Quarterly report pursuant to Section 13 or 15(d)

Stockholders??? Equity

v3.21.2
Stockholders’ Equity
9 Months Ended
Sep. 30, 2021
Equity [Abstract]  
Stockholders’ Equity

4. Stockholders’ Equity

 

Preferred Stock

 

The Company is authorized to issue a total of 10,000,000 shares of preferred stock, par value $0.0001 per share. On March 17, 2015, the Company filed a Certificate of Designations, Preferences, Rights and Limitations of its Series A Convertible Preferred Stock with the Delaware Secretary of State to amend the Company’s certificate of incorporation. The Company has designated a total of 350,000 shares as Series A Convertible Preferred Stock, which are non-voting and are not subject to increase without the written consent of a majority of the holders of the Series A Convertible Preferred Stock or as otherwise set forth in the Preferences, Rights and Limitations. The holders of each tranche of 175,000 shares of the Series A Convertible Preferred Stock are entitled to receive a per share dividend equal to 1% of the annual net revenue of the Company divided by 175,000, until converted or redeemed. As of September 30, 2021 and December 31, 2020, 9,650,000 shares of preferred stock were undesignated and may be issued with such rights and powers as the Board of Directors may designate.

 

 

Each share of Series A Convertible Preferred Stock may be converted, at the option of the holder, into 2.0833 shares of common stock (subject to customary anti-dilution provisions) and the Series A Convertible Preferred Stock is subject to mandatory conversion at the conversion rate in the event of a merger or sale transaction resulting in gross proceeds to the Company of at least $21,875,000. The Series A Convertible Preferred Stock has a liquidation preference based on its assumed conversion into shares of common stock. The Series A Convertible Preferred Stock does not have a cash liquidation preference.

 

If fully converted, the 350,000 outstanding shares of Series A Convertible Preferred Stock would convert into 729,167 shares of common stock at September 30, 2021 and December 31, 2020. The Company had the right to redeem the Series A Convertible Preferred Stock up to the fifth anniversary of their respective closing dates (March 17, 2015 and January 21, 2016) at a price per share equal to $50.00. Accordingly, as of December 31, 2020, the Company had the right to redeem the 175,000 shares of Series A Convertible Preferred Stock that were issued on January 21, 2016; however, that right expired on January 21, 2021. The Series A Convertible Preferred Stock has no right to cash, except with respect to the payment of the aforementioned dividend based on the generation of revenues by the Company. The shares of Series A Convertible Preferred Stock do not have any registration rights.

 

Based on the attributes of the Series A Convertible Preferred Stock as previously described, the Company has accounted for the Series A Convertible Preferred Stock as a permanent component of stockholders’ equity.

 

Common Stock

 

The Company is authorized to issue a total of 100,000,000 shares of common stock, par value $0.0001 per share. As of September 30, 2021 and December 31, 2020, the Company had 13,746,593 shares and 12,402,157 shares, respectively, of common stock issued, issuable and outstanding.

 

Effective November 30, 2020, the Company raised gross proceeds $5,700,000 through a public offering of 1,200,000 units at a sale price of $4.75 per unit. Each unit consisted of one share of common stock and one warrant to purchase one share of common stock exercisable for five years at an exercise price of $5.70 per share. Additionally, on December 7, 2020, the Company received an additional $1,800 from the sale of 180,000 warrants as part of the overallotment option granted to the underwriters in the public offering. The warrants sold are exercisable for five years and represent the right to purchase one share of common stock at an exercise price of $5.70 per share. The total cash costs of the public offering were $1,110,451, resulting in net cash proceeds of $4,591,349. Pursuant to the underwriting agreement, the Company also granted to the underwriters warrants to purchase up to 120,000 shares of common stock commencing on May 24, 2021 and expiring on November 24, 2025, at an exercise price of $5.70 per share.

 

During February and March 2021, the Company issued 3,000 shares of common stock upon the exercise of 3,000 warrants at $5.70 per share and received cash proceeds of $17,100.

 

Effective March 2, 2021, the Company completed the sale of 1,133,102 shares of common stock at a price of $3.70 per share in a registered direct equity offering, generating gross proceeds of $4,192,478. The total cash costs of this offering were $502,717, resulting in net cash proceeds of $3,689,761. Pursuant to the placement agents’ agreement, the Company granted to the placement agents warrants to purchase up to 113,310 shares of common stock commencing on March 2, 2021 and expiring on March 2, 2026, at an exercise price of $3.70 per share.

 

Effective April 22, 2021, stock options held by an officer and two of the Company’s directors for 125,001 shares of common stock were exercised. Such stock options consisted of 75,000 options at $0.72 per share, 16,667 options at $0.90 per share, and 33,334 options at $0.96 per share. The exercise of these stock options generated total cash proceeds of $101,000 and resulted in the issuance of 125,001 shares of common stock.

 

Effective July 14, 2021, a stock option held by a consultant of the Company for 83,333 shares of common stock were exercised at $1.20 per share. The exercise of this stock option generated total cash proceeds of $100,000 and resulted in the issuance of 83,333 shares of common stock.

 

 

Common Stock Warrants

 

A summary of common stock warrant activity during the nine months ended September 30, 2021 is presented below.

 

   

Number of

Shares

   

Weighted

Average

Exercise Price

   

Weighted

Average

Remaining

Contractual

Life (in Years)

 
                   
Warrants outstanding at December 31, 2020     3,000,000     $ 5.850          
Issued     113,310       3.700          
Exercised     (3,000 )     5.700          
Expired                    
Warrants outstanding at September 30, 2021     3,110,310     $ 5.772       2.73  

 

At September 30, 2021, the outstanding warrants are exercisable at the following prices per common share:

 

Exercise

Prices

 

Warrants

Outstanding

(Shares)

 
$3.700     113,310  
$5.700     1,497,000  
$6.000     1,500,000  
      3,110,310  

 

Based on a fair market value of $2.08 per share on September 30, 2021, there was no intrinsic value attributed to exercisable but unexercised common stock warrants at September 30, 2021.

 

Information with respect to the issuance of common stock in connection with various stock-based compensation arrangements is provided at Note 6.