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Stockholders' Equity

12 Months Ended

Dec. 31, 2019

Note 8 — Stockholders' Equity:

Common Stock:

The Company had a prior sales agreement with B. Riley for its ATM program, which expired on April 16, 2018, under which the Company could issue and sell up to an aggregate of $60.0 million of shares of its common stock. On March 9, 2018, the Company entered into a new agreement with B. Riley for the sale of up to $14.7 million of the Company's common stock under the ATM program, pursuant to a registration statement filed on March 9, 2018 for an aggregate of $70 million of the Company's securities, which became effective on April 16, 2018. This new ATM agreement replaced a prior sales agreement with B. Riley that expired on April 16, 2018. The ATM program amount was increased by $25.0 million in November 2018. Under the ATM program, the Company may issue and sell common stock from time to time through B. Riley acting as agent, subject to limitations imposed by the Company and subject to B. Riley's acceptance, such as the number or dollar amount of shares registered under the registration statement to which the offering relates. B. Riley is entitled to a commission of up to 3% of the gross proceeds from the sale of common stock sold under the ATM program. During the years ended December 31, 2019 and 2018, the Company sold 1,768,012 and 7,177,755 shares of common stock under the new and expired ATM programs, respectively, and realized net proceeds of approximately $15.2 million and $22.0 million during the years ended December 31, 2019 and 2018, respectively. At December 31, 2019, the Company has approximately $4.6 million available under its current ATM program and $30.3 million available under its current shelf registration for the issuance of equity, debt or equity-linked securities unrelated to the current ATM program (see note 11 for subsequent event sales under ATM).

Restricted Stock Units

During the year ended December 31, 2019 and 2018, the Company granted an aggregate of 24,850 and 18,900 restricted stock units ("RSUs") to its officers and directors under its 2013 Stock Incentive Plan with a weighted average grant date fair value of $8.33 and $3.50 per share, respectively. The fair value of each RSU was estimated to be the closing price of the Company's common stock on each date of grant. These RSUs vest monthly over one year after grant date, subject to continued service on the board through the vesting date. During the year ended December 31, 2019 and 2018, compensation expense recorded for these RSUs was $198,000 and $93,000, respectively. Unrecognized compensation expense as of December 31, 2019 and 2018 was $11,000 and $23,000, respectively. The expected weighted average period for the expense to be recognized is 0.19 years. During the year ended December 31, 2019, 2,830 RSU's were forfeited and no RSUs were forfeited during the year ended December 31, 2018. At December 31, 2019, there were 2,490 RSUs outstanding to vest.

During the year ended December 31, 2019, the Company issued an aggregate of 25,346 shares of its common stock upon the vesting of restricted stock units issued to the Company's board of directors.

Preferred Stock

The Company is authorized to issue up to 2,000,000 shares of preferred stock in one or more series without stockholder approval. The Company's board of directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock. Of the 2,000,000 shares of preferred stock authorized, the Company's board of directors has designated (all with par value of $0.001 per share) the following:

	As of December 31, 2019						As of December 31, 2018
	Preferred Shares Outstanding		Liquidation Preference (Per Share)		Total Liquidation Preference		Preferred Shares Outstanding		Liquidation Preference (Per Share)		Total Liquidation Preference
Series C-2		-		-		-		150,000	$	10.00	$	1,500,000
Series C-3		52,000	$	10.00	$	520,000		104,000	$	10.00	$	1,040,000
Series D		-		-		-		73,962	$	21.00	$	1,553,202
Series E		89,623	$	49.20	$	4,409,452		89,623	$	49.20	$	4,409,452
Series F		-		-		-		2,000	$	1,000.00	$	2,000,000
Series G		100,000	$	187.36	$	18,736,452		-		-		-
Total		241,623			$	23,665,904		419,585			$	10,502,654

On November 9, 2017, the Company entered into a securities purchase agreement which, on November 16, 2017, resulted in the Company selling $2.0 million of its Series F preferred stock ("Series F Stock") at $1,000 per share. Based on the terms of the Series F Stock, the conversion price was $0.81. The conversion price of the Series F Stock was subject to anti-dilution adjustment for customary recapitalization events such as stock splits, as well as full ratchet anti-dilution protection in the event that the Company did not obtain the subordination of the Series C-3 preferred stock to that of the Series F Stock or obtain stockholder approval, if required by NYSE American rules, of the issuance of common stock that exceeds NYSE American rules. All outstanding shares of Series F Stock were cancelled in connection with the terms of the Exchange Agreement, as described below.

On August 14, 2019, the Company entered into the Exchange Agreement with Elliott, pursuant to which Elliott agreed to exchange all of its outstanding warrants, its 10% senior secured convertible note and its shares of Series C-2 preferred stock, Series D preferred stock and Series F preferred stock, and make a cash payment of $2.0 million to the Company, for 100,000 shares of Series G preferred stock, with an aggregate liquidation preference of $18,736,452, which are convertible into an aggregate of 5,560,138 shares of the Company's common stock at a conversion price of $3.37 per share. Elliott retained the shares of the Company's common stock and Series E preferred stock that it held at the time of the consummation of the Exchange Agreement. Other than with respect to conversion price and liquidation preference, the Series G preferred stock has substantially the same terms as the Company's outstanding Series E preferred stock, including the restrictive covenants contained therein as modified as set forth in the Exchange Agreement. However, Elliott is prohibited from converting the Series G preferred stock into shares of the Company's common stock to the extent that, as a result of such conversion, Elliott would own more than 4.99% of the total number of shares of the Company's common stock then issued and outstanding. The shares of Series G preferred stock are entitled to vote on an as-converted basis with respect to the number of shares of common stock into which they are convertible, based upon an assumed conversion price, solely for the purpose of the voting rights, equal to $7.93, the closing price of the Company's common stock on August 14, 2019, and the Series E preferred stock was modified to provide for similar rights to vote on an as-converted basis. The Company filed the Certificate of Designation of the Series G preferred stock and the Second Amended and Restated Certificate of Designation of the Series E preferred stock with the Secretary of State of the State of Delaware on September 5, 2019. On September 6, 2019, the Company closed this transaction and issued the Series G preferred stock.

Pursuant to the terms of the Exchange Agreement, the exchange of the Series C-2 preferred stock, Series D preferred stock, Series F preferred stock and the 10% senior secured convertible note was considered an extinguishment. As a result, the difference between the fair value allocated to the Series G preferred stock and the carrying value of the Series C-2 preferred stock, Series D preferred stock, Series F preferred stock and the 10% senior secured convertible note is being treated as a deemed dividend and is added to net loss to arrive at loss available to common stockholders.

The Series G preferred stock was valued using the Black Scholes option pricing model. The Black-Scholes option pricing model was also used to determine the fair value of the warrants and the Series C-2 preferred stock, Series D preferred stock and Series F preferred stock. These fair values, along with the fair value of the 10% senior secured convertible note were utilized to allocate the fair value of the Series G preferred stock based on relative fair values. ASC 820, Fair Value Measurements, states that the reporting entity should use the valuation technique(s) appropriate for the measurement, considering the availability of data with which to develop inputs that represent the assumptions that market participants would use when pricing the asset or liability. Market participants price options based on expected volatility, not historical volatility. In estimating the expected volatility of the Company's common stock, the Company followed the guidance of ASC 820 and considered a number of factors - including the implied volatility of the Company's listed warrant contracts.

A summary of the assumptions used in the Black Scholes pricing model are as follows:

Expected term, years	3.0
Volatility	93.3	%
Dividend yield	0.0	%
Risk-free interest rate	1.53	%

As a result of the Exchange Agreement, the Company recognized a deemed dividend of $26,733,098. The deemed dividend was comprised of (1) a beneficial conversion related to the 10% secured senior convertible note recognized at extinguishment; (2) the difference between the allocated fair value of the Series G Preferred Stock issued and the carrying values of the 10% secured senior convertible note, the Series C-2 Preferred Stock, Series D Preferred Stock and Series F Preferred Stock; (3) the difference between the fair value of the exchanged warrants before and after the Exchange Agreement; and (4) the difference between the fair value and the carrying value of Series E Preferred Stock, less the fair value of the Series E warrants that were cancelled as part of the Exchange Agreement.

During the year ended December 31, 2019, the Company issued 104,000 shares of its common stock upon conversion of 52,000 shares of Series C-3 non-voting preferred stock.

The following rights, privileges, terms and condition apply to the outstanding preferred stock at December 31, 2019:

Series C-3 Non-Voting Preferred Stock

Rank. The Series C-3 non-voting preferred stock will rank senior to our common stock; senior to any class or series of capital stock created after the issuance of the Series C-3 non-voting preferred stock; and junior to the Series E voting convertible preferred stock in each case, as to dividends or distributions of assets upon our liquidation, dissolution or winding up whether voluntarily or involuntarily.

Conversion. Each share of Series C-3 preferred stock is convertible into 2 shares of our common stock (subject to adjustment in the event of stock dividends and distributions, stock splits, stock combinations, or reclassifications affecting our common stock) at a per share price of $5.00 at any time at the option of the holder, except that a holder will be prohibited from converting shares of Series C-3 preferred stock into shares of common stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than 9.99% of the total number of shares of our common stock then issued and outstanding.

Liquidation Preference. In the event of our liquidation, dissolution or winding up, holders of Series C-3 preferred stock will receive a payment equal to $10.00 per share of Series C-3 preferred stock before any proceeds are distributed to the holders of our common stock. After the payment of this preferential amount, and subject to the rights of holders of any class or series of our capital stock hereafter created specifically ranking by its terms senior to the Series C-3 preferred stock and holders of Series C-3 preferred stock will participate ratably in the distribution of any remaining assets with the common stock and any other class or series of our capital stock hereafter created that participates with the common stock in such distributions.

Voting Rights. Shares of Series C-3 preferred stock will generally have no voting rights, except as required by law and except that the consent of holders of two thirds of the outstanding Series C-3 preferred Stock will be required to amend the terms of the Series C-3 preferred stock or the certificate of designation for the Series C-3 preferred stock.

Dividends. Holders of Series C-3 preferred stock are entitled to receive, and we are required to pay, dividends on shares of the Series C-3 preferred stock equal (on an as-if-converted-to-common-stock basis) to and in the same form as dividends (other than dividends in the form of common stock) actually paid on shares of the common stock when, as and if such dividends (other than dividends in the form of common stock) are paid on shares of the common stock.

Redemption. We are not obligated to redeem or repurchase any shares of Series C-3 preferred stock. Shares of Series C-3 preferred stock are not otherwise entitled to any redemption rights, or mandatory sinking fund or analogous fund provisions.

Listing. There is no established public trading market for the Series C-3 preferred stock, and we do not expect a market to develop. In addition, we do not intend to apply for listing of the Series C-3 preferred stock on any national securities exchange or trading system.

Fundamental Transactions. If, at any time that shares of Series C-3 preferred stock are outstanding, we effect a merger or other change of control transaction, as described in the certificate of designation and referred to as a fundamental transaction, then a holder will have the right to receive, upon any subsequent conversion of a share of Series C-3 preferred stock (in lieu of conversion shares) for each issuable conversion share, the same kind and amount of securities, cash or property as such holder would have been entitled to receive upon the occurrence of such fundamental transaction if such holder had been, immediately prior to such fundamental transaction, the holder of a share of common stock.

Series E Voting Convertible Preferred Stock

Rank. The Series E voting preferred stock will rank senior to our common stock; senior to any class or series of capital stock created after the issuance of the Series E voting convertible preferred stock; senior to the Series C-3 non-voting convertible preferred stock; and on parity with the Series G voting convertible preferred stock in each case, as to dividends or distributions of assets upon our liquidation, dissolution or winding up whether voluntarily or involuntarily.

Conversion. Each share of Series E preferred stock is convertible into 4.3733 shares of our common stock (subject to adjustment as provided in the certificates of designation for the Series E preferred stock) at a per share price of $3.75 at any time at the option of the holder, except that a holder will be prohibited from converting shares of Series E preferred stock into shares of common stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than 4.99% of the total number of shares of our common stock then issued and outstanding.

Liquidation Preference. In the event of our liquidation, dissolution or winding up, holders of Series E preferred stock will receive a payment equal to $49.20 per share of Series E preferred stock on parity with the payment of the liquidation preference due the Series G preferred stock, but before any proceeds are distributed to the holders of common stock, and the Series C-3 non-voting convertible preferred stock. After the payment of this preferential amount, holders of Series E preferred stock will participate ratably in the distribution of any remaining assets with the common stock and any other class or series of our capital stock that participates with the common stock in such distributions.

Voting Rights. Shares of Series E preferred stock are entitled to vote on an as-converted basis, based upon an assumed conversion price of $7.93.

Dividends. Holders of Series E preferred stock are entitled to receive, and we are required to pay, dividends on shares of the Series E preferred stock equal (on an as-if-converted-to-common-stock basis) to and in the same form as dividends (other than dividends in the form of common stock) actually paid on shares of the common stock when, as and if such dividends (other than dividends in the form of common stock) are paid on shares of the common stock.

Redemption. We are not obligated to redeem or repurchase any shares of Series E preferred stock. Shares of Series E preferred stock are not otherwise entitled to any redemption rights, or mandatory sinking fund or analogous fund provisions.

Listing. There is no established public trading market for the Series E preferred stock, and we do not expect a market to develop. In addition, we do not intend to apply for listing of the Series E preferred stock on any national securities exchange or trading system.

Fundamental Transactions. If, at any time that shares of Series E preferred stock are outstanding, we effect a merger or other change of control transaction, as described in the certificate of designation and referred to as a fundamental transaction, then a holder will have the right to receive, upon any subsequent conversion of a share of Series E preferred stock (in lieu of conversion shares) for each issuable conversion share, the same kind and amount of securities, cash or property as such holder would have been entitled to receive upon the occurrence of such fundamental transaction if such holder had been, immediately prior to such fundamental transaction, the holder of a share of common stock.

Debt Restriction. As long as any of the Series E preferred stock is outstanding, we cannot create, incur, guarantee, assume or suffer to exist any indebtedness, other than (i) trade payables incurred in the ordinary course of business consistent with past practice, and (ii) up to $10 million aggregate principal amount of indebtedness with a maturity less than twelve months outstanding at any time, which amount may include up to $5 million of letters of credit outstanding at any time.

Other Covenants. In addition to the debt restrictions above, as long as any of the Series E preferred stock is outstanding , we cannot, among others things: create, incur, assume or suffer to exist any encumbrances on any of our assets or property; redeem, repurchase or pay any cash dividend or distribution on any of our capital stock (other than as permitted, which includes the dividends on the Series E preferred stock and Series G preferred stock); redeem, repurchase or prepay any indebtedness (other than as permitted); or engage in any material line of business substantially different from our current lines of business.

Purchase Rights. In the event we issue any options, convertible securities or rights to purchase stock or other securities pro rata to the holders of common stock, then a holder of Series E preferred stock will be entitled to acquire, upon the same terms a pro rata amount of such stock or securities as if the Series E preferred stock had been converted to common stock.

Series G Voting Convertible Preferred Stock

Rank. The Series G voting convertible preferred stock will rank senior to our common stock; senior to any class or series of capital stock created after the issuance of the Series G voting convertible preferred stock; junior to the Series C-3 non-voting convertible preferred stock, pending the consent of the holders of such series to the subordination thereof; and on parity with the Series E voting convertible preferred stock in each case, as to dividends or distributions of assets upon our liquidation, dissolution or winding up whether voluntarily or involuntarily.

Conversion. Each share of Series G preferred stock is convertible into approximately 55.5978 shares of our common stock (subject to adjustment as provided in the certificate of designation for the Series G preferred stock) at a per share price of $3.37 at any time at the option of the holder, except that a holder will be prohibited from converting shares of Series G preferred stock into shares of common stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than 4.99% of the total number of shares of our common stock then issued and outstanding.

Liquidation Preference. In the event of our liquidation, dissolution or winding up, holders of Series E preferred stock will receive a payment equal to $187.36452 per share of Series G preferred stock on parity with the payment of the liquidation preference due the Series E preferred stock, but before any proceeds are distributed to the holders of Series C-3 preferred stock (pending the consent of the holders of such series to the subordination thereof) and any proceeds are distributed to the holders of common stock. After the payment of this preferential amount, holders of Series G preferred stock will participate ratably in the distribution of any remaining assets with the common stock and any other class or series of our capital stock that participates with the common stock in such distributions.

Voting Rights. Shares of Series G preferred stock are entitled to vote on an as-converted basis, based upon an assumed conversion price of $7.93.

Dividends. Holders of Series G Preferred stock are entitled to receive, and we are required to pay, dividends on shares of the Series G preferred stock equal (on an as-if-converted-to-common-stock basis) to and in the same form as dividends (other than dividends in the form of common stock) actually paid on shares of the common stock when, as and if such dividends (other than dividends in the form of common stock) are paid on shares of the common stock.

Redemption. We are not obligated to redeem or repurchase any shares of Series G preferred stock. Shares of Series G preferred stock are not otherwise entitled to any redemption rights, or mandatory sinking fund or analogous fund provisions.

Listing. There is no established public trading market for the Series G preferred stock, and we do not expect a market to develop. In addition, we do not intend to apply for listing of the Series G preferred stock on any national securities exchange or trading system.

Fundamental Transactions. If, at any time that shares of Series G preferred stock are outstanding, we effect a merger or other change of control transaction, as described in the certificate of designation and referred to as a fundamental transaction, then a holder will have the right to receive, upon any subsequent conversion of a share of Series G preferred stock (in lieu of conversion shares) for each issuable conversion share, the same kind and amount of securities, cash or property as such holder would have been entitled to receive upon the occurrence of such fundamental transaction if such holder had been, immediately prior to such fundamental transaction, the holder of a share of common stock.

Debt Restriction. As long as any of the Series G preferred stock is outstanding, we cannot create, incur, guarantee, assume or suffer to exist any indebtedness, other than (i) trade payables incurred in the ordinary course of business consistent with past practice, and (ii) up to $10 million aggregate principal amount of indebtedness with a maturity less than twelve months outstanding at any time, which amount may include up to $5 million of letters of credit outstanding at any time.

Other Covenants. In addition to the debt restrictions above, as long as any of the Series G preferred stock is outstanding, we cannot, among others things: create, incur, assume or suffer to exist any encumbrances on any of our assets or property; redeem, repurchase or pay any cash dividend or distribution on any of our capital stock (other than as permitted, which includes the dividends on the Series E preferred stock and the Series G preferred stock); redeem, repurchase or prepay any indebtedness (other than as permitted); or engage in any material line of business substantially different from our current lines of business.

Purchase Rights. In the event we issue any options, convertible securities or rights to purchase stock or other securities pro rata to the holders of common stock, then a holder of Series G preferred stock will be entitled to acquire, upon the same terms a pro rata amount of such stock or securities as if the Series G preferred stock had been converted to common stock.

Stock Options:

The Company's 2013 Stock Incentive Plan (the "2013 Plan") was approved by the shareholders in July 2013. The 2013 Plan provides for the issuance of equity grants in the form of options, restricted stock, stock awards and other forms of equity compensation. Awards under the 2013 Plan may be made to directors, officers, employees and consultants. Initially, an aggregate of 1,000,000 shares of the Company's common stock was reserved for issuance under the 2013 Plan. On January 19, 2016, the shareholders approved an increase of the shares issuable under the 2013 Plan from 1,000,000 to 1,600,000 and on June 13, 2016 from 1,600,000 to 2,200,000.

On November 26, 2019, the Company's shareholders approved the CorMedix Inc. 2019 Omnibus Stock Incentive Plan (the "2019 Plan"). Pursuant to the 2019 Plan and subject to certain adjustments as described below, the Company may issue up to 3,000,000 shares of its common stock, plus any shares that remain available for grant under its 2013 Plan as of the effective date (up to a maximum carry-forward of 522,606 shares plus any outstanding options under the 2013 Plan that were canceled, forfeited and expired after the approval of the 2019 Plan), as long-term equity incentives to the Company's employees, consultants, and directors. The long-term incentives may be in the form of stock options, stock appreciation rights, restricted stock, restricted stock units, dividend equivalent rights, or other rights or benefits (collectively, stock rights) to employees, consultants, and directors of the Company or a related entity (collectively, participants). The Company believes that the effective use of long- term equity incentives is essential to attract, motivate, and retain employees, consultants and directors, to further align participants' interests with those of the Company's stockholders, and to provide participants incentive compensation opportunities that are competitive with those offered by other companies in the same industry and locations as the Company.

The 2019 Plan is a new equity compensation plan for the Company's employees, consultants, and directors which replaced the 2013 Plan. The 2013 Plan and the Amended and Restated 2006 Stock Incentive Plan (the "2006 Plan") are referred to collectively as the "Prior Plans". No further awards will be granted under the Prior Plans after the approval of the 2019 Plan. Awards outstanding under the Prior Plans will remain outstanding in accordance with their terms and the Prior Plans.

During the year ended December 31, 2019, the Company granted ten-year qualified and non-qualified stock options to its officers, directors, employees and consultants covering an aggregate of 496,300 shares of the Company's common stock under the 2013 Plan. The weighted average exercise price of these options is $7.64 per share.

During the years ended December 31, 2019 and 2018, total compensation expense for stock options issued to employees, directors, officers and consultants was $2,242,000 and $1,018,000, respectively. As of December 31, 2019, there was $1,856,000 total unrecognized compensation expense related to unvested stock options granted which expense is expected to be recognized over an expected remaining weighted average period of 1.6 years. All share-based awards are recognized on a straight-line method, assuming all awards granted will vest. Forfeitures of share-based awards are recognized in the period in which they occur.

The fair value at grants dates of the grants issued subject to service and performance-based vesting conditions were determined using the Black-Scholes option pricing model with the following assumptions:

	Year Ended December 31,
	2019	2018
Risk-free interest rate	1.51% - 2.74%	2.63% - 2.96%
Expected volatility	103% - 110%	93% - 103%
Expected term (years)	5 – 10 years	5 years
Expected dividend yield	0.0%	0.0%
Weighted-average grant date fair value of options granted during the period	$6.11	$8.00

The Company estimated the expected term of the stock options granted based on anticipated exercises in future periods. The expected term of the stock options granted to consultants is based upon the full term of the respective option agreements. The expected stock price volatility for the Company's stock options is calculated based on the historical volatility since the initial public offering of the Company's common stock in March 2010. The expected dividend yield of 0.0% reflects the Company's current and expected future policy for dividends on the Company's common stock. To determine the risk-free interest rate, the Company utilized the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected term of the Company's awards which is 5 years for employees and 10 years for non-employees.

The following table summarizes the Company's stock options activity and related information for the year ended December 31, 2019:

	Shares Underlying Stock Options			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at beginning of year		1,011,266		$	9.32		6.7	$	1,006,743
Granted		496,300		$	7.64				156,744
Exercised		(38,090	)	$	3.22				154,589
Expired/Canceled		(7,093	)	$	10.29				664
Forfeited		(85,989	)	$	7.73				53,047
Outstanding at end of year		1,376,394		$	8.98		6.8	$	1,232,545
Vested at end of year		932,959		$	9.31		6.0	$	950,659
Expected to vest in the future		443,435		$	8.28		8.6	$	281,887

The total intrinsic value of stock options exercised during the years ended December 31, 2019 and 2018 was $154,589 and $42,400, respectively. The aggregate intrinsic value is calculated as the difference between the exercise prices of the underlying options and the quoted closing price of the common stock of the Company at the end of the reporting period for those options that have an exercise price below the quoted closing price.

Warrants:

The following table is the summary of warrant activities:

	Shares Underlying Warrants			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
Outstanding at December 31, 2018		3,319,008		$	5.50		3.1
Issued		-			-		-
Exercised		(1,948,207	)	$	4.45		-
Canceled in connection with the Exchange Agreement		(892,973	)	$	4.68		-
Expired		(136,500	)	$	12.50		-
Outstanding at December 31, 2019		341,328		$	6.24		1.42

On December 31, 2018, the Company sold to Elliott a senior secured convertible note in the aggregate principal amount of $7,500,000 and a warrant to purchase up to an aggregate of 90,000 shares of common stock, for gross proceeds of $7,500,000. The warrant is immediately exercisable, has an exercise price of $7.50 per share, subject to adjustment in the event of stock dividends and distributions, stock splits, stock combinations, or reclassifications affecting the Company's common stock, and has a term of five years (see Note 6). On December 31, 2018, the Company amended and restated the following warrants held by Elliott and its affiliates to reduce the exercise price of each warrant to $0.001 per share: warrants issued in May 2013 to purchase up to an aggregate of 100,000 shares of the Company's common stock with a pre-amendment exercise price of $3.25 per share and an expiration date of May 30, 2019 (the "May 30, 2019 Warrants"); and warrants issued in October 2013 to purchase up to an aggregate of 150,000 shares of common stock with a pre-amendment exercise price of $4.50 per share and an expiration date of October 22, 2019 (the "October 22, 2019 Warrants"). The incremental cost of approximately $710,000 associated with the warrant modification was recorded as a debt discount. The senior secured convertible note and warrant to purchase up to an aggregate of 90,000 shares of the Company's common stock were cancelled in connection with the terms of the Exchange Agreement.

The fair value of the warrant was determined using a Black-Scholes option pricing model using the following assumptions at the grant date of the warrant:

Expected Term		5.0 years
Volatility		102.85	%
Dividend yield		0.0	%
Exercise Price	$	1.50
Risk-free interest rate		2.51	%

On September 25, 2019, the Company entered into Letter Agreements with Holders of Series B Warrants. Pursuant to each Letter Agreement, the Company agreed to reduce the exercise price of each Holder's Series B Warrants from $5.25 to $4.00, provided that the Holder exercised its Warrant for cash at the time of entry into such Letter Agreement. Each Holder exercised its Series B Warrants in full and the Company issued an aggregate of 1,224,263 shares of Common Stock to them. The Company received net proceeds of approximately $4,900,000. As a result of the modification of the exercise price of these warrants, the Company recognized an incremental value of $369,500, which was recorded as a deemed dividend on the consolidated statement of operations and comprehensive loss for the year ended December 31, 2019, using the Black-Scholes pricing model with the following assumptions:

Expected term	2.88 years
Volatility	111.5	%
Dividend yield	0.0	%
Risk-free interest rate	1.62	%

During the year ended December 31, 2019, the expiration date of a warrant to purchase up to 100,000 shares of the Company's common stock was extended from May 30, 2019 to August 16, 2019, then subsequently canceled in connection with the Exchange Agreement transaction (see Note 6). The warrant had an exercise price of $0.005. The incremental value of the warrant extended was immaterial.

During the year ended December 31, 2019, the Company issued an aggregate of 1,948,207 shares of its common stock upon exercise of warrants, resulting in net proceeds of $8,674,000.

Stock-based Deferred Compensation Plan for Non-Employee Directors

In 2014, the Company established an unfunded stock-based deferred compensation plan, providing non-employee directors the opportunity to defer up to one hundred percent of fees and compensation, including restricted stock units. The amount of fees and compensation deferred by a non-employee director is converted into stock units, the number of which is determined based on the closing price of the Company's common stock on the date such compensation would have otherwise been payable. At all times, the plan participants are one hundred percent vested in their respective deferred compensation accounts. On the tenth business day of January in the year following a director's termination of service, the director will receive a number of common shares equal to the number of stock units accumulated in the director's deferred compensation account. The Company accounts for this plan as stock-based compensation under ASC 718. During the year ended December 31, 2019 and 2018, the amount of compensation that was deferred under this plan was $36,500 and $30,000, respectively.