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Stockholders' Deficiency
 12 Months Ended
Dec. 31, 2018
Equity [Abstract]  
Stockholders' Deficiency

6. Stockholders’ Deficiency

 

Preferred Stock

 

The Company has authorized a total of 5,000,000 shares of preferred stock, par value $0.001 per share. As of December 31, 2018 and 2017, 1,250,000 shares were designated as 9% Cumulative Convertible Preferred Stock (non-voting, “9% Preferred Stock”); 37,500 shares were designated as Series B Convertible Preferred Stock (non-voting, “Series B Preferred Stock”); 205,000 shares were designated as Series A Junior Participating Preferred Stock (non-voting, “Series A Junior Participating Preferred Stock”); and 1,700 shares were designated as Series G 1.5% Convertible Preferred Stock. Accordingly, as of December 31, 2018, 3,505,800 shares of preferred stock were undesignated and may be issued with such rights and powers as the Board of Directors may designate.

 

There were no shares of 9% Preferred Stock or Series A Junior Participating Preferred Stock or Series G 1.5% Convertible Preferred Stock outstanding as of December 31, 2018 and 2017.

 

Series B Preferred Stock outstanding as of December 31, 2018 and 2017 consisted of 37,500 shares issued in a May 1991 private placement. Each share of Series B Preferred Stock is convertible into approximately 0.00030 shares of common stock at an effective conversion price of $2,208.375 per share of common stock, which is subject to adjustment under certain circumstances. As of December 31, 2018 and 2017, the shares of Series B Preferred Stock outstanding are convertible into 11 shares of common stock. The Company may redeem the Series B Preferred Stock for $25,001, equivalent to $0.6667 per share, an amount equal to its liquidation preference, at any time upon 30 days prior notice.

 

Common Stock

 

There are 3,872,076 shares of the Company’s Common Stock outstanding as of December 31, 2018. After reserving for conversions of convertible debt as well as common stock purchase options and warrants exercises, there are 50,486,154 shares of the Company’s Common Stock available for future issuances.

 

2018 Unit Offering

 

On September 12, 2018, the Company consummated an initial closing on an offering (“2018 Unit Offering”) of Units comprised of one share of the Company’s common stock and one common stock purchase warrant. The 2018 Unit Offering was for up to $1.5 million and had a final termination date of October 15, 2018. The initial closing was for $250,750 of which $200,750 was the gross cash proceeds. The additional $50,000 was represented by the conversion into the 2018 Unit Offering of the principal amount of the Arnold S. Lippa, Demand Promissory Note described below. With the exchange of Dr. Lippa’s Demand Promissory Note into the 2018 Unit Offering, 47,620 warrants exercisable at 150% of the unit price ($1.575) per share of common stock and expiring on April 30, 2023 were issued with a value of $49,975 which amount was considered a loss on the extinguishment of that officer note and which amount was credited to additional paid-in capital. Units were sold for $1.05 per unit and the warrants issued in connection with the units are exercisable through April 30, 2023 at a fixed price of 150% of the unit purchase price. The warrants contain a cashless exercise provision and certain blocker provisions preventing exercise if the investor would beneficially own more than 4.99% of the Company’s outstanding shares of common stock as a result of such exercise. The warrants are also subject to redemption by the Company at $0.001 per share upon ten (10) days written notice if the Company’s common stock closes at $3.00 or more for any five (5) consecutive trading days. In total, 238,814 shares of the Company’s common stock and 238,814 common stock purchase warrants were purchased. Other than Arnold S. Lippa, the investors in the offering were not affiliates of the Company. Investors also received an unlimited number of piggy-back registration rights in respect to the shares of common stock and the shares of common stock underlying the common stock purchase warrants, unless such common stock is eligible to be sold with volume limits under an exemption from registration under any rule or regulation of the SEC that permits the holder to sell securities of the Company to the public without registration and without volume limits (assuming the holder is not an affiliate).

 

The shares of common stock and common stock purchase warrants were offered and sold without registration under the Securities Act of 1933, as amended (the “Securities Act”) in reliance on the exemptions provided by Section 4(a)(2) of the Securities Act as provided in Rule 506(b) of Regulation D promulgated thereunder. None of the shares of common stock issued as part of the units, the common stock purchase warrants, the Common Stock issuable upon exercise of the common stock purchase warrants or any warrants issued to a qualified referral source (of which there were none in the initial closing) have been registered under the Securities Act or any other applicable securities laws, and unless so registered, may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act.

  

In addition, as set forth in the Purchase Agreements, each Purchaser had an unlimited number of exchange rights, which were options and not obligations, to exchange such Purchaser’s entire investment as defined (but not less than the entire investment) into one or more subsequent equity financings (consisting solely of convertible preferred stock or common stock or units containing preferred stock or common stock and warrants exercisable only into preferred stock or common stock) that would be considered as “permanent equity” under United States Generally Accepted Accounting Principles and the rules and regulations of the United States Securities and Exchange Commission, and therefore classified within stockholders’ equity, and excluding any form of debt or convertible debt or preferred stock redeemable at the discretion of the holder (each such financing a “Subsequent Equity Financing”). These exchange rights were effective until the earlier of: (i) the completion of any number of Subsequent Equity Financings that aggregate at least $15 million of gross proceeds, or (ii) December 30, 2018. For clarity, a Purchaser’s entire investment was the entire amount invested (“Investment Amount”) (for purposes of the multiple described below) and all of the Common Stock and Warrants purchased (for purposes of the exchange) pursuant to the Purchase Agreement of such Purchaser, however, if the Warrants had been exercised in part or in whole on a cashless basis, then the Investment Amount (for purposes of the multiple described below) would have been the Investment Amount (for purposes of the multiple described below) and all of the Common Stock initially purchased pursuant to the Purchase Agreement of such Purchaser plus any shares of Common Stock issued pursuant to a cashless exercise and any Warrants remaining after such cashless exercise (for purposes of the exchange), or, if the Warrants had been exercised for cash, then the entire investment would have been the Investment Amount plus the amount of cash paid upon cash exercise (for purposes of the multiple described below) and all of the Common Stock initially purchased pursuant to the Purchase Agreement of such Purchaser plus any shares of Common Stock issued pursuant to the cash exercise and any Warrants remaining after such cash exercise (for purposes of the exchange). The exchange rights expired on December 31, 2018.

 

1st 2017 Unit Offering

 

On March 10, 2017 and March 28, 2017, the Company sold units to investors for aggregate gross proceeds of $350,000, with each unit consisting of one share of the Company’s common stock and one common stock purchase warrant to purchase one share of the Company’s common stock (the “1st 2017 Unit Offering”). Units were sold for $2.50 per unit and the warrants issued in connection with the units were exercisable through December 31, 2021 at a fixed price $2.75 per share of the Company’s common stock. The warrants contained a cashless exercise provision and certain blocker provisions preventing exercise if the investor would beneficially own more than 4.99% of the Company’s outstanding shares of common stock as a result of such exercise. The warrants were also subject to redemption by the Company at $0.001 per share upon ten (10) days written notice if the Company’s common stock closed at 200% or more of the unit purchase price for any five (5) consecutive trading days. Investors were not affiliates of the Company. The investors received an unlimited number of piggy-back registration rights. Investors also received an unlimited number of exchange rights, which were options and not obligations, to exchange such investor’s entire investment (and not less than the entire investment) into one or more subsequent equity financings (consisting solely of convertible preferred stock or common stock or units containing preferred stock or common stock and warrants exercisable only into preferred stock or common stock) that would be considered as “permanent equity” under United States Generally Accepted Accounting Principles and the rules and regulations of the United States Securities and Exchange Commission, and therefore classified as stockholders’ equity, and excluding any form of debt or convertible debt (each such financing a “Subsequent Equity Financing”). These exchange rights were effective until the earlier of: (i) the completion of any number of subsequent financings aggregating at least $15 million gross proceeds to the Company, or (ii) December 30, 2017. The dollar amount used to determine the amount invested or exchanged into the subsequent financing would be 1.2 times the amount of the original investment. Under certain circumstances, the ratio might have been 1.4 instead of 1.2. The Company evaluated whether the warrants or the exchange rights met criteria to be accounted for as a derivative in accordance with Accounting Standard Codification Topic (ASC) 815 and determined that the derivative criteria were not met. Therefore, the Company determined no bifurcation and separate valuation was necessary and that the warrants and exchange right should be accounted for with the host instrument. The closing market prices of the Company’s common stock on March 10, 2017 and March 28, 2017 were $4.05 and $3.80 respectively. In connection with this transaction, Aurora Capital LLC (“Aurora”) served as a placement agent and earned $20,000 fees and 8,000 placement agent common stock warrants associated with the closing of 1st 2017 Unit Offering. The fees were unpaid as of December 31, 2018 and have been accrued in accounts payable and accrued expenses and charged against Additional paid-in capital as of December 31, 2017 and December 31, 2018. The placement agent common stock warrants were valued at $27,648 and were accounted for in Additional paid-in capital as of December 31, 2017 and remain valued at that amount as of December 31, 2018.

 

On July 26, 2017, the Company’s Board approved an offering of securities conducted via private placement (the “2nd 2017 Unit Offering” described below) that, because of the terms of the 2nd 2017 Unit Offering as compared to the terms of the 1st2017 Unit Offering, resulted in an exchange of all of the units from the 1st 2017 Unit Offering into equity securities of the Company in the 2nd 2017 Unit Offering by all of the investors in the 1st 2017 Unit Offering.

 

2nd 2017 Unit Offering

 

On August 29, 2017, September 27, 2017, September 28, 2017, October 5, 2017, October 25, 2017, November 29, 2017, December 13, 2017, December 21, 2017, December 22, 2017 and December 29, 2017 the Company sold units in the 2nd 2017 Unit Offering to investors for aggregate gross proceeds of $404,500, with each unit consisting of one share of the Company’s common stock and one common stock purchase warrant to purchase one share of the Company’s common stock. Units were sold for $1.00 per unit and the warrants issued in connection with the units are exercisable through September 29, 2022 at a fixed price $1.10 per share of the Company’s common stock. The warrants contain a cashless exercise provision and certain blocker provisions preventing exercise if the investor would beneficially own more than 4.99% of the Company’s outstanding shares of common stock as a result of such exercise. The warrants are also subject to redemption by the Company at $0.001 per share upon ten (10) days written notice if the Company’s common stock closes at 250% or more of the unit purchase price for any five (5) consecutive trading days. The investors were not affiliates of the Company. Investors received an unlimited number of piggy-back registration rights. Investors also received an unlimited number of exchange rights, which were options and not obligations, to exchange such investor’s entire investment (and not less than the entire investment) into one or more subsequent equity financings (consisting solely of convertible preferred stock or common stock or units containing preferred stock or common stock and warrants exercisable only into preferred stock or common stock) that would be considered as “permanent equity” under United States Generally Accepted Accounting Principles and the rules and regulations of the United States Securities and Exchange Commission, and therefore classified as stockholders’ equity, and excluding any form of debt or convertible debt (each such financing a “Subsequent Equity Financing” as in the 1st 2017 Unit Offering). These exchange rights were effective until the earlier of: (i) the completion of any number of subsequent financings aggregating at least $15 million gross proceeds to the Company, or (ii) December 30, 2017 and have therefore expired. The dollar amount used to determine the amount invested or exchanged into the subsequent financing would have been 1.2 times the amount of the original investment. Under certain circumstances, the ratio might have been 1.4 instead of 1.2. The exchange right did not permit the investors to exchange into a debt offering or into redeemable preferred stock, therefore the 2nd 2017 Unit Offering resulted in the issuance of permanent equity. All exchange rights have expired as of December 30, 2017. The Company evaluated whether the warrants or the exchange rights met criteria to be accounted for as a derivative in accordance with Accounting Standard Codification Topic (ASC) 815 and determined that the derivative criteria were not met. Therefore, the Company determined no bifurcation and separate valuation was necessary and that the warrants and exchange right should be accounted for with the host instrument. The closing market prices of the Company’s common stock on August 29, 2017, September 27, 2017, September 28, 2017, October 5, 2017, October 25, 2017, November 29, 2017, December 13, 2017, December 21, 2017, December 22, 2017 and December 29, 2017 were $1.00, $1.40, $1.40, $1.50, $0.80, $1.05, $1.45, $1.51, $1.45 and $1.14, respectively. There was no placement agent and therefore no fees associated with the 2nd 2017 Unit Offering.

 

The terms of the 2nd 2017 Unit Offering resulted in an exchange of all of the units from each of the last unit offering in 2016 and the 1st 2017 Unit Offering into equity securities of the 2nd 2017 Unit Offering. The 1st 2017 Unit Offering and the 2nd 2017 Unit Offering were both originally accounted for as equity.

 

Common Stock Warrants

 

Although not considered stock-based compensation, the Company issued a warrant to purchase 47,620 shares of common stock at an exercise price of $1.50 per share and expiring on December 30, 2023 as part of an officer note exchange into the 2018 Unit Offering. The warrants were valued at $49,925 as of September 12, 2018, the date of issuance and were accounted for in Additional paid-in capital as of December 31, 2018 During the fiscal year ended December 31, 2017, the Company issued warrants to purchase 8,000 shares of the Company’s common stock at an exercise price of $2.75 per share and expiring on December 31, 2021 to Aurora Capital LLC, an affiliate of the Company, for placement agent services. The warrants were valued at $27,648 and were accounted for in Additional paid-in capital as of March 31, 2017, the date of issuance, and remain valued at that amount as of December 31, 2017 and December 31, 2018.

 

A summary of warrant activity for the year ended December 31, 2018 is presented below.

 

    Number of
Shares		     Weighted
Average
Exercise Price		     Weighted
Average
Remaining
Contractual
Life (in Years)		  
Warrants outstanding at December 31, 2017     1,464,415     $ 2.68146       3.73  
Issued     318,814       1.55618       4.50  
Warrants outstanding at December 31, 2018     1,783,229     $ 2.20393       3.06  
                         
Warrants exercisable at December 31, 2017     1,464,415     $ 2,68146       3.73  
Warrants exercisable at December 31, 2018     1,783,229     $ 2.20393       3.06  

 

The exercise prices of common stock warrants outstanding and exercisable are as follows at December 31, 2018:

 

Exercise Price     Warrants Outstanding
(Shares)		     Warrants Exercisable
(Shares)		     Expiration Date
$ 1.0000       916,217       916,217     September 20, 2022
$ 1.2870       41,002       41,002     April 17, 2019
$ 1.5000       80,000       80,000     December 30, 2023
$ 1.5620       130,284       130,284     December 31, 2021
$ 1.5750       238,814       238,814     April 30, 2023
$ 2.7500       8,000       8000     September 20, 2022
$ 4.8500       5,155       5,155     September 23, 2019
$ 4.8750       108,594       108,594     September 30, 2020
$ 5.0000       5,000       5,000     September 22, 2019
$ 5.1025       10,309       10,309     January 29, 2019
$ 6.5000       8,092       8,092     February 4, 2019
$ 6.8348       145,758       145,758     September 30, 2020
$ 7.9300       86,004       86,004     February 28, 2021
          1,783,229       1,783,229      

 

Based on a fair market value of $0.65 per share on December 31, 2018, there were no exercisable in-the money common stock warrants as of December 31, 2018.

 

A summary of warrant activity for the year ended December 31, 2017 is presented below.

 

    Number of
Shares		     Weighted
Average
Exercise Price		     Weighted
Average
Remaining
Contractual
Life (in Years)		  
Warrants outstanding at December 31, 2016     540,198     $ 4.84842       3.93  
Issued     1,194,500                  
Reduction through transactions in conjunction with - Unit Exchange Agreements     (270,283 )                
Warrants outstanding at December 31, 2017     1,464,415     $ 2.68146       4.88  
                         
Warrants exercisable at December 31, 2016     540,198     $ 4.84842       3.93  
Warrants exercisable at December 31, 2017     1,464,415     $ 2.68146       4.88  

 

The exercise prices of common stock warrants outstanding and exercisable are as follows at December 31, 2017:

 

Exercise Price     Warrants Outstanding
(Shares)		     Warrants Exercisable
(Shares)		     Expiration Date
$ 1.0000       916,217       916,217     September 20, 2022
$ 1.2870       41,002       41,002     April 17, 2019
$ 1.5620       130,284       130,284     December 31, 2021
$ 2.7500       8,000       8000     September 20, 2022
$ 4.8500       5,155       5,155     September 23, 2019
$ 4.8750       108,594       108,594     September 30, 2020
$ 5.0000       5,000       5,000     September 22, 2019
$ 5.1025       10,309       10,309     January 29, 2019
$ 6.5000       8,092       8,092     February 4, 2019
$ 6.8348       145,758       145,758     September 30, 2020
$ 7.9300       86,004       86,004     February 28, 2021
          1,464,415       1,464,415      

 

Based on a fair market value of $1.14 per share on December 31, 2017, the intrinsic value of exercisable in-the-money common stock warrants was $128,270 as of December 31, 2017.

 

Stock Options

 

On March 18, 2014, the stockholders of the Company holding a majority of the votes to be cast on the issue approved the adoption of the Company’s 2014 Equity, Equity-Linked and Equity Derivative Incentive Plan (the “2014 Plan”), which had been previously adopted by the Board of Directors of the Company, subject to stockholder approval. The Plan permits the grant of options and restricted stock with respect to up to 325,025 shares of common stock, in addition to stock appreciation rights and phantom stock, to directors, officers, employees, consultants and other service providers of the Company.

 

On June 30, 2015, the Board of Directors adopted the 2015 Stock and Stock Option Plan (the “2015 Plan”). The 2015 Plan initially provided for, among other things, the issuance of either or any combination of restricted shares of common stock and non-qualified stock options to purchase up to 461,538 shares of the Company’s common stock for periods up to ten years to management, members of the Board of Directors, consultants and advisors. The Company has not and does not intend to present the 2015 Plan to stockholders for approval. On August 18, 2015, the Board of Directors increased the number of shares that may be issued under the 2015 Plan to 769,231 shares of the Company’s common stock. On March 31, 2016, the Board of Directors further increased the number of shares that may be issued under the 2015 Plan to 1,538,461 shares of the Company’s common stock. On January 17, 2017, the Board of Directors further increased the number of shares that may be issued under the 2015 Plan to 3,038,461 shares of the Company’s common stock. On December 9, 2017, the Board of Directors further increased the number of shares that may be issued under the 2015 Plan to 6,985,260 shares of the Company’s common stock. On December 28, 2018, the Board of Directors further increased the number of shares that may be issued under the 2015 Plan to 8,985,260 shares of the Company’s common stock.

 

During fiscal year ended December 31, 2018, there were three grants of options to purchase an aggregate of 348,827 shares of the Company’s common stock to a vendor. The value of these options on the grant date was approximately equal to the amount payable to the vendor that was to be paid with the options. The cumulative loss on extinguishment of three liabilities totaling $353,623 was $11,154. The remaining amount payable to the vendor is due in cash.

 

Information with respect to the Black-Scholes variables used in connection with the evaluation of the fair value of stock-based compensation costs and fees is provided at Note 3.

 

A summary of stock option activity for the year ended December 31, 2018 is presented below.

 

    Number of
Shares		     Weighted
Average
Exercise
Price		     Weighted
Average
Remaining
Contractual
Life (in Years)		  
Options outstanding at December 31, 2017     3,996,167     $ 3.7634       6.30  
Granted     348,827       1.1002       4.29  
Options outstanding at December 31, 2018     4,344,994     $ 3.5414       5.90  
                         
Options exercisable at December 31, 2017     3,996,167     $ 3.7634       6.30  
Options exercisable at December 31, 2018     4,344,994     $ 3,5414       5.90  

 

The exercise prices of common stock options outstanding and exercisable were as follows at December 31, 2018:

 

Exercise Price     Options Outstanding (Shares)     Options Exercisable (Shares)     Expiration Date
$ 0.7000       21,677       21,677     November 21, 2023
$ 1.1200       310,388       310,388     April 5, 2023
$ 1.2500       16,762       16,762     December 7, 2022
$ 1.3500       34,000       34,000     July 28, 2022
$ 1.4500       1,849,418       1,849,418     December 9, 2027
$ 1.4500       100,000       100,000     December 9, 2027
$ 2.0000       285,000       285,000     June 30, 2022
$ 2.0000       25,000       25,000     July 26, 2022
$ 3.9000       395,000       395,000     January 17, 2022
$ 4.5000       7,222       7,222     September 2, 2021
$ 5.6875       89,686       89,686     June 30, 2020
$ 5.7500       2,608       2,608     September 12, 2021
$ 6.4025       27,692       27,692     August 18, 2020
$ 6.4025       129,231       129,231     August 18, 2022
$ 6.4025       261,789       261,789     August 18, 2025
$ 6.8250       8,791       8,791     December 11, 2020
$ 7.3775       523,077       523,077     March 31, 2021
$ 8.1250       169,231       169,231     June 30, 2022
$ 13.0000       7,385       7,385     March 13, 2019
$ 13.0000       3,846       3,846     April 14, 2019
$ 13.9750       3,385       3,385     March 14, 2024
$ 15.4700       7,755       7,755     April 8, 2020
$ 15.9250       2,462       2,462     February 28, 2024
$ 16.0500       46,154       46,154     July 17, 2019
$ 16.6400       1,538       1,538     January 29, 2020
$ 19.5000       9,487       9,487     July 17, 2022
$ 19.5000       6,410       6,410     August 10, 2022
          4,344,994       4,344,994      

 

There was no deferred compensation expense for the outstanding and unvested stock options at December 31, 2018.

 

Based on a fair market value of $0.65 per share on December 31, 2018, there were no exercisable in-the-money common stock options as of December 31, 2018.

 

A summary of stock option activity for the year ended December 31, 2017 is presented below.

 

    Number of Shares     Weighted
Average
Exercise
Price		     Weighted
Average
Remaining
Contractual
Life (in Years)		  
Options outstanding at December 31, 2016     1,307,749     $ 7.6515       5.31  
Granted     2,688,418       1.8721       8.38  
Expired     -       -       -  
Forfeited     -       -       -  
Options outstanding at December 31, 2017     3,996,167     $ 3.7634       7.38  
                         
Options exercisable at December 31, 2016     1,307,749     $ 7.6515       5.31  
Options exercisable at December 31, 2017     3,996,167     $ 3.7634       7.38  

 

There was no deferred compensation expense for the outstanding and unvested stock options at December 31, 2017.

 

The exercise prices of common stock options outstanding and exercisable were as follows at December 31, 2017:

 

Exercise Price     Options
Outstanding
(Shares)		     Options
Exercisable
(Shares)		     Expiration Date
$ 1.3500       34,000       34,000     July 28, 2022
$ 1.4500       1,849,418       1,849,418     December 9, 2027
$ 1.4500       100,000       100,000     December 9, 2027
$ 2.0000       285,000       285,000     June 30, 2022
$ 2.0000       25,000       25,000     July 26, 2022
$ 3.9000       395,000       395,000     January 17, 2022
$ 4.5000       7,222       7,222     September 2, 2021
$ 5.6875       89,686       89,686     June 30, 2020
$ 5.7500       2,608       2,608     September 12, 2021
$ 6.4025       27,692       27,692     August 18, 2020
$ 6.4025       129,231       129,231     August 18, 2022
$ 6.4025       261,789       261,789     August 18, 2025
$ 6.8250       8,791       8,791     December 11, 2020
$ 7.3775       523,077       523,077     March 31, 2021
$ 8.1250       169,231       169,231     June 30, 2022
$ 13.0000       7,385       7,385     March 13, 2019
$ 13.0000       3,846       3,846     April 14, 2019
$ 13.9750       3,385       3,385     March 14, 2024
$ 15.4700       7,755       7,755     April 8, 2020
$ 15.9250       2,462       2,462     February 28, 2024
$ 16.0500       46,154       46,154     July 17, 2019
$ 16.6400       1,538       1,538     January 29, 2020
$ 19.5000       9,487       9,487     July 17, 2022
$ 19.5000       6,410       6,410     August 10, 2022
          3,996,167       3,996,167      

 

Based on a fair market value of $1.14 per share on December 31, 2017, there were no exercisable in-the-money common stock options as of December 31, 2017.

 

For the years ended December 31, 2018 and 2017, stock-based compensation costs and fees included in the consolidated statements of operations consisted of general and administrative expenses of $14,248 and $1,164,537 respectively, and research and development expenses of $15,000 and $762,741, respectively.

 

Pier Contingent Stock Consideration

 

In connection with the merger transaction with Pier effective August 10, 2012, RespireRx issued 179,747 newly issued shares of its common stock with an aggregate fair value of $3,271,402 ($18.2000 per share), based upon the closing price of RespireRx’s common stock on August 10, 2012. The shares of common stock were distributed to stockholders, convertible note holders, warrant holders, option holders, and certain employees and vendors of Pier in satisfaction of their interests and claims. The common stock issued by RespireRx represented approximately 41% of the 443,205 common shares outstanding immediately following the closing of the transaction.

 

Pursuant to the terms of the transaction, RespireRx agreed to issue additional contingent consideration, consisting of up to 56,351 shares of common stock, to Pier’s former security holders and certain other creditors and service providers (the “Pier Stock Recipients”) that received RespireRx’s common stock as part of the Pier transaction if certain of RespireRx’s stock options and warrants outstanding immediately prior to the closing of the merger were subsequently exercised. In the event that such contingent shares were issued, the ownership percentage of the Pier Stock Recipients, following their receipt of such additional shares, could not exceed their ownership percentage as of the initial transaction date.

 

The stock options and warrants outstanding at June 30, 2012 were all out-of-the-money on August 10, 2012. During late July and early August 2012, shortly before completion of the merger, the Company issued options to officers and directors at that time to purchase a total of 22,651 shares of common stock exercisable for ten years at $19.5000 per share. By October 1, 2012, these options, as well as the options and warrants outstanding at June 30, 2012, were also out-of-the-money and continued to be out-of-the-money through December 31, 2018.

 

There were no stock options or warrants exercised subsequent to August 10, 2012 that triggered additional contingent consideration, and the only remaining stock options outstanding that could still trigger the additional contingent consideration remained out-of-the-money through December 31, 2018. As of December 31, 2018, due to the expirations and forfeitures of RespireRx stock options and warrants occurring since August 10, 2012, 6,497 contingent shares of common stock remained potentially issuable under the Pier merger agreement.

 

The Company concluded that the issuance of any of the contingent shares to the Pier Stock Recipients was remote, as a result of the large spread between the exercise prices of these stock options and warrants as compared to the common stock trading range, the subsequent expiration or forfeiture of most of the options and warrants, the Company’s distressed financial condition and capital requirements, and that these stock options and warrants have remained significantly out-of-the-money through December 31, 2018. Accordingly, the Company considered the fair value of the contingent consideration to be immaterial and therefore did not ascribe any value to such contingent consideration. If any such shares are ultimately issued to the former Pier stockholders, the Company will recognize the fair value of such shares as a charge to operations at that time.

 

Reserved and Unreserved Shares of Common Stock

 

On January 17, 2017, the Board of Directors of the Company approved the adoption of an amendment of the Amended and Restated RespireRx Pharmaceuticals, Inc. 2015 Stock and Stock Option Plan (as amended, the “2015 Plan”). That amendment increases the shares issuable under the plan by 1,500,000, from 1,538,461 to 3,038,461. On December 9, 2017, the Board of Directors further amended the 2015 Plan to increase the number of shares that may be issued under the 2015 Plan to 6,985,260 shares of the Company’s common stock. On December 28, 2018, the Borad of Directors further amended the 2015 Plan to increase the number of shares that may be issued under the 2015 Plan to 8,985,260 shares of the Company’s common stock.

 

Other than the change in the number of shares available under the 2015 Plan, no other changes were made to the 2015 Plan by these amendments.

 

At December 31, 2018, the Company had 65,000,000 shares of common stock authorized and 3,872,076 shares of common stock issued and outstanding. Furthermore, as of December 31, 2018, the Company had reserved an aggregate of 11 shares for issuance upon conversion of the Series B Preferred Stock; 1,783,229 shares for issuance upon exercise of warrants; 4,344,996 shares for issuance upon exercise of outstanding stock options; 63,236 shares to cover equity grants available for future issuance pursuant to the Company’s 2014 Equity, Equity-linked and Equity Derivative Incentive Plan; 4,427,341 shares to cover equity grants available for future issuance pursuant to the 2015 Plan; 16,460 shares for issuance upon conversion of the Convertible Notes; and 6,497 shares issuable as contingent shares pursuant to the Pier merger. Accordingly, as of December 31, 2018, the Company had an aggregate of 10,641,770 shares of common stock reserved for issuance and 50,486,154 shares of common stock unreserved and available for future issuance. The Company expects to satisfy its future common stock commitments through the issuance of authorized but unissued shares of common stock.