Common Stock and Warrants

12 Months Ended

Dec. 31, 2018

Notes to Financial Statements

Note 6. Common Stock and Warrants

Note 6. Common Stock and Warrants

Common Stock

At December 31, 2018, the Company had 500,000,000 authorized shares of common stock with a par value of $0.00001 per share, 87,175,522 shares of common stock outstanding and 19,440,765 shares reserved for issuance under the Company’s 2013 Long-Term Incentive Plan (the “2013 Plan”) as adopted and approved by the Company’s Board of Directors (the “Board”) on June 20, 2013 that provides for the grant of stock options to employees, directors, officers and consultants. See “Note 7. Stock Options” for further discussion.

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During the year ended December 31, 2018, the Company had the following common stock related transactions:

• On February 3, 2018, Thomas Bold, the Company’s President, CEO and Interim Chief Financial Officer exercised options to purchase up to 60,000 shares, on a cashless basis, resulting in the issuance of 44,083 shares of common stock.

• On February 11, 2018, a consultant exercised options to purchase up to 40,000 shares, on a cashless basis, resulting in the issuance of 17,480 shares of common stock.

• On February 12, 2018, Dr. Gerlach exercised a Series A Warrant to purchase up to 480,000 shares, on a cashless basis, resulting in the issuance of 457,480 shares of common stock.

• On February 13, 2018, the Company issued 100,000 shares of common stock, upon the exercise of a Series D Warrant at an exercise price of $1.10 per share resulting in $110,000 of proceeds to the Company.

• On February 22, 2018, Kenneth Kirkland, a member of the Company’s board of directors, exercised options to purchase up to 50,000 shares, on a cashless basis, resulting in the issuance of 41,033 shares of common stock.

• On February 22, 2018, Joseph Sierchio, a member of the Company’s board of directors 1) exercised options to purchase up to 37,500 shares, on a cashless basis, resulting in the issuance of 22,711 shares of common stock; 2) exercised a Series F Warrant to purchase up to 7,246 shares, on a cashless basis, resulting in the issuance of 4,899 shares of common stock; and 3) exercised a Series H Warrant to purchase up to 10,000 shares, on a cashless basis, resulting in the issuance of 7,418 shares of common stock.   On November 26, 2018, the Company entered into Subscription Agreements (each, a “Subscription Agreement”) with KCC, a private corporation owning in excess of 10% of the Company's issued and outstanding common stock, for the purchase and sale of 10,335,000 units of the Company's equity securities (the “Units”) at a price of $1.50 per Unit, pursuant to a private placement offering conducted by the Company (the “Offering”) for (i) aggregate cash proceeds of $14,407,500 and (ii) conversion of $1,095,000 principal amount of outstanding loan indebtedness. The Each Unit consists of: (i) one (1) share of common stock; and (ii) one (1) Series I Stock Purchase Warrant to purchase one (1) share of common stock at a price of $2.00 per share for a period of seven (7) years commencing on the date the Warrants are first issued. (the “Series I Warrants”). The Series I Warrants do not have a cashless exercise provision. KCC does not have any registration rights with respect to the shares comprising a part of the Units or issuable upon exercise of the Series I Warrants. A deemed dividend of $180,000 was incurred with respect to the difference between the floor price of the conversion feature of $395,000 of outstanding loan indebtedness. This amount is a reclassification within equity only. 

During the year ended December 31, 2017, the Company had the following common stock related transactions:

• On October 16, 2017, the Company completed a self-directed offering of 920,000 shares of the Company common stock at a price of $2.50 per share for $2,300,000 in aggregate proceeds (the “October 2017 Private Placement”). Additionally, each purchaser, in a concurrent private placement, received one stock purchase warrant for each share of stock purchased for no additional consideration (the "Series H Warrant"). Each Series H Warrant is exercisable at a price of $2.75 per share for a period of five years. The warrants may be exercised on a cashless basis. The relative fair value of the common stock was estimated to be $1,309,458. The relative fair value of the Series H Warrants was estimated to be $990,542 as determined based on the relative fair value allocation of the proceeds received. The Series H Warrants were valued using the Black-Scholes option pricing model using the following variables: market price of common stock - $3.10 per share; exercise price of $2.75; estimated volatility – 98.25%; 5-year risk free interest rate – 1.95%; expected dividend rate - 0% and expected life - 5 years. 

• On July 21, 2017, the Company completed a self-directed offering of 460,250 units of the Company's equity securities (the "Units") at a price of $2.44 per unit for $1,122,610 in aggregate proceeds (the “July 2017 Private Placement”). Each unit consists of (a) one share of common stock and one Series G Stock Purchase Warrant (the “Series G Warrants”) allowing the holder to purchase one share of the Company’s common stock at a price of $2.68 per share for a period of five years. The warrants may be exercised on a cashless basis. The relative fair value of the common stock was estimated to be $634,782. The relative fair value of the Series G Warrants was estimated to be $487,828 as determined based on the relative fair value allocation of the proceeds received. The Series G Warrants were valued using the Black-Scholes option pricing model using the following variables: market price of common stock - $2.92 per share; estimated volatility – 102.23%; 5-year risk free interest rate – 1.81%; expected dividend rate - 0% and expected life - 5 years.

• On June 28, 2017, KCC exercised 114,493 Series F Warrants for $3.01 per share resulting in the issuance of 114,493 shares of common stock and proceeds of $344,624.

• March 1, 2017, KCC exercised 1,326,087 Series B Warrants and 3,500,000 Series C Warrants, on a cashless basis, resulting in the issuance of 4,273,831 shares of common stock.

• On February 17, 2017, Thomas Bold, the Company’s former President exercised options to purchase up to 40,000 shares, on a cashless basis, resulting in the issuance of 34,296 shares of common stock. Mr. Bold resigned as President and Director on March 30, 2019.

• On February 10, 2017, Joseph Sierchio, a former member of the Company’s board of directors, exercised options to purchase up to 70,000 shares, on a cashless basis, resulting in the issuance of 38,642 shares of common stock.  

• On February 2, 2017, Kenneth Kirkland, a member of the Company’s board of directors, exercised options to purchase up to 40,000 shares, on a cashless basis, resulting in the issuance of 29,642 shares of common stock.

• On January 10, 2017, Dr. Gerlach exercised a Series A Warrant to purchase up to 240,000 shares, on a cashless basis, resulting in the issuance of 204,571 shares of common stock.

Warrants

The following table summarizes information about warrants outstanding at December 31, 2018 and 2017:

	Shares of Common Stock Issuable from Warrants Outstanding as of		Weighted
Description	December 31,	December 31,	Average Exercise Price	Expiration
	2018	2017
Series A	240,000	720,000	$              0.35	July 12, 2019
Series D	810,000	910,000	$              1.10	June 5, 2020
Series E	584,416	584,416	$              1.54	September 8, 2021
Series F	7,246	14,492	$               3.45	February 23, 2022 & March 9, 2022
Series G	460,250	460,250	$               2.68	July 21, 2022
Series H	910,000	920,000	$               2.75	October 16, 2022
Series I	10,335,000	-	$               2.00	November 26, 2025
Total	13,346,912	3,609,158

As consideration for the CellMist^TM System and services performed in connection therewith, the Company issued to Dr. Gerlach a Series A Stock Purchase Warrant entitling him to purchase 1,200,000 shares of the Company’s common stock at an exercise price of $0.35 per share. Pursuant to the terms of the Amended APA, the Series A Warrant will vest in five equal installments of 240,000 shares on each of July 12, 2014, July 12, 2015, July 12, 2016, July 12, 2017 and July 12, 2018. On August 5, 2015, Dr. Gerlach exercised a Series A Warrant to purchase up to 240,000 shares on a cashless basis and the Company issued him 196,812 shares of common stock. On January 10, 2017, Dr. Gerlach exercised a Series A Warrant to purchase up to 240,000 shares on a cashless basis and the Company issued him 204,571 shares of common stock. On February 3, 2018, Dr. Gerlach exercised a Series A Warrant to purchase up to 480,000 shares on a cashless basis and the Company issued him 457,480 shares of common stock.

A Series B Warrant with an exercise price of $0.46 to purchase 3,500,000 shares of common stock was issued on November 29, 2013 to KCC in connection with the November 29, 2013 financing. On February 2, 2016, KCC exercised a portion of its Series B Warrant for 2,173,913 shares of the Company’s common stock resulting in proceeds of $1,000,000. On March 1, 2017, KCC exercised, in full, on a cashless basis, the remaining 1,326,087 Series B Warrants resulting in the issuance of 1,181,194 shares of common stock.

A Series C Warrant with an exercise price of $0.49, to purchase 3,500,000 shares of common stock was issued on November 29, 2013 to KCC in connection with a financing. On March 1, 2017, KCC exercised, in full, on a cashless basis, the 3,500,000 Series C Warrants resulting in the issuance of 3,092,637 shares of common stock.

Series D Warrants with an exercise price of $1.10 to purchase 1,010,000 shares of common stock were issued on June 5, 2015 in connection with the sale of units pursuant to a private placement. On December 6, 2016, 100,000 Series D Warrants were exercised resulting in the Company receiving $110,000 of proceeds. On February 13, 2018, an additional 100,000 Series D Warrants were exercised resulting in the Company receiving $110,000 of proceeds

A Series E Warrant to purchase 584,416 shares of common stock was issued on September 9, 2016 in connection with the Loan Agreement. See “Note 5. Debt” for further discussion.

Three Series F Warrants to purchase 128,985 shares of common stock were issued between February 22, 2017 and March 9, 2017 in connection with the February 2017 Loan Agreements. On June 28, 2017, KCC exercised 114,493 Series F Warrants for $3.01 per share resulting in the issuance of 114,493 shares of common stock and proceeds of $344,624. See “Note 5. Debt” for further discussion. On February 22, 2018, Joe Sierchio exercised a Series F Warrant to purchase up to 7,246 shares on a cashless basis and the Company issued him 4,899 shares of common stock.

The Series G Warrants to purchase 460,250 shares of common stock were issued on July 21, 2017 in connection with the sale of units pursuant to the July 2017 Private Placement. See above for further discussion.

The Series H Warrants to purchase 920,000 shares of common stock were issued on October 16, 2017 in connection with the sale of units pursuant to the October 2017 Private Placement. See “Note 6. Common Stock and Warrants” for further discussion. On February 22, 2018, Joe Sierchio exercised a Series F Warrant to purchase up to 10,000 shares on a cashless basis and the Company issued him 7,418 shares of common stock.