Stockholders’ Equity

Preferred Stock

Summary

-- We are authorized to issue up to

10,000,000

shares of our Preferred Stock,

$.01

par value, which

may

be issued in

one

or more series. The table below presents our issued and outstanding series of preferred stock as of

December 31, 2019

and

2018.

Each series of our outstanding preferred stock has a stated value of

1,000

per share. Further details concerning each series of preferred stock, and the changes in each series during the years ended

December 31, 2019

and

2018

are discussed in the sections that follow the table.

	December 31, 2019				December 31, 2018
			Carrying				Carrying
	Shares		Value		Shares		Value
Series B Convertible Preferred Stock		100	$	76,095		100	$	76,095
Series C Convertible Preferred Stock		-		-		2,150		705,238
Series E Convertible Preferred Stock		-		-		1,200		1,190,000
Series H Convertible Preferred Stock		1,686		1,156,338		-		-
Series I Convertible Preferred Stock		700		700,000		-		-
Total		2,486	$	1,932,433		3,450	$	1,971,333

Series B Convertible Preferred Stock

–

Our Series B Convertible Preferred Stock,

$1,000

stated value (“Series B Preferred Stock”), has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series B Preferred Stock has

voting rights and is

not

entitled to a dividend. As of

December 31, 2019,

there were

100

shares of Series B Preferred Stock outstanding, convertible at any time at the option of the holder into shares of common stock at a fixed conversion price of

$350,000

per common share. There were

transactions involving our Series B Preferred Stock during the years ended

December 31, 2019

and

2018.

Series C Convertible Preferred Stock

–

Our Series C Convertible Preferred Stock,

$1,000

stated value (“Series C Preferred Stock”), has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series C Preferred Stock has

voting rights and is

not

entitled to a dividend. During

2018,

420

shares of Series C Preferred Stock were converted into

shares of common stock. During

January

and

February 2019,

587

shares of our Series C Convertible Preferred Stock (“Series C Preferred Stock”) were converted into

shares of our common stock. As discussed below, during

February 2019,

all remaining outstanding shares of Series C Preferred Stock (

1,563

shares) were exchanged for Series F Preferred Stock.

Series D Convertible Preferred Stock

–

May 2017,

we issued

1,000

shares of our Series D Convertible Preferred Stock,

$1,000

stated value (“Series D Preferred Stock”), for net proceeds, after deduction of certain expenses, of

$980,000.

Our Series D Preferred Stock has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series D Preferred Stock has

voting rights and is

not

entitled to a dividend. During

2018,

all outstanding shares of Series D Preferred Stock were converted into

shares of common stock.

Series

Convertible Preferred Stock

–

March 2018,

we issued

600

shares of our Series E Convertible Preferred Stock,

$1,000

stated value, (“Series E Preferred Stock”) for net proceeds, after deduction of certain expenses, of

$590,000.

September 2018,

we issued an additional

600

shares of Series E Preferred Stock for net proceeds of

$600,000.

Our Series E Preferred Stock has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series E Preferred Stock has

voting rights and is

not

entitled to a dividend. As discussed below, during

February 2019,

all outstanding shares of Series E Preferred Stock (

1,200

shares) were exchanged for Series F Preferred Stock.

Series F Preferred Stock

–

February 2019,

we entered into Exchange Agreements with holders of our Series C and Series E Preferred Stock, pursuant to which the holders exchanged all shares of Series C and Series E Preferred Stock held by them for an aggregate of

2,763

shares of Series F Convertible Preferred Stock (“Series F Preferred Stock”). Our Series F Preferred Stock has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series F Preferred Stock has

voting rights and is

not

entitled to a dividend. During

2019,

507

shares of Series F Preferred Stock were converted into

191

shares of our common stock. As discussed below, during

July 2019,

all remaining outstanding shares of Series F Preferred Stock (

2,256

shares) were exchanged for Series H Preferred Stock.

Series G Preferred Stock

–

February 2019,

we entered into a Securities Purchase Agreement with the purchasers identified therein (the “Purchasers”) providing for sale to the Purchasers of an aggregate of up to

1,000

shares of our Series G Convertible Preferred Stock (“Series G Preferred Stock”) and related warrants for gross proceeds of up to

$1.0

million, which was funded at

three

different closings. Our Series G Preferred Stock has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series G Preferred Stock has

voting rights and is

not

entitled to a dividend. At the

first

closing, which occurred in

February 2019,

we issued

500

shares of Series G Preferred Stock in exchange for the payment by the Purchasers of

$250,000

in the aggregate, plus the cancellation of Term Notes held by the Purchasers (see Note

) in the amount of

$250,000.

At the

second

and

third

closings, which occurred in

April

and

June 2019,

we issued an aggregate of

500

additional shares of Series G Preferred Stock in exchange for the payment by the Purchasers of a total of

500,000

As discussed below, during

July 2019,

all outstanding shares of Series G Preferred Stock (

1,000

shares) were exchanged for Series H Preferred Stock.

Series H Preferred Stock

–

July 2019,

we entered into Exchange Agreements with holders of our Series F and Series G Preferred Stock, pursuant to which the holders exchanged all shares of Series F and Series G Preferred Stock held by them for an aggregate of

3,257

shares of Series H Convertible Preferred Stock (“Series H Preferred Stock”). Our Series H Preferred Stock has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series H Preferred Stock has

voting rights and is

not

entitled to a dividend. The Series H Preferred Stock is convertible at any time at the option of the holders into shares of our common stock, at a conversion price equal to the lesser of (i)

$15,000

per common share and (ii)

80%

of the lowest volume weighted average price of the common stock during the

ten

trading days immediately preceding the delivery of a notice of conversion. The Series H Preferred Stock contains price adjustment provisions, which

may,

under certain circumstances reduce the conversion price to match if we sell or grant options to purchase, including rights to reprice, our common stock or common stock equivalents at a price lower than the then conversion price of the Series H Preferred Stock. During

2019,

1,570

shares of Series H Preferred Stock were converted into

296,160

shares of our common stock.

Series I Preferred Stock

–

July 2019,

we entered into a Securities Purchase Agreement with the purchasers identified therein (the “Purchasers”) providing for sale to the Purchasers of an aggregate of

700

shares of our Series I Convertible Preferred Stock (“Series I Preferred Stock”) for gross proceeds of

$700,000.

Our Series I Preferred Stock has rights and privileges as set forth in the pertinent Certificate of Designation of Preferences, Rights and Limitations, including a liquidation preference equal to the stated value per share. The Series I Preferred Stock has

voting rights and is

not

entitled to a dividend. The Series I Preferred Stock is convertible at any time at the option of the holders into shares of our common stock, at a conversion price equal to the lesser of (i)

$15,000

per common share and (ii)

80%

of the lowest volume weighted average price of the common stock during the

ten

trading days immediately preceding the delivery of a notice of conversion. The Series I Preferred Stock contains price adjustment provisions, which

may,

2019,

there were

conversions of our Series I Preferred Stock.

Common Stock

Reverse Stock Split

–

Following approval by our shareholders at a meeting held on

April 15, 2019,

April 30, 2019,

we effected a

one

-for-

five hundred

reverse split of our common stock by the filing of an amendment to our certificate of incorporation with the State of Delaware.

During

2019

and

2018

we issued an aggregate of

296,390

and

shares of our common stock, respectively, pursuant to the conversion of several series of our Convertible Preferred Stock as discussed above.

During

2019,

we issued an aggregate of

3,224

shares of our common stock pursuant to a consulting agreement; for which we recognized

$24,000

of expense. During

2018,

we issued an aggregate of

shares of our common stock pursuant to certain consulting and investment banking agreements. We assigned an aggregate value to these shares of

$513,500,

$314,419

of which was expensed during

2018.

The remaining

$199,080

was recorded as a prepaid expense as of

December 31, 2018

and recognized as expense during

2019

over the terms of the related agreements.

Stock Option

We have a stock-based incentive plan pursuant to which our Board of Directors

may

grant stock options to our employees. The exercise price for any option granted

may

not

be less than fair value (

110%

of fair value for ISO’s granted to certain employees). Options have a maximum

ten

-year term and generally vest over

three

years.

There were

grants of stock options during the year ended

December 31, 2019.

As a result of the reverse stock splits enacted in

April 2019

and in

January 2020,

we have made adjustments and retroactive restatements to all of our outstanding stock options such that the balances as of

December 31, 2019

and

2018

are negligible.

We use the Black-Scholes model for determining the grant date fair value of our stock option grants. This model utilizes certain information, such as the interest rate on a risk-free security with a term generally equivalent to the expected life of the option being valued and requires certain other assumptions, such as the expected amount of time an option will be outstanding until it is exercised or expired, to calculate the fair value of stock options granted. The significant assumptions we used in our fair value calculations were as follows:

	2019		2018
Weighted average risk-free interest rates		N/A		2.79	%
Expected dividend yield		N/A		0.0	%
Expected life of option (yrs)		N/A		7.0
Expected volatility		N/A		71.34	%

Total employee and director stock-based compensation expense recognized in the consolidated statement of operations for the years ended

December 31, 2019

and

2018

was

$104,420

and

$155,304,

respectively, of which

$43,801

and

$41,998

was included in research and development expenses and

$60,619

and

$113,306

was included in general and administrative expenses, respectively. As of

December 31, 2019,

there is

$99,975

of unrecognized compensation expense related to employee and director stock-based compensation arrangements.

Stock Purchase

Warrants

The following table summarizes our warrants outstanding as of

December 31, 2019:

	Expiration Date	Exercise Price		Number of Warrants
Series G	September 2021	$	25,440		48
Series H	December 2021		1.15		217,392
Series I	Aug-Dec 2024		15,000		48

During

2019,

in connection with the sale of our Series G Preferred Stock, we issued Series I Warrants to purchase an aggregate of

shares of our common stock with an exercise price of

$15,000

per share.

All of the outstanding warrants contain anti-dilution and price adjustment provisions, which

may,

under certain circumstances reduce the exercise price to match if we sell or grant options to purchase, including rights to reprice, our common stock or common stock equivalents at a price lower than the then exercise price of the warrants. Such provisions as to the Series G and Series H Warrants apply to the exercise price only, with

effect on the number of shares subject to the warrants. Such provisions as to the Series I Warrants apply to both the exercise price and the number of shares subject to the warrants, so that the number of warrants will be increased such that the aggregate exercise price, after taking into account the decrease in the exercise price, will be equal to the aggregate exercise price prior to the adjustment. The Series H Warrants have an additional price adjustment provision requiring a similar adjustment to the exercise price and number of warrants following a reverse stock split of our common stock; such adjustments occurred in connection with our

April 30, 2019

reverse stock split and our

January 21, 2020

reverse stock split (see Note

), which is retroactively reflected in the table above.