares.
In August 2019, the Company terminated its 2011 Equity Incentive Plan.
As of March 31, 2020, an aggregate of 29,486 shares of common stock were reserved for issuance under the 2013 Plan.
During the three months ended March 31, 2020, the Company granted an option to purchase 8,100 shares of common stock to Iron Dome Ventures, LLC as partial compensation for investor relations services to be rendered. The option vests equally over nine months beginning February 2020.
During the three months ended March 31, 2019, the Company granted options to purchase a total of 20,996 shares of common stock to 18 employees with vesting periods ranging from immediately upon issuance to 4 years beginning January 2019.
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 five 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 three months ended March 31, 2020 and 2019 is $154,170 and $254,206, of which $154,170 and $176,206 is related to stock options, respectively.
The fair value of share-based awards was estimated using the Black-Scholes model with the following weighted-average assumptions for the three months ended March 31, 2020 and 2019:
Option activity for the three months ended March 31, 2020 and the year ended December 31, 2019 was as follows:
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 $2.76 closing price of our Common Stock on March 31, 2020. All of the 2020 option grants have an exercise price currently below $2.76.
At March 31, 2020, there was $659,679 of unrecognized share-based compensation expense related to unvested share options with a weighted average remaining recognition period of 4.64 years.
Warrant activity for the three months ended March 31, 2020 and 2019 was as follows:
In connection with its January 2020 private placement, the Company issued 6,156 warrants to purchase its Series D Preferred Stock (the Preferred Warrants”). The Preferred Warrants have an exercise price of $975 per warrant and expire on February 15, 2021. Pursuant to the terms of the Securities Purchase Agreement, the Company forced the exercise of 512 warrants on March 27, 2020. As of March 31, 2020, there were 5,644 Preferred Warrants outstanding, which if exercised would result in the issuance of 5,644 shares of Series D Convertible Preferred Stock. The Series D Convertible Preferred stock, including make-whole dividends, was convertible into 2,996,713 shares of common stock on March 31, 2020.
The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef