Quarterly report pursuant to Section 13 or 15(d)

Stockholders' Equity

v3.10.0.1
Stockholders' Equity
9 Months Ended
Sep. 30, 2018
Stockholders' Equity Note [Abstract]  
Stockholders' Equity Note Disclosure [Text Block]
Note 10. Stockholders’ Equity
 
(a) Stock options and stock award activity
 
The following table illustrates the common stock options granted during the nine months ended September 30, 2018:
 
Title
 
Grant
date
 
No. of

options
 
 
Weighted

average

exercise

price
 
 
Weighted

average

grant date

fair value
 
 
Vesting

terms
 
Assumptions used in Black-Scholes

option pricing model
Consultants
 
January - September 2018
 
 
15,000
 
 
$
0.34
 
 
$
0.29
 
 
Immediately
 
Volatility
 
 
114 -118
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk free interest rate
 
 
2.22 -2.82
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expected term, in years
 
 
6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividend yield
 
 
0.00
%
Management,
 
January - September 2018
 
 
57,000
 
 
$
0.25
 
 
$
0.22
 
 
2 years
 
Volatility
 
 
118
%
Directors and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk free interest rate
 
 
2.96
%
Employees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expected term, in years
 
 
6
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividend yield
 
 
0.00
%
 
The following table illustrates the common stock options granted during the nine months ended September 30, 2017:
 
Title
 
Grant
date
 
No. of

options
 
 
Weighted

average

exercise

price
 
 
Weighted

average

grant date

fair value
 
 
Vesting

terms
 
Assumptions used in Black-Scholes

option pricing model
Management,
 
January - September 2017
 
 
366,500
 
 
$
4.00
 
 
$
2.60
 
 
1-3 years
 
Volatility
 
 
109-115
%
Directors and
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk free interest rate
 
 
2.22-2.53
%
Employees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expected term, in years
 
 
6-10
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividend yield
 
 
0.00
%
 
The following table illustrates the stock awards during the nine months ended September 30, 2018.
 
Title
 
Grant
date
 
No. of

stock

awards
 
 
Weighted

average

grant date

fair value
 
 
Vesting

terms
Consultants
 
January - September
2018
 
 
100,000
 
 
$
0.38
 
 
Immediately
 
The fair value of stock awards was determined using the share price on the date of grant.
 
There were no stock awards during the nine months ended September 30, 2017.
 
The following table summarizes information about stock option activity for the nine months ended September 30, 2018:
 
 
 
Options
 
 
 
No. of

options
 
 
Weighted

average

exercise

price
 
 
Exercise price

range
 
Weighted

average

grant date

fair value
 
 
Aggregate

Intrinsic

Value (in

thousands)
 
Outstanding at December 31, 2017
 
 
519,014
 
 
$
9.80
 
 
 $0.80 - $80.00
 
$
9.40
 
 
$
-
 
Granted
 
 
72,000
 
 
$
0.27
 
 
$0.25-$0.34
 
$
0.23
 
 
$
-
 
Forfeited/cancelled
 
 
(111,351
)
 
$
22.23
 
 
$2.68-$80.00
 
$
19.12
 
 
 
-
 
Outstanding at September 30, 2018
 
 
479,663
 
 
$
5.40
 
 
 $0.25 - $61.00
 
$
5.80
 
 
$
-
 
Exercisable at September 30, 2018
 
 
356,787
 
 
$
7.00
 
 
$0.25 - $61.00
 
$
7.60
 
 
$
-
 
 
As of September 30, 2018, unamortized stock-based compensation for stock options was $0.1 million, with a weighted-average recognition period of approximately 2.1 years.
 
(b) Warrants
 
The following table illustrates warrants granted during the nine months ended September 30, 2018:
 
Title
 
Grant
date
 
No. of

warrants
 
 
Weighted

average

exercise

price
 
 
Weighted

average

grant date

fair value
 
 
Vesting

terms
 
Assumptions used in Black-Scholes

option pricing model
Investors
 
January - September 2018
 
 
474,667
 
 
$
0.47
 
 
$
0.19
 
 
Six months
 
Volatility
 
 
118
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk free interest rate
 
 
2.90
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expected term, in years
 
 
5
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividend yield
 
 
0.00
%
 
The following table illustrates warrants granted during the nine months ended September 30, 2017:
 
Title
 
Grant date
 
No. of

warrants
 
 
Weighted

average

exercise

price
 
 
Weighted

average

grant date

fair value
 
 
Vesting

terms
 
Assumptions used in Black-Scholes

option pricing model
Investors
 
January - September 
2017
 
 
52,910
 
 
$
10.00
 
 
$
3.80
 
 
Immediately
 
Volatility
 
 
109
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk free interest rate
 
 
1.89
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expected term, in years
 
 
5
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividend yield
 
 
0.00
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noteholders
 
January - September 2017
 
 
387,597
 
 
$
0.86
 
 
$
1.96
 
 
Immediately
 
Volatility
 
 
105
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Risk free interest rate
 
 
1.91
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Expected term, in years
 
 
5
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividend yield
 
 
0.00
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The following table summarizes information about warrants outstanding at September 30, 2018:
 
 
 
Number of
Warrants
 
 
Weighted
Average
Exercise
Price
 
 
Exercise
price range
 
Warrants outstanding at December 31, 2017
 
 
18,695,677
 
 
$
3.00
 
 
 
$0.86-$200.00
 
Warrants issued
 
 
474,667
 
 
 
0.47
 
 
$
0.47
 
Warrants increased
 
 
4,004,147
 
 
 
0.08
 
 
$
0.08
 
Warrants exercised
 
 
(34,820
)
 
 
.08
 
 
 
.08
 
Outstanding and exercisable at September 30, 2018
 
 
23,139,671
 
 
$
1.61
 
 
 
$0.08-$200.00
 
 
The 83,333 warrants issued with the April 2017 Convertible Notes were valued using the Monte Carlo model, which is a pricing model that incorporates all of the required inputs of a Black-Scholes model and Monte Carlo simulation process that capture additional features of the warrant related to its fair value estimate, but are outside of the Black-Scholes model. The warrants contain a provision whereby if the Company completes a transaction with an effective price per share lower than the exercise price of the warrants then the exercise price shall be reduced and the number of warrant shares issuable shall be increased such that the aggregate exercise price payable after taking into account the decrease in the exercise price, shall be equal to the aggregate exercise price prior to such adjustment. The allocated fair value of the warrant of $180,000 is the mean of the present value of the future cash flows resulting from the Monte Carlo simulation process. The fair value of $180,000 was calculated using the Monte Carlo model and the allocated value of $180,000 was recorded as additional paid-in capital. In 2017, the number of warrants increased to 387,597 and exercise price lowered to $0.86 due to the above provision. During the nine months ended September 30, 2018, the number of warrants increased by 4,004,147 to 4,391,744 and the exercise price lowered to $0.0759 due to the above provision. Based on the above provision, we recorded a deemed dividend for the three and nine months ended September 30, 2018 of $441,000 and $441,000, respectively, based on the change in fair value, in our consolidated statement of operations.
 
Stock-based compensation expense for stock options and awards and warrants for the three months ended September 30, 2018 and 2017 was $9,000 and $180,000, respectively, which has not been tax-effected due to the recording of a full valuation allowance against net deferred tax assets. Stock-based compensation expense for stock options and awards and warrants for the nine months ended September 30, 2018 and 2017 was $131,000 and $345,000, respectively, which has not been tax-effected due to the recording of a full valuation allowance against net deferred tax assets.
 
(c) Series E Convertible Preferred Stock
 
For the nine months ended September 30, 2018, 8,478 shares of Series E Convertible Preferred Stock were converted into 23,825,614 shares of our common stock.
 
As of September 24, 2018, we notified the holders of Series E Convertible Preferred Stock that funds are not legally available for the payment of dividends and that such dividends shall accrete to and increase the outstanding stated value of the Series E Convertible Preferred Stock and shall thereafter no longer be accrued and unpaid dividends. As of September 30, 2018, dividends in accrued expenses of $396,000 were adjusted and recorded in additional paid in capital. For the nine months ended September 30, 2018, we recorded dividends of approximately $342,000.